<PAGE>








                                  EXHIBIT 22.2

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


                          The Commercial Bancorp Inc.'s
                               1998 Annual Report

<PAGE>


                          THE COMMERCIAL BANCORP, INC.

                               1998 ANNUAL REPORT




<PAGE>




                       ABOUT THE COMMERCIAL BANCORP, INC.


The Commercial Bancorp,  Inc. (the "Holding Company") was incorporated on August
15, 1996. The Holding Company owns 100% of the  outstanding  common stock of The
Commercial  Bank of Volusia County  ("TCB-Volusia")  (collectively  "TCB").  The
Holding  Company was  organized  simultaneously  with  TCB-Volusia  and its only
business is the ownership and operation of TCB-Volusia. TCB-Volusia is a Florida
state-chartered  commercial  bank and its  deposits  are  insured by the Federal
Deposit Insurance  Corporation.  TCB-Volusia  opened for business on October 14,
1997, and provides  community  banking services to businesses and individuals in
Volusia County,  Florida.  At December 31, 1998, TCB operated one retail banking
office in Ormond Beach,  Florida and had total assets of $21.7 million and total
stockholders' equity of $3.3 million.


                        COMMON STOCK PRICES AND DIVIDENDS


TCB's common stock is not actively traded. The common stock was sold in a public
offering  in which TCB sold  "units"  including  one common  share and a warrant
entitling the holder to purchase an additional common share. The units were sold
for $10 each. TCB has never paid cash dividends.  Future dividends, if any, will
be determined by the Board of Directors.

As of March 15, 1999, the Company had 350 holders of record of common stock.


                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Report  contains  certain  forward-looking  statements  which represent the
issuer's  expectations  or beliefs,  including,  but not limited to,  statements
concerning  the  banking  industry  and the  issuer's  operations,  performance,
financial  condition,  and growth. For this purpose, any statements contained in
this  Report  that are not  statements  of  historical  fact may be deemed to be
forward-looking  statements.  Without  limiting the generality of the foregoing,
words  such as  "may,"  "will,"  "expect,"  "believe,"  "anticipate,"  "intend,"
"could,"  "should,"  "can,"  "estimate,"  or "continue" or the negative of other
variations   thereof  or  comparable   terminology   are  intended  to  identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties,  certain of which are beyond the issuer's control,  and
actual  results  may  differ  materially  depending  on a variety  of  important
factors, including competition,  general economic conditions,  potential changes
in interest  rates,  and changes in the value of real estate securing loans made
by The Commercial Bancorp, Inc. among other things.

                                    CONTENTS

                                                                           Page

Consolidated Financial Highlights...........................................1

Message from the President................................................2-3

Officers and Directors....................................................4-5

Selected Financial Data.....................................................6

Management's Discussion and Analysis of Financial Condition
         and Results of Operations.......................................7-21

Consolidated Financial Statements.......................................22-39

Independent Auditors' Report...............................................40

Corporate Information......................................................41




<PAGE>
<TABLE>
<CAPTION>



                        CONSOLIDATED FINANCIAL HIGHLIGHTS

            At December 31, 1998 and 1997 or For the Years Then Ended
                (Dollars in thousands, except per share figures)

                                                                                                 1998             1997
                                                                                                 ----             ----
At Year End:

<S>                                                                                       <C>                   <C>  
     Total assets.......................................................................  $    21,676             7,078
     Securities.........................................................................  $     3,302              -
     Loans, net.........................................................................  $    11,563             3,746
     Deposits...........................................................................  $    16,785             2,678
     Borrowings.........................................................................  $     1,365              -
     Stockholders' equity...............................................................  $     3,257             4,334
     Book value per share...............................................................  $      7.01              9.32
     Shares outstanding.................................................................      464,791           464,791
     Warrants to purchase one share of common stock outstanding.........................      450,000           450,000
     Equity-to-assets ratio.............................................................        15.03%            61.23%
     Nonperforming assets-to-total assets ratio.........................................         5.53%             -

For The Year:

     Net interest income................................................................          357                69
     Provision for loan losses..........................................................          725                35
     Cumulative effect of accounting change for organization costs                               (100)               -
     Net loss...........................................................................       (1,071)             (262)
     Return on average assets...........................................................        (6.35)%           (9.18)%
     Return on average equity...........................................................       (28.23)%          (11.91)%
     Average equity-to-average assets ratio.............................................        22.51%            77.02%
     Noninterest expenses to average assets.............................................         7.32%            16.85%


                                                                                                     Average Yield
                                                                                                     or Rate
                                                                                                     During the
                                                                                                     Years Ended
                                                                                                     December 31,
                                                                                                     ------------
                                                                                                 1998            1997
                                                                                                 ----            ----
Yields and Rates:

     Loans...............................................................................        8.14%           8.88%
     Securities..........................................................................        4.07%            -  %
     Other interest-earnings assets (1)..................................................        5.41%           4.88%
     Total interest-earnings assets......................................................        6.71%           5.38%
     Deposits............................................................................        5.17%           3.95%
     Borrowings..........................................................................        6.86%           9.47%
     Total interest-bearing liabilities..................................................        5.22%           7.19%
     Net interest margin (2).............................................................        2.42%           3.28%
</TABLE>

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

(1)       Includes  federal funds sold,  interest  bearing  deposits and Federal
          Home Loan Bank stock.

(2)       Net interest income divided by average interest-earning assets.

                                                             1

<PAGE>



                           MESSAGE FROM THE PRESIDENT





Dear Stockholders:

We present the 1998 Annual Report to you with mixed emotions.  At the end of our
first full year of operations we have many  accomplishments to view with a great
deal of pride.  And yet,  the year has not been without its  challenges  and the
impact  of those  challenges  moderates  our  accomplishments  and  forces us to
reflect soberly on the issues at hand and their resolution.

Our Bank's performance can be highlighted for its success in meeting anticipated
growth rates. The total deposits of the Bank met original growth goals when they
reached  almost $16.8 million at year end. Loan growth met  originally  budgeted
growth rates as well and totaled $12.3 million on December 31st. However, it was
in our  loan  portfolio  that  our  first  disappointment  occurred.  Management
downgraded  two separate  loan  relationships  in August of 1998.  In both cases
these  borrowers had suffered  problems not related to our loans.  The continued
performance  of the loans  became  questionable  soon  after the  problems  were
identified and management recommended the provision for loan losses be increased
in  accordance  with  our  loan  policy.  The  provision  is  believed  to  be a
conservative   position  for  the  potential  losses  on  these   relationships,
nevertheless, the impact on our earnings for 1998 was significant.

In July of 1998 our Bank had one of the proudest  moments in its brief  history.
As a result of the  wildfires  that  plagued our area for so many weeks,  it was
necessary for us to enact our disaster plans and evacuate our building. While we
were able to return to operation the next morning,  the fires in Flagler  County
forced the  evacuation of the entire  county.  During the  evacuations,  we were
aware that the banks in Flagler could be days in opening  while their  employees
returned from the evacuation,  and that automated teller machines would be empty
of cash or may not be  online  with the loss of power  and/or  telephone  lines.
Recognizing the difficulties  this would create on the residents and having just
executed our own disaster  and  recovery  programs,  we felt our Bank could help
provide  relief  services to the residents of Flagler  County upon their return.
Our Bank decided to offer an emergency check cashing service.  In an outstanding
display of the cooperation by professionals,  agencies,  and individuals that is
characteristic  of the human  reaction to disaster,  we applied for and received
regulatory  approval  to  operate  the check  cashing  service in under 8 hours.
Coordinating  with the Emergency  Relief Team effort in Flagler  County was next
and on July 6,  1998  our Bank  opened a check  cashing  facility.  We  received
national recognition for this effort and are proud to relate it to you today.

In a less  positive  development,  our  Company's  plans to assist an organizing
group in Highlands County with the charter of a new bank which would have joined
our Holding Company as its second bank were not able to proceed.  The efforts of
management,  our time and  attention,  and the financial  impact of the expenses
related to the applications and stock registration were  substantially  expensed
in 1998, also creating a significant  impact on our first full year's  earnings.
On the positive  side, our focus  proceeding  forward will return to the Volusia
County  Bank and we are  certain  its  performance  can be  improved  to provide
desirable returns for our shareholders.


                                        2

<PAGE>






During our proposed  expansion,  the Bank  expanded  its Board of Directors  and
Management  Team.  Most notably,  after the Annual  Meeting last year,  our Bank
Board was expanded  with addition of Michael D. Crotty and William L. Olivari as
Directors.  Michael Crotty is an attorney with the firm of Black,  Crotty, Sims,
Hubka,  Burnett,  Birch and Samuels in Daytona Beach,  Florida. He is a lifelong
resident  of Volusia  County and  extends  our  contacts  with  businessmen  and
professionals  in the area with his experience.  Bill Olivari is a prominent CPA
in the Ormond Beach area practicing at his own firm, Olivari and Associates.  He
has been living and working in the area since 1973, has a most  impressive  list
of  professional  and  service  organization  achievements,  and brings a lot of
experience  to our Board.  We are  extremely  proud to welcome both of these new
Directors to our Bank Board.

In addition, the Bank hired a new President and Chief Executive Officer,  Robert
M. Montgomery. Bob Montgomery brings 25 years of service with Compass Bancshares
in  Birmingham,  Alabama  and a great deal of banking  expertise  to our Volusia
County Bank.  His  professional  and civic  activities  have included  Chairman,
Junior  Achievement of Greater  Birmingham,  Inc.;  Chairman,  Commercial Credit
Committee,  Alabama  Bankers'  Association;  and President's  Advisory  Council,
Birmingham  Southern College.  We are very happy to have Bob associated with our
Bank.

Our growth and earnings potential are firm and our marketplace in Volusia County
continues  to grow and  prosper.  The capital  base of the Bank will support the
growth  anticipated for the future and with that growth will come  profitability
on a monthly basis. The problem loans appear to be near their resolution and the
rest  of  our  portfolio  has  exhibited  satisfactory  performance  and  credit
strengths.  Management  is confident  the Volusia  County Bank is sound and will
continue to develop.

While we are disappointed with our plans for the development of the second bank,
we are proud and  confident  that our initial plans for our Company can still be
met.  There is no doubt that the challenges of the first full year of operations
have tested our Company but those  challenges  have not diminished our potential
for  the  future  in any  manner.  We  look  to that  future  to  provide  you a
competitive  return on your  investment  while we provide our community  with an
outstanding Bank.

Sincerely,



Gary G. Campbell
President


                                        3

<PAGE>



                            DIRECTORS AND OFFICERS OF

                          THE COMMERCIAL BANCORP, INC.



                                    OFFICERS

                                Gary G. Campbell
                      President and Chief Executive Officer

                              Harvey E. Buckmaster
                             Chief Financial Officer


                                    DIRECTORS

                                   Larry Kent
                 Chairman of the Board - Burger King Franchiser

                                James R. Peacock
               Vice Chairman of the Board - Real Estate Developer

                                Gary G. Campbell
                      President and Chief Executive Officer

                                Richard R. Dwyer
                                   Stockbroker

                                Frederick Keiber
                              Opthamologist/Surgeon

                                 James McCollum
                                 Attorney at Law

                                  Norbert Walz
                              Real Estate Developer























                                        4

<PAGE>



                            DIRECTORS AND OFFICERS OF

                      THE COMMERCIAL BANK OF VOLUSIA COUNTY

                                    OFFICERS

                                 Bob Montgomery
                      President and Chief Financial Officer

                              Harvey E. Buckmaster
           Senior Vice President - Chief Financial Officer and Cashier

                                 Charles E. Merz
                        Vice President - Commercial Loans

                                Barbara A. Cloyd
                      Assistant Vice President - Operations

                                   Sandy Bowe
                 Assistant Vice President - Loan Administration

                                  Ginny Goodin
                            Assistant Vice President

                                    DIRECTORS

                                James R. Peacock
                  Chairman of the Board - Real Estate Developer

                                   Larry Kent
               Vice Chairman of the Board - Burger King Franchiser

                                Gary G. Campbell
                          The Commercial Bancorp, Inc.

                               Stanley S. Bronski
                                     Retired

                                Richard R. Dwyer
                                   Stockbroker

                                Thomas R. Horton
                           Trustee/Stetson University

                               Susan A. Nicholson
                                Interior Designer

                               Clarence Singletary
                              Real Estate Developer

                                Michael D. Crotty
                                 Attorney at Law

                               William L. Oliveri
                           Certified Public Accountant

                                   Kirk Bauer
                                 Attorney at Law



                                        5

<PAGE>

                             SELECTED FINANCIAL DATA

            At December 31, 1998 and 1997 or For the Years Then Ended
                (Dollars in thousands, except per share figures)
<TABLE>

                                                                                              1998               1997
                                                                                              ----               ----
<S>                                                                                       <C>                 <C>  
At Year End:
Cash and cash equivalents...............................................................  $   4,949             2,466
Securities..............................................................................      3,302             -
Loans, net..............................................................................     11,563             3,746
All other assets........................................................................      1,862               866
                                                                                           --------          --------

     Total assets.......................................................................  $  21,676             7,078
                                                                                            =======           =======

Deposits................................................................................     16,785             2,678
Borrowings..............................................................................      1,365              -
All other liabilities...................................................................        269                66
Stockholders' equity....................................................................      3,257             4,334
                                                                                           --------           -------

     Total liabilities and stockholders' equity.........................................  $  21,676             7,078
                                                                                            =======           =======

For the Year:

Total interest income...................................................................        989               113
Total interest expense..................................................................        632                44
                                                                                          ---------         ---------

Net interest income.....................................................................        357                69
Provision for loan losses...............................................................        725                35
                                                                                          ---------         ---------

Net interest (loss) income after provision for loan losses..............................       (368)               34
                                                                                          ---------         ---------

Noninterest income......................................................................         52                 2
Noninterest expenses....................................................................      1,233               481
                                                                                           --------          --------

Loss before income tax benefit and cumulative effect of change in
     accounting principle...............................................................     (1,549)             (445)

Income tax benefit......................................................................       (578)             (183)
                                                                                           --------          --------

Net loss before cumulative effect of change in accounting principle                            (971)             (262)

Cumulative effect of accounting change for organization costs                                  (100)               -
                                                                                           --------           -------

Net loss................................................................................  $  (1,071)             (262)
                                                                                            =======          ========

Basic and diluted loss per share:
     Loss before cumulative effect of change in accounting principle                          (2.09)            (2.00)
     Cumulative effect of accounting change for organization costs                             (.22)              -
                                                                                          ---------           -------

     Net loss........................................................................... $    (2.31)            (2.00)
                                                                                           ========          ========

Weighted-average number of shares outstanding for basic and diluted.....................    464,791           130,682
                                                                                            =======           =======


Ratios and Other Data:

Return on average assets................................................................      (6.35%)           (9.18%)
Return on average equity................................................................     (28.23%)          (11.91%)
Average equity to average assets........................................................       22.51%           77.02%
Net interest margin.....................................................................        2.42%            3.28%
Noninterest expenses to average assets..................................................        7.32%           16.85%
Ratio of average interest-earning assets to average interest-bearing liabilities........        1.22             3.43
Nonperforming loans as a percentage of total assets at end of year......................        5.53%              -
Allowance for loan losses as a percentage of total loans at end of year.................        6.17%             .93%
Allowance for loan loses as a percentage of nonperforming loans                               127.24%              N/A
Number of banking offices...............................................................           1                1
Total shares outstanding at end of year.................................................     464,791          464,791
Book value per share at end of year.....................................................      $ 7.01             9.32
Dividend pay-out ratio..................................................................       -                 -
</TABLE>

                                        6
<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                     Years Ended December 31, 1998 and 1997

                                     General

The Commercial  Bancorp,  Inc.  ("TCB") was incorporated on August 15, 1996. TCB
owns 100% of the  outstanding  common  stock of The  Commercial  Bank of Volusia
County   ("TCB-Volusia")   (collectively   also   "TCB").   TCB  was   organized
simultaneously  with  TCB-Volusia  and its only  business is the  ownership  and
operation of TCB-Volusia.  TCB-Volusia is a Florida  state-chartered  commercial
bank and is insured by the Federal Deposit  Insurance  Corporation.  TCB-Volusia
opened for business on October 14, 1997, and provides community banking services
to businesses and individuals in Volusia County, Florida.

At December 31, 1998, TCB had total  consolidated  assets of $21.7  million,  an
increase of 206.24%  over total  assets of $7.1  million at December  31,  1997.
During the year ended December 31, 1998, net loans receivable  increased to $7.8
million from $11.6 million at December 31, 1997.  TCB's  portfolio of securities
increased  to $3.3 million at December 31,  1998.  TCB's  deposits  increased to
$16.8  million at December  31, 1998 from $2.7  million as of December 31, 1997.
TCB's  borrowings  increased to $1.4 million as of December 31, 1998.  TCB had a
consolidated  net loss of  $1,071,000  or $2.31 basic and diluted loss per share
for the year ended  December  31,  1998  compared  to  consolidated  net loss of
$262,000 or $2.00 basic and diluted loss per share for 1997.

                                New Bank Charter

TCB along  with a group of local  organizers  made  application  to the state of
Florida for a bank charter in Highlands County,  Florida.  Management planned to
raise the capital for the new bank from a public offering of TCB's common stock.
In early 1999,  TCB withdrew their  application  and the local  organizers  from
Highlands County elected to continue  without TCB.  Because of this,  management
has  terminated  its planned  public  offering  and has  charged-off  $88,986 in
prepaid offering expenses as of December 31, 1998.

                           Regulation and Legislation

As a  state-chartered  commercial  bank,  TCB-Volusia  is subject  to  extensive
regulation by the Florida  Department of Banking and Finance ("Florida DBF") and
the Federal Deposit Insurance  Corporation  ("FDIC").  TCB-Volusia files reports
with the  Florida  DBF and the FDIC  concerning  its  activities  and  financial
condition,  in addition to obtaining regulatory approvals prior to entering into
certain  transactions  such as mergers with or  acquisitions  of other financial
institutions.  Periodic  examinations  are  performed by the Florida DBF and the
FDIC  to  monitor   TCB-Volusia's   compliance   with  the  various   regulatory
requirements. TCB and TCB-Volusia are also subject to regulation and examination
by the Federal Reserve Board of Governors.

                              Year 2000 Compliance

TCB is acutely aware of the many areas affected by the Year 2000 computer issue,
including  those  addressed by the Federal  Financial  Institutions  Examination
Council in its interagency  statement which provided an outline for institutions
to  effectively  manage  the Year  2000  challenges.  A Year  2000 plan has been
approved by the Board of Directors which includes  multiple phases,  tasks to be
completed, and target dates for completion. Issues addressed in the plan include
awareness,  assessment,  renovation,  validation,  implementation,  testing, and
contingency planning.

TCB has formed a Year 2000  committee  that is  charged  with the  oversight  of
completing  the Year 2000  project  on a timely  basis.  TCB has  completed  its
awareness,  assessment  and  renovation  phases  and  is  actively  involved  in
validating and implementing its plan. At the present time, TCB has substantially
completed  its  testing  phase.   Since  it  routinely  upgrades  and  purchases
technologically  advanced  software and hardware on a continual  basis,  TCB has
determined that the cost of making modifications to correct any Year 2000 issues
will not materially affect reported operating results.



                                        7

<PAGE>



TCB's vendors and suppliers  have been  contacted  for written  confirmation  of
their  product  readiness  for  Year  2000  compliance.  Negative  or  deficient
responses are analyzed and  periodically  reviewed to prescribe  timely  actions
within TCB's  contingency  planning.  TCB's main service  provider has completed
testing  of its  mission  critical  application  software  and  item  processing
software; the test results, which have been documented and validated, are deemed
to be Year 2000  compliant.  FFIEC  guidance on testing Year 2000  compliance of
service  providers states that proxy tests are acceptable  compliance  tests. In
proxy  testing,  the  service  provider  tests with a  representative  sample of
financial  institutions that use a particular service,  with the results of such
testing shared with all similarly situated clients of the service provider.  TCB
has  authorized  the acceptance of proxy testing since the proxy tests have been
conducted with financial institutions that are similar in type and complexity to
its own,  using the same  version of the Year 2000 ready  software  and the same
hardware and operating systems.

TCB also  recognizes  the  importance  of  determining  that its  borrowers  are
addressing  the Year 2000 problem in a timely manner to avoid  deterioration  of
TCB's loan portfolio solely due to this issue. All material  relationships  have
been  identified and  questionnaires  have been completed to assess the inherent
risks.  Deposit  customers have received  statement  stuffers and  informational
material  in this  regard.  TCB  plans to work on a  one-on-one  basis  with any
borrower who has been identified as having high Year 2000 risk exposure.

Accordingly,  management  does not believe  that TCB has  incurred or will incur
material  costs  associated  with the Year  2000  issue.  Yet,  there  can be no
assurances  that all hardware  and software  that TCB will use will be Year 2000
compliant. Management cannot predict the amount of financial difficulties it may
incur due to  customers  and vendors  inability  to perform  according  to their
agreements  with TCB or the  effects  that other  third  parties  may cause as a
result of this issue.  Therefore,  there can be no assurance that the failure or
delay of others to address the issue or that the costs  involved in such process
will not have a material adverse effect on TCB's business,  financial condition,
and results of operations.

TCB's  contingency  plans relative to Year 2000 issues have not been finalized -
these  plans are  evolving  as the  testing  of  systems  proceeds.  During  the
completion of the testing phase  management will determine if it is necessary to
develop a "worst case scenario"  contingency  plan.  Based on testing results to
date (as noted  above),  TCB's mission  critical  systems have been deemed to be
Year 2000  compliant  and,  therefore a contingency  plan has not been developed
with respect to those  systems.  With regards to non-mission  critical  internal
systems, TCB's contingency plans are to replace those systems that test as being
noncompliant.  Alternatively,  some  systems  could be  handled  manually  on an
interim basis. Should outside service providers not be able to provide compliant
systems,  TCB will terminate those  relationships and transfer to other vendors.
It is anticipated that TCB's deposit  customers will have increased  demands for
cash in the latter part of 1999 and  correspondingly  TCB will  maintain  higher
liquidity levels.

                         Liquidity and Capital Resources

A  state-chartered  commercial  bank is  required  under  Florida  law and  FDIC
regulations  to  maintain  a  liquidity  reserve  of at least  15% of its  total
transaction  accounts  and 8% of its total  nontransaction  accounts  subject to
certain restrictions.  The reserve may consist of cash-on-hand,  demand deposits
due from  correspondent  banks, and other investments and short-term  marketable
securities. At December 31, 1998 and December 31, 1997, TCB-Volusia exceeded its
regulatory liquidity requirements.

TCB's primary source of cash and cash equivalents during the year ended December
31, 1998 was net deposit  inflows of $14.1 million and  repayments on securities
available  for sale of $2.9  million.  During  this same  period,  cash and cash
equivalents were used to originate loans, net of repayments, of $8.6 million and
purchase  securities  available  for  sale of $6.3  million  resulting  in a net
increase in cash and cash  equivalents  of  approximately  $2.5  million.  TCB's
primary  source of cash during the year ended December 31, 1997 was the proceeds
from the sale of common  stock of $4.6  million and net deposit  inflows of $2.7
million. Cash was used primarily to originate loans and to purchase premises and
equipment.


                                        8

<PAGE>



                                   Credit Risk

TCB's primary business is making commercial, business, consumer, and real estate
loans.  That  activity  entails  potential  loan losses,  the magnitude of which
depend on a variety of economic factors affecting borrowers which are beyond the
control of TCB.  While TCB has  instituted  underwriting  guidelines  and credit
review procedures to protect TCB from avoidable credit losses,  some losses will
inevitably  occur. The provision for loan losses for the year ended December 31,
1998 was $725,000 and the allowance for loan losses was $760,000 at December 31,
1998.  The  provision  and  the  allowance   increased   primarily  due  to  the
classification  of commercial loans to two borrowers during the third quarter of
1998. Management has identified certain weaknesses in these borrowers. These two
relationships include $597,000 (4.84% of total loans) in commercial loans to one
borrower which were more than 180 days past due at December 31, 1998 and another
commercial  relationship  of $602,000 (4.89% of total loans) which was more than
ninety days past due at December 31, 1998.  Management believes the allowance at
December 31, 1998 is adequate.  Both loans are on nonaccrual  status at December
31,  1998.  TCB  had no  nonaccrual  loans  at  December  31,  1997,  and has no
charge-off experience.

The  following  table sets forth  information  with respect to activity in TCB's
allowance for loan losses during the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                             Year Ended December 31,
                                                                                             -----------------------
                                                                                           1998                  1997
                                                                                           ----                  ----
<S>                                                                                     <C>                      <C>  

     Average loans outstanding.......................................................   $  8,466                   259
                                                                                          ======               =======

     Allowance at beginning of year..................................................         35                    -
     Provision for loan losses.......................................................        725                    35
                                                                                         -------               -------

     Allowance at end of year........................................................  $     760                    35
                                                                                         =======               =======

     Allowance as a percent of total loans...........................................       6.17%                  .93%
                                                                                         =======                ======

     Total gross loans at end of year................................................   $ 12,319                 3,770
                                                                                          ======                 =====
</TABLE>

The following  table presents  information  regarding  TCB's total allowance for
losses as well as the  allocation  of such amounts to the various  categories of
loans (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                                At December 31,
                                                                               -----------------------------------------
                                                                                      1998                  1997
                                                                                      ----                  ----
                                                                                            Loans                 Loans
                                                                                             to                    to
                                                                                            Total                 Total
                                                                               Amount       Loans     Amount      Loans
                                                                               ------       -----     ------      -----

<S>                                                                            <C>          <C>         <C>       <C>   
               Commercial.................................................     $ 733         75.1%      $ 27       75.1%
               Residential real estate....................................        13         11.8          4       11.4
               Commercial real estate.....................................         6          5.8          2        6.4
               Consumer and home equity...................................         8          7.3          2        7.1
                                                                               -----       ------        ---     ------

               Total allowance for loan losses............................     $ 760        100.0%      $ 35      100.0%
                                                                                 ===        =====         ==      =====

</TABLE>

                                        9

<PAGE>



                           Loan Portfolio Composition

Commercial  loans and residential  real estate loans comprise the largest groups
of loans in TCB's  portfolio.  As of December  31, 1998 and  December  31, 1997,
commercial  loans amounted to $9.3 million or 75.1% and $2.8 million or 75.1% of
the total loan portfolio. Residential real estate loans amounted to $1.4 million
or 11.8% and $429,000 or 11.4% as of December 31, 1998 and December 31, 1997, of
which approximately 89.5% and 86.9% are first mortgage loans.

Consumer and home equity loans comprise the next largest group of loans in TCB's
loan portfolio,  amounting to $897,000 or 7.3% and $268,000 or 7.1% of the total
loan portfolio as of December 31, 1998 and December 31, 1997. As of December 31,
1998 and December 31, 1997,  commercial real estate loans,  amounted to $717,000
or 5.8% and $241,000 or 6.4%, of the total loan portfolio.

The  following  table sets forth the  composition  of TCB's  loan  portfolio  at
December 31, 1998 and 1997:
<TABLE>
<CAPTION>


                                                                                     1998                1997
                                                                              ------------------     ----------------
                                                                                          % of                  % of
                                                                              Amount      Total       Amount    Total
                                                                              ------      -----       ------    -----
                                                                                               (In thousands)

<S>                                                                           <C>         <C>          <C>       <C>   
               Commercial................................................   $  9,255       75.1%     $ 2,832      75.1%
               Residential real estate...................................      1,450       11.8          429      11.4
               Commercial real estate....................................        717        5.8          241       6.4
               Consumer and home-equity..................................        897        7.3          268       7.1
                                                                            --------     ------       ------    ------

                                                                              12,319      100.0%       3,770     100.0%
                                                                                          =====                  =====

               (Subtract) add:
                 Allowance for loan losses...............................       (760)                    (35)
                 Net deferred costs......................................          4                      11
                                                                             -------                 -------

               Loans, net................................................   $ 11,563                 $ 3,746
                                                                              ======                   =====
</TABLE>

                                   Securities

The securities portfolio is comprised of mortgage-backed  securities.  According
to Financial  Accounting  Standards No. 115, the  securities  portfolio  must be
categorized  as either "held to  maturity",  "available  for sale" or "trading".
Securities  held  to  maturity  represent  those  securities  which  TCB has the
positive intent and ability to hold to maturity.  Securities  available for sale
represent those  investments  which may be sold for various  reasons,  including
changes in interest  rates and liquidity  considerations.  These  securities are
reported at fair market value with unrealized gains and losses being reported as
a separate  component  of  stockholders  equity,  net of income  taxes.  Trading
securities  are held primarily for resale and are recorded at their fair values.
Unrealized  gains or losses on trading  securities  are included  immediately in
earnings.  At December 31, 1998,  TCB had no securities  categorized  as held to
maturity or trading. At December 31, 1997, TCB did not have any securities.

The following table sets forth the carrying value of TCB's securities portfolio,
maturities of which all exceed ten years (dollars in thousands):
<TABLE>
<CAPTION>

                                                                                        At December 31,       Average
                                                                                           1998               Yield
                                                                                           ----               -----
         Securities available for sale:
<S>                                                                                      <C>                    <C>  
               Mortgage-backed securities..............................................  $ 3,302                4.07%
                                                                                           =====                ====
</TABLE>


                                       10

<PAGE>



                         Regulatory Capital Requirements

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

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  TCB-Volusia to maintain  minimum amounts and percents (set forth in the
table  below) of total and Tier I capital  (as  defined in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets  (as  defined).  Management  believes,  as of  December  31,  1998,  that
TCB-Volusia meets all capital adequacy requirements to which it is subject.
<TABLE>
<CAPTION>
                                                                                                    To Be Well
                                                                          Minimum                Capitalized Under
                                                                        For Capital              Prompt Corrective
                                                 Actual              Adequacy Purposes:          Action Provisions
                                                 ------              ------------------          -----------------
                                       Amount            %          Amount           %          Amount            %
                                       ------            -          ------           -          ------            -
                                                                          (dollars in thousands)
<S>                                   <C>                <C>       <C>               <C>        <C>              <C>  
     As of December 31, 1998:
         Total capital (to Risk-
         Weighted Assets).........    $ 3,168            23.2%     $ 1,081           8.0%       $ 1,352          10.0%
         Tier I Capital (to Risk-
         Weighted Assets).........      2,504            18.3          541           4.0            811           6.0
         Tier I Capital
         (to Average Assets)......      2,504            12.6          798           4.0          1,596           5.0

     As of December 31, 1997:
         Total capital (to Risk-
         Weighted Assets).........   $  3,950            92.7%       $ 341           8.0%         $ 426          10.0%
         Tier I Capital (to Risk-
         Weighted Assets).........      3,767            88.4          171           4.0            256           6.0
         Tier I Capital
         (to Average Assets)......      3,767            69.2          218           4.0            272           5.0

</TABLE>


                                       11

<PAGE>



                                   Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates.
TCB's  market risk arises  primarily  from  interest-rate  risk  inherent in its
lending and deposit taking activities. To that end, management actively monitors
and manages its  interest-rate  risk  exposure.  The  measurement of market risk
associated  with financial  instruments is meaningful  only when all related and
offsetting  on-  and  off-balance-sheet  transactions  are  aggregated,  and the
resulting  net  positions are  identified.  Disclosures  about the fair value of
financial instruments,  which reflect changes in market prices and rates, can be
found in Note 8 of Notes to Consolidated Financial Statements.

TCB's  primary  objective  in managing  interest-rate  risk is to  minimize  the
adverse  impact of changes in interest  rates on TCB's net  interest  income and
capital,  while adjusting TCB's asset-liability  structure to obtain the maximum
yield-cost spread on that structure. TCB relies primarily on its asset-liability
structure  to control  interest-rate  risk.  However,  a sudden and  substantial
increase in interest rates may adversely  impact TCB's  earnings,  to the extent
that the  interest  rates borne by assets and  liabilities  do not change at the
same speed,  to the same  extent,  or on the same basis.  TCB does not engage in
trading activities.

                           Asset - Liability Structure

As part of its asset and liability management,  TCB has emphasized  establishing
and  implementing  internal  asset-liability  decision  processes,  as  well  as
communications  and  control  procedures  to aid  in  managing  TCB's  earnings.
Management  believes that these processes and procedures provide TCB with better
capital planning, asset mix and volume controls,  loan-pricing  guidelines,  and
deposit  interest-rate  guidelines  which should result in tighter  controls and
less exposure to interest-rate risk.

The matching of assets and  liabilities  may be analyzed by examining the extent
to which such  assets and  liabilities  are  "interest  rate  sensitive"  and by
monitoring  an  institution's  interest  rate  sensitivity  "gap."  An  asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap  is  defined  as  the  difference   between   interest-earning   assets  and
interest-bearing  liabilities  maturing or repricing within a given time period.
The gap ratio is computed as rate sensitive assets/rate sensitive liabilities. A
gap ratio of 1.0% represents perfect matching. A gap is considered positive when
the amount of  interest-rate  sensitive assets exceeds  interest-rate  sensitive
liabilities.  A gap is  considered  negative  when the  amount of  interest-rate
sensitive liabilities exceeds interest-rate sensitive assets. During a period of
rising  interest  rates,  a negative  gap would  adversely  affect net  interest
income, while a positive gap would result in an increase in net interest income.
During a period of falling  interest  rates,  a negative  gap would result in an
increase in net interest income, while a positive gap would adversely affect net
interest income.

In order to minimize the potential for adverse effects of material and prolonged
increases  in interest  rates on the  results of  operations,  TCB's  management
continues to monitor asset and liability management policies to better match the
maturities   and   repricing   terms   of  its   interest-earning   assets   and
interest-bearing  liabilities.  Such policies have  consisted  primarily of: (i)
emphasizing the origination of adjustable-rate  loans; (ii) maintaining a stable
core deposit base; and (iii) maintaining a significant  portion of liquid assets
(cash and short-term securities).


                                       12

<PAGE>



The  following   table  sets  forth  certain   information   relating  to  TCB's
interest-earning  assets and  interest-bearing  liabilities at December 31, 1998
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
<TABLE>
<CAPTION>

                                                             More       More
                                                             Than       Than
                                                            Three       Six           More          More
                                                             Months     Months       than One      than
                                              Three        to Six       to One       Year to       Five
                                               Months        Months       Year      Five Years      Years       Total
                                               ------        ------       ----      ----------      -----       -----
<S>                                          <C>              <C>        <C>            <C>         <C>         <C>            
Loans (1):
    Commercial............................    $ 8,910           -            2             289         54        9,255
    Residential real estate...............         40           -           -               61      1,349        1,450
    Commercial real estate................        684           -           -               33       -             717
    Consumer and home equity..............        186             4          9             698       -             897
                                               ------      --------    -------          ------    -------      -------

         Total loans......................      9,820             4         11           1,081      1,403       12,319

Securities................................      1,414         1,888         -             -          -           3,302
Federal funds sold........................      4,259           -           -             -          -           4,259
                                               ------       -------    -------        --------   --------      -------

         Total rate-sensitive assets......     15,493         1,892         11           1,081      1,403       19,880
                                               ------         -----     ------           -----      -----       ------

Deposit accounts (2):
    Money-market deposits.................        329           -           -             -          -             329
    Savings and NOW deposits..............      5,069           -           -             -          -           5,069
    Time deposits.........................      3,156         1,119        833           5,375       -          10,483
                                                -----         -----     ------           -----   --------       ------

         Total deposits...................      8,554         1,119        833           5,375       -          15,881

    Borrowings............................        365           -           -             -         1,000        1,365
                                              -------      --------   --------        --------      -----      -------

         Total rate-sensitive liabilities.      8,919         1,119        833           5,375      1,000       17,246
                                              -------      --------   --------        --------      -----      -------

GAP (repricing differences)...............   $  6,574           773       (822)         (4,294)       403        2,634
                                               ======        ======     ======           =====     ======       ======

Cumulative GAP............................   $  6,574         7,347      6,525           2,231      2,634
                                               ======         =====      =====           =====      =====

Cumulative GAP/total assets...............      30.27%        33.83%     30.04%          10.27%     12.13%
                                                =====         =====      =====           =====      =====
</TABLE>



(1)      In preparing the table above, adjustable-rate loans are included in the
         period in which the interest  rates are next scheduled to adjust rather
         than in the  period  in which the loans  mature.  Fixed-rate  loans are
         scheduled, including repayment, according to their maturities.
(2)      Money-market,  NOW,  and  savings  deposits  are  regarded  as  readily
         accessible withdrawable accounts. Time deposits are scheduled according
         to their respective maturity dates.


                                       13

<PAGE>



The following table reflects the contractual  principal  repayments by period of
TCB's loan portfolio at December 31, 1998 (in thousands):
<TABLE>
<CAPTION>

                                                              Residential      Commercial      Consumer
         Years Ending                                             Real            Real         and Home
         December 31,                            Commercial      Estate          Estate         Equity         Total
         ------------                            ----------      ------          ------         ------         -----

<S>                                               <C>             <C>             <C>             <C>          <C>   
           1999.............................      $ 4,886         -               629              77           5,592
           2000.............................          315         -               -               175             490
           2001-2002........................        1,910            16            59             379           2,364
           2003-2004........................        1,651            71            29             210           1,961
           2005 & beyond....................          493         1,363           -                56           1,912
                                                   ------         -----         -----            ----          ------

           Total............................      $ 9,255         1,450           717             897          12,319
                                                    =====         =====           ===             ===          ======
</TABLE>

Of the $6.7 million of loans at December  31, 1998 due after one year,  36.9% of
such loans have fixed interest rates and 63.1% have adjustable interest rates.

Scheduled  contractual  principal  repayments of loans do not reflect the actual
life of such assets.  The average life of loans is substantially less than their
average contractual terms due to prepayments.  In addition,  due-on-sale clauses
on loans generally give TCB the right to declare a conventional loan immediately
due and payable in the event,  among other things,  that the borrower  sells the
real  property  subject to the mortgage and the loan is not repaid.  The average
life of mortgage loans tends to increase,  however,  when current  mortgage loan
rates are  substantially  higher  than  rates on  existing  mortgage  loans and,
conversely,  decrease when rates on existing mortgages are substantially  higher
than current mortgage loan rates.

Origination  and  Repayment  of  Loans.  The  primary  focus of  TCB's  new loan
originations are to commercial borrowers.  These loans are attributable to TCB's
relationship  with their depositors and other existing  customers as well as its
local advertising.  TCB generally originates loans on real estate located in its
primary geographical lending area in Volusia County, Florida.

The following table sets forth total loan originations and principal repayments:
<TABLE>
<CAPTION>

                                                                                              Year Ended December 31,
                                                                                              -----------------------
                                                                                              1998               1997
                                                                                              ----               ----
                                                                                                     (In thousands)

<S>                                                                                          <C>                <C>  
         Originations:
              Commercial...............................................................      $ 6,948            3,290
              Residential real estate..................................................        1,237              430
              Commercial real estate...................................................        1,019             -
              Consumer and home equity.................................................          743              271
                                                                                             -------           ------

                 Total loans originated................................................        9,947            3,991

              Principal reductions.....................................................       (1,398)            (221)
                                                                                               -----           ------

              Increase in total loans..................................................      $ 8,549            3,770
                                                                                               =====            =====
</TABLE>


                                       14

<PAGE>



Deposits and Other Sources of Funds

General. In addition to deposits, the sources of funds available for lending and
other business  purposes  include loan  repayments  and principal  repayments on
securities.  Loan  repayments  are a relatively  stable  source of funds,  while
deposit inflows and outflows are influenced  significantly  by general  interest
rates and money-market conditions.  Borrowings may be used on a short-term basis
to compensate  for  reductions in other  sources,  such as deposits at less than
projected levels.

Deposits.  Deposits are  attracted  principally  from TCB's  primary  geographic
market areas in Volusia County, Florida. TCB offers a broad selection of deposit
instruments  including  demand  deposit  accounts,  NOW accounts,  money- market
accounts,  regular savings accounts,  term certificate accounts,  and retirement
savings plans (such as IRA  accounts).  Certificate  of deposit rates are set to
encourage longer  maturities as cost and market  conditions will allow.  Deposit
account  terms vary,  with the  primary  differences  being the minimum  balance
required,  the time period the funds must remain on  deposit,  and the  interest
rate.  TCB has  emphasized  commercial  banking  relationships  in an  effort to
increase demand deposits as a percentage of total deposits.

Management  sets the deposit  interest rates weekly based on a review of deposit
flows for the previous  week and a survey of rates among  competitors  and other
financial institutions in Florida.

The following  table shows the  distribution  of, and certain other  information
relating to, TCB's deposit accounts by type (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                         At December 31,
                                                                                         ---------------
                                                                                   1998                   1997
                                                                                   ----                   ----
                                                                                     % of                     % of
                                                                             Amount  Deposits       Amount   Deposits
                                                                             ------  --------       ------   --------

<S>                                                                        <C>          <C>        <C>          <C>   
         Demand deposits................................................  $     905       5.4%     $   832       31.0%
         NOW deposits...................................................      4,859      28.9          948       35.4
         Money-market deposits..........................................        329       2.0           66        2.5
         Savings deposits...............................................        209       1.2           93        3.5
                                                                                ---     -----       ------     ------

              Subtotal     .............................................      6,302      37.5        1,939       72.4

         Certificates of deposit:
              3.00% - 3.99%.............................................        164       1.0          -          -
              4.00% - 4.99%.............................................      1,310       7.8          -          -
              5.00% - 5.99%.............................................      5,262      31.4          514       19.2
              6.00% - 6.99%.............................................      3,747      22.3          225        8.4
                                                                            -------     -----       ------     ------

         Total certificates of deposit..................................     10,483      62.5          739       27.6
                                                                             ------     -----       ------      -----

         Total deposits.................................................   $ 16,785     100.0%     $ 2,678      100.0%
                                                                             ======     =====        =====      =====
</TABLE>

The following table presents by various  interest rate categories the amounts of
certificates  of deposit at December  31, 1998 which  mature  during the periods
indicated (in thousands):
<TABLE>
<CAPTION>

                                                                                   Year Ending December 31,
                                                                                   ------------------------
                                                                            1999        2000         2001       Total
                                                                            ----        ----         ----       -----

<S>                                                                       <C>          <C>            <C>      <C>   
     3.00% - 3.99%...................................................     $   164        -             -          164
     4.00% - 4.99%...................................................       1,258         23           29       1,310
     5.00% - 5.99%...................................................       3,387      1,747          128       5,262
     6.00% - 6.99%...................................................         298      3,449          -         3,747
                                                                           ------      -----        -----       -----

     Total certificates of deposit...................................     $ 5,107      5,219          157      10,483
                                                                            =====      =====          ===      ======
</TABLE>


                                       15

<PAGE>



Jumbo certificates ($100,000 and over) mature as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                                      December 31,
                                                                                                ------------------------
                                                                                                  1998           1997
                                                                                                  ----           ----

<S>                                                                                             <C>               <C>
     Due three months or less................................................................  $    402           -
     Due over three months to six months.....................................................       100           100
     Due over six months to one year.........................................................       201           -
     Due over one year.......................................................................       827           200
                                                                                                 ------           ---

                                                                                                $ 1,530           300
                                                                                                  =====           ===
</TABLE>

The  following  table sets forth the net deposit flows of TCB during the periods
indicated (in thousands):
<TABLE>
<CAPTION>

                                                                                              Year Ended December 31,
                                                                                              -----------------------
                                                                                                   1998       1997
                                                                                                   ----       ----

<S>                                                                                            <C>             <C>  
     Net increase before interest credited..............................................       $ 13,494        2,668
     Net credited.......................................................................            613           10
                                                                                               --------       ------

          Net deposit increase..........................................................       $ 14,107        2,678
                                                                                                 ======        =====
</TABLE>

The  following  table shows the average  amount of and the average  rate paid on
each of the following  interest-bearing  deposit account  categories  during the
periods indicated (dollars in thousands):
<TABLE>
<CAPTION>

                                                                                  1998                  1997
                                                                           -----------------------------------------
                                                                           Average   Average      Average    Average
                                                                           Balance     Yield      Balance      Yield
                                                                           -------     -----      -------      -----

<S>                                                                       <C>           <C>         <C>         <C>  
     Savings and NOW deposits......................................       $  3,282      3.90%       $ 112       3.57%
     Money-market deposits.........................................            184      2.72           67       2.99
     Time deposits.................................................          8,289      5.73           74       5.41
                                                                            ------                    ---

          Total interest-bearing deposits..........................       $ 11,755      5.17%       $ 253       3.95%
                                                                            ======      ====          ===       ====
</TABLE>



                                       16

<PAGE>



                              Results of Operations

The operating results of TCB depend primarily on its net interest income,  which
is the  difference  between  interest  income  on  interest-earning  assets  and
interest  expense  on  interest-bearing  liabilities,  consisting  primarily  of
deposits.  Net interest  income is determined by the  difference  between yields
earned on interest-earning assets and rates paid on interest-bearing liabilities
("interest-rate spread") and the relative amounts of interest-earning assets and
interest-bearing   liabilities.   TCB's  interest-rate  spread  is  affected  by
regulatory,  economic,  and competitive  factors that influence  interest rates,
loan demand, and deposit flows. In addition,  TCB's net loss is also affected by
the  level of  nonperforming  loans,  as well as the  level  of its  noninterest
income,  and its noninterest  expenses,  such as salaries and employee benefits,
occupancy and equipment costs and income taxes.

The following table sets forth, for the periods indicated, information regarding
(i) the  total  dollar  amount  of  interest  and  dividend  income  of TCB from
interest-earning  assets and the resultant  average yield; (ii) the total dollar
amount of interest  expense on  interest-bearing  liabilities  and the resultant
average costs; (iii) net  interest/dividend  income; (iv) interest-rate  spread;
(v) net interest margin. Average balances are based on average daily balances.
<TABLE>
<CAPTION>

                                                                                      Year Ended December 31,
                                                               ----------------------------------------------------------------
                                                                              1998                               1997
                                                               ----------------------------------------------------------------
                                                                            Interest     Average               Interest   Average
                                                                 Average       and        Yield/     Average      and     Yield/
                                                                 Balance    Dividends     Rate       Balance   Dividends   Rate
                                                                 -------    ---------     ----       -------   ---------   ----
                                                                                                (Dollars in thousands)
Interest-earning assets:
<S>                                                            <C>             <C>         <C>       <C>           <C>     <C>  
     Loans.................................................    $  8,466        690         8.14%     $  259        23      8.88%
     Securities............................................       2,973        121         4.07          -          -         -
     Other interest-earning assets (1).....................       3,292        178         5.41       1,842        90      4.88
                                                                -------        ---                    -----       ---

         Total interest-earning assets.....................      14,731        989         6.71       2,101       113      5.38
                                                                               ---                                ---

Noninterest-earning assets.................................       2,128                                 754
                                                                 ------                              ------

         Total assets......................................    $ 16,859                             $ 2,855
                                                                 ======                               =====

Interest-bearing liabilities:
     Savings and NOW deposits..............................       3,282        128         3.90         112         4      3.57
     Money-market deposits.................................         184          5         2.72          67         2      2.99
     Time deposits.........................................       8,289        475         5.73          74         4      5.41
     Borrowings............................................         350         24         6.86         359        34      9.47
                                                                -------        ----                  ------       ---

         Total interest-bearing liabilities................      12,105        632         5.22         612        44      7.19
                                                                                            ---                   ---

Noninterest-bearing deposits...............................         430                                  23
Noninterest-bearing liabilities............................         529                                  21
Stockholders' equity.......................................       3,795                               2,199
                                                                 ------                               -----

         Total liabilities and stockholders'
              equity.......................................    $ 16,859                             $ 2,855
                                                                 ======                               =====

Net interest/dividend income...............................                  $ 357                              $  69
                                                                               ===                                ===

Interest-rate spread (2)...................................                                1.49%                          (1.81%)
                                                                                           ====                            ====

Net interest margin (3)....................................                                2.42%                           3.28%
                                                                                           ====                            ====

Ratio of average interest-earning assets to
     average interest-bearing liabilities..................        1.22                                          3.43
                                                                   ====                                          ====
</TABLE>


(1)       Other   interest-earning    assets   include   federal   funds   sold,
          interest-earning deposits and Federal Home Loan Bank stock.
(2)       Interest-rate  spread  represents the  difference  between the average
          yield   on   interest-earning   assets   and  the   average   cost  of
          interest-bearing liabilities.
(3)       Net interest margin is net interest/dividend income divided by average
          interest-earning assets.

                                       17

<PAGE>



Rate/Volume Analysis

The following table sets forth certain information regarding changes in interest
income and interest expense of TCB for the periods indicated.  For each category
of  interest-earning  assets and  interest-bearing  liabilities,  information is
provided  on  changes  attributable  to (1)  changes  in  rate  (change  in rate
multiplied by prior volume),  (2) changes in volume (change in volume multiplied
by prior  rate) and (3) changes in  rate-volume  (change in rate  multiplied  by
change in volume).

<TABLE>
<CAPTION>

                                                                                         Year Ended December 31,
                                                                                             1998 vs. 1997
                                                                                             -------------
                                                                                       Increase (Decrease) Due to
                                                                                       --------------------------
                                                                                                      Rate/
                                                                                  Rate    Volume     Volume     Total
                                                                                  ----    ------     ------     -----
                                                                                                (In thousands)
<S>                                                                               <C>         <C>        <C>      <C>
Interest earning assets:
    Loans....................................................................     $ (2)       723       (54)      667
    Securities...............................................................       -         -         121       121
    Other interest-earning assets............................................      (45)        93        40        88
                                                                                    --       ----       ---      ----

      Total..................................................................      (47)       816       107       876
                                                                                    --        ---       ---       ---

Interest-bearing liabilities:
    Deposits:
      Savings and NOW deposits...............................................       -         106        18       124
      Money-market deposits..................................................       (1)         9        (5)        3
      Time deposits..........................................................       -         473        (2)      471
      Borrowings.............................................................      (10)       (13)       13       (10)
                                                                                    --        ---       ---       ---

      Total..................................................................      (11)       575        24       588
                                                                                    --        ---       ---       ---

Net change in net interest income............................................     $(36)       241        83       288
                                                                                    ==        ===       ===       ===
</TABLE>



                                       18

<PAGE>



Comparison  of the Year  Ended  December  31,  1998  Compared  to the Year Ended
December 31, 1997

General. Net loss for the year  ended  December  31,  1998 was  $(1,071,398)  or
     $(2.31) per basic and diluted  share  compared to a loss of  $(261,698)  or
     $(2.00) per basic and diluted  share for the year ended  December 31, 1997.
     The increased losses in 1998 resulted from an increased loan loss provision
     and allowance related to two loans.

Interest Income and Expense. Interest income totaled $988,527 for the year ended
     December 31, 1998 compared to $112,458 for 1997.  Interest income earned on
     loans was $689,347 compared to $22,789 for 1997. The increase resulted from
     an increase in the average loan  balance in 1998.  The average loan balance
     for the year ended  December  31, 1998 was $8.5  million  and the  weighted
     average  yield was 8.14%  compared  to a  $259,000  average  balance  and a
     average yield of 8.88% in 1997.

     Interest on other interest earning assets totaled $178,071 in 1998 compared
     to $89,669 for 1997. The average balance of these assets  increased to $3.3
     million  1998 from $1.8  million  in 1997 and the  weighted  average  yield
     increased to 5.41% in 1998 from 4.88% in 1997.

     Interest expense increased to $631,798 for the year ended December 31, 1998
     from  $43,522 for the year ended  December 31,  1997.  Interest  expense on
     deposit accounts  amounted to $607,970 for the year ended December 31, 1998
     compared  to  $10,007  for the  year  ended  December  31,  1997.  Interest
     increased  because of growth in deposits from an average of $253,000 during
     1997 to an average of $11,755,000 during 1998. The weighted-average cost of
     deposits was 5.17%  during 1998  compared to  approximately  3.95% in 1997.
     Interest  expense on borrowed  funds amounted to $23,828 for the year ended
     December 31, 1998 compared to $33,515 for 1997.

Provision for Loan Losses.  The provision for loan losses is charged to earnings
     to bring the total  allowance to a level deemed  appropriate  by management
     and is based upon the volume and type of lending conducted by TCB, industry
     standards,   the  amount  of  nonperforming   loans  and  general  economic
     conditions,  particularly  as they relate to TCB's market areas,  and other
     factors  related  to  the  collectibility  of  TCB's  loan  portfolio.  The
     provision for the year ended December 31, 1998 was $725,000.  The provision
     and  the  allowance  increased  primarily  due  to  the  classification  of
     commercial  loans to two  borrowers  which  management  has  identified  as
     impaired  during  the  1998  period.   Management  has  identified  certain
     weaknesses in these borrowers.  Management  believes that the allowance for
     loan losses of $760,000 is adequate at December 31, 1998.

Noninterest Expense.  Noninterest  expense totaled $1,233,963 for the year ended
     December  31, 1998  compared to $480,681  for 1997.  Salaries  and employee
     benefits was the largest,  amounting  to $514,629  during 1998  compared to
     $245,302  during  1997.  TCB-Volusia  began  operations  in  October  1997,
     therefore 1998 was the first full year of banking operations resulting in a
     substantial increase in all noninterest expenses in 1998 compared to 1997.

Income Taxes. TCB recognized a credit for income taxes as well as a deferred tax
     asset because  management  believes its likely TCB will be able to generate
     taxable income in the future to offset these amounts.


                                       19

<PAGE>



                     Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance with GAAP,  which requires the measurement of financial  position and
operating results in terms of historical dollars, without considering changes in
the relative  purchasing power of money over time due to inflation.  Unlike most
industrial companies, substantially all of the assets and liabilities of TCB are
monetary in nature. As a result,  interest rates have a more significant  impact
on  TCB-Volusia's  performance  than the effects of general levels of inflation.
Interest  rates do not  necessarily  move in the same  direction  or in the same
magnitude as the prices of goods and services, since such prices are affected by
inflation to a larger extent than interest rates.

                         Future Accounting Requirements

Financial Accounting  Standards 133 - Accounting for Derivative  Investments and
Hedging Activities requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those  derivatives  would be accounted for depending on
the use of the  derivatives and whether they qualify for hedge  accounting.  The
key criterion  for hedge  accounting  is that the hedging  relationship  must be
highly  effective in achieving  offsetting  changes in fair value or cash flows.
TCB will be required to adopt this Statement effective January 1, 2000.
Management  does not anticipate  that this Statement will have a material impact
on TCB.


                                       20

<PAGE>



                           Selected Quarterly Results

The following table presents summarized quarterly data (in thousands, except per
share amounts):
<TABLE>
<CAPTION>

                                                                          Year Ended December 31, 1998
                                                                          ----------------------------
                                                              First       Second         Third      Fourth
                                                            Quarter      Quarter       Quarter     Quarter      Total
                                                            -------      -------       -------     -------      -----

<S>                                                             <C>          <C>           <C>         <C>         <C>
         Interest income...................................     $ 169        257           288         275         989
         Interest expense..................................        81        156           188         207         632
                                                                  ---        ---           ---         ---       -----

              Net interest income..........................        88        101           100          68         357

         Provision for loan losses.........................        29         26           190         480         725
                                                                  ---        ---           ---         ---      ------

              Net interest income (loss) after provision
                  for loan losses..........................        59         75           (90)       (412)       (368)
                                                                  ---        ---           ---         ---      ------

         Noninterest income................................        10          9            17          16          52
         Noninterest expense...............................       229        249           320         435       1,233
                                                                  ---        ---           ---         ---       -----
         Loss before income tax benefit and cumulative
              effect of change in accounting principle           (160)      (165)         (393)       (831)     (1,549)
         Income tax benefit ...............................       (50)       (53)         (135)       (340)       (578)
                                                                  ---        ---           ---         ---      ------

         Net loss before cumulative effect of change in
              accounting principle.........................      (110)      (112)         (258)       (491)       (971)
         Cumulative effect of accounting change for
              organization costs...........................       -          -             -          (100)       (100)
                                                                -----      -----         -----         ---      ------

         Net loss..........................................     $(110)      (112)         (258)       (591)     (1,071)
                                                                  ===        ===           ===         ===       =====

         Basic and diluted loss per common share                 (.24)      (.24)         (.55)      (1.28)      (2.31)
                                                                  ===        ===           ===        ====       =====


                                                                             Year Ended December 31, 1997
                                                                             ----------------------------
                                                                First     Second         Third      Fourth
                                                              Quarter    Quarter       Quarter     Quarter     Total

         Interest income...................................     $  -         -              37          75         112
         Interest expense..................................         5          9            19          10          43
                                                                   --       ----          ----         ---        ----

              Net interest income..........................        (5)        (9)           18          65          69

         Provision for loan losses.........................        -          -             -           35          35
                                                                  ---       ----         -----         ---        ----

              Net interest (loss) income after provision
                  for loan losses..........................        (5)        (9)           18          30          34
                                                                   --       ----          ----         ---        ----
         Noninterest income................................        -          -             -            2           2
         Noninterest expense...............................        42        101           176         162         481
                                                                   --        ---           ---         ---         ---

         Loss before income tax benefit....................       (47)      (110)         (158)       (130)       (445)

         Income tax benefit ...............................       (18)       (42)          (60)        (63)       (183)
                                                                   --        ---           ---         ---         ---

         Net loss..........................................      $(29)       (68)          (98)        (67)       (262)
                                                                   ==        ===           ===         ===         ===

         Basic and diluted loss per common share                    *         *             *           *        (2.00)
                                                                  ===        ===           ===         ===        ====
</TABLE>

*   Numbers are not presented due to bank opening in fourth quarter.


                                       21

<PAGE>
<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                                               At December 31,
                                                                                               ---------------
                                                                                            1998            1997
                                                                                            ----            ----
    Assets

<S>                                                                                   <C>                  <C>      
Cash and due from banks...........................................................    $     689,903        1,065,817
Federal funds sold................................................................        4,258,602        1,400,000
                                                                                         ----------        ---------

              Total cash and cash equivalents.....................................        4,948,505        2,465,817

Securities available for sale.....................................................        3,302,486           -
Loans, net of allowance for loan losses of $760,000
    in 1998 and $35,000 in 1997...................................................       11,563,373        3,745,577
Premises and equipment, net.......................................................          838,931          462,784
Accrued interest receivable.......................................................           89,527           15,671
Restricted security, Federal Home Loan Bank stock, at cost                                   50,000            -
Deferred tax asset................................................................          824,981          183,161
Other assets......................................................................           58,003          204,917
                                                                                       ------------       ----------

              Total assets........................................................     $ 21,675,806        7,077,927
                                                                                         ==========        =========

    Liabilities and Stockholders' Equity

Liabilities:
    Demand deposits...............................................................          904,585          832,396
    Savings and NOW deposits......................................................        5,068,758        1,040,454
    Money-market deposits.........................................................          329,293           65,777
    Time deposits.................................................................       10,482,545          739,433
                                                                                         ----------       ----------

              Total deposits......................................................       16,785,181        2,678,060

    Advance from Federal Home Loan Bank...........................................        1,000,000            -
    Other borrowings..............................................................          364,749            -
    Official checks...............................................................          127,342           54,138
    Accrued interest payable and other liabilities................................          141,642           11,944
                                                                                        -----------       ----------

              Total liabilities...................................................       18,418,914        2,744,142
                                                                                         ----------        ---------

Commitments and contingencies (Notes 4, 8 and 16)

Stockholders' equity:
    Common stock, $.01 par value; 10,000,000 shares authorized,
         464,791 shares issued and outstanding....................................            4,648            4,648
    Additional paid-in capital....................................................        4,628,542        4,628,542
    Accumulated deficit...........................................................       (1,370,803)        (299,405)
    Accumulated other comprehensive income........................................           (5,495)             -
                                                                                       ------------        ---------

              Total stockholders' equity..........................................        3,256,892        4,333,785
                                                                                         ----------        ---------

              Total liabilities and stockholders' equity..........................     $ 21,675,806        7,077,927
                                                                                         ==========        =========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.


                                       22

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                                                                          Year Ended December 31
                                                                                          ----------------------
                                                                                            1998           1997
                                                                                            ----           ----
<S>                                                                                     <C>                <C>      
Interest income:
    Loans receivable................................................................    $   689,347          22,789
    Securities available for sale...................................................        121,109           -
    Other interest-earning assets...................................................        178,071          89,669
                                                                                          ---------        --------

       Total interest income........................................................        988,527         112,458
                                                                                          ---------         -------

Interest expense:
    Deposits........................................................................        607,970          10,007
    Borrowings......................................................................         23,828          33,515
                                                                                         ----------        --------

       Total interest expense.......................................................        631,798          43,522
                                                                                          ---------        --------

       Net interest income..........................................................        356,729          68,936

Provision for loan losses...........................................................        725,000          35,000
                                                                                          ---------        --------

       Net interest (loss) income after provision for loan losses...................       (368,271)         33,936
                                                                                          ---------        --------

Noninterest income-
    Service charges and fees........................................................         52,526           1,886
                                                                                         ----------        --------

Noninterest expense:
    Salaries and employee benefits..................................................        514,629         245,302
    Occupancy expense...............................................................        242,093          91,720
    Offering costs..................................................................         88,986            -
    Advertising.....................................................................         74,563          15,842
    Professional fees...............................................................         48,638          11,269
    Telephone.......................................................................         33,365          20,557
    Data processing.................................................................         30,657           2,631
    Printing and office supplies....................................................         24,435          40,610
    Amortization of organization costs..............................................         30,000           7,500
    Insurance expense...............................................................         23,948           7,474
    Other ..........................................................................        122,649          37,776
                                                                                          ---------         -------

       Total noninterest expense....................................................      1,233,963         480,681
                                                                                          ---------         -------

Loss before income tax benefit and cumulative effect of change in
    accounting principle............................................................     (1,549,708)       (444,859)

       Income tax benefit...........................................................       (577,850)       (183,161)
                                                                                          ---------         -------

Net loss before cumulative effect of change in accounting principle                        (971,858)       (261,698)

       Cumulative effect of change in accounting principle, net of income
          tax benefit of $60,600 ...................................................        (99,540)           -
                                                                                         ----------        --------

Net loss............................................................................    $(1,071,398)       (261,698)
                                                                                          =========         =======

Basic and diluted loss per share:
    Before cumulative effect of change in accounting principle                                (2.09)          (2.00)

    Cumulative effect of change in accounting principle.............................           (.22)           -
                                                                                       -------------      --------

    Net loss........................................................................  $       (2.31)          (2.00)
                                                                                        ===========       =========

Weighted-average shares outstanding for basic and diluted                                   464,791         130,682
                                                                                          =========         =======
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.

                                       23

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>

                                                                                     Accumulated
                                                          Additional                    Other         Total
                                              Common       Paid-In     Accumulated  Comprehensive  Stockholders'
                                              Stock        Capital       Deficit       Income        Equity
                                              -----        -------       -------       ------        ------

<S>                                       <C>            <C>          <C>               <C>        <C>      
Balance at December 31, 1996 ..........   $       65        64,935       (37,707)         --          27,293

Retire 6,500 shares of common stock ...          (65)      (64,935)         --            --         (65,000)

Issuance of 464,791 shares of common
     stock, net of $14,720 of offering
     costs ............................        4,648     4,628,542          --            --       4,633,190

     Net loss and comprehensive income
         (loss) .......................         --            --        (261,698)         --        (261,698)
                                          ----------    ----------    ----------    ----------    ----------

Balance at December 31, 1997 ..........        4,648     4,628,542      (299,405)         --       4,333,785
                                                                                    ----------    ----------

Comprehensive income:

     Net loss .........................         --            --      (1,071,398)         --      (1,071,398)

     Net change in unrealized loss on
         securities available for sale,
         net of tax of $3,370 .........         --            --            --          (5,495)       (5,495)
                                                                      ----------    ----------    ----------

Comprehensive income (loss) ...........         --            --      (1,071,398)       (5,495)   (1,076,893)
                                          ----------    ----------    ----------    ----------    ----------

Balance at December 31, 1998 ..........   $    4,648     4,628,542    (1,370,803)       (5,495)    3,256,892
                                          ==========    ==========    ==========    ==========    ==========
</TABLE>




















See Accompanying Notes to Consolidated Financial Statements.

                                       24

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                         Year Ended December 31,
                                                                                         -----------------------
                                                                                          1998             1997
                                                                                          ----             ----
Cash flows from operating activities:
<S>                                                                                     <C>                 <C>      
    Net loss ........................................................................   $ (1,071,398)       (261,698)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
         Depreciation ...............................................................         81,557          16,579
         Provision for loan losses ..................................................        725,000          35,000
         Credit for deferred income taxes ...........................................       (638,450)       (183,161)
         Net amortization of fees, costs, premiums and discounts ....................         72,085             342
         Increase in accrued interest receivable ....................................        (73,856)        (15,671)
         Decrease (increase) in other assets ........................................        146,914         (55,379)
         Increase in accrued interest payable and other liabilities .................        129,698          11,944
                                                                                                        ------------

              Net cash used in operating activities .................................       (628,450)       (452,044)
                                                                                        ------------    ------------

Cash flows from investing activities:
    Purchases of securities available for sale ......................................     (6,297,091)           --
    Principal repayments on securities available for sale ...........................      2,924,447            --
    Net increase in loans ...........................................................     (8,553,588)     (3,780,919)
    Purchase of Federal Home Loan Bank stock ........................................        (50,000)           --
    Purchases of premises and equipment .............................................       (457,704)       (479,363)
                                                                                        ------------    ------------

              Net cash used in investing activities .................................    (12,433,936)     (4,260,282)
                                                                                        ------------    ------------

Cash flows from financing activities:
    Net increase in demand, savings, NOW and money-market deposits ..................      4,364,009       1,938,627
    Net increase in time deposits ...................................................      9,743,112         739,433
    Net increase in advances from Federal Home Loan Bank ............................      1,000,000            --
    Net increase (decrease) in other borrowings .....................................        364,749        (134,204)
    Net increase in official checks .................................................         73,204          54,138
    Retire common stock .............................................................           --           (65,000)
    Sale of common stock ............................................................           --         4,633,190
                                                                                        ------------    ------------

              Net cash provided by financing activities .............................     15,545,074       7,166,184
                                                                                        ------------    ------------

Net increase in cash and cash equivalents ...........................................      2,482,688       2,453,858

Cash and cash equivalents at beginning of year ......................................      2,465,817          11,959
                                                                                        ------------    ------------

Cash and cash equivalents at end of year ............................................   $  4,948,505       2,465,817
                                                                                        ============    ============

Supplemental disclosure of cash flow information: Cash paid during the year for:
         Interest...................................................................    $    669,266          43,229
                                                                                        ============    ============

         Income taxes...............................................................    $      --              --
                                                                                        ============    ============

    Noncash transactions-
         Accumulated other comprehensive income, change in unrealized
              loss on securities available for sale, net............................$          5,495            --
                                                                                        ============    ============
</TABLE>









See Accompanying Notes to Consolidated Financial Statements.

                                       25

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

             December 31, 1998 and 1997 and For the Years Then Ended


(1)  Summary of Significant Accounting Policies
    Organization.  The Commercial  Bancorp,  Inc.  ("TCB") was  incorporated  on
         August 15, 1996. TCB owns 100% of the  outstanding  common stock of The
         Commercial  Bank of Volusia County  ("TCB-Volusia").  TCB was organized
         simultaneously  with TCB-Volusia and its only business is the ownership
         and operation of TCB-Volusia. TCB- Volusia is a Florida state-chartered
         commercial  bank  and is  insured  by  the  Federal  Deposit  Insurance
         Corporation.  TCB-Volusia  opened for  business on October 14, 1997 and
         provides  community banking services,  from its office in Ormond Beach,
         to businesses and individuals in Volusia County, Florida.

    Basisof Presentation.  The accompanying  consolidated  financial  statements
         include  the  accounts  of  TCB  and  TCB-  Volusia.   All  significant
         intercompany   accounts  and  transactions   have  been  eliminated  in
         consolidation. The accounting and reporting practices of TCB conform to
         generally  accepted  accounting  principles  and to  general  practices
         within the banking industry.

    Estimates.  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.

    Securities.  TCB must  classify its  securities as either  trading,  held to
         maturity or available for sale. Trading securities are held principally
         for resale and  recorded  at their fair  values.  Unrealized  gains and
         losses on trading  securities  are  included  immediately  in earnings.
         Held-to-maturity securities are those which TCB has the positive intent
         and ability to hold to maturity  and are  reported at  amortized  cost.
         Available-for-sale  securities  consist of securities not classified as
         trading  securities  nor  as  held-to-maturity  securities.  Unrealized
         holding gains and losses, net of tax, on available-for-sale  securities
         are reported as a net amount in a separate  component of  stockholders'
         equity   until   realized.   Gains   and   losses   on  the   sale   of
         available-for-sale     securities    are    determined     using    the
         specific-identification  method.  Premiums and  discounts on securities
         available  for sale and held to  maturity  are  recognized  in interest
         income using the interest method over the period to maturity.

    LoansReceivable.  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
         charge-offs,  the allowance  for loan losses,  and any deferred fees or
         costs on originated loans.

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

         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.   Interest   income  is  subsequently
         recognized only to the extent cash payments are received.

         The  allowance  for loan losses is increased by charges to earnings and
         decreased by charge-offs  (net of  recoveries).  Management's  periodic
         evaluation of the adequacy of the allowance is based on TCB'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.

                                                                     (continued)




                                       26

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(1)  Summary of Significant Accounting Policies, Continued
    Premises  and  Equipment.  Premises  and  equipment  are stated at cost less
    accumulated   depreciation.   Depreciation   expense  is   computed  on  the
    straight-line basis over the estimated useful life of each type of asset.

    Income Taxes.  Provisions  for  income  taxes are based on taxes  payable or
         refundable for the current year (after  exclusion of nontaxable  income
         such as interest on state and municipal  securities) and deferred taxes
         on  temporary  differences  between  the amount of  taxable  income and
         pretax  financial  income  and  between  the tax  bases of  assets  and
         liabilities  and their  reported  amounts in the financial  statements.
         Deferred  tax assets and  liabilities  are  included  in the  financial
         statements  at currently  enacted  income tax rates  applicable  to the
         period in which the deferred tax assets and liabilities are expected to
         be realized or  settled.  As changes in tax laws or rates are  enacted,
         deferred tax assets and liabilities are adjusted  through the provision
         for income taxes.

    Advances from Organizers.  Certain of TCB's organizers made interest-bearing
         advances  totaling $738,882 during 1997 to TCB. These amounts were used
         to fund  organization  and other costs incurred by TCB and TCB-Volusia.
         The advances  were repaid to the  organizers on September 15, 1997 from
         the proceeds of TCB's common stock offering.

    Stock-Based  Compensation.  Statement of Financial  Accounting Standards No.
         123,  "Accounting  for  Stock-Based   Compensation"  ("Statement  123")
         establishes a "fair value" based method of accounting  for  stock-based
         compensation  plans and encourages all entities to adopt that method of
         accounting for all of their employee stock compensation plans. However,
         it also allows an entity to continue to measure  compensation  cost for
         those  plans  using the  intrinsic  value  based  method of  accounting
         prescribed  by APB  Opinion  No. 25,  "Accounting  for Stock  Issued to
         Employees"  ("Opinion  25").  TCB has elected to follow  Opinion 25 and
         related  interpretations  in accounting for its employee stock options.
         Statement  123  requires  the  disclosure  of proforma net earnings and
         earnings  per share  determined  as if TCB  accounted  for its employee
         stock options under the fair value method of that Statement.

    Per  Share Amounts. Per share amounts have been computed on the basis of the
         weighted-average  number of shares of common stock  outstanding.  TCB's
         common  stock  equivalents  are  not  dilutive  due to the  net  losses
         incurred during the years presented in the  consolidated  statements of
         operations.

    Accounting Change.  Effective  December 1, 1998, TCB adopted AICPA Statement
         of Position  98-5  "Reporting on the Costs of Start-Up  Activities  and
         Organization  Expenses."  The effect of this  accounting  change was to
         expense all  unamortized  organizational  costs in the  current  period
         which resulted in an after tax charge against earnings of $99,540.

    Off-Balance-Sheet  Instruments.  In the ordinary  course of business TCB has
         entered into  off-balance-sheet  financial  instruments  consisting  of
         commitments to extend credit.  Such financial  instruments are recorded
         in the financial statements when they are funded.

    Advertising.  TCB expenses all media advertising as incurred.

    Fair Values of Financial Instruments.  The following methods and assumptions
         were used by TCB in  estimating  fair values of  financial  instruments
         disclosed herein:

          Cash and  Cash  Equivalents.  The  carrying  amounts  of cash and cash
          equivalents approximate their fair value.

          Securities.  Fair  values for  securities  are based on quoted  market
          prices. If quoted market prices are not available, fair value is based
          on quoted market prices for similar securities. 

                                                                     (continued)


                                       27

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(1)  Summary of Significant Accounting Policies, Continued
    Fair Values of Financial Instruments, Continued.
         Loans.  For  variable-rate  loans that reprice  frequently  and have no
         significant  change in credit  risk,  fair values are based on carrying
         values. Fair values for certain fixed-rate  mortgage (e.g.  one-to-four
         family  residential),  commercial real estate and commercial  loans are
         estimated  using  discounted  cash flow analyses,  using interest rates
         currently  being  offered for loans with similar  terms to borrowers of
         similar credit quality.

          Accrued Interest. The carrying amounts of accrued interest approximate
          their fair values.

         Deposits.  The fair values disclosed for demand, NOW,  money-market and
         savings  deposits are, by  definition,  equal to the amount  payable on
         demand at the reporting  date (that is, their carrying  amounts).  Fair
         values for  fixed-rate  certificates  of deposit are estimated  using a
         discounted cash flow  calculation that applies interest rates currently
         being  offered on  certificates  to a schedule of  aggregated  expected
         monthly maturities on time deposits.

         Borrowed Funds. The carrying  amounts of other  borrowings  approximate
         their fair values.  Fair values of advances from Federal Home Loan Bank
         are  estimated  using  discounted  cash  flow  analysis  based on TCB's
         current  incremental  borrowing  rates for similar  types of  borrowing
         arrangements.

         Off-Balance-Sheet   Instruments.   Fair  values  for  off-balance-sheet
         lending  commitments are based on fees currently  charged to enter into
         similar  agreements,  taking into  account the  remaining  terms of the
         agreements and the counterparties' credit standing.

    Reclassifications.  Certain  amounts in the 1997 financial  statements  have
          been reclassified to conform to the 1998 presentation.

    Future  Accounting  Requirements.   Financial  Accounting  Standards  133  -
         Accounting for Derivative  Investments and Hedging Activities  requires
         companies  to  record  derivatives  on the  balance  sheet as assets or
         liabilities,  measured at fair value.  Gains or losses  resulting  from
         changes  in the  values of those  derivatives  would be  accounted  for
         depending  on the use of the  derivatives  and whether they qualify for
         hedge  accounting.  The key criterion for hedge  accounting is that the
         hedging  relationship must be highly effective in achieving  offsetting
         changes in fair value or cash flows. TCB will be required to adopt this
         Statement  effective  January 1, 2000.  Management  does not anticipate
         that this Statement will have a material impact on TCB.

                                                                     (continued)



                                       28

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(2) Securities Available for Sale
    The carrying amounts of securities and their approximate fair values were as
follows:
<TABLE>
<CAPTION>

                                                                             Gross          Gross
                                                              Amortized    Unrealized     Unrealized        Fair
                                                               Cost           Gains         Losses          Value
                                                               ----           -----         ------          -----
<S>                                                         <C>               <C>           <C>           <C>      
           December 31, 1998-
              Mortgage-backed securities................    $ 3,311,351       1,264         (10,129)      3,302,486
                                                              =========       =====          ======       =========
</TABLE>

    There were no sales of securities  during the years ended  December 31, 1998
or 1997.

(3)  Loans
    The components of loans were as follows:
<TABLE>
<CAPTION>

                                                                                               At December 31,
                                                                                               ---------------
                                                                                            1998             1997
                                                                                            ----             ----

<S>                                                                                    <C>                   <C>      
              Commercial.............................................................. $  9,254,806          2,832,020
              Residential real estate.................................................    1,449,602            429,364
              Commercial real estate..................................................      716,633            240,643
              Consumer and home equity................................................      897,475            268,297
                                                                                        -----------         ----------

                                                                                         12,318,516          3,770,324
              (Subtract) add:
                Allowance for loan losses.............................................     (760,000)           (35,000)
                Net deferred costs....................................................        4,857             10,253
                                                                                       ------------        -----------

              Loans, net.............................................................. $ 11,563,373          3,745,577
                                                                                         ==========          =========
</TABLE>

    An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>

                                                                                                        Year Ended
                                                                                                        December 31,
                                                                                                        ------------
                                                                                                     1998         1997
                                                                                                     ----         ----

<S>                                                                                              <C>            <C>   
              Balance at January 1............................................................. $   35,000       -
              Provision for loan losses........................................................    725,000      35,000
                                                                                                   -------      ------

              Balance at December 31...........................................................  $ 760,000      35,000
                                                                                                   =======      ======
</TABLE>

                                                                     (continued)



                                       29

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(3)  Loans, Continued
    The following summarizes the collateral dependent amounts of impaired loans:
<TABLE>
<CAPTION>

                                                                                                At
                                                                                             December 31,
                                                                                             ------------
                                                                                               1998
                                                                                               ----
              Loans identified as impaired:
<S>                                                                                        <C>       
                  Gross loans with no related allowance for loan losses                    $        -
                  Gross loans with related allowance for loan losses recorded                 1,199,025
                  Less: Allowances on these loans........................................       599,512
                                                                                             ----------

              Net investment in impaired loans...........................................  $    599,513
                                                                                             ==========
</TABLE>

    The  average net investment in impaired loans and interest income recognized
         and received on impaired loans were as follows:
<TABLE>
<CAPTION>
                                                                                              Year Ended
                                                                                            December 31,
                                                                                            ------------
                                                                                                1998
                                                                                                ----

<S>                                                                                         <C>      
              Average net investment in impaired loans..................................    $ 338,572
                                                                                              =======

              Interest income recognized on impaired loans..............................       75,589
                                                                                              =======

              Interest income received on impaired loans................................       75,589
                                                                                              =======
</TABLE>

    There  were no loans  identified  as  impaired  at or during  the year ended
December 31, 1997.

(4)  Premises and Equipment
    A summary of premises and equipment follows:
<TABLE>
<CAPTION>
                                                                                                  At December 31,
                                                                                                  ---------------
                                                                                                1998            1997
                                                                                                ----            ----

<S>                                                                                         <C>               <C>  
              Land.....................................................................     $ 261,246          -
              Building and leasehold improvements......................................       138,437          96,080
              Furniture, fixtures and equipment........................................       537,384         383,283
                                                                                              -------         -------

                  Total, at cost.......................................................       937,067         479,363

              Less accumulated depreciation............................................       (98,136)        (16,579)
                                                                                              -------         -------

                  Premises and equipment, net..........................................     $ 838,931         462,784
                                                                                              =======         =======
</TABLE>

                                                                     (continued)

                                       30

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(4)  Premises and Equipment, Continued
    TCB  leases its office  facilities  under  operating  leases.  These  leases
         contain escalation clauses and provide for annual adjustments for TCB's
         prorata  share of  operating  expenses.  Rent expense  under  operating
         leases  during the years ended  December  31, 1998 and 1997 was $55,210
         and $38,858, respectively.  Estimated future rentals over the remaining
         noncancellable lease terms follow:
<TABLE>
<CAPTION>

                                                                                          Operating
                        Year Ending                                                        Lease
                         December 31,                                                      Amount
                         ------------                                                      ------


<S>                      <C>                                                              <C>      
                         1999...........................................................  $  77,581
                         2000...........................................................     70,295
                         2001...........................................................     72,450
                         2002...........................................................     29,493
                         2003...........................................................     17,722
                                                                                            -------

                      Total minimum lease payments......................................  $ 267,541
                                                                                            =======
</TABLE>

(5)  Deposits
    The  aggregate amount of certificates of deposit with a minimum denomination
         of $100,000 was approximately  $1.5 million and $.3 million at December
         31, 1998 and 1997, respectively.

    A schedule of  maturities  of  certificates  of deposit at December 31, 1998
follows:
<TABLE>
<CAPTION>

                         Year Ending
                         December 31,                                                      Amount
                         ------------                                                      ------

<S>                        <C>                                                          <C>        
                           1999.......................................................  $ 5,107,456
                           2000.......................................................    5,217,403
                           2001.......................................................      157,686
                                                                                        -----------

                                                                                        $10,482,545
</TABLE>

(6) Advance from Federal Home Loan Bank
     The maturity  and  interest  rate on the advance from the Federal Home Loan
Bank ("FHLB") was as follows:
<TABLE>
<CAPTION>

                 Year Ending                                    Interest                  At December 31,
                 December 31,                                      Rate                      1998
                 ------------                                      ----                      ----

<S>                  <C>                                           <C>                    <C>        
                     2008...................................       4.80%                  $ 1,000,000
                                                                                            =========
</TABLE>

     At  December 31, 1998, pursuant to the collateral  agreement with the FHLB,
         advances  are  collateralized  by $1.0 million of TCB's  federal  funds
         sold.

(7) Other Borrowings
     At  December 31, 1998, TCB had two  variable-rate  lines of credit at 7.75%
         from other financial  institutions,  totaling $700,000. At December 31,
         1998, borrowings against these lines totaled $364,749. These borrowings
         are collateralized by TCB-Volusia's stock.

                                                                     (continued)

                                       31

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued



(8) Financial Instruments
     TCB 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.
         These financial  instruments are unused lines of credit and undisbursed
         loans in process  and may  involve,  to varying  degrees,  elements  of
         credit and interest-rate risk in excess of the amount recognized in the
         balance sheet.  The contract amounts of these  instruments  reflect the
         extent of involvement TCB has in these financial instruments.

     TCB's exposure to credit loss in the event of  nonperformance  by the other
         party to the  financial  instrument  for  unused  lines of  credit  and
         undisbursed  loans in process is represented by the contractual  amount
         of those  instruments.  TCB uses the same  credit  policies  in  making
         commitments as it does for on-balance-sheet instruments.

     The estimated fair values of TCB's  financial  instruments  were as follows
(in thousands):
<TABLE>
<CAPTION>

                                                                                          At
                                                                 --------------------------------------------------
                                                                   December 31, 1998              December 31, 1997
                                                                 ---------------------        -----------------------
                                                                 Carrying          Fair       Carrying           Fair
                                                                   Amount          Value       Amount            Value
                                                                   ------          -----       ------            -----
         Financial assets:
<S>                                                              <C>               <C>           <C>             <C>  
              Cash and cash equivalents........................  $  4,949          4,949         2,466           2,466

              Securities.......................................     3,302          3,302         -                -

              Loans receivable.................................    11,563         11,643         3,746           3,703

              Accrued interest receivable......................        90             90            16              16

         Financial liabilities:

              Deposits.........................................    16,785         17,352         2,678           2,692

              Advances from Federal Home Loan Bank                  1,000           958            -               -

              Other borrowings.................................       365            365           -               -
                                                                  =======        =======      ========           =====

    A    summary of the notional  amounts of TCB's financial  instruments  which
         approximate  fair value,  with  off-balance  sheet-risk at December 31,
         1998 was as follows (in thousands):

              Unused lines of credit..................................................         $ 1,242
                                                                                                 =====

              Undisbursed loans in process............................................         $   358
                                                                                                 =====
</TABLE>

                                                                     (continued)


                                       32

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued



(9) Related Party Transactions
    In   the ordinary course of business,  TCB has made loans at terms and rates
         prevailing  at the time to  officers  and  directors  of TCB and  their
         affiliates.   The  aggregate  dollar  amount  of  these  loans  totaled
         approximately  $2.2 million and $.7 million December 31, 1998 and 1997,
         respectively.  As of the same dates, these individuals and entities had
         approximately $1.0 million and $71,773 of funds on deposit in TCB.

(10)  Credit Risk
    TCB  grants  the  majority  of its  loans to  borrowers  throughout  Volusia
         County,  Florida.  Although TCB has a  diversified  loan  portfolio,  a
         significant  portion of its borrowers' ability to honor their contracts
         is dependent upon the economy in Volusia County, Florida.

(11)  Income Taxes
    Income taxes are  included in the  consolidated  statements  of operation as
follows:
<TABLE>
<CAPTION>

                                                                                                  Year Ended
                                                                                                  December 31,
                                                                                                  ------------
                                                                                                1998         1997
                                                                                                ----         ----

<S>                                                                                           <C>          <C>      
              Income tax benefit on loss before cumulative effect of change
                  in accounting principal.............................................        $(577,850)   (183,161)
              Cumulative effect on change in accounting principal                               (60,600)       -
                                                                                                -------    --------

                                                                                             $ (638,450)   (183,161)
                                                                                                =======     =======
</TABLE>

    The income tax  benefit  before  cumulative  effect of change in  accounting
principal consisted of the following:
<TABLE>
<CAPTION>

                                                                                                    Year Ended
                                                                                                    December 31,
                                                                                                    ------------
                                                                                               1998             1997
                                                                                               ----             ----

<S>                                                                                        <C>                <C>      
              Deferred:
                  Federal............................................................      $(493,400)         (156,000)
                  State..............................................................        (84,450)          (27,161)
                                                                                             -------           -------

                     Total deferred benefit..........................................      $(577,850)         (183,161)
                                                                                             =======           =======
</TABLE>

    The  income tax benefit  before  cumulative  effect of change in  accounting
         principal  is  different  than that  computed by  applying  the Federal
         statutory rate of 34%, as indicated in the following analysis:
<TABLE>
<CAPTION>

                                                                                      Year Ended December 31,
                                                                            -----------------------------------------
                                                                                    1998                   1997
                                                                            -------------------   -------------------
                                                                                        % of                    % of
                                                                                       Pretax                  Pretax
                                                                               Amount    Loss        Amount      Loss
                                                                               ------    ----        ------      ----
<S>                                                                         <C>         <C>       <C>          <C>    
         Income tax benefit at statutory Federal
              income tax rate..........................................     $(526,901)  (34.0)%   $(151,000)   (34.0)%
         (Increases) decreases resulting from
              State taxes, net of federal tax benefit                         (55,737)   (3.6)      (18,000)    (4.0)
              Other....................................................         4,788     0.3       (14,161)    (3.2)
                                                                             --------    ----       -------     ----

                                                                            $(577,850)  (37.3)%   $(183,161)   (41.2)%
                                                                              =======    ====       =======     ====
</TABLE>

                                                                     (continued)

                                       33

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued



(11)  Income Taxes, Continued
    The tax  effects  of  temporary  differences  that give rise to  significant
    portions  of the  deferred  tax  assets and  deferred  tax  liabilities  are
    presented below.
<TABLE>
<CAPTION>

                                                                                             At December 31,
                                                                                             ---------------
                                                                                        1998                 1997
                                                                                        ----                 ----
<S>                                                                                    <C>                   <C>    
              Deferred tax assets:
                  Unrealized loss on securities available for sale                     $   3,370              -
                  Allowance for loan losses..........................................    250,000              -
                  Organization and startup costs.....................................    120,000             114,000
                  Net operating loss carryforwards...................................    484,000              88,000
                  Other..............................................................      1,611                 161
                                                                                        --------           ---------

                    Gross deferred tax assets........................................    858,981             202,161
                                                                                         -------             -------

              Deferred tax liabilities:
                  Accrued income net of accrued expenses.............................     14,000              16,000
                  Premises and equipment.............................................     20,000               3,000
                                                                                         -------            --------

                    Gross deferred tax liabilities...................................     34,000              19,000
                                                                                         -------             -------

                    Net deferred tax asset...........................................  $ 824,981             183,161
                                                                                         =======             =======
</TABLE>

    TCB had net operating  loss  carryforwards  for federal and state income tax
purposes as follows:
<TABLE>
<CAPTION>


                                                                                    At December 31,
                                                                                    ---------------
              Year Expires                                                               1998
              ------------                                                               ----

<S>                                                                                   <C>        
                  2011............................................................   $      4,000
                  2012............................................................        231,000
                  2018............................................................      1,050,000
                                                                                        ---------

                                                                                      $ 1,285,000
</TABLE>

                                                                     (continued)













                                       34

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(12) Stock Option Plan
    TCB  adopted  an  employee  stock  option  plan  which was  approved  by the
         stockholders  on April 21, 1998.  During 1998,  the Plan was amended to
         adjust  the  number  of  options  which  may be  granted  to 10% of the
         original stock issuance or 46,479 shares.  At December 31, 1998, 27,979
         remain  available  for grant.  A summary of stock  option  transactions
         follows:
<TABLE>
<CAPTION>
                                                                                            Weighted-
                                                                   Number     Range of       Average       Aggregate
                                                                   of         Per Share     Per Share       Option
                                                                   Shares    Option Price     Price          Price
                                                                   ------    ------------     -----          -----

<S>                                                                <C>         <C>             <C>         <C>    
              Outstanding at December 31, 1997                                    -       $     -             -    -
              Options granted................................      18,500        10.00         10.00       185,000
                                                                   ------        -----                     -------

              Outstanding at December 31, 1998                     18,500      $ 10.00         10.00       185,000
                                                                   ======      =======         =====       =======
</TABLE>

    The  weighted-average  remaining  contractual life of the outstanding  stock
         options at December 31, 1998 was 110 months.

    These options are exercisable as follows:
<TABLE>
<CAPTION>

                                                                          Number           Weighted-Average
              Year Ending                                               of Shares           Exercise Price
              -----------                                               ---------           --------------

<S>                                                                       <C>                 <C>    
                  1999...............................................      6,550              $ 10.00
                  2000...............................................      3,700                10.00
                  2001...............................................      3,700                10.00
                  2002...............................................      3,700                10.00
                  2003...............................................        850                10.00
                                                                         -------

                                                                          18,500              $ 10.00
                                                                          ======                =====
</TABLE>

    FASB Statement 123 requires proforma information regarding net loss and loss
         per share. This proforma  information has been determined as if TCB had
         accounted  for its stock  options  under the fair value  method of that
         Statement and was as follows:

                                                                     Year Ended
                                                                    December 31,
                                                                    ------------
                                                                        1998
                                                                        ----
              Net loss:
                  As reported....................................    (1,071,398)
                                                                      =========

                  Proforma.......................................    (1,082,071)
                                                                      =========


              Loss per share:
                  As reported....................................         (2.31)
                                                                          =====

                  Proforma.......................................         (2.33)
                                                                          =====

    The  fair value of each option grant is estimated on the date of grant using
         the minimum value option pricing method with the following assumptions:
         Risk-free interest rate 5.0% and an expected life-in years 10.

                                                                     (continued)


                                       35

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


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

     Quantitative measures  established by regulation to ensure capital adequacy
         require TCB-Volusia to maintain minimum amounts and percents (set forth
         in the table  below) of Total and Tier I  capital  (as  defined  in the
         regulations)  to risk-  weighted  assets  (as  defined),  and of Tier I
         capital (as defined) to average assets (as defined). As of December 31,
         1998, that TCB-Volusia  exceeded all capital  adequacy  requirements to
         which it is subject.

     As  of December 31, 1998, the most recent  notification from the regulatory
         authorities  categorized  TCB-Volusia  as well  capitalized  under  the
         regulatory framework for prompt corrective action. To be categorized as
         well capitalized  TCB-Volusia  must maintain minimum total  Risk-based,
         Tier I  risk-based,  and Tier I leverage  percents  as set forth in the
         table.  There are no conditions or events since that  notification that
         management believes have changed TCB- Volusia's category. TCB-Volusia's
         actual  capital  amounts and percentage are also presented in the table
         (dollars in thousands).
<TABLE>
<CAPTION>
                                                                                                  To Be Well
                                                                        Minimum                Capitalized Under
                                                                      For Capital              Prompt Corrective
                                                Actual            Adequacy Purposes:           Action Provision:
                                                ------            ------------------           -----------------
                                       Amount            %        Amount           %          Amount            %
                                       ------            -        ------           -          ------            -
<S>                                   <C>               <C>      <C>               <C>       <C>                <C>  
     At December 31, 1998:
         Total capital (to Risk-
         Weighted Assets)..........   $ 3,168           23.2%    $ 1,081           8.0%      $ 1,352            10.0%
         Tier I Capital (to Risk-
         Weighted Assets)..........     2,504           18.3         541           4.0           811             6.0
         Tier I Capital
         (to Average Assets).......     2,504           12.6         798           4.0         1,596             5.0

     At December 31, 1997:
         Total capital (to Risk-
         Weighted Assets)..........   $ 3,950           92.7%      $ 341           8.0%        $ 426            10.0%
         Tier I Capital (to Risk-
         Weighted Assets)..........     3,767           88.4         171           4.0           256             6.0
         Tier I Capital
         (to Average Assets).......     3,767           69.2         218           4.0           272             5.0
</TABLE>

(14)  Stockholders' Equity
     TCB-Volusia is subject to certain  restrictions  on the amount of dividends
         that it may declare without prior regulatory approval.  At December 31,
         1998, TCB-Volusia had no amounts available for dividends.

     During 1997,  TCB sold  464,791  shares of common stock for an aggregate of
         $4,647,910. TCB incurred $14,720 in offering expenses relating to their
         public offering of TCB's common stock and warrants.  Offering  expenses
         were deducted from the proceeds  received from the sale of common stock
         and warrants.

                                                                     (continued)

                                       36

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(14)  Stockholders' Equity, Continued
     During the initial offering period shares were offered in units with a unit
         consisting  of one share of common stock and one warrant.  Each warrant
         entitles the holder thereof to purchase one additional  share of common
         stock for $10 per share  during the 36 month  period  ending  April 27,
         2000.  There were 450,000  warrants  issued and as of December 31, 1998
         and 1997 they were all outstanding.

(15)  Parent Company Only Financial Information
    Unconsolidated financial information for The Commercial Bancorp, Inc., is as
follows:

                            Condensed Balance Sheets
<TABLE>
<CAPTION>
                                                                                                   At December 31,
                                                                                                   ---------------
                                                                                                 1998          1997
                                                                                                 ----          ----
<S>                                                                                           <C>            <C>      
                  Assets

              Cash......................................................................     $     37,432      371,769
              Investment in subsidiary..................................................        3,162,731    3,950,016
              Deferred tax asset........................................................          161,650        -
              Premises and equipment, net...............................................          342,122        -
              Other assets..............................................................            5,555       12,000
                                                                                               ----------   ----------

                  Total assets..........................................................      $ 3,709,490    4,333,785
                                                                                                =========    =========

                  Liabilities and Stockholders' Equity

              Borrowings................................................................          364,749       -
              Other liabilities.........................................................           87,849       -
              Stockholders' equity......................................................        3,256,892    4,333,785
                                                                                                ---------    ---------

                  Total liabilities and stockholders' equity............................      $ 3,709,490    4,333,785
                                                                                                =========    =========

                                          Condensed Statements of Operations
                                                                                                      Year Ended
                                                                                                      December 31,
                                                                                                      ------------
                                                                                                  1998           1997
                                                                                                  ----           ----

              Revenues..................................................................    $       5,529       43,702
              Expenses..................................................................          295,137        5,416
                                                                                               ----------      -------

                  (Loss) earnings before loss of subsidiary.............................         (289,608)      38,286
                  Loss of subsidiary....................................................         (781,790)    (299,984)
                                                                                               ----------      -------

                  Net loss..............................................................      $(1,071,398)    (261,698)
                                                                                                =========      =======
</TABLE>

                                                                     (continued)











                                       37

<PAGE>



                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued



(15)  Parent Company Only Financial Information, Continued


                       Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                       Year Ended
                                                                                                      December 31,
                                                                                                      ------------
                                                                                                   1998          1997
                                                                                                   ----          ----
         Cash flows from operating activities:
<S>                                                                                            <C>            <C>      
              Net loss.......................................................................  $(1,071,398)   (261,698)
              Adjustments to reconcile net loss to net cash
                (used in) provided by operating activities:
                  Equity in undistributed loss of subsidiary.................................      781,790     299,984
                  Credit for deferred income taxes...........................................     (161,650)      -
                  Net decrease in other assets...............................................        6,445     137,538
                  Increase in other liabilities..............................................       87,849        -
                                                                                               --------------------

                  Net cash (used in) provided by operating
                     activities..............................................................     (356,964)    175,824
                                                                                                ----------   ---------

         Cash flows from investing activities-
              Purchases of premises and equipment............................................     (342,122)         -
                                                                                                ---------- ----------

         Cash flows from financing activities:
              Net proceeds from issuance of common stock.....................................        -       4,633,190
              Retire common shares...........................................................        -         (65,000)
              Net increase (decrease) in borrowings..........................................      364,749    (134,204)
              Investment in subsidiary.......................................................        -      (4,250,000)
                                                                                             -------------   ---------

                  Net cash provided by financing activities..................................      364,749     183,986
                                                                                                 ---------   ---------

         Net (decrease) increase in cash and cash equivalents................................     (334,337)    359,810

         Cash at beginning of the year.......................................................      371,769      11,959
                                                                                                 ---------  ----------

         Cash at end of year.................................................................  $    37,432     371,769
                                                                                                 =========   =========
</TABLE>

(16)  Year 2000 Issues
    TCB  is acutely  aware of the many areas  affected by the Year 2000 computer
         issue, as addressed by the Federal Financial  Institutions  Examination
         Council  ("FFIEC")  in its  interagency  statement  which  provided  an
         outline  for   institutions   to  effectively   manage  the  Year  2000
         challenges.  A Year  2000  plan  has  been  approved  by the  Board  of
         Directors which includes  multiple phases,  tasks to be completed,  and
         target  dates  for  completion.   Issues   addressed   therein  include
         awareness, assessment, renovation, validation, implementation, testing,
         and contingency planning.

                                                                     (continued)

                                       38

<PAGE>


                   THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(16)  Year 2000 Issues, Continued
    TCB  has formed a Year 2000  committee that is charged with the oversight of
         completing  the Year 2000 project on a timely basis.  TCB has completed
         its  awareness,  assessment  and  renovation  phases  and  is  actively
         involved in validating and  implementing its plan. At the present time,
         TCB has substantially  completed its testing phase.  Since it routinely
         upgrades and purchases  technologically  advanced software and hardware
         on a  continual  basis,  TCB has  determined  that the  cost of  making
         modifications  to  correct  any Year 2000  issues  will not  materially
         affect reported operating results.

    TCB'svendors and suppliers have been contacted for written  confirmation  of
         their product readiness for Year 2000 compliance. Negative or deficient
         responses are analyzed and  periodically  reviewed to prescribe  timely
         actions within TCB's contingency planning.  TCB's main service provider
         has completed testing of its mission critical  application software and
         item processing software;  the test results, which have been documented
         and validated, are deemed to be Year 2000 compliant.  FFIEC guidance on
         testing Year 2000  compliance  of service  providers  states that proxy
         tests are acceptable  compliance  tests. In proxy testing,  the service
         provider tests with a representative  sample of financial  institutions
         that use a particular service,  with the results of such testing shared
         with all similarly  situated clients of the service  provider.  TCB has
         authorized  the  acceptance of proxy testing since the proxy tests have
         been conducted with financial institutions that are similar in type and
         complexity  to its own,  using the same  version of the Year 2000 ready
         software and the same hardware and operating systems.

    TCB  also  recognizes the  importance of determining  that its borrowers are
         facing the Year 2000 problem in a timely manner to avoid  deterioration
         of  the  loan  portfolio   solely  due  to  this  issue.  All  material
         relationships  have  been  identified  and  questionnaires   have  been
         completed to assess the inherent risks. Deposit customers have received
         statement stuffers and informational material in this regard. TCB plans
         to work on a one-on-one basis with any borrower who has been identified
         as having high Year 2000 risk exposure.

    Accordingly, management does not believe that TCB has incurred or will incur
         material costs  associated with the Year 2000 issue.  Yet, there can be
         no assurances  that all hardware and software that TCB will use will be
         Year 2000 compliant.  Management cannot predict the amount of financial
         difficulties  it may incur due to  customers  and vendors  inability to
         perform  according  to their  agreements  with TCB or the effects  that
         other third  parties  may cause as a result of this  issue.  Therefore,
         there  can be no  assurance  that the  failure  or delay of  others  to
         address the issue or that the costs  involved in such  process will not
         have a material adverse effect on TCB's business,  financial condition,
         and results of operations.

    TCB'scontingency   plans   relative  to  Year  2000  issues  have  not  been
         finalized. These plans are evolving as the testing of systems proceeds.
         During the completion of the testing phase management will determine if
         it is necessary to develop a "worst case  scenario"  contingency  plan.
         Based on  testing  results  to date (as  noted  above),  TCB's  mission
         critical  systems  have  been  deemed to be Year  2000  compliant  and,
         therefore a  contingency  plan has not been  developed  with respect to
         those systems.  With regards to nonmission  critical  internal systems,
         TCB's contingency plans are to replace those systems that test as being
         noncompliant.  Alternatively, some systems could be handled manually on
         an interim  basis.  Should  outside  service  providers  not be able to
         provide compliant systems,  TCB will terminate those  relationships and
         transfer  to  other  vendors.  It is  anticipated  that  TCB's  deposit
         customers  will have  increased  demands for cash in the latter part of
         1999 and correspondingly TCB will maintain higher liquidity levels.

(17) New Bank Charter and Planned Public Offering
    TCB  along with a group of local organizers made application to the state of
         Florida for a bank charter in  Highlands  County,  Florida.  Management
         planned to raise the capital for the new bank from a public offering of
         TCB's common stock.  In early 1999, TCB withdrew their  application and
         the local  organizers from Highlands County elected to continue without
         TCB.  Because of this,  management  has  terminated  its planned public
         offering and has charged-off $88,986 in prepaid offering expenses as of
         December 31, 1998.





                                       39

<PAGE>

                          Independent Auditors' Report



Board of Directors
The Commercial Bancorp, Inc.
Ormond Beach, Florida:

We have audited the accompanying  consolidated  balance sheets of The Commercial
Bancorp,  Inc. and  Subsidiary  ("TCB") at December  31, 1998 and 1997,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of TCB'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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of TCB at December 31,
1998 and 1997,  and the  results  of its  operations  and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, TCB changed its
method of accounting for  organizational  costs.  During 1998, TCB adopted AICPA
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities."





HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
January 29, 1999











                                       40



<PAGE>


                              CORPORATE INFORMATION




Corporate
Headquarters                              258 North Nova Road
                                          Ormond Beach, Florida 32174
                                          (904) 672-3003



Annual                                    
Meeting                                   The Annual Meeting of the Stockholders
                                          will be held at the Trails  Homeowners
                                          Association Community Center, 201 Main
                                          Trail,  Ormond Beach,  Florida at 2:00
                                          P.M., April 20, 1999.



Transfer Agent and
Registrar                                  Continental  Stock  Transfer  & Trust
                                           Company 2 Broadway New York, New York
                                           10004



Form 10-KSB                                A copy of the Form  10-KSB,  as filed
                                           with  the   Securities  and  Exchange
                                           Commission,   may  be   obtained   by
                                           stockholders   without   charge  upon
                                           written  request  to  Mr.  Harvey  E.
                                           Buckmaster,  Chief Financial Officer,
                                           The  Commercial  Bancorp,  Inc.,  258
                                           North   Nova  Road,   Ormond   Beach,
                                           Florida 32174.



Corporate Counsel                          Igler &  Dougherty,  P.A.  1501  Park
                                           Avenue  East   Tallahassee,   Florida
                                           32301



Independent
Auditors                                   Hacker,  Johnson,  Cohen &  Grieb  PA
                                           Certified   Public   Accountants  500
                                           North  Westshore   Boulevard   Tampa,
                                           Florida 33609


                                       41