TELEBANC FINANCIAL CORPORATION

                                    FORM 10-Q
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                       FOR THE QUARTER ENDED JUNE 30, 1997

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

                          Commission File No. 33-76930

                         TELEBANC FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)


             DELAWARE                                   13-3759196
  (State or other jurisdiction of        (I.R.S. Employer Identification Number)
  incorporation or organization)

               1111 N. HIGHLAND STREET, ARLINGTON, VIRGINIA 22201
               (Address of principal executive office) (Zip code)

                                 (703) 247-3700
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months ( or for such shorter  period that the registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                      Yes   X                   No

Indicate the number of shares  outstanding  for the  issuer's  classes of common
stock, as of August 1, 1997.

           $.01 par value of common stock             2,211,961
                       (class)                      (outstanding)


<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                                    FORM 10-Q

                                      INDEX

<TABLE>

Part I - Financial Information                                                                  Page
------------------------------                                                                  ----
<S>                                                                                            <C>
Consolidated Statements of Financial Condition -June 30, 1997 and December 31, 1996              3

Consolidated Statements of Operations - Three and six months ended June 30, 1997 and
   1996                                                                                          4

Consolidated Statements of Changes in Stockholders' Equity - Six months ended June 30,
   1997 and 1996                                                                                 6

Consolidated Statements of Cash Flows - Six months ended June 30, 1997 and 1996                  7

Notes to Consolidated Financial Statements                                                       9

Management's Discussion and Analysis of Financial Condition and Results of Operations           12

Part II -- Other Information
----------------------------

Item 4, Submission of Matters to a vote of Security Holders                                     21

Item 6, Exhibits and Reports on Form 8-K                                                        22

Signatures                                                                                      23
</TABLE>

                                       2
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                  (Dollars in Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                                                         June 30,        December 31,
Assets:                                                                                    1997              1996
                                                                                           -----             ----
                                                                                        (unaudited)
<S>                                                                                       <C>             <C>       
Cash and cash equivalents                                                                 $ 13,252        $    3,259
Investment securities available for sale                                                    71,277            78,826
Mortgage-backed securities available for sale and trading                                  231,313           184,743
Loans receivable, net                                                                      260,301           185,757
Loans receivable held for sale                                                             174,623           166,064
Other assets                                                                                53,948            29,316
                                                                                            ------            ------

                                 Total assets                                            $ 804,714         $ 647,965
                                                                                           =======           =======

Liabilities and Stockholders' Equity:

Liabilities:
Deposits                                                                                 $ 437,811         $ 390,486
Advances from the Federal Home Loan Bank of Atlanta                                        145,000           144,800
Securities sold under agreements to repurchase                                             122,661            57,581
Subordinated debt                                                                           29,500            16,586
Other liabilities                                                                           15,402            13,854
                                                                                            ------            ------

                               Total liabilities                                           750,374           623,307
                                                                                           -------           -------

Corporation-Obligated Mandatory Redeemable Capital Securities of Subsidiary
         Trust Holding Solely Junior Subordinated Debentures of the Corporation             10,000               --

Commitments and contingencies                                                                   --                --

Stockholders' equity:
4% Cumulative Preferred Stock, $0.01 par value,
         500,000 shares authorized
         Series A, 18,850 issued and outstanding                                                --                --
         Series B, 4,050 issued and outstanding                                                 --                --
         Series C, 7,000 issued and outstanding                                                 --                --
Common stock, $0.01 par value, 3,500,000 shares authorized;  2,211,961 and
         2,049,500 issued and outstanding                                                       22                20
Additional paid-in capital                                                                  31,190            14,637
Retained earnings, substantially restricted                                                  9,754             7,905
Unrealized gain on securities available for sale, net of deferred tax                        3,374             2,096
                                                                                             -----             -----

                          Total stockholders' equity                                        44,340            24,658
                                                                                            ------            ------

                               Total liabilities & stockholders' equity                  $ 804,714         $ 647,965
                                                                                           =======           =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  (Dollars in Thousands, Except Per Share Data)

                                   (unaudited)
<TABLE>
<CAPTION>
                                                                           Three Months Ended           Six Months Ended 
                                                                                 June 30,                     June 30,
                                                                           1997           1996           1997         1996
                                                                           ----           ----           ----         ----
<S>                                                                    <C>            <C>            <C>          <C>     
Interest income:
     Mortgage loans and other loans                                    $  8,315       $  5,663       $ 15,872     $ 11,082
     Mortgage-backed and related securities                               5,126          4,593          8,931        9,418
     Investment securities                                                1,538          1,096          2,982        1,971
     Other                                                                  296             12            327           24
                                                                            ---             --            ---           --

           Total interest income                                         15,275         11,364         28,112       22,495
                                                                         ------         ------         ------       ------

Interest expense:
     Deposits                                                             6,332          4,915         12,037        9,783
     Advances from the Federal Home Loan Bank of Atlanta                  2,183          1,613          4,256        3,078
     Reverse repurchase agreements                                        2,472          1,402          3,929        2,908
     Subordinated debt                                                      878            519          1,521        1,037
                                                                            ---            ---          -----        -----

          Total interest expense                                         11,865          8,449         21,743       16,806
                                                                         ------          -----         ------       ------

          Net interest income                                             3,410          2,915          6,369        5,689

Provision for loan losses                                                   308            200            551          619
                                                                            ---            ---            ---          ---

          Net interest income after provision for loan losses             3,102          2,715          5,818        5,070
                                                                          -----          -----          -----        -----

Non-interest income:
     Gain (loss) on sale of securities                                    1,158           (160)         1,419           82
     Gain on sale of loans                                                  283            316            410          316
     Loss on investment net of fees, service charges and other             (198)           135             22          498
                                                                          -----            ---             --          ---

          Total non-interest income                                       1,243            291          1,851          896
                                                                          -----            ---          -----          ---
                                   (continued)
</TABLE>

                                       4
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

                  (Dollars in Thousands, Except Per Share Data)

                                   (unaudited)
<TABLE>
<CAPTION>
                                                                      Three Months Ended           Six Months Ended 
                                                                            June 30,                     June 30,
                                                                      1997           1996           1997         1996
                                                                      ----           ----           ----         ----
<S>                                                                  <C>              <C>            <C>            <C>  
Non-interest expenses:
     General and administrative expenses:
          Compensation and employee benefits                         1,200            864            2,378          1,788
          Other                                                      1,050            885            1,770          1,639
                                                                     -----            ---            -----          -----

               Total general and administrative expenses             2,250          1,749            4,148          3,427
                                                                     -----          -----            -----          -----

     Other non-interest expenses:
          Net operating costs of real estate acquired
             through foreclosure                                        56             40              131             47
          Amortization of goodwill and other intangibles               146             41              279            336
                                                                       ---             --              ---            ---

               Total other non-interest expenses                       202             81              410            383
                                                                       ---             --              ---            ---

                    Total non-interest expenses                      2,452          1,830            4,558          3,810
                                                                     -----          -----            -----          -----

          Income before income tax expense and minority              1,893          1,176            3,111          2,156
                interest

Income tax expense                                                     617            417              973            748

Minority interest in subsidiary                                       (67)             --              (67)            --
                                                                      ----             --             ----             --

          Net income                                              $  1,209         $  759         $  2,071       $  1,408
                                                                     =====            ===            =====          =====

Preferred stock dividends                                              162             --              222             --
                                                                       ---             --              ---             --

Net income after preferred stock dividends                        $  1,047         $  759         $  1,849       $  1,408
                                                                     =====            ===            =====          =====

Net income per common share:
          Primary                                                  $  0.35        $  0.35          $  0.71        $  0.65
          Fully diluted                                               0.35           0.35             0.70           0.65
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                         TELEBANC FINANCIAL CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


                 FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996

                             (Dollars in Thousands)

                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                              UNREALIZED
                                                                                               GAIN (LOSS)
                                                                   ADDITIONAL                 ON AVAILABLE
                                          PREFERRED     COMMON       PAID-IN     RETAINED      FOR SALE
                                            STOCK       STOCK        CAPITAL     EARNINGS     SECURITIES       TOTAL
                                            -----       -----        -------     --------     ----------       -----
<S>                                       <C>                      <C>           <C>           <C>            <C>     
Balances at December 31, 1995             $               $ 20     $ 14,637      $   5,352     $   1,556      $ 21,565
                                                --

Net income for the six months ended
   June 30, 1996                                --          --           --          1,408            --         1,408

Unrealized Gain on Available for Sale
   Securities,  net of tax effect               --          --           --             --             7             7
                                                --          --           --             --             -             -

Balances at June 30, 1996                 $     --        $ 20     $ 14,637       $  6,760   $     1,563      $ 22,980
                                                            ==       ======          =====         =====        ======


Balances at December 31, 1996             $     --        $ 20     $ 14,637      $   7,905     $   2,096      $ 24,658

Net income for the six months ended             --          --           --          2,071            --         2,138
   June 30, 1997

Minority interest in subsidiary                 --          --           --            (67)           --           (67)

Stock issued                                    --           2        1,272             --            --         1,274

Issuance of 4% cumulative Preferred  
   Stock, Series A                              --          --        9,634             --            --         9,634 
                                                                                                                       
Issuance of 4% cumulative Preferred                                                                                    
   Stock, Series B                              --          --        2,070             --            --         2,070 
                                                                                                                       
Issuance of 4% cumulative Preferred                                                                                    
   Stock, Series C                              --          --        3,577             --            --         3,577 
                                                                                                                       
Dividends on 4% cumulative Preferred                                                                                   
   Stock                                        --          --           --           (222)           --          (222) 
                                                                                                                       
Unrealized Gain on Available for Sale                                                                                  
   Securities,  net of tax effect                                                                                      
                                                --          --           --             --         1,278         1,278 
                                                --          --           --             --         -----         ----- 

Balances at June 30, 1997                 $     --        $ 22     $ 31,190       $  9,754       $ 3,374      $ 44,340
                                                ==          ==       ======          =====         =====        ======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (Dollars in thousands)

                                   (unaudited)
<TABLE>
<CAPTION>
                                                                         Six Months Ended
                                                                              June 30,
                                                                      1997                1996
<S>                                                            <C>                   <C>         
Net cash (used in) provided by operating activities            $     (24,430)        $    36,075
                                                                     --------              ------

Cash flows from investing activities:
     Net increase in loans                                          (105,691)            (90,377)
     Equity investments in subsidiaries                               (1,183)               (925)
      Purchases of available-for-sale securities                    (202,950)           (180,363)
      Proceeds from sale of available-for-sale securities             82,361              86,204
     Proceeds from maturities of and principal payment on
       available-for-sale securities                                 121,306             114,296
     Net purchases of premises and equipment                            (149)               (139)
     Proceeds from sale of foreclosed real estate                        924                 219
                                                                         ---                 ---

Net cash used in investing activities                               (105,382)            (71,085)
                                                                    ---------            --------

                                                                     (continued)
</TABLE>
                                       7
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                             (Dollars in thousands)

                                   (unaudited)
<TABLE>
<CAPTION>

                                                                                               Six Months Ended
                                                                                                   June 30,
                                                                                            1997              1996
<S>                                                                                   <C>               <C>   
Cash flows from financing activities:
     Net increase in non-interest bearing demands, savings, and
       NOW deposit accounts                                                                35,288             29,966
     Increase in advances from FHLB                                                       181,000             85,000
     Payments on advances from FHLB                                                      (180,800)           (70,000)
     Net decrease (increase) in securities sold under agreements to repurchase
                                                                                           65,080            (13,961)
     Net increase in other borrowed funds                                                  12,914                 45
     Issuance of trust preferred stock                                                     10,000                 --
     Issuance of common stock and 4% preferred stock                                       16,555                 --
     Dividends paid on common and preferred stock                                            (222)                --
                                                                                            -----                 --
                                                                                                    
Net cash provided by financing activities                                                 139,815             31,050
                                                                                          -------             ------
                                                                                                    
Net increase (decrease) in cash and cash equivalents                                        9,993             (3,960)
                                                                                                    
Cash and cash equivalents at beginning of period                                            3,259              8,965
                                                                                            -----              -----
Cash and cash equivalents at end of period                                               $ 13,252            $ 5,005
                                                                                           ======              =====
                                                                                                    
                                                                                                    
Supplemental information:                                                                           
                                                                                                    
Interest paid on deposits and borrowed funds                                            $  15,214           $  7,986
Income taxes paid                                                                             853                768
Transfers from loans to real estate acquired through foreclosures                             607                354
 Gross unrealized gain on securities available for sale                                     2,111                 11
Tax effect of gain on available for sale securities                                           833                  4
                                                                                                    
          See accompanying notes to consolidated financial statements.                             
</TABLE>

                                       8
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE AND SIX ENDED JUNE 30, 1997 AND 1996

NOTE 1.       BASIS OF PRESENTATION

         TeleBanc  Financial  Corporation,  (the "Company") was  incorporated on
January 26, 1994 and in March,  1994 became the direct  savings and loan holding
company parent of TeleBank (the "Bank"), formerly known as Metropolitan Bank for
Savings, F.S.B. The primary business of the Company is the business of the Bank,
the Bank's subsidiaries and TeleBanc Capital Markets, Inc. ("TCM"), a registered
investment  advisor,  funds manager and broker  dealer.  The Bank is a federally
chartered  savings  bank,  deposit  accounts in which are insured to  applicable
limits by the Federal Deposit Insurance Corporation  ("FDIC").  The consolidated
financial statements include accounts of TeleBanc Financial  Corporation and its
wholly-owned subsidiaries, the Bank and TCM.

         The financial  statements as of June 30, 1997 and for the three and six
months  ended  June  30,  1997 and 1996 are  unaudited,  but in the  opinion  of
management,  contain  all  adjustments,  consisting  solely of normal  recurring
entries,  necessary to present fairly the consolidated financial condition as of
June 30, 1997 and the results of  consolidated  operations for the three and six
months ended June 30, 1997 and 1996. The results of consolidated  operations for
the three and six months ended June 30, 1997 are not  necessarily  indicative of
the results that may be expected for the entire year. The Notes to  Consolidated
Financial  Statements  for the year ended  December  31,  1996,  included in the
Company's Annual Report to Stockholders for 1996,  should be read in conjunction
with these statements.

         Certain prior year's amounts have been  reclassified  to conform to the
current year's presentation.

NOTE 2.  NET INCOME PER COMMON SHARE

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting Standards No. 128 "Earnings per Share" ("SFAS
129"),  effective  December 15, 1997. This statement  specifies the computation,
presentation,  and  disclosure  requirements  for earnings per share ("EPS") for
entities with publicly held common stock or potential  common stock.  The impact
on the Company has been calculated below:

                                       9
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                            Pro Forma EPS Calculation
<TABLE>
<CAPTION>
                                      Three months ended              Six months ended
                                           June 30,                       June 30,
                                 ------------------------------ -----------------------------
Per share amounts                     1997           1996           1997           1996
                                 --------------- -------------- -------------- --------------
<S>                               <C>            <C>             <C>           <C>      
Primary EPS as reported           $    0.35      $    0.35       $    0.71     $    0.63
Effect of SFAS 128                     0.12           0.02            0.15          0.06
                                       ----           ----            ----          ----
Pro forma basic EPS               $    0.47      $    0.37       $    0.86     $    0.69
                                       ====           ====            ====          ====

Fully diluted EPS as reported     $    0.35      $    0.35       $    0.70     $    0.62
Effect of SFAS 128                    (0.06)         (0.07)          (0.10)        (0.08)
                                      ------          ------         ------         ------
Pro Forma diluted EPS             $    0.29      $    0.28       $    0.60     $    0.54
                                       ====           ====            ====          ====
</TABLE>

         Basic  earnings per common share,  as required by SFAS 128, is computed
by dividing  adjusted net income by the total of the weighted  average number of
common  shares  outstanding  during  the  respective  periods.  The year to date
weighted average number of common shares outstanding was 2,159,612 and 2,049,500
for the Company at June 30, 1997 and 1996, respectively. Weighted average shares
outstanding also include common stock  equivalents  which consist of outstanding
stock options and warrants, if such options or warrants are dilutive.

                            Pro Forma EPS Calculation
<TABLE>
<CAPTION>
                                                      Income                 Shares             Per Share Amount
                                                      ------                 ------             ----------------
                                                               For the Quarter Ended June 30, 1996
                                              -----------------------------------------------------------------------
<S>                                           <C>                            <C>                   <C>     
Basic earnings per share
Net income                                    $         759,000              2,049,500             $   0.37
                                                                                            =========================
Options issued to management                                 --                279,142
Warrants                                                     --                338,928
                                              ----------------------- ---------------------
Diluted earnings per share                    $         759,000              2,667,570             $   0.28
                                              ======================= ===================== =========================
<CAPTION>

                                                               For the Quarter Ended June 30, 1997
                                              -----------------------------------------------------------------------
<S>                                           <C>                            <C>                   <C>     
Net income                                    $       1,209,000
less: Preferred Stock Dividends                        (162,000)
                                              -----------------------
Basic earnings per share
Income available to common shareholders
                                              $       1,047,000              2,211,961               $   0.47
                                                                                              =======================
Options issued to management                                 --                481,047
Warrants                                                     --                319,620
Convertible preferred stock                             162,000              1,144,148
                                              ----------------------- -----------------------
Diluted earnings per share                    $       1,209,000              4,156,776               $   0.29
                                              ======================= ======================= =======================
</TABLE>
                                       10

<PAGE>
                         TELEBANC FINANCIAL CORPORATION

NOTE 3.       RECENT EVENTS

         On February  28, 1997,  the Company sold $29.9  million of units in the
form of 4%  convertible  preferred  stock,  9.5% senior  subordinated  notes and
warrants,  and  purchased  substantially  all of the  assets  of  Arbor  Capital
Partners,  Inc. ("Arbor"),  a registered  investment advisor,  funds manager and
broker-dealer.  MET Holdings, TeleBanc's majority shareholder,  owned a majority
of Arbor. In connection with this sale, the Company incurred  approximately $1.7
million of  expenses,  of which,  approximately  $725,000 is  attributed  to the
senior subordinated notes and will be amortized through March 31, 2004.

         The $29.9 million in units were sold to investment partnerships managed
by Conning & Co., CIBC Wood Gundy Argosy  Merchant Fund 2, LLC, The  Progressive
Corporation and The Northwestern  Mutual Life Insurance  Company.  Upon the unit
sale,  representatives  from the Conning partnerships and the CIBC Merchant Fund
were  appointed to the  Company's  Board.  The units consist of $13.7 million in
9.5% senior subordinated notes with 198,088 detachable  warrants,  $16.2 million
in 4.0% convertible  preferred stock, and rights to 205,563 contingent warrants.
The senior  subordinated notes are due on March 31, 2004 and stipulate increases
over time in interest rates subsequent to March 31, 2002 from 9.5% up to 15.25%.
The warrants are  exercisable  at $9.50 with an expiration  date of February 28,
2005.  The preferred  stock  consists of Series A Voting  Convertible  Preferred
Stock,  Series B Nonvoting  Convertible  Preferred  Stock and Series C Nonvoting
Convertible  Preferred  Stock and is convertible  to 1,199,743  shares of common
stock. Series A and Series B shares may be converted at any time into fully-paid
and  non-assessable  shares  of  Voting  Common  Stock.  Series C shares  may be
converted  at any time to  Series  A or  Series  B  shares  or at any time  into
fully-paid and  non-assessable  nonvoting common stock. The contingent  warrants
may be exercised upon a change of control or at any time after February 29, 2002
("Exercise Event"). If the Company's annual internal rate of return is less than
25% at the time of an Exercise  Event,  unit holders may exercise the contingent
warrants for $0.01 until an internal rate of return of 25% is reached.

         Also in connection with the sale of units, the Arbor asset  acquisition
was structured as a tax free issuance of 162,461 shares of TeleBanc common stock
and a $500,000  cash  payment for the Arbor  assets.  An  independent  appraisal
valued the assets to be acquired  from Arbor at $3.1  million.  Consistent  with
TeleBanc's  charter,  the number of shares issued to Arbor as consideration  was
limited to 5% of total market value of outstanding TeleBanc stock at the time of
acquisition.

         In June 1997,  the Company  formed  TeleBanc  Capital Trust I, which in
turn  sold,  at par,  10,000  shares of trust  preferred  securities,  Series A,
liquidation amount of $1,000, for a total of $10,000,000 in a private placement.
TeleBanc  Capital Trust I is a business  trust formed for the purpose of issuing
capital securities, and investing the proceeds in junior subordinated debentures
issued by the company. The trust preferred securities mature in 2027 and have an
annual dividend rate of 11.0% payable semi-annually, beginning in December 1997.
The net proceeds will be used, for general corporate purposes, including to fund
Bank  operations  and the creation and  expansion of its  financial  service and
product operations.

                                       11
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

NOTE 4.       COMMITMENTS AND CONTINGENT LIABILITIES

         In managing the  Company's  interest-rate  risk,  the Company  utilizes
financial  derivatives in the normal course of business.  These products consist
primarily of interest rate cap and swap  agreements.  Financial  derivatives are
employed to assist in the management  and/or reduction of interest rate risk for
the Company and can  effectively  alter the interest  sensitivity of segments of
the balance sheet for specified periods of time.

         The  Company  accounts  for  interest  rate  swap  agreements  and  cap
agreements as hedges of debt issuances,  deposit balances and investment in loan
portfolio  to which such  agreements  have been  specifically  designated.  Cash
remittances  due or  received  pursuant  to these  agreements  are  reported  as
adjustments  to  interest  expense on an accrual  basis.  Any  premiums  paid in
conjunction  with these  interest rate swap and interest rate cap agreements are
amortized as additional  interest expense on a straight-line basis over the term
of  these  agreements.  Any  gain  or  loss  upon  early  termination  of  these
instruments would be deferred and amortized as an adjustment to interest expense
over the term of the applicable interest rate agreement.

                                       12
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS, AS OF AND FOR
                  THE THREE AND SIX MONTHS ENDED JUNE 30, 1997

         This discussion and analysis includes  descriptions of material changes
which  have  affected  the  Company's   consolidated   financial  condition  and
consolidated  results of operations during the periods included in the Company's
financial statements.

FINANCIAL CONDITION (JUNE 30, 1997 COMPARED TO DECEMBER 31, 1996)

         The Company's  total assets  increased by $156.8  million or 24.2% from
$648.0  million at December  31, 1996 to $804.8  million at June 30,  1997.  The
increase in total assets primarily reflects  increases in loans receivable,  net
and  loans  held  for  sale of  $83.1  million,  or  23.6%  and  mortgage-backed
securities  available for sale of $46.6 million, or 25.2%. The increase in loans
receivable  includes purchases of primarily  adjustable rate loans. In February,
1997,  the Company  raised $28.2  million of net proceeds from the sale of units
consisting of debt and equity  securities  and in June 1997,  the Company raised
$10.0  million  in  Trust  Preferred  securities  (see  Note  1 to  Consolidated
Financial Statements for the three and six months ended June 30, 1997 and 1996).
The Company continues to invest the net proceeds as additional equity capital of
the Bank. The increase in asset size reflects  management's  initial  efforts to
leverage the proceeds raised from the sale of units and capital securities.  The
Company intends to continue to leverage such proceeds, as well as capital raised
from earnings, for additional growth for the foreseeable future.

         The Company funded its asset growth with a mix of securities sold under
agreements to repurchase ("reverse repos"),  Federal Home Loan Bank advances and
deposits.  Total  deposits  increased  by $47.3  million,  or 12.1% from  $390.5
million at December  31, 1996 to $437.8  million at June 30,  1997.  The average
term for the new time deposits  gathered in the three months ended June 30, 1997
was  approximately  37.5 months with an average  percentage  yield of 6.28%. The
Company has continued to focus on building core deposit  accounts.  Money market
checking and savings  accounts  increased  33.9% from $109.8 million at December
31, 1996 to $147.1  million at June 30, 1997.  Federal  Home Loan Bank  Advances
remained  relatively  stable. As of June 30, 1997, the weighted average interest
rate and weighted average maturity for Federal Home Loan Bank Advances was 5.75%
and 574 days,  respectively.  Securities  sold under  agreements to  repurchase,
increased by $65.1  million or 113.0% from $57.6 million at December 31, 1996 to
$122.7 million at June 30, 1997 largely as a result of management's intention to
fund high growth after the capital raising and to replace these  borrowings with
the core  deposits  over the year.  As of June 30, 1997,  the  weighted  average
interest rate and weighted average maturity for securities sold under agreements
to  repurchase  was  5.77%  and 143  days,  respectively.  As of June 30,  1997,
subordinated  debt,  net of original  issue  discount was $29.5  million,  which
includes  the 9.5% senior  subordinated  debt raised in  February,  1997 and the
11.5% subordinated debt raised in the second quarter of 1994. As noted in recent
events, In June 1997, the Company formed TeleBanc Capital Trust I, which in turn
sold shares of trust preferred securities,  Series A, for a total of $10,000,000
in a private placement.  The trust preferred  securities have an annual dividend
rate of 11.0% payable semi-annually, beginning in December 1997.

                                       13

<PAGE>
                         TELEBANC FINANCIAL CORPORATION

         Stockholders'  equity  increased  $19.7 million,  from $24.7 million at
December 31, 1996 to $44.3 million at June 30, 1997. The increase was due to the
$15.3 million  issuance of 4% convertible  preferred  stock,  $1.3 million stock
issuance in exchange for Arbor's assets,  $2.1 million in net income for the six
months ended June 30, 1997,  $67,000 loss in minority interest in subsidiary and
an unrealized  gain on securities  available for sale, net of deferred taxes, of
$1.3 million,  which  pursuant to SFAS 115 affects the  Company's  stockholders'
equity  but does  not  impact  the  statement  of  operations  all of which  was
partially offset by $222,000 of preferred stock dividends.


                                       14

<PAGE>
                         TELEBANC FINANCIAL CORPORATION

         The consolidated  average balance sheets, along with income and expense
and related  interest  yields and rates for the quarters ended June 30, 1997 and
1996 are shown  below.  The table  also  presents  information  for the  periods
indicated  with respect to the  difference  between the weighted  average  yield
earned  on   interest-earning   assets  and   weighted   average  rate  paid  on
interest-bearing   liabilities,   or  "interest   rate  spread,"   which  saving
institutions have traditionally  used as an indicator of profitability.  Another
indicator  of an  institution's  net  interest  income  is  its  "net  yield  on
interest-earning  assets,"  which  is its net  interest  income  divided  by the
average balance of  interest-earning  assets and  interest-bearing  liabilities.
When interest-earning assets approximate or exceed interest-bearing liabilities,
any positive interest rate spread will generate interest income.

<TABLE>
<CAPTION>
                                       Quarter ended June 30, 1997         Quarter ended June 30, 1996
                                    ----------------------------------- ------------------------------------
                                                Interest     Average                  Interest     Average
(Dollars in thousands)               Average     Income/    Annualized    Average     Income/    Annualized
         unaudited                   Balance     Expense    Yield/Cost    Balance      Expense   Yield/Cost
                                     -------     -------    ----------    -------      -------   ----------
<S>                                 <C>         <C>           <C>      <C>          <C>           <C>   
Interest-earning assets:
Loans receivable, net               $ 421,820   $    8,322     7.89%   $  257,484    $    5,575     8.66%
Mortgage-backed and related
   securities                              --           --       --            --            --       --
Investment securities                   6,360          114     7.22         8,627           234    10.89
Mortgage-backed and related
   securities available for sale      264,732        5,126     7.74       235,085         4,659     7.93
Investment securities
   available for sale (a)              80,836        1,286     6.37        53,114           913     6.88
Federal funds sold                      1,874           25     5.36           973            12     5.06
Investment in FHLB                      8,160          148     7.25         6,174           111     7.21
Trading account                         6,672          271    16.30            --            --       --
                                    ---------   ----------  -------     ---------    ----------  -------
  Total interest-earning assets       790,454       15,292     7.74%      561,457        11,504     8.20%

Non-interest-earning assets            34,977                              30,756
                                       ------                              ------

  Total assets                      $  825,431                          $ 592,213
                                       =======                            =======

Interest-bearing liabilities:
Savings deposits                    $ 140,354   $    1,863     5.32%    $  98,618         1,178     4.81%
Time deposits                         300,346        4,712     6.29       234,605         3,736     6.41
FHLB advances                         154,863        2,379     6.08       116,973         1,738     5.88
Other borrowings                      155,181        2,276     5.80        88,919         1,278     5.68
Subordinated debt, net                 29,463          879    11.92        17,250           519    12.03
                                       ------   ----------  -------     ---------    ----------  -------
  Total interest-bearing 
   liabilities                        780,207       12,109     6.19%      556,365         8,449     6.07%

Non-interest-bearing liabilities        3,786                              15,302
                                        -----                              ------

Total liabilities                     783,993                             571,667

Stockholders' equity                   41,438                              20,546
                                       ------                              ------

Total liabilities and
   stockholders' equity             $ 825,431                           $ 592,213
                                      =======                             =======

Excess of interest-earning assets
   over interest-bearing
   liabilities/net interest         $  10,247   $    3,183     1.55%    $   5,092    $    3,055     2.13%
                                       ======   ==========  =======     =========    ==========  =======
   income/interest rate spread
Net yield on interest earning assets                           1.61%                                2.18%
                                                               =====                              ======
Ratio of interest-earning assets
   to interest-bearing liabilities                           101.31%                              100.92%
                                                             =======                              =======
</TABLE>

(a)  Interest  income and average  yields on municipal  bonds are presented on a
     tax equivalent basis.

                                       15
<PAGE>
                         TELEBANC FINANCIAL CORPORATION


RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996

         Net Income. Net income for the three and six months ended June 30, 1997
was $1.2 million and $2.1 million, compared to $759,000 and $1.4 million for the
three and six months ended June 30, 1996, respectively. Net income for the three
months ended June 30, 1997  consisted  primarily of $3.4 million of net interest
income and non-interest income of $1.2 on the sale of securities and on the sale
of loans  offset by $308,000  in  provision  for loan  losses,  $2.3  million of
general and  administrative  expenses and  $617,000 in income tax  expense.  Net
income for the three  months  ended June 30, 1996  consisted  primarily  of $2.9
million in net interest income and non-interest  income gains of $316,000 on the
sale of loans  and  $109,000  for loan  fees and  service  charges,  reduced  by
$200,000  in  provision  for loan and  losses and $1.7  million  in general  and
administrative  expenses.  Net  income for the six  months  ended June 30,  1997
consisted of $6.4 of net interest income and $1.9 million of non-interest income
offset by $551,000 of provision  for loan losses,  $4.6 million of  non-interest
expenses and $973,000 in income tax expense. Net income for the six months ended
June 30, 1996 consisted of net interest income of $5.7 million and  non-interest
income of $896,000  offset by $619,000 of provision for loan and $3.8 million of
non-interest expense.

         Net  Interest  Income.  Net  interest  income was $3.4 million and $2.9
million  for the  three  months  ended  June 30,  1997 and  1996,  respectively,
reflecting an  annualized  interest rate spread of 1.55% and 2.13% for the three
months ended June 30, 1997 and 1996,  respectively.  In the quarter  ending June
30,  1997,  total  interest  earning  assets,   consisting  primarily  of  loans
receivable,  net and mortgage-backed  and related  securities,  yielded 7.74% as
compared to 8.20% for the same period in 1996. Average  interest-earning  assets
were $790.5 million and $561.5 million for the quarters ending June 30, 1997 and
1996, respectively. Average interest bearing liabilities were $780.2 million and
$556.4  million for the  quarters  ending June 30, 1997 and 1996,  respectively.
Interest-bearing  liabilities  cost  6.19%  in the  second  quarter  of  1997 as
compared 6.07% in the same period in 1996. Net interest  income was $6.4 million
and $5.7 million for the six months ended June 30, 1997 and 1996,  respectively.
For the three and six month periods of 1997,  the Company  experienced a decline
in  annualized  interest  rate spread  compared to the same period in 1996.  The
decline  reflects a 46 basis point  decrease  in the yield of  interest  earning
assets and an increase of 12 basis points on interest  bearing  liabilities  for
the first half of 1997. The decline in yield  reflects the Company's  investment
in agency  securities.  Subsequent  to  capital  raising  efforts,  the  Company
invested in low risk  securities to leverage  proceeds  quickly.  Over time, the
Company intends to change the asset mix to reflect  increased  investment in the
Company's core assets,  loans receivable.  Average interest bearing  liabilities
were $719.2  million and $547.8  million for the six months  ended June 30, 1997
and 1996,  respectively.  In the six months ended June 30, 1996,  total interest
earning   assets,   consisting   primarily   of   loans   receivable,   net  and
mortgage-backed  and  related  securities,  yielded  7.74% and 8.20% for the six
months  ended June 30,  1997 and 1996,  respectively.  Average  interest-earning
assets were $790.5  million and $555.6 million for the six months ended June 30,
1997 and 1996,  respectively.  Interest-bearing  liabilities  cost  6.19% in the
first six months of 1997 as compared 6.07% in the same period in 1996.

                                       16

<PAGE>
                         TELEBANC FINANCIAL CORPORATION

         Provision for Loan Losses.  Total  provision for loan losses  increased
$108,000 or 54.0% from  $200,000  for the three  months  ending June 30, 1996 to
$308,000 for the three months  ending June 30, 1997.  The provision for loan and
losses reflects  management's  intent to provide prudent  reserves for potential
loan  losses  and for loan  acquisitions  made  during the  quarter.  During the
quarter  ended June 30,  1996,  the Company  provided  additional  reserves  for
single-family  loans.  The Company had recoveries of $54,000 and  charge-offs of
$174,000 on three one to four family mortgage  loans.  During the second quarter
of 1997, the Company provided  additional general reserves for loan acquisitions
of $34.6.  Total provision for loan and losses  decreased  $68,000 or 11.0% from
$619,000  for the six months  ended June 30, 1996 to $551,000 for the six months
ended  June 30,  1997.  The  provision  for the  first  six  months  of 1997 was
attributable to an increase in reserves for several  single-family loans and for
reserves  on  approximately  $76.7  million in loan  acquisitions.  For the same
period in 1996, the Company provided  reserves for several  single-family  loans
and for loan  acquisitions  in accordance  with the Company's  loan loss reserve
policy.  The total loan loss  allowance at June 30, 1997 was $3.2 million  which
was 0.7% of total loans  outstanding.  The total loan loss allowance at June 30,
1996 was $2.7  million  which was 0.9% of total  loans  outstanding.  Total loss
allowance as a percentage of total non-performing  assets was 29.7% and 17.8% as
of June 30, 1997 and 1996, respectively.

         Non-Interest  Income.  Total non-interest income increased by $952,000,
or 327.1%,  from  $291,000  for the three  months  ended  June 30,  1996 to $1.2
million for the three months ended June 30, 1997.  During the second  quarter of
1997, the Company  securitized  coop loans held for sale resulting in a $639,000
trading  gain.  The Company  classified  the  resulting  security in its trading
portfolio.  In  addition,  the  Company  recognized  $452,000  on  the  sale  of
securities,  $283,000 on loan sales and $138,000 on loan fees. During the second
quarter,  the Company accrued a $500,000 operating loss on its equity investment
in  AGT  Mortgage   Services,   LLC  ("AGT").   AGT  serviced   performing   and
non-performing loans for a fee. Given lower than anticipated non-performing loan
levels, AGT did not achieve adequate  economies of scale to generate  sufficient
revenue. Accordingly,  management decided to cease operations of AGT on July 31,
1997. Total non-interest income increased by $955,000,  or 106.6%, from $896,000
for the six months  ended June 30, 1996 to $1.9 million for the six months ended
June 30,  1997.  During  the first  six  months of 1997,  the  Company  reported
non-interest   income  of  $728,000  in  trading   income   attributed   to  the
aforementioned  coop  securitization,  $690,000  on the sale of  mortgage-backed
securities and investments held for liquidity purposes,  $410,000 on the sale of
loans, $333,000 in loan fees and $286,000 in TeleBanc Capital Markets commission
income offset by a $500,000 loss on its equity  investment in AGT. Non- interest
income  for 1996  reflects  primarily  $498,000  in fees and  purchase  mortgage
servicing  income,  $316,000  on the sale of loans  and  $82,000  on the sale of
liquid securities.

         Non-Interest  Expenses.  Non-interest  expenses  for the  three and six
months ended June 30, 1997 were $2.5 million and $4.6 million,  compared to $1.8
million  and $3.8  million  for the three and six months  ended  June 30,  1996,
respectively.  Total  non-interest  expenses increased by $622,000 for the three
months  ended June 30, 1997 as compared  to the same  quarter in 1996,  which is
largely  due to a $501,000  increase  in  general  and  administrative  expenses
attributable to

                                       17
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

the addition of the TeleBanc Capital Market expenses, a $110,000 increase in the
compensation  bonus  accrual  for other than  TeleBanc  Capital  Markets  and an
overall increase in compensation levels.  Total non-interest  expenses increased
$748,000  from $3.8  million  for the six  months  ended  June 30,  1996 to $4.6
million for the same period in 1997.  The increase is primarily  the result of a
$721,000  increase  in general  and  administrative  expenses.  The  increase in
general and  administrative  expense  for the six months  ended June 30, 1997 is
almost entirely a result of increases in  compensation,  increases in personnel,
and an accrual for bonuses. Overall deposit growth has precipitated the need for
additional personnel to handle the increased volume of sales, distribution,  and
back office  operations.  In addition,  1997 reflects  TeleBanc  Capital Markets
expenses.  General and  administrative  expenses as a percentage of total assets
was 1.12% and 1.03% for the quarter and year ending June 30, 1997.

         Income Tax Expense.  The  effective tax rate for the quarter ended June
30, 1997 was 32.6%  compared to 35.5% for the quarter  ended June 30, 1996.  The
income tax expense for the quarter ended June 30, 1997 was $617,000  compared to
$417,000 for the quarter  ended June 30, 1996.  The  effective tax rate declined
slightly in the second quarter of 1997 as a result of an increase in non-taxable
transactions such as the coop securitization. The effective tax rate for the six
months ended June 30, 1997 was 31.3%  compared to 34.7% for the six months ended
June 30, 1996.


LIQUIDITY

         Liquidity  is the  ability  of  the  Company  to  generate  cash  flows
sufficient  to  fund  operations  and  to  meet  present  and  future  financial
obligations  to borrowers  and  depositors in a timely  manner.  Cash flows from
(used) in operating  activities,  consisting primarily of interest received less
interest paid on deposits and borrowings, were $(24.3) million and $36.1 million
for the six months  ended June 30,  1997 and 1996,  respectively.  Net cash flow
used in investing activities (primarily purchases of mortgage-backed and related
securities  and  mortgage  loans,  offset  by  principal  payments  on loans and
mortgage-backed  and related  securities  and proceeds  from sale or maturity of
investment  securities) was  $105.4million  and $71.1 million for the six months
ended June 30, 1997 and 1996,  respectively.  The increase in cash flows related
to  investing  activities  for the six  months  ended June 30,  1997  reflects a
significant increase in the amount of mortgage-backed securities, mortgage loans
and investment  securities  purchased.  Net financing activities  (primarily net
activity in deposits and  borrowings)  were $139.8 million and $31.1 million for
the six months ended June 30, 1997 and 1996,  respectively.  The increase in net
cash provided by financing  activities for the six months ended June 30, 1997 is
primarily the result of increased  growth in 1997 as compared to the same period
in 1996.  The total net increase  (decrease)  in cash and cash  equivalents  was
$10.0  million and $4.0 million for the six months ended June 30, 1997 and 1996,
respectively.

         The  Company's  primary  sources of funds are  deposits,  principal and
interest  payments on loans and  mortgage-backed  securities,  and proceeds from
sales and maturities of  mortgage-backed  and related  securities and investment
securities.  Investment  maturities,  and  scheduled  amortization  of loans and
mortgage-backed securities are generally a predictable source of funds.

                                       18
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

Deposit  flows and mortgage  prepayments  are greatly  influenced by the general
level of interest rates, economic conditions, and competition.  The Company also
accesses FHLB advances,  utilizes securities sold under agreements to repurchase
and subordinated debt.

         The Bank is  required to maintain  minimum  levels of liquid  assets as
defined  by the  OTS  regulations.  This  requirement,  which  may  vary  at the
discretion of the OTS depending upon economic  conditions and deposit flows,  is
based upon a  percentage  of deposits  and  short-term  borrowings.  The minimum
required ratio is 5.0%. At June 30, 1997, the Company's  average liquidity ratio
was 6.18%.

         In the second quarter of 1994, the Company completed its initial public
offering,  raising an aggregate of $21.9 million  through the issuance of common
stock and  subordinated  notes with warrants.  Upon completion of this offering,
the  Company  invested  $15 million of the  proceeds as capital of the Bank.  In
February , 1997,  the Company  raised an  additional  $29.9 million in aggregate
through  the  issuance  of 4.0%  cumulative  preferred  stock  and  9.5%  senior
subordinated notes with warrants.  Upon completion of this offering, the Company
invested  $10 million of the proceeds as capital of the Bank.  The  subordinated
debt represents a stable,  although  relatively  expensive,  source of funds. In
addition, the Company formed TeleBanc Capital Trust I, which in turn sold shares
of trust preferred securities, Series A, for a total of $10,000,000 in a private
placement.  The annual  expense to service the total  subordinated  debt and the
trust  preferred  securities  is $3.3  million and $1.1  million,  respectively.
Annual dividends on the 4% preferred stock is $648,000.

         Subject to regulatory approval,  the Bank will dividend $3.9 million to
the  Company  to  service  the debt  and  preferred  stock.  There  are  various
regulatory  limitations  on the  extent  to which  federally  chartered  savings
institutions  may pay  dividends.  Also,  savings  institution  subsidiaries  of
holding companies  generally are required to provide their OTS Regional Director
with  no  less  than  30  days  notice  of  any  proposed   declaration  on  the
institution's  stock.  Under  terms of the  indentures  pursuant  to  which  the
subordinated  notes were issued,  the Company presently is required to maintain,
on an unconsolidated  basis, liquid assets in an amount equal to or greater than
$3.3 million,  which represents 100% of the aggregate  interest expenses for one
year on the subordinated debt.

         The Company's most liquid assets are cash and cash  equivalents,  which
include investments in liquid short-term investments and federal funds sold with
maturities of nine months or less. The levels of these assets are dependent upon
the Company's  operating,  financing,  and investing activities during any given
period.  Cash equivalents  totaled $13.3 million and $3.3 million as of June 30,
1997 and December 31, 1996,  respectively.  As of June 30, 1997, the Company had
commitments to purchase $48.4 million in loans.  Also,  certificates  of deposit
which are  scheduled to mature in less than one year as of June 30, 1997 totaled
$41.5 million.

         In the normal course of business, the Company makes various commitments
to extend credit and incurs  contingent  liabilities  which are not reflected in
the balance sheets.

                                       19
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

CAPITAL RESOURCES

         Capital  ratios at June 30, 1997 exceeded each of the three OTS capital
requirements  on a fully  phased-in  basis.  The following  table sets forth the
actual and required  minimum levels of regulatory  capital for the Company under
applicable OTS regulations as of June 30, 1997:

                  ACTUAL    PERCENT       REQUIRED      PERCENT        EXCESS
                  ------    -------       --------      -------        ------
                                   (DOLLARS IN THOUSANDS)

Core            $46,022       5.84%         $23,643       3.00%        $22,379
Tangible         46,010       5.84           11,821       1.50          34,189
Risk-based       48,887      12.59           31,056       8.00          17,831



                                       20

<PAGE>
                         TELEBANC FINANCIAL CORPORATION


PART II -- OTHER INFORMATION


Item 4.           Submission of Matters to Security Holders

         On May 7, 1997 the Company held its 1997 Annual Meeting of Shareholders
(the "Annual Meeting").  At the Annual Meeting,  David R. DeCamp, Mark Rollinson
and Michael A.  Smilow were  elected to the Board of  Directors  for  three-year
terms ending in 2000. The Directors continuing in office were Mitchell H. Caplan
and David Smilow whose terms expire in 1998 and Arlen W. Gelbard, Dean C. Kehler
and Steven F. Piaker whose terms expire in 1999. The shareholders  also voted at
the Annual  Meeting to amend the  certificate of  incorporation  to increase the
number of  authorized  shares of common stock and to  authorize  the issuance of
nonvoting  common stock, to amend the certificate of incorporation to revise two
anti-takeover  provisions, to adopt the 1997 Stock Option Plan and to ratify the
Board's  appointment  of Arthur  Andersen  LLP as the  independent  auditors  of
Company for the fiscal year ending December 31, 1997.

         The votes cast at the Annual Meeting were as follows:

         Election of David R. DeCamp                          FOR - 2,886,817
                                                              AGAINST - 0
                                                              WITHHELD -81,504

         Election of Mark Rollinson                           FOR - 2,886,817
                                                              AGAINST - 0
                                                              WITHHELD - 81,504

         Election of Michael A. Smilow                        FOR - 2,886,817
                                                              AGAINST - 0
                                                              WITHHELD - 81,504

         Amend  Article  4 of the  Certificate  of
         Incorporation  to increase the authorized
         number of Common Shares from 3,500,000 to
         8,500,000  and to to authorize  Nonvoting
         Common Stock                                         FOR - 2,886,817
                                                              AGAINST - 0
                                                              WITHHELD - 81,504

         Amend Article 8 of the Certificate of Incorporation  FOR - 2,426,022
                                                              AGAINST - 0
                                                              WITHHELD - 542,299


                                       21
<PAGE>
                         TELEBANC FINANCIAL CORPORATION


         Amend Article 11 of the Certificate of
         Incorporation                                        FOR - 2,426,022
                                                              AGAINST - 0
                                                              WITHHELD - 542,299

         Adopt the 1997 Stock Option Plan                     FOR - 2,423,927
                                                              AGAINST - 0
                                                              WITHHELD - 544,394
         Ratification of Appointment
         of Arthur Andersen LLP:                              FOR - 2,888,817
                                                              AGAINST - 0
                                                              WITHHELD - 81,504

Item 6.           Exhibits and Reports on Form 8-K

         (a) Exhibits

                  27. Financial Data Schedule

         (b)   Reports on Form 8-K

                  No information to report.

                                       22
<PAGE>
                         TELEBANC FINANCIAL CORPORATION

SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                         TeleBanc Financial Corporation
                                                  (Registrant)


Date:      August 14, 1997              By:    /s/ Mitchell H. Caplan
           ---------------------               ---------------------------------
                                               Mitchell H. Caplan
                                               President



Date:      August 14, 1997              By:    /s/ Aileen Lopez Pugh
           ---------------------               ---------------------------------
                                               Aileen Lopez Pugh
                                               Executive Vice President
                                               Chief Financial Officer/Treasurer