As filed with the Securities and Exchange Commission on February 12, 1999

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549-1004

                                    FORM 10-Q


(Mark One)

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

         For the quarterly period ended December 31, 1998

                                       OR

[ ]      Transition report pursuant to section 13 or 15(d) of the Securities 
         Exchange Act of 1934

         For the Transition Period From         To                          

                        Commission file number 333-38673

                                 RB ASSET, INC.
             (Exact name of registrant as specified in its charter)

Delaware                                      13-5041680    
(State or other jurisdiction                  (I.R.S. Employer
of incorporation or organization)             Identification No.)


645 Fifth Avenue  Eight Floor, New York, New York                 10022   
(Address of principal executive offices)                       (Zip Code)

Company's telephone number, including area code:   (212)  848-0201



Securities registered pursuant to section 12(b) of the Act:         None
Securities registered pursuant to section 12(g) of the Act:         None



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  periods 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



The number of shares outstanding of the Registrant's Common Stock as of February
15, 1999 was 7,100,000. The number of shares outstanding of the Registrant's 15%
Non-cumulative  Perpetual  Preferred Stock, Series A as of February 15, 1999 was
984,727.





<PAGE>


<TABLE>
<CAPTION>



                                 RB ASSET, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                  FOR THE THREE MONTHS ENDED DECEMBER 31, 1998

                                TABLE OF CONTENTS




                                                                                                          PAGE
INDEX
<S>         <C>             <C>                                                                           <C>

PART I.     FINANCIAL INFORMATION

            Item 1.    Financial Statements

                            Consolidated Statements of Financial Condition as of December 31,
                            1998 (unaudited) and June 30, 1998................................             3

                            Consolidated Statements of Operations for the three and six months
                            ended December 31, 1998 and 1997 (unaudited) ......................            4

                            Consolidated Statements of Changes in Stockholders' Equity for the 
                            six months ended December 31, 1998 and 1997........................            5

                            Consolidated Statements of Cash Flows for the six months ended 
                            December 31, 1998 and 1997.........................................            6


                            Notes to the Consolidated Financial Statements ....................            8


            Item 2.    Management's Discussion and Analysis of Financial Condition
                       and the Results of Operations ..........................................           21

PART II.    OTHER INFORMATION

            Item 1.    Legal Proceedings ......................................................           30
            Item 2.    Changes in Securities ..................................................           30
            Item 3.    Defaults Upon Senior Securities ........................................           30
            Item 4.    Submissions of Matters to a Vote of Securities Holders .................           30
            Item 5.    Other Information ......................................................           30
            Item 6.    Exhibits and Reports ...................................................           31

SIGNATURES.....................................................................................           31

</TABLE>


                                        2

<PAGE>




PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements


<TABLE>
<CAPTION>

                                 RB ASSET, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                       December 31, 1998 and June 30, 1998
                             (Dollars in Thousands)

                                     Assets
                                                                          (Unaudited)
                                                                          December 31,           June 30,
                                                                             1998                  1998
                                                                            ------                 ----
<S>                                                              <C>                    <C>   
Real estate assets:
Real estate held for investment, net of accumulated
   depreciation of $1,742 and $583, respectively                  $         78,817      $         82,835

Real estate held for disposal                                                2,000                 5,013
   Allowance for fair market value reserve under SFAS-121                      -                  (1,363)
                                                                  ----------------      -----------------
      Total real estate held for disposal, net                               2,000                 3,650

Real estate loans receivable:
   Secured by real estate                                                   55,623                59,006
   Loans sold with recourse, net                                            13,789                15,781
   Allowance for possible credit losses                                    (16,337)              (17,697)
                                                                  ----------------     -----------------
      Total loans receivable, net                                           53,075                57,090

Investments in joint ventures                                                1,536                 1,536
                                                                  ----------------     -----------------
   Total real estate assets                                                135,428               145,111

Cash, due from banks and cash equivalents                                   14,350                12,532
Cash, due from banks - restricted                                           28,516                19,555
Investment securities available for sale                                     1,541                 1,373
Commercial and consumer loans                                               10,322                10,431
   Allowance for possible credit losses                                     (2,340)               (2,340)
                                                                  ----------------     -----------------
Commercial and consumer loans, net                                           7,982                 8,091
Other assets                                                                 4,744                 4,248
                                                                  ----------------     -----------------
   Total Assets                                                   $        192,561      $        190,910
                                                                  ================     =================

                      Liabilities and Stockholders' Equity

Liabilities:
Increasing Rate Junior Subordinated Notes due 2006,
 net of unamortized discount                                      $         10,555      $            -
Other borrowed funds                                                        68,760                68,760
Other liabilities                                                           15,369                14,967
                                                                  ----------------     -----------------
   Total Liabilities                                                        94,684                83,727
                                                                  ----------------     -----------------

Stockholders' equity:
15% non-cumulative preferred stock, Series A par value $1, liquidation value $25
(1,400,000  shares  authorized,  984,727 issued and  outstanding at December 31,
1998, 1,400,000
issued and outstanding at June 30, 1998)                                       985                 1,400

Common stock par value $1 (30,000,000 shares authorized,
7,100,000 shares issued and outstanding at December 31,
1998 and June 30, 1998)                                                      7,100                 7,100

Additional paid in capital                                                 101,419               111,170
Accumulated deficit                                                        (10,870)              (11,561)
Accumulated comprehensive income                                              (757)                 (926)
                                                                  ----------------      -----------------
   Total Stockholders' Equity                                               97,877               107,183
                                                                  ----------------      -----------------
Total Liabilities and Stockholders' Equity                        $        192,561      $        190,910
                                                                  ================      ================

See notes to Consolidated Financial Statements

</TABLE>

                                        3

<PAGE>


<TABLE>
<CAPTION>


                                 RB ASSET, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       For the Three and Six Months Ended
                           December 31, 1998 and 1997
                  (Dollars in thousands, except per share data)

                                                                            Three months ended             Six months ended
                                                                                December 31,                  December 31,
                                                                        ---------------------------   ---------------------------
                                                                             1998           1997          1998            1997
                                                                        ------------   ------------   -----------     -----------
<S>                                                                   <C>                 <C>            <C>            <C>    
REVENUE:
Rental revenue and operations:
       Rental income and other property revenue                        $     3,743       $   3,336     $   7,513       $    6,609
       Property operating and maintenance expense                           (2,625)         (2,711)       (5,189)          (4,975)
       Depreciation - real estate held for investment                         (608)            (54)       (1,185)           (104)
                                                                        ------------   ------------   -----------     -----------
  Net rental operations                                                        510             571         1,139            1,530

Other property income (expense):
       Net gain/(loss) on sale of real estate                                1,243             (89)        1,731           (1,003)
       Recovery (writedown) of investments in real estate                      106              -            106             (350)
                                                                        ------------   ------------   -----------     -----------
  Total other property income/(expense)                                      1,349             (89)        1,837           (1,353)

Other income:
  Interest income:
       Loans receivable                                                        733           1,369         1,373            2,136
       Investment securities                                                    -              -             -                 55
       Money market investments and other                                      126              95           353              154
                                                                        ------------   ------------   -----------     -----------
         Total interest income                                                 859           1,464         1,726            2,345
       Realization of contingent participation revenues                         -              -           1,000              769
                                                                        ------------   ------------   -----------     -----------
  Total other income                                                           859           1,464         2,726            3,114
                                                                        ------------   ------------   -----------     -----------
       Total revenues                                                        2,718           1,946         5,702            3,291
                                                                        ------------   ------------   -----------     -----------
EXPENSES:
  Interest expense:
       Increasing Rate Junior Subordinated Notes due 2006                        2              -              2               -
       Other borrowed funds                                                    987           1,535         2,413           3,172
       Other                                                                    29              31            34              52
                                                                        -----------    ------------   -----------     -----------
         Total interest expense                                              1,018           1,566         2,449           3,224

  Other expenses:
       Salaries and employee benefits                                           58             225           108             430
       Legal and professional fees                                             569             596           771           1,341
       Management fees                                                         613             659         1,230           1,330
       Other                                                                    73              95           138             196
                                                                        ------------   ------------   -----------     -----------
         Total other expenses                                                1,313           1,575         2,247           3,297
                                                                        ------------   ------------   -----------     -----------
       Total expenses                                                        2,331           3,141         4,696           6,521
                                                                        ------------   ------------   -----------     -----------

Income (loss) before other income (expense) and before                  ------------   ------------   -----------     -----------
    provision for income taxes                                                 387          (1,195)        1,006          (3,230)
Other income (expense):
         Net gains (losses) on sales of investment securities                   -              -             -             1,697
                                                                        ------------   ------------   -----------     -----------
   Total other income (expense)                                                 -              -             -             1,697

Net income / (loss) after other income (expense) and before             ------------   ------------   -----------     -----------

    provision for income taxes                                                 387          (1,195)        1,006          (1,533)

Provision for income taxes                                                     145              50           314             101
                                                                        ------------   ------------   -----------     -----------
Net income /(loss)                                                             242          (1,245)          692          (1,634)
Dividends declared on preferred stock                                           -              -             -               -
                                                                        ------------   ------------   -----------     -----------
Net income /(loss) applicable to common stock                           $      242      $   (1,245)   $      692       $  (1,634)
                                                                        ============   ============   ===========     ===========
Basic and diluted income /(loss) per common share                       $      0.03     $    (0.18)   $      0.10      $   (0.23)
                                                                        ============   ============   ===========     ===========
See Notes to Consolidated Financial Statements

</TABLE>

                                        4

<PAGE>


<TABLE>
<CAPTION>


                                 RB ASSET, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Six months
                  ended December 31, 1998 and 1997
                             (dollars in Thousands)
                                   (Unaudited)

                                  Series A
                                  Non-
                                  cumulative
                                  Perpetual                      Additional      Retained         Accumulated           Total
                                  Preferred        Common         Paid-in        Earnings        Comprehensive      Stockholders'
                                  Stock             Stock         Capital        (Deficit)           Income             Equity
                                  ------------   ----------    -------------   -------------   ------------------   --------------


<S>                                <C>            <C>          <C>              <C>             <C>                  <C>         
Balances at June 30, 1997         $    1,400     $  7,100     $   111,170      $   (10,055)    $        (1,105)      $    108,510

Net loss for the six months ended
December 31, 1997                         -            -              -             (1,634)                 -              (1,634)

Preferred stock dividends payable         -            -              -                 -                   -                  -

Change in comprehensive income 
resulting from changes in unrealized 
loss on securities available-for-sale     -            -              -                 -                  179                179
                                  ------------   ----------   -------------   -------------   ------------------   --------------
Balances at December 31, 1997     $    1,400     $  7,100     $   111,170     $   (11,689)    $           (926)     $     107,055
                                  ============   ==========   =============   =============   ==================   ==============

Balances at June 30, 1998         $    1,400     $  7,100     $   111,170     $   (11,561)    $           (926)     $     107,183

Net income for the six months 
ended December 31, 1998                   -            -               -              692                   -                 692

Preferred stock dividends payable         -            -               -               -                    -                   -

Reduction in Stockholders' Equity   
resulting from the Preferred Stock  
Exchange Offer (Note 2)                 (415)          -           (9,751)                                                (10,166)

Change in comprehensive income                                                                                           
resulting from changes in unrealized
loss on securities available-for-sale     -            -               -               -                   169                169
                                  ------------   ----------   -------------   -------------   ------------------   --------------
Balances at December 31, 1998     $      985     $  7,100     $   101,419     $   (10,870)    $           (757)      $     97,877
                                  ============   ==========   =============   =============   ==================   ==============

</TABLE>


See notes to Consolidated Financial Statements


                                        5

<PAGE>


<TABLE>
<CAPTION>


                                 RB ASSET, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Six Months Ended December 31, 1998 and 1997
                             (dollars in thousands)
                                   (Unaudited)

                                                                                        Six months ended
                                                                                          December 31,
                                                                               ---------------------------------
                                                                                      1998             1997
                                                                               ----------------  ---------------
<S>                                                                             <C>                 <C>    
Operating Activities:
Cash Flows Provided by (Used in) Operating Activities:
  Net (loss)/income                                                            $        692      $     (1,634)
  Adjustments to reconcile net (loss)/income to cash
  used in operating activities:
      Net (gain) loss on sale of real estate assets                                  (1,739)            1,003
      (Recovery) writedowns of real estate assets                                      (106)              350
      Depreciation and amortization                                                   1,186               104
      Net gain on sales of loans, other investments
            and investment securities                                                    -             (1,697)
  Change in operating assets and liabilities:
      Net decrease/(increase) in accrued interest receivable                             79              (486)
      Net (decrease)/increase in accrued interest payable                              (100)             (642)
      Net (decrease)/increase in accrued income taxes                                   407              (185)
      Net (decrease)/increase in accrued expenses
            and other liabilities                                                       484            (2,836)
      Net (increase)/decrease in prepaid expenses and other assets                     (575)              597
      Cash effect of increases/(decreases) in allowance for
            possible credit losses                                                      331               774
      Other                                                                              39              (160)
                                                                             ----------------  ---------------
            Net cash (used in)/provided by operating activities                         698            (4,812)
                                                                             ----------------  ---------------

Investing Activities:
Cash Flows Provided by (Used in) Investing Activities:
  Proceeds from sales and maturities of investment
        securities, available for sale                                                     -            6,871
  Net repayment/(origination) of loans secured by real estate, net                     3,383            1,404
  Net repayment/(reacquisition) of commercial and consumer loans                          61          (2,002)
  Net decrease/(increase) in loans sold with recourse                                    842            4,794
  Proceeds from sales of real estate held                                              6,105            8,458
  Additional fundings on real estate held                                              (309)          (4,104)
                                                                            ----------------  ---------------
            Net cash provided by investing activities                                 10,082           15,421
                                                                            ----------------  ---------------

(Continued on next page)

</TABLE>



See notes to Consolidated Financial Statements





                                        6

<PAGE>


<TABLE>
<CAPTION>


                                 RB ASSET, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Six Months Ended December 31, 1998 and 1997
                             (dollars in thousands)
                                   (Unaudited)

(Continued from previous page)

                                                                                   Six months ended
                                                                                     December 31,
                                                                           --------------------------------
                                                                                 1998            1997
                                                                           ---------------- ---------------
<S>                                                                             <C>                 <C> 
Financing Activities:
Cash Flows Provided by (used in) Financing Activities:
  Increase in restricted cash                                                      (8,962)          (196)
  Proceeds from borrowed funds                                                         -             551
  Repayment of borrowed funds                                                          -          (6,936)
  Increase/decrease in borrowed funds secured by loans sold with
    recourse, net of construction advances                                             -          (6,493)
                                                                           ----------------  ---------------
      Net cash used in financing activities                                        (8,962)       (13,074)


Net increase/(decrease) in cash and money market investments                        1,818         (2,465)

Beginning cash                                                                     12,532          8,940
                                                                           ----------------  ---------------

Ending cash                                                                 $      14,350   $      6,475
                                                                           ================ ===============



Supplemental Disclosure of Cash Flow Information
Cash paid for:
      Interest                                                              $       2,546   $      3,990
      Federal, state and local taxes                                                  395            268


</TABLE>





See notes to Consolidated Financial Statements



                                        7

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)


1.  Organization and Formation of the Company

RB Asset,  Inc. (the "Company") is a Delaware  corporation  that, as a result of
the  completion  of  reorganization  steps (the  "Reorganization,"  described in
detail  below),  on May 22,  1998,  succeeded  to the  assets,  liabilities  and
business of River Bank America ("River Bank" or the "Predecessor  Bank").  Prior
to the  Reorganization,  River Bank was a New York State chartered stock savings
bank and was  regulated by the New York State Banking  Department  ("the Banking
Department" or the "NYSBD") and,  until  December 31, 1997, the Federal  Deposit
Insurance  Corporation (the "FDIC").  The Company's principal business continues
to be the  management of its real estate  assets,  mortgage loans and investment
securities,  under a business  plan  intended  to  maximize  shareholder  value.
Following  the  Reorganization,  the Company  intends to manage its business and
assets without the regulatory  constraints previously imposed on the Predecessor
Bank by the Banking Department.  This report is for the three month period ended
December 31, 1998.  Unless the context  otherwise  requires,  references  to the
business,  assets and  liabilities  of the Company prior to May 22, 1998 include
the business, assets and liabilities of the Predecessor Bank.

The Predecessor  Bank was founded in 1848. In 1925, the Predecessor Bank adopted
the name "East  River  Savings  Bank"  which it  continued  to use in its retail
business  through June 28, 1996. The Predecessor  Bank converted to a stock-form
savings bank through a plan of  conversion in 1985.  Effective  October 1, 1988,
East River  Savings  Bank  formally  changed its  corporate  name to "River Bank
America." On June 28,  1996,  the  Predecessor  Bank sold its  remaining  eleven
branches ("the Branch Sale") to Marine Midland Bank ("Marine"), inclusive of the
name East River Savings Bank.  Following  consummation  of the Branch Sale,  all
retail banking operations of the Predecessor Bank ceased.

On May 22,  1998,  River  Bank  completed  its  Reorganization  into a  Delaware
corporation  named  RB  Asset,  Inc.,  under a plan  that  was  approved  at the
Predecessor Bank's special meeting of stockholders reconvened on May 1, 1998. RB
Asset,  Inc., as the successor in the  Reorganization,  succeeded to the assets,
liabilities  and business of River Bank. As a result of the  reorganization  and
related  dissolution  discussed  below,  the  capital  stock of  River  Bank was
canceled  and, as of the close of business on May 22,  1998,  River Bank's stock
transfer records were closed.

Following stockholder approval of the Reorganization on May 18, 1998, all of the
Predecessor  Bank's assets,  liabilities  and business were  transferred  to, or
assumed by, the Predecessor  Bank's  wholly-owned  subsidiary,  River Asset Sub,
Inc. on May 11,  1998,  pursuant to the terms of an  assignment  and  assumption
agreement and related  transfer  documents.  Thereafter,  the Board of Directors
declared distribution of the capital stock of its wholly-owned subsidiary, River
Distribution Sub, Inc. ("River Distribution"),  payable on a book-entry basis to
the  Predecessor  Bank's  stockholders of record on May 22, 1998. At the time of
such distribution the capital stock of River Distribution had no value.

In the  distribution,  all of the issued and outstanding  shares of common stock
and 15% noncumulative  perpetual preferred stock, series A of River Distribution
("River  Distribution  Series A Preferred")  held by the  Predecessor  Bank were
distributed to the Predecessor  Bank's  stockholders on a share-for-share  basis
such that each  holder of the common  stock of River Bank  ("River  Bank  Common
Stock") received one share of River Distribution  Common Stock for each share of
River Bank Common Stock held by such  stockholder  and each holder of River Bank
15%  noncumulative  perpetual  preferred  stock,  series A ("River Bank Series A
Preferred")  received one share of River  Distribution  Series A Preferred Stock
for each share of River Bank Series A Preferred Stock held by such stockholder.

Finally,  upon book-entry  payment of the  distribution,  on May 22, 1998, River
Distribution  merged with and into River Asset  whereupon  the  stockholders  of
River  Distribution  became  stockholders  of the  surviving  corporation  which
changed its name to RB Asset, Inc. In the merger, the shares of capital stock of
River  Distribution  were converted into identical shares of capital stock of RB
Asset,  Inc. and the capital stock of River Asset  outstanding and held by River
Bank prior to the merger was  canceled.  Accordingly,  subsequent to the merger,
the capital stock of River Bank had no value.  Stock  certificates  representing
shares of capital stock of RB Asset,  Inc. were then  distributed  to holders of
record as of May 22, 1998.



                                        8

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

In connection with the reorganization  steps, on May 19, 1998, a petition for an
order of  dissolution  declaring  River Bank  dissolved and its legal  existence
terminated  was filed in the Supreme Court of the State of New York. The Supreme
Court  issued  the order on June 18,  1998 and,  upon the filing of the order of
dissolution with the Banking Department,  on June 23, 1998, the Predecessor Bank
was dissolved and its legal  existence  terminated.  Prior to  dissolution,  the
stock transfer records of River Bank were closed and upon such dissolution,  the
capital stock of River Bank was canceled.

On June 28, 1996, the Predecessor Bank consummated the transactions (the "Branch
Sale") contemplated by the Purchase of Assets and Liability Assumption Agreement
(the  "Branch  Agreement")  by and  between  the  Predecessor  Bank and  Marine.
Pursuant to the terms of the Branch  Agreement,  Marine assumed $1,159.6 million
of deposit  liabilities  (the "Assumed  Deposits")  and acquired  assets with an
aggregate  carrying value of $1,066.6 million (the  "Transferred  Assets").  The
Transferred  Assets  consisted  primarily  of  loans  secured  by  real  estate,
mortgage-backed and investment securities, and 11 bank branch offices, inclusive
of the name East River  Savings  Bank.  Included in the  Transferred  Assets was
approximately  $32.4 million of loans in which the Predecessor  Bank was granted
subordinated  participation  interests.  Also included in the Transferred Assets
were the proceeds of dispositions  from five individual asset sale  transactions
with third parties,  aggregating $60.4 million,  composed of real estate assets,
loans and other  receivables  (the  "Asset Sale  Transactions").  The Asset Sale
Transactions  were structured to include ongoing recourse to, and  participation
by, the  Predecessor  Bank with respect to the assets  sold,  based upon the net
proceeds realized on disposition of assets by the purchasers.

The Assumed  Deposits  exceeded the Transferred  Assets by  approximately  $93.0
million,  which  represented the premium received by the Predecessor Bank in the
Branch Sale.  Marine also purchased the Predecessor  Bank's branch office realty
at 96th Street in Manhattan for $1.3 million.  The  Predecessor  Bank recorded a
net pretax gain on the sale of offices and branches of $77.6 million  reflecting
the  deposit  premium  of  $93.0  million,   partially  offset  by  Branch  Sale
transaction costs of $5.8 million,  professional fees of $3.2 million,  employee
benefits and severance  costs of $4.6 million,  net losses on the sale of assets
of $1.1 million and other net costs of $700,000.  During the year ended June 30,
1997, the Predecessor Bank's indemnification agreements with Marine were amended
and a $3.3 million contingency reserve was recorded.

At June 30,  1996,  the  Predecessor  Bank  retained  $285.5  million in assets,
including primarily real estate assets and non-performing  loans. The balance of
the retained assets  consisted of performing  loans  (including  loans sold with
recourse, subordinated participations, junior subordinated participations, loans
to facilitate  the sale of real estate owned and mortgage and other loans) and a
modest amount of cash and  investment  securities  (collectively,  the "Retained
Assets").  Subsequent  to  the  Branch  Sale,  the  Predecessor  Bank  continued
substantially the same asset management strategy for Retained Assets as had been
previously  employed by the Predecessor  Bank, in the years immediately prior to
the Branch Sale.

Following the Branch Sale, the Company engaged RB Management  Company,  LLC (the
"Management Company") to manage its operations on a day-to-day basis,  including
developing  and  recommending  strategies  to the  Company's  Board of Directors
regarding  the  ongoing  management  of  assets.  The  Management  Company  is a
privately-owned  entity that was newly formed in June 1996 and is  controlled by
Alvin Dworman, who owns 39.0% of the outstanding Common Stock of the Company.

The  closing of the Branch  Sale was  conditioned  upon the  Predecessor  Bank's
obtaining  financing  with terms and in an amount  reasonably  acceptable to the
Predecessor Bank and determined to be reasonably adequate to permit consummation
of the Branch Sale.  The  Predecessor  Bank obtained from Marine a loan facility
(the  "Facility"  or  "Initial  Facilities")  consisting  of eleven  independent
mortgage loans with additional collateral,  in an aggregate amount not to exceed
$99.1 million.  As of June 30, 1996, Marine had extended $89.8 million under the
Facility to the Predecessor  Bank, which has been reduced by repayment  activity
to $60.6  million at December  31, 1998,  with an  additional  $28.3  million in
proceeds maintained in a restricted cash account pending negotiation with Marine
as to the application of such proceeds to reduce the outstanding balances of the
Facility.  Proceeds of the Facility were utilized by River Bank to (i) refinance
all or part of the certain  indebtedness  secured by assets to be transferred to
Marine, including all or a substantial part of the outstanding advances from the
Federal  Home Loan  Bank  ("FHLB")  and (ii)  provide  additional  funds for the
development  and completion of two individual  real estate assets as part of the
Predecessor Bank's operations subsequent to the Branch Sale.


                                        9

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

Marine assumed  substantially  all of the Predecessor  Bank's retail deposits in
connection  with the Branch  Sale.  In  addition,  the  Predecessor  Bank ceased
accepting  retail deposits on the date of the Branch Sale. At June 30, 1996, the
Predecessor   Bank  held   certain   non-retail   deposits,   which   aggregated
approximately  $3.0 million.  During the quarter  following the Branch Sale, the
Predecessor  Bank  arranged  for the  assumption  by  other  insured  depository
institutions of its remaining non-retail deposits.  Accordingly, the Predecessor
Bank held no deposit  liabilities at June 30, 1997.  However,  at June 30, 1997,
the  Predecessor  Bank  continued to be regulated by the FDIC and the NYSBD.  On
October 31, 1996 the  Predecessor  Bank  requested  that the FDIC  terminate its
insurance  of  accounts  in  accordance  with the  requirements  of the  NYSBD's
approval of the Branch Sale. On April 14, 1997,  the  Predecessor  Bank received
notice  that the  FDIC,  as  requested  by the  Predecessor  Bank,  intended  to
terminate the  Predecessor  Bank's status as an insured state  nonmember Bank on
December 31, 1997.  Upon the issuance of this order by the FDIC, the Predecessor
Bank was no longer  subject to banking  regulation  by the FDIC.  In  connection
therewith,  the  Predecessor  Bank also received  from the Banking  Department a
waiver of any applicable New York State deposit insurance requirements.

Conditions  imposed in connection  with the NYSBD's  approval of the Branch Sale
included:  (i) the Predecessor  Bank's agreement to file an application with the
Banking  Department,  within one year of the  closing of the  Branch  Sale,  for
approval of a plan of dissolution; (ii) the Predecessor Bank's agreement to file
with the  Supreme  Court of the State of New York an  application  for a closing
order within 13 months of the closing of the Branch Sale and an application  for
a final  order of  dissolution  within five  months  following  the filing of an
application for a closing order;  (iii) increased  levels of minimum  regulatory
capital  requirements;  (iv) the  Predecessor  Bank's  agreement  to continue to
submit its proposed  capital  transactions to the NYSBD for prior approval;  (v)
the  continuation  of the Predecessor  Bank's  then-current  periodic  reporting
obligations with respect to its retained  assets,  as well as in connection with
its  ongoing  activities  subsequent  to the  Branch  Sale;  and (vi) such other
conditions  and   obligations   as  the  Banking   Department  may  have  deemed
appropriate.

In June  1997,  the  Predecessor  Bank  submitted  an  alternate  proposal  (the
"Alternate  Proposal") to the NYSBD pursuant to which the Predecessor Bank would
implement  Conditions  No.  1 and No.  2 of the  approval  of the  Branch  Sale,
described  above.  The Predecessor  Bank proposed to adopt a plan under which it
would  transfer  all of its assets and  liabilities,  including  all  contingent
liabilities,   to  a  successor  corporation  ("Successor")  incorporated  under
Delaware General  Corporation Law.  Successor would acquire all of the assets of
the Predecessor  Bank and continue all of the business of the  Predecessor  Bank
under the same business plan as adopted by the Predecessor  Bank.  Following the
transfer of its assets and liabilities to Successor,  the Predecessor Bank would
surrender its banking charter and dissolve.  The  implementation of the proposed
plan  would  result in a mere  change of form  from a banking  corporation  to a
corporation incorporated under the Delaware General Corporation Law, which would
not be subject to the  jurisdiction  of the  Banking  Department.  The  proposed
transfer was expected to qualify as a tax-free reorganization under the Internal
Revenue Code and, as such,  the Company  expected (and continues to expect) that
certain  of the  Predecessor  Bank's  tax  attributes  would  be  preserved.  In
connection  with the Alternate  Proposal,  common and preferred  stockholders of
River Bank would receive shares of Successor on a share-for-share  basis so that
Successor will be owned by the same  stockholders,  in the same proportions,  as
owned the Predecessor Bank on the record date.

Prior to June 30,  1997,  the  Predecessor  Bank  received  the  NYSBD's  letter
indicating their conditional  approval of the Alternate  Proposal as meeting the
Conditions  of  the  Banking  Department's  approval  of  the  Branch  Sale,  if
implemented by the Predecessor Bank on a timely basis.  The NYSBD's  conditional
approval of the Alternate  Proposal and related  modification of Condition No. 1
of the Approval of the Branch Sale provided that the approval of shareholders of
the  Alternate  Proposal  not later than  September  30, 1997 would be deemed to
satisfy Condition No. 1. Condition No. 2 of the Banking Department's approval of
the Branch  Sale would be deemed to be  satisfied  if the  petition  required by
Condition No. 2 was filed by the Bank by October 15, 1997. The Predecessor  Bank
met  Condition  No.  1 and  Condition  No. 2 on a  timely  basis.  A copy of the
Alternate Proposal and the NYSBD's letter indicating their conditional  approval
of the Alternate  Proposal were included as Exhibits 14 and 15 to FDIC Form F-2,
dated June 30, 1997.




                                       10

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

The  Banking   Department  had  also  advised  the  Predecessor  Bank  that  the
Predecessor  Bank's  minimum  capital  requirement,  set at $115  million in the
NYSBD's approval of the Branch Sale and subsequently  amended to $106 million in
May 1997,  was to remain at $106  million  until the  Predecessor  Bank's  final
dissolution.  Further,  the  Banking  Department's  conditional  approval of the
Alternate  Proposal  required that the Predecessor Bank seek prior approval from
the NYSBD for any  material  sale or transfer  of assets,  or  expenditures  for
development or renovation of any properties held by the  Predecessor  Bank prior
to the completion of the dissolution of the Predecessor Bank.

The Company will continue to be subject to the  requirements  of the  Securities
Exchange  Act of 1934 (the  "Exchange  Act") as amended  and will be required to
file  periodic  reports  and  other  information  with the  Securities  Exchange
and Commission (the "SEC").

The  Company's  principal  business  continues to be the  management of its real
estate assets,  mortgage loans and investment securities,  under a business plan
intended to maximize  shareholder value.  Primarily as a result of deterioration
in the real estate  markets  and a general  economic  recession  in the New York
metropolitan  area and, later in other areas in which the  Predecessor  Bank was
engaged  in  lending   activities,   particularly   California,   the  Company's
non-performing  assets began increasing in 1989 and continued to increase in the
aggregate  through  1992.  The  resolution  of  non-performing   assets,   which
substantially  resulted  from the  Predecessor  Bank's  lending  strategy of the
1980s,  required  significant  time  and  attention  by the  Predecessor  Bank's
management.  Over the five year period  preceding  the Branch  Sale,  the Bank's
primary loan origination focus was single-family  (one-to-four  units) and, to a
lesser extent,  multi-family  (five or more units)  residential loans secured by
properties  in the New York City  metropolitan  area.  Primarily  as a result of
conditions  imposed by the NYSBD,  subsequent to June 28, 1996, the  Predecessor
Bank has not originated a material amount of loans.

The Predecessor Bank has previously received notice that the approvals necessary
to declare or pay  dividends on the  Predecessor  Bank's  outstanding  shares of
River Bank Series A Preferred  Stock would not be  provided.  In June 1996,  the
Predecessor  Bank's  Board of  Directors  declared  a Series A  Preferred  Stock
dividend for the quarter  ending June 30, 1996,  payment of which was subject to
the receipt of required  approvals from the FDIC and the NYSBD (the  Predecessor
Bank's  regulators at the time), as well as Marine (the  Predecessor  Bank's and
the Company's principal lender). Primarily as a result of the above, neither the
Company's or the  Predecessor  Bank's  Board of  Directors  has taken any action
regarding a quarterly dividend on the Company's Series A Preferred Stock for any
of the  quarterly  periods ended from  September  30, 1996 through  December 31,
1998.  Although the Company is no longer subject to the  jurisdiction  of either
the FDIC or the  NYSBD,  declaration  or  payment  of  future  dividends  on the
Company's  Series A Preferred  Stock will continue to be subject to the approval
of Marine for so long as the  Facility  remains  outstanding.  The  Company  has
received  notice  from  Marine  that the  approval  necessary  to declare or pay
dividends on the Company's Series A Preferred Stock will not be provided at this
time.  There can be no assurance that the Board of Directors of the Company will
deem it  appropriate to pay dividends on the Series A Preferred  Stock,  even if
permitted to do so by Marine.

2.  Preferred Stock Exchange Offer

Summary. On November 25, 1998, the Company offered upon the terms and conditions
set forth in its Offering Circular and the related Letter of Transmittal  (which
together  constituted the "Exchange Offer"), to exchange $25.94 principal amount
of its Increasing  Rate Junior  Subordinated  Notes due 2006 (the  "Subordinated
Notes") for each outstanding share of its 15% Non-Cumulative Preferred Perpetual
Stock,  Series A, par value  $1.00 (the  "Series A Preferred  Stock"),  of which
1,400,000 shares were outstanding on that date.

Description of the  Subordinated  Notes. The following  narrative  describes the
Subordinated Notes, issued by the Company on December 30, 1998:

Issue -  Increasing  Rate Junior  Subordinated  Notes due 2006  issued  under an
indenture (the "Indenture"), as amended on February 1, 1999, between the Company
and La Salle National Bank, as trustee.




                                       11

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

Principal  Amount -  $10,771,000,  plus  such  additional  principal  amount  of
Subordinated  Notes as may be issued in payment of interest on the  Subordinated
Notes from the date of their initial  issuance  until the  semi-annual  interest
period beginning January 16, 2002.

Interest  Payment Dates - January 15 and July 15 of each year,  commencing  July
15, 1999.

Maturity - January 15, 2006.

Interest Rate - Interest will accrue from the issuance date  (December 30, 1998)
at the initial  rate of 8% per annum (the  "Initial  Rate")  until the  interest
period  beginning  January 16, 2002 (the "Interest  Increase  Date") and will be
payable,  at the  option  of the  Company,  either  in  cash or by  issuance  of
additional   Subordinated   Notes.   Thereafter,   interest   will  be   payable
semi-annually  in cash at an annual rate  increasing  from the  Initial  rate by
0.50% per annum each  semi-annual  interest  payment period  commencing with the
interest payment period beginning on the Interest  Increase Date up to a maximum
of 12% per  annum.  The  Company's  ability  to pay in cash any  installment  of
interest  on, or  principal  or premium (if any) of, the  Subordinated  Notes is
currently  subject to the  approval of Marine  under the terms of the  Company's
Credit  Agreement,  dated  June 28,  1996  (the  "Credit  Agreement").  However,
borrowings under the Credit  Agreement  mature on June 30, 1999,  subject to the
right of the Company to extend for two successive  one-year  periods to June 30,
2001,  which date is prior to the dates on which cash  payments of interest  and
principal  are required to be made on the  Subordinated  Notes.  There can be no
assurance  that Marine will provide any such  approval  that may be requested by
the Company in the future for payment of cash of any  installment of interest or
any  prepayment of principal and premium,  if any,  prior to the dates such cash
payments are required to be made under the terms of the Subordinated Notes.

Ranking - The Subordinated Notes constitute unsecured obligations of the Company
and will be  subordinated  in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company.  At December 31, 1998, the Company had
approximately  $68.8 million of Senior Indebtedness  outstanding.  The Indenture
will not limit the  amount of  additional  indebtedness  which the  Company  can
create,  incur, assume or guarantee,  nor will the Indenture limit the amount of
indebtedness  which any  subsidiary of the Company can create  incur,  assume or
guarantee.

Mandatory  Redemption - The Company will be required to redeem 1/14th (7.14285%)
of the  aggregate  principal  amount  of the  Subordinated  Notes  issued by the
Company (including any issued in payment of interest)  semi-annually  commencing
on July 15, 2002 and on each January 15, and July 15 thereafter to and including
July 15, 2005 at a price of 100% of the principal amount plus accrued and unpaid
interest  plus,  for  redemptions  effected after January 15, 2003, a premium as
noted below.  The balance of the outstanding  Subordinated  Notes will mature on
January 15, 2006. All mandatory redemptions will be made on a pro rata basis.

Optional Redemption - The Subordinated Notes will be redeemable at the option of
the Company at any time in whole or in part, by lot or pro rata as determined by
the Company's Board of Directors (the "Board"),  at the redemption price of 100%
of the principal  amount plus accrued and unpaid  interest plus, for redemptions
effected after January 15, 2003, a premium as noted below.

Premium - The  redemption  price for each  redemption  (mandatory  or  optional)
effected  after  January 15, 2003 and the  payment at  maturity  will  include a
premium based on the amount  redeemed or paid.  Such premium will consist of (i)
0.5% of the principal  amount  redeemed  during the period from January 16, 2003
through and including July 15, 2003, (ii) 0.75% of the principal amount redeemed
during the period from July 16, 2003 through and including  January 15, 2004 and
(iii) 1% of the  principal  amount  redeemed  during the period from January 16,
2004 through and including July 15, 2004,  which premium will increase by 1% for
redemptions  during each subsequent six month period  beginning each July 16 and
January 16 thereafter until it reaches 4% of the principal amount for the period
from July 16, 2005 to January 15, 2006.  Payments of a premium at maturity  will
also be at the rate of 4% of the principal amount paid.


                                       12

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

The following  chart  illustrates  the amount of premium  payable on each $1,000
principal amount of Subordinated Notes during the periods indicated:


     If redeemed during the six month period beginning        Premium

    January 16, 2003 ....................................   $     5.00
    July 16, 2003 .......................................   $     7.50
    January 16, 2004 ....................................   $    10.00
    July 16, 2004 .......................................   $    20.00
    January 16, 2005 ....................................   $    30.00
    July 16, 2005 .......................................   $    40.00



Purposes  of the  Exchange  Offer.  In view of the  changes in the nature of the
Company and its business as a result of the Reorganization  described in Note 1,
the Board of Directors  effected the Exchange Offer for the purpose of affording
all holders of the Series A Preferred  Stock an  opportunity  to exchange  their
shares of Series A  Preferred  Stock for the  Subordinated  Notes which may have
been  determined  by  them to be a more  attractive  investment.  As more  fully
described in the Offering  Circular  dated November 25, 1998, the Exchange Offer
provided  holders  of the  Series A  Preferred  Stock  with the  opportunity  to
exchange  perpetual  preferred stock having a $25.00 per share liquidation value
with non-cumulative  dividend rights and no mandatory redemption  provisions for
$25.94  principal  amount of a debt  instrument  maturing  in seven  years which
requires (i)  semi-annual  payments of interest,  payable in kind or in cash, at
the Company's option, for the first three years and thereafter in cash, at rates
increasing from an initial 8% per annum rate and (ii) the repayment of principal
in  mandatory  semi-annual   installments  commencing  after  three  years  with
increasing premiums on installments paid after four years.

By letter,  dated May 22,  1998,  counsel for  certain  holders of shares of the
Company's  Series A  Preferred  Stock  advised  the  Company  that such  holders
objected to the  Reorganization.  Specifically,  such  counsel  alleged that the
Reorganization  (i)  constituted  a  "liquidation"  of  River  Bank  America  in
violation  of the  terms of the  Certificate  of  Designations  of the  Series A
Preferred  Stock by  failing to provide  for the  payment to the  holders of the
Series  A  Preferred  Stock  of the  liquidating  distribution  required  by the
Certificate of  Designations of $25.00 per share,  plus all accrued,  undeclared
and unpaid  dividends  thereon,  (ii) was illegal under the New York Banking Law
(the "NYBL") which provides,  in the case of a voluntary  liquidation,  that the
liquidating   corporation  shall  distribute  its  remaining  assets  among  its
shareholders according to their respective rights and interests,  (iii) violated
a commitment made in River Bank's proxy statement, dated May 13, 1996, to retire
the Series A Preferred Stock following  approval and finalization of the sale of
certain of its  branches and assets to Marine and (iv)  constituted  a breach of
duty owed by River  Bank's  Board of  Directors  to the  holders of the Series A
Preferred Stock.

The Company believes such allegations are without merit.  However,  in an effort
to resolve these claims on an amicable basis, representatives of the Company and
such holders discussed from time to time since the date of such letter,  certain
proposals under which the Company would offer to exchange a new security for the
Series  A  Preferred   Stock.  In  October,   1998,  the  Company   proposed  to
representatives  of such holders to effect an exchange offer upon  substantially
the terms and conditions of the Exchange Offer. Such proposal was not acceptable
to such holders and, on October 27, 1998, 11 holders of Series A Preferred Stock
who claim to beneficially own, in the aggregate,  849,000 shares  (approximately
60.6%  of the  then  outstanding  shares)  of  Series  A  Preferred  Stock  (the
"Organized Group") commenced a lawsuit entitled Strome Global Income Fund et al.
v. River Bank America et. al. (the "Complaint") in Supreme Court of the State of
New York,  County of New York, Index No.  605226198 (the "Action"),  against the
Company, certain of its predecessors and certain of its directors (collectively,
the  "Defendants").  The  complaint in the Action  alleged (the  "Allegations"),
among  other  things,  that  (i) the  Defendants  breached  the  Certificate  of
Designations   relating  to  the  Series  A  Preferred   Stock  by  fraudulently
transferring  assets of River Bank and by illegally  amending the Certificate of
Designations,  (ii) the  Defendants  fraudulently  conveyed  the assets of River
Bank,  thereby  depriving the holders of a liquidating  distribution,  (iii) the
Defendants  violated  the NYBL by  liquidating  River  Bank  without  making the
liquidating distribution required by the NYBL and by


                                       13

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

denying holders  appraisal  rights to which they were entitled by the NYBL, (iv)
the  Defendants  breached  their  fiduciary duty to holders by depriving them of
their  liquidating  distribution,  (v) the  Defendants  breached  their  duty of
disclosure  by omitting from the Proxy  Statement  dated March 27, 1998 material
facts  relating to the holders'  rights to receive a  liquidating  distribution,
their appraisal rights for their shares and the requirement that holders vote as
a class with respect to the amendment of the Certificate of  Designations,  (vi)
the  Defendants'  implementation  of the  liquidation  of  River  Bank  and  the
amendment  of the  Certificate  of  Designations  were ultra vires and should be
declared void and (vii) the  intentionally  tortious  nature of the  Defendants'
conduct bars them from seeking indemnification for their actions and, therefore,
the Defendants  should be enjoined from seeking  indemnification  for damages or
attorney's fees relating to the Action.

The Company  believes  that the  Allegations  are  without  merit and intends to
vigorously oppose the Action. Consequently, the Company and the other defendants
responded to the Action by filing a motion to dismiss on December 21, 1998.  The
plaintiffs  responded  to the motion and the motion is scheduled to be addressed
by the court on February 23, 1999.

Release of Claims.  Holders of Series A Preferred  Stock,  including  any of the
plaintiffs in the Action, whose shares were tendered and accepted by the Company
for exchange  pursuant to the  Exchange  Offer have  released  the Company,  its
predecessors  and  successors,  and  their  respective  parents,   subsidiaries,
affiliates  and  assigns,  and each of  their  respective  officers,  directors,
employees,  partners,  advisors,  agents and  representatives  from all actions,
causes of action,  claims,  judgments,  contracts,  agreements or understandings
whether individual or derivative in nature,  which such holders had with respect
to the shares of Series A Preferred  Stock  exchanged  pursuant to the  Offering
Circular or any disclosures,  rights or agreements relating thereto,  including,
but not limited to, any claims made in the Action and any claims with respect to
the Reorganization and the transfer of assets from River Bank.

Waiver of  Dividend.  Each  Holder (as  defined in the  Offering  Circular)  who
accepted the Exchange  Offer was deemed to have waived all rights,  with respect
to each share of Series A Preferred  Stock  exchanged,  to receive the $0.94 per
share quarterly dividend that was declared on shares of Series A Preferred Stock
for the quarter ended June 30, 1996 but which remains unpaid.

Proposed  Equity  Rights  Offering.  If within one year after  expiration of the
Exchange Offer, the Company effects an equity  enhancement plan through either a
rights  offering to the holders of its Common Stock or the  distribution to such
holders of Warrants to purchase  additional  shares of Common Stock, each holder
of Series A  Preferred  Stock  whose  shares  were  accepted  by the Company for
exchange  pursuant to the Exchange Offer will be entitled to participate in such
rights  offering or  distribution  of Warrants on the basis of one  subscription
right or Warrant for each share of Series A  Preferred  Stock so  exchanged  for
Subordinated  Notes. The Company's Board of Directors has authorized  management
to develop a proposal for such a rights  offering or  distribution  of Warrants,
provided that, under the terms thereof,  Alvin Dworman,  Odyssey Partners,  L.P.
and East River  Partnership  B., who  currently own an aggregate of 50.8% of the
outstanding  shares of Common Stock,  will have the ability to avoid dilution of
their  aggregate  percentage  ownership  of the Common  Stock  outstanding  upon
consummation thereof. While the Company presently intends to effect such a plan,
there can be no assurance that such rights  offering or distribution of Warrants
plan will be effected or as to the terms and conditions thereof.

Conditions of the Exchange Offer.  The Company obtained the consent of Marine to
effect the Exchange Offer and issue the Subordinated Notes.  However,  there can
be no assurance  that Marine will provide any approval  that may be requested by
the  Company  in the  future  for the  payment  in cash of any  installments  of
interest or any prepayment of principal and premium,  if any, prior to the dates
such cash  payments are required to be made under the terms of the  Subordinated
Notes.

Acceptance  Results of the Exchange  Offer.  On December  28, 1998,  the Company
announced that it had completed its offer to exchange $25.94 principal amount of
its newly-authorized Subordinated Notes for each outstanding share of its Series
A  Preferred  Stock  properly  tendered  to, and  accepted  by,  the  Company in
accordance  with the provisions of the Exchange  Offer. At the expiration of the
Exchange  Offer on December 24, 1998,  415,273  shares of the Series A Preferred
Stock (representing approximately 29.7% of the 1,400,000




                                       14

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

shares of Series A Preferred Stock  outstanding  before the  commencement of the
Exchange  Offer) had been  properly  tendered  and  accepted  by the Company for
exchange.  No members of the Organized Group tendered any shares of the Series A
Preferred Stock in the Exchange Offer.

The Subordinated  Notes carry an interest rate of 8%, compounded  semi-annually,
for the first 36 months following December 30, 1998, the date of their issuance.
During the quarter ended December 31, 1998,  accrued  interest  expense,  in the
amount of approximately $2 thousand,  was recognized for the one-day period from
date of  issuance  of the  Subordinated  Notes to the end of the  quarter.  As a
result of the  tender of  415,273  shares of the  Company's  Series A  Preferred
Stock, assuming payment of interest on the Subordinated Notes by the issuance of
additional  Subordinated  Notes, the Company will recognize  additional interest
expense of approximately $490,000 (approximately one-half year from December 30,
1998 to June 30,  1999),  $968,000 and $1.05  million for the fiscal years ended
June 30, 1999, 2000 and 2001, respectively.

The  following  table sets forth the changes to the  Company's  liabilities  and
stockholders'  equity resulting from the exchange of 415,273 shares of Preferred
Stock and the associated  accrued preferred  dividend (declared at June 30, 1996
but not paid) for approximately  $10.8 million in Subordinated Notes (dollars in
thousands):


<TABLE>
<CAPTION>


                                                              Liabilities and                            Liabilities and
                                                              Stockholders'                               Stockholders'
                                                              Equity Prior to         Effect of           Equity After
                                                                Preferred             Preferred             Preferred
                                                                  Stock                 Stock                 Stock
                                                                 Exchange             Exchange              Exchange
                                                        -------------------- --------------------- ---------------------
<S>                                                    <C>                      <C>                      <C>   
Liabilities:

Increasing Rate Junior Subordinated Notes due                                                                          
2006 (1)                                                $          -         $         10,555       $       10,555
Other borrowed funds                                            68,760                    -                 68,760
Other liabilities (2)                                           15,758               (389,318)              15,369
                                                        -------------------- --------------------- ---------------------
   Total liabilities                                            84,518                 10,166               94,684
                                                        -------------------- --------------------- ---------------------

Stockholders' Equity:
15% non-cumulative preferred stock, Series A par
value $1, liquidation value $25                         $        1,400       $           (415)      $          985
Common stock, par value $1                                       7,100                    -                  7,100
Additional paid-in capital                                     111,170                 (9,751)             101,419
Accumulated deficit                                            (10,870)                   -                (10,870)
Accumulated comprehensive income                                  (757)                   -                   (757)
                                                        -------------------- --------------------- ---------------------
Total Stockholders' Equity                                     108,043                (10,166)              97,877
                                                        -------------------- --------------------- ---------------------
Total Liabilities and Stockholders' Equity:             $      192,561       $            -         $      192,561
                                                        ==================== ===================== =====================

</TABLE>



                                       15

<PAGE>

<TABLE>
<CAPTION>

                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

(1) - The following table sets forth a  reconciliation  of the principal  amount
recognized under the line item caption Increasing Rate Junior Subordinated Notes
due 2006 at December 31, 1998:


<S>                                                                                                 <C> 
      Principal transferred from Stockholders' Equity and due to holders of the                               
      Subordinated Notes at December 31, 1998                                                    $    10,382

      Add: Preferred stock dividend transferred from other liabilities (2)                               389
                                                                                                 -----------
      Total amount transferred to Subordinated Notes and due to holders of the  
      Subordinated Notes at December 31, 1998                                                         10,771

      Less: Discount adjustment necessary to provide a level yield over the
      estimated term of the debt (3)                                                                    (216)
                                                                                                 -----------
      Net amount transferred to Subordinated Notes at December 31, 1998                          $    10,555
                                                                                                 ===========
</TABLE>


(2) - Amount deducted from other liabilities  represents  approximately 29.7% of
the $1,312,500  preferred stock dividend declared but not paid at June 30, 1996.
This amount was the portion of the total preferred  stock dividend  allocable to
the  exchanged  shares,  which  were  added  to  the  principal  amount  of  the
Subordinated Notes outstanding at December 31, 1998 in accordance with the terms
of the Exchange Offer.

(3) - The  repayment  structure  of the  Subordinated  Notes,  described  above,
includes  both  increasing  rates  at  specified  semi-annual  periods  and  the
potential for increasing  outstanding principal balances each semi-annual period
as  interest  payments  are, at the option of the  Company,  made in the form of
additional  Subordinated Notes. Under generally accepted  accounting  principals
("GAAP"),  the Company's  periodic  interest  cost must be determined  using the
interest method based on the estimated  outstanding term of the debt. Based upon
this  estimation  of the debt term and an  analysis  of  interest  rates paid on
similarly structured marketable debt securities,  the Company has discounted the
Subordinated  Notes  approximately  $216,000 at December 31, 1998.  The discount
rate applied to determine this discount was 9.0%.


3. Presentation of Interim Financial Statements

The  accompanying  unaudited  consolidated  financial  statements of the Company
include  all  adjustments  which  management   believes  necessary  for  a  fair
presentation  of the  Company's  financial  condition at December 31, 1998,  the
results of its  operations  for the three and six months ended December 31, 1998
and 1997 and the  statements of changes in  stockholders'  equity and cash flows
for the six months ended December 31, 1998 and 1997. Adjustments are of a normal
recurring nature.  These unaudited  consolidated  financial statements have been
prepared in conformity with the accounting principals and practices in effect as
of June 30, 1998, as set forth in the  consolidated  financial  statements of RB
Asset,  Inc., at such date. These unaudited  consolidated  financial  statements
should be read in conjunction with the audited consolidated financial statements
of RB Asset, Inc. as of June 30, 1998.

The consolidated financial statements include the accounts of RB Asset, Inc. and
its wholly-owned subsidiaries.  Intercompany balances and transactions have been
eliminated in  consolidation.  Due to the anticipated  short-term nature of such
investments,   investments  in  unconsolidated   real  estate  partnerships  are
generally  carried at cost,  subject to periodic  assessment  of net  realizable
value.   Losses  on  sales  or  dispositions  and  any  adjustments  related  to
redetermination of net realizable value are charged,  as real estate charge-offs
to operations of the current period.

In the opinion of management,  the accompanying unaudited consolidated financial
statements  contain  all  adjustments   (consisting  of  only  normal  recurring
accruals) necessary for a fair presentation of the Company's financial condition
as of December 31, 1998,  the results of operations for the three and six months
ended December 31, 1998 and 1997, and changes in  stockholders'  equity and cash
flows for the six months ended December 31, 1998 and 1997.

In preparing the consolidated  financial  statements,  management is required to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  as of  the  dates  of  the  consolidated  statements  of  financial
condition  and   operations  for  the  period.   Material   estimates  that  are
particularly



                                       16

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

susceptible to significant  change in the near-term relate to the  determination
of the allowance for possible  credit  losses,  the valuation of  investments in
real estate for investment.

Management  believes that the  allowance for possible  credit losses is adequate
and that  other  real  estate  owned and real  estate  held for  investment  are
properly  valued.  While  management  uses  available  information  to establish
reserves,  future additions to the allowance or write downs of other real estate
owned or real estate held for  investment  may be necessary  based on changes in
economic conditions, as well as changes in management strategies.

Management  determines  the  appropriate   classification  of  debt  and  equity
securities  (collectively,  "marketable" securities) at the time of purchase and
reevaluates such  designation as of each balance sheet date.  Available-for-sale
securities are stated at estimated fair value, with unrealized gains and losses,
net of tax, reported in a separate  component of stockholders'  equity. The cost
of  marketable  securities  classified  as  available-for-sale  is adjusted  for
amortization of premiums and accretion of discounts to maturity,  or in the case
of mortgage-backed  securities,  over the estimated life of the security using a
method  approximating  the level yield method.  Such amortization is included in
interest  income  from  investments.  Interest  and  dividends  are  included in
interest  income from  investments.  Realized gains and losses,  and declines in
value judged to be other-than-temporary are included in net securities gains and
losses.  The cost of  securities  sold is based on the  specific  identification
method.  At December 31, 1998, the balance of  stockholders'  equity  included a
$757,000    unrealized   loss   on   marketable    securities    classified   as
available-for-sale.

The provision for income taxes differs from the amount  computed by applying the
statutory  Federal income tax rate of 35% to the income (loss) before  provision
for income taxes primarily due to state and local income and franchise taxes and
limitations  on the  recognition  of tax benefits of net  operating  losses.  At
December  31, 1998 the  Company  reviewed  its  potential  current and  deferred
federal and state tax  liabilities in light of the results of operations for the
Company  since  June  30,  1998.  As a  result  of this  analysis,  the  Company
recognized income tax expense in the amount of $145,000 and $314,000, during the
three and six months ending December 31, 1998, respectively.

For the purpose of the statements of cash flows, cash equivalents are defined as
those amounts included in cash and due from banks and money market investments.

Certain  reclassifications  have  been  made to the  prior  years'  consolidated
financial statements to conform to the current year's presentation.


4. Commitments, Contingencies and Other

As of December 31, 1998, the Company had deferred tax assets that were primarily
attributable to federal income tax net operating loss carryforwards ("NOLs"), an
allowance  for loan losses and  suspended  passive  activity  losses and credits
which were  partially  offset by a deferred tax  liability  in its  consolidated
financial  statements.  However,  a valuation  allowance was set up equal to the
amount  of the  difference  between  the  tentative  deferred  tax asset and the
tentative deferred tax liability due to the uncertainty of the Company's ability
to utilize the  deferred  tax assets in the future.  Accordingly,  neither a net
overall  asset  nor a net  overall  liability  was  reflected  in the  Company's
consolidated financial statements.

Under current tax law, the Company's  ability to utilize certain tax benefits in
the future may be limited in the event of an  "ownership  change," as defined by
the Internal  Revenue Code Section 382 and the  regulations  thereunder.  In the
event that the  Reorganization in Note 1 is deemed to be an ownership change, or
if, transactions in the Company's capital stock subsequent to the Reorganization
result in an ownership change, the subsequent  utilization of net operating loss
carryforwards,  suspended  passive  activity  losses  and  credits,  alternative
minimum tax credit  carryforwards  and certain  other  built-in  losses would be
subject  to an annual  limitation  as  prescribed  by current  regulations.  The
application  of this  limitation  could have a material  effect on the Company's
ability to realize its deferred  tax assets.  The Company is of the view that no
ownership  change of the Company will be deemed to have  occurred as a result of
the Reorganization or otherwise.  However,  the application of Section 382 is in
many respects uncertain. In assessing the effects of prior


                                       17

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)


transactions and of the  Reorganization  under Section 382, the Company has made
certain legal  judgments and certain  factual  assumptions.  The Company has not
requested or received  any rulings from the IRS with respect to the  application
of Section 382 to the  implementation  of the  Reorganization  and the IRS could
challenge the Company's determinations.

In the normal course of the Company's  business,  there are outstanding  various
claims, commitments and contingent liabilities.  The Company also is involved in
various other legal  proceedings  which have occurred in the ordinary  course of
business. Management, based on discussions with legal counsel, believes that the
Company will not be materially  affected by the actions of any outstanding legal
proceedings.  However,  there can be no  assurance  that any  outstanding  legal
proceedings  will not be decided  adversely  to the  Company and have a material
adverse  effect on the financial  condition and the results of operations of the
Company.


5. Regulatory capital requirements

Prior to the reorganization of the Predecessor Bank into a Delaware corporation,
which was  completed on May 22,  1998,  the Banking  Department  had advised the
Predecessor Bank that the Predecessor Bank's minimum capital requirement, set at
$115 million in the NYSBD's approval of the Branch Sale and subsequently amended
to $106 million in May 1997, was to remain at $106 million until the Predecessor
Bank's final  dissolution,  unless the Banking  Department  shall  provide prior
approval of the Company's written request to amend the Company's minimum capital
requirement. So long as the Company's deposit accounts were insured by the FDIC,
as a  Federally-insured  state-chartered  bank,  the  Company  was  required  to
maintain  minimum levels of regulatory  capital.  Under those FDIC  regulations,
insured state-chartered banks were generally required to maintain (i) a ratio of
Tier 1 leverage  capital to total  assets of at least 4.0% to 5.0% (3.0% for the
most highly-rated banks) and (ii) a ratio of Tier 1 capital to risk weighted (as
defined by  regulation)  assets of at least 4.0% and a ratio of total capital to
risk weighted assets of at least 8.0%.

On October 31, 1996, the Company requested that the FDIC terminate its insurance
of accounts as a result of having  transferred  all of its remaining  non-retail
deposits and mortgage escrow accounts to other insured institutions or servicing
entities.  On April 14,  1997,  the Company  received  notice that the FDIC,  as
requested  by the  Company,  intended to terminate  the  Company's  status as an
insured state nonmember Bank on December 31, 1997.

Subsequent to the  termination  of the  Predecessor  Bank's status as an insured
nonmember bank by the FDIC and the reorganization of the Predecessor Bank into a
Delaware corporation, the Company is no longer subject to the regulatory capital
requirements of either the FDIC or the Banking Department.


6. Comprehensive Income

As of July 1, 1998, the Company  adopted  Statement of Accounting  Standards No.
130, "Reporting  Comprehensive  Income"  ("SFAS-130").  SFAS-130 establishes new
rules for the reporting and display of comprehensive  income and its components.
However,  the adoption of this  Statement has had no effect on the Company's net
income or stockholders' equity.  SFAS-130 requires unrealized gains or losses on
the  Company's  available-for-sale  securities,  which  prior to  adoption  were
reported   separately  in  shareholders'   equity,   to  be  included  in  other
comprehensive  income. Prior year financial statements have been reclassified to
conform to the requirements of SFAS-130.

During the three and six months ended  December 31,  1998,  total  comprehensive
income was $430 and $768,  respectively.  During the three and six months  ended
December 31, 1997, total comprehensive  income (loss) was $(1,066) and $(1,455),
respectively.



                                       18

<PAGE>

<TABLE>
<CAPTION>



                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

The  following  table  describes  the  components  of  comprehensive  income and
accumulated comprehensive income for the dates indicated:


      Components of Comprehensive Income (Unaudited):

                                                       Three months ended December 31,
                                                          1998                       1997
                                                   ------------------         -----------------

<S>                                                       <C>                        <C>        
      Net income                                          $       242                $   (1,245)
      Unrealized gains (losses) on securities                     281                       179
                                                   ------------------         -----------------
      Comprehensive income                                $       523                $   (1,066)
                                                   ==================         =================

                                                            Six months ended December 31,
                                                          1998                       1997
                                                   ------------------         -----------------

      Net income                                          $       692                $   (1,634)
      Unrealized gains (losses) on securities                     169                       179
                                                   ------------------         -----------------
      Comprehensive income                                $       861                $   (1,455)
                                                   ==================         =================


      Components of Accumulated Comprehensive Income (Unaudited):

                                                       December 31,               June 30,
                                                          1998                      1998

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

      Unrealized losses on securities                     $      (757)               $     (926)
                                                   ------------------         -----------------
      Accumulated comprehensive income                    $      (757)               $     (926)
                                                   ==================         =================
</TABLE>


7. Earnings per share

Earnings per share were based upon 7,100,000  weighted  average shares of Common
Stock  outstanding  during the three and six months ended  December 31, 1998 and
1997,  respectively.  The  Company  had  no  securities  outstanding  that  were
convertible to common stock at December 31, 1998 or 1997.

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Accounting  Standards  No. 128,  "Earnings  Per Share"  ("SFAS-128"),  which was
required  to be adopted on  December  31,  1997.  At that time,  the Company was
required to change the method it previously  used to compute  earnings per share
and to restate all prior periods.  Under the new  requirements of SFAS-128,  the
dilutive effect of stock options was excluded.  The  implementation  of SFAS-128
has not had any effect upon the Company's  reported  primary  earnings per share
for the three and six month periods ended December 31, 1998 and 1997, or for the
fiscal years ended June 30, 1998, 1997 and 1996.

8. Legal Proceedings

On  October  27,  1998,  11  holders  of Series A  Preferred  Stock who claim to
beneficially own, in the aggregate,  849,000 shares  (approximately 60.6% of the
then  outstanding  shares) of Series A Preferred Stock (the  "Organized  Group")
commenced  a lawsuit  entitled  Strome  Global  Income Fund et al. v. River Bank
America et. al. ( the  "Complaint"  ) in Supreme Court of the State of New York,
County of New York,  Index No.  605226198  (the "Action" ), against the Company,
certain of its  predecessors  and certain of its  directors  (collectively,  the
"Defendants").  The complaint in the Action (the "Allegations")  alleged,  among
other things,  that (i) the Defendants  breached the Certificate of Designations
relating to the Series A Preferred Stock by fraudulently  transferring assets of
River Bank and by illegally  amending the Certificate of 


                                       19

<PAGE>


                                 RB Asset, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                             (dollars in thousands)
                                   (Unaudited)

Designations,  (ii) the  Defendants  fraudulently  conveyed  the assets of River
Bank,  thereby  depriving the holders of a liquidating  distribution,  (iii) the
Defendants  violated  the NYBL by  liquidating  River  Bank  without  making the
liquidating  distribution  required by the NYBL and by denying holders appraisal
rights to which they were  entitled by the NYBL,  (iv) the  Defendants  breached
their  fiduciary  duty  to  holders  by  depriving  them  of  their  liquidating
distribution,  (v) the Defendants  breached their duty of disclosure by omitting
from the Proxy  Statement  dated March 27, 1998 material  facts  relating to the
holders' rights to receive a liquidating  distribution,  their appraisal  rights
for their shares and the  requirement  that holders vote as a class with respect
to the  amendment  of the  Certificate  of  Designations,  (vi) the  Defendants'
implementation  of the  liquidation  of  River  Bank  and the  amendment  of the
Certificate  of  Designations  were ultra vires and should be declared  void and
(vii) the  intentionally  tortious nature of the  Defendants'  conduct bars them
from seeking  indemnification for their actions and,  therefore,  the Defendants
should be enjoined from seeking  indemnification  for damages or attorney's fees
relating to the Action.

The Company  believes  that the  Allegations  are  without  merit and intends to
vigorously oppose the Action. Consequently, the Company and the other defendants
responded to the Action by filing a motion to dismiss on December 21, 1998.  The
plaintiffs  responded  to the motion and the motion is scheduled to be addressed
by the court on February 23, 1999.


9. Subsequent Events

As disclosed in the Company's Annual Report on Form 10-K for the year ended June
30, 1998,  dated September 21, 1998, the Company had been engaged in discussions
with the FDIC related to deposit  insurance  premiums that the FDIC had asserted
were due from the Company following the Branch Sale.

The Company  transferred  substantially all its deposits to Marine in connection
with the  Branch  Sale on June  28,  1996,  and had not  paid  any FDIC  deposit
insurance  assessments for any assessment  period following the Branch Sale. The
FDIC had  asserted  that the  Company  is liable for  unpaid  deposit  insurance
assessments,  plus accrued interest attributable to the Transferred Deposits and
certain other retained deposit liabilities for the semi-annual assessment period
that began on July 30,  1996 and ended on  December  31,  1996 (the  "Assessment
Period").  During the Assessment  Period,  the Company maintained only a minimal
amount of deposits.  Therefore,  the Company pursued administrative  discussions
with the FDIC to have the FDIC withdraw its assertion that the Company is liable
for the deposit insurance assessment on the Transferred Deposits. If the Company
were to be  unsuccessful  in changing the FDIC's  position  with respect to this
matter,  it would have been required to pay the contested  assessment,  together
with applicable interest.

On  February  4,  1999,  the  Company  and the FDIC  reached a final  settlement
agreement  concerning  this issue.  Under this final  settlement  agreement  the
Company  will be required to pay the FDIC $1  thousand  in  administrative  cost
reimbursements.  As a result of this  agreement,  the matter has been closed and
each party has waived the right to further assertions related to this matter.



                                       20

<PAGE>



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations


Financial Condition:

At December  31, 1998 the  consolidated  assets of the  Company  totaled  $192.6
million, an increase of $1.7 million, or 0.9% from June 30, 1998.

Real estate held for investment, net of accumulated depreciation,  declined $4.0
million,  or 4.9%,  from  $82.8  million  at June 30,  1998 to $78.8  million at
December  31,  1998.  The  decline in real estate  held for  investment,  net of
accumulated  depreciation,  at December 31, 1998 was attributable to gross sales
of $2.7 million (for which gains of $658,000 were  recognized,  thereby reducing
the recorded value of the asset by $2.0 million),  depreciation  charges of $1.2
million and  transfers of $858,000 to real estate held for  disposal,  partially
offset by  capitalized  additions of  $116,000.  Of the $2.7 million in sales of
real estate  held for  investment,  $2.3  million  related to a shopping  center
complex  in New York City for which a net gain in the  amount  of  $304,000  was
recognized in the quarter ended December 31, 1998,  and $496,000  related to the
sale of a condominium unit at one of the Company's multi-family housing projects
for which a gain in the amount of $354,000 was  recognized  in the quarter ended
December 31, 1998.

Real estate held for  disposal,  net of allowance  for fair market value reserve
under  Statement of Accounting  Standards  No. 121  (SFAS-121),  decreased  $1.6
million,  or 45.2%,  from  $3.6  million  at June 30,  1998 to $2.0  million  at
December 31, 1998.  During the quarter ended December 31, 1998, the Company sold
a multi-car parking garage adjacent to its office complex real estate investment
in Atlanta,  GA. The parking garage was sold for approximately  $1.6 million for
which  the  Company  recognized  a gain on that sale in the  amount of  $523,000
(thereby  reducing the recorded value of the asset by $1.1 million).  During the
six months ended December 31, 1998,  sales of real estate held for disposal also
consisted of apartment  units sold from  inventory held for disposal at June 30,
1998.  Such sales totaled $1.7 million  during the six months ended December 31,
1998.  Offsetting the effects of the sales on the book value of real estate held
for disposal,  net at December 31, 1998 were  transfers of additional  apartment
units from real estate held for investment, net totaling $858,000 and additional
capitalized  fundings of $324,000.  Apartment units transferred into real estate
held for disposal  during the six months ended December 31, 1998 are expected to
be sold within the next twelve months.

Total loans receivable  secured by real estate, net of the related allowance for
possible  credit losses  declined $4.0 million,  or 7.0%,  from $57.1 million at
June 30, 1998 to $53.1 million at December 31, 1998. The $4.0 million decline in
real estate  loans,  net,  during the six months ended  December  31, 1998,  was
attributable  to a decline in loans  receivable,  secured by real estate of $3.4
million  and a  decline  in  loans  sold  with  recourse,  net of $2.0  million,
partially  offset by a decline in the  related  allowance  for  possible  credit
losses of $1.4 million.

The Company's loans secured by real estate  decreased by $3.4 million,  or 5.7%,
from $59.0  million at June 30,  1998 to $55.6  million at  December  31,  1998.
During the six months ended December 31, 1998, the Company received  payments in
satisfaction of $3.5 million in loans secured by real estate,  recognizing a net
gain of  $500,000.  This  decrease  in loans  secured  by real  estate,  net was
partially  offset by $138,000  in loan  fundings  advanced  during the six month
period.

The Company's loans sold with recourse, net decreased by $2.0 million, or 12.6%,
from $15.8  million,  at June 30, 1998 to $13.8  million at December  31,  1998.
During the six months ended  December 31, 1998, the Company sold $1.8 million in
loans sold with recourse,  net, which was partially  offset by additional  asset
fundings of $855,000.  In addition,  $1.1 million in losses related to the asset
sales were charged  against the allowance for possible  credit  losses,  thereby
reducing  the  remaining  book  value of loans sold with  recourse,  net and the
allowance for possible credit losses by that amount.

The Company's  allowance for possible  credit losses related to loans secured by
real estate decreased by $1.4 million,  or 7.7%, from $17.7 million, at June 30,
1998 to  $16.3  million  at  December  31,  1998.  The  decrease  resulted  from
chargeoffs of $1.2 million net of  recoveries of $330,000 for asset  disposition
transactions  previously  provided  for at  June  30,  1998.  In  addition,  the
allowance  for possible  credit  losses was reduced  during the six months ended
December  31, 1998 by $500,000  when a junior  subordinated  participation  loan
secured by real estate,  that had been fully  reserved for at June 30, 1998, was
repaid in full.  As a result of this  transaction,  the  allowance  for possible
credit losses was reduced by $500,000 and a gain of $500,000 was


                                       21

<PAGE>



recognized.  The Company's allowance for possible credit losses is maintained at
a level which management  considers adequate based on its periodic review of the
Company's loans secured by real estate portfolios and certain  individual loans,
taking into consideration,  among other things, the likelihood of repayment, the
diversity of the  borrowers,  the type of loan,  the quality of the  collateral,
current market  conditions and the associated  risks.  At December 31, 1998, the
allowance for possible  credit losses was 29.4% of real estate loans as compared
to 30.0% at June 30, 1998.

Cash and due from banks increased by $1.8 million,  or 14.5%, from $12.5 million
at June  30,  1998 to  $14.3  million  at  December  31,  1998.  Allocations  to
restricted cash,  scheduled asset fundings and the payment of operating expenses
were  exceeded  by the  total  operating  revenues  and  asset  sales  proceeds,
resulting  in the  increase in  unrestricted  cash  during the six months  ended
December 31, 1998.

At December  31, 1998,  Marine had  restricted  a total of  approximately  $28.5
million in funds, held on deposit at Marine, in accordance with the terms of the
Branch  Sale  and  the  Marine  Facility   agreements.   Marine  had  restricted
approximately  $19.6 million at June 30, 1998.  Restricted  funds held by Marine
are not available to the Company for settlements of any of the Company's current
obligations.  The  restricted  cash reserves arose from the sale of assets which
had served as primary or supplemental  collateral for the Marine  Facility.  The
restricted cash held by Marine is intended to serve as substitute collateral for
the  Marine  Facility,  until  such time as the  Marine  Facility  is reduced in
accordance  with the Company's  Asset  Management  Plan and the Marine  Facility
Agreements. See "Liquidity and Capital Resources," below.

Commercial  and consumer  loans,  net of the related  allowance for loan losses,
totaled $8.0 million at December 31, 1998, a decrease of $100,000, or 1.4%, from
the June 30, 1998  balance of $8.1  million.  This  decrease was  primarily  the
result of the effects of normal  amortization and prepayment of individual loans
in the portfolio.

Other  liabilities  totaled  $15.4  million at December 31, 1998, an increase of
$402,000,  or 2.7%,  from the June 30, 1998  balance of $15.0  million.  The net
increase in other liabilities  during the six months ended December 31, 1998, as
compared to the same period in the  previous  year,  was related to the relative
timing of  payments  for  certain  accrued  liabilities  during the  current and
previous fiscal years.

During the six months  ended  December  31,  1998,  total  stockholders'  equity
decreased by $9.3  million,  or 8.7% to $97.9  million,  as compared with $107.2
million at June 30, 1998.  This decrease was primarily due to the effects of the
Company's  Preferred  Stock Exchange Offer (the  "Exchange  Offer")  whereby the
Company  exchanged  415,273 shares of its 15%  non-cumulative  preferred  stock,
Series  A, for $10.8  million  (discounted  to $10.6  million)  in  newly-issued
Increasing Rate Junior  Subordinated Notes due 2006 (the  "Subordinated  Notes,"
see Note 2 to the Consolidated  Financial  Statements).  Of the $10.8 million in
Subordinated Notes issued at December 31, 1998,  $10.4  million  (discounted  to
$10.2 million) was transferred from Stockholders' Equity. This $10.2 million net
decline in Stockholders'  Equity was partially offset by the net income recorded
for the six months ended December 31, 1998 in the amount of $692,000,  and by an
increase in the securities valuation account (allowance for unrealized losses on
marketable   securities)  of  $169,000.   The  following  table  summarizes  the
calculation  of the Company's book value per share at December 31, 1998 and June
30, 1998 (dollars in thousands):

<TABLE>
<CAPTION>

                                                                    December 31,               June 30,
                                                                        1998                     1998
                                                            ----------------------   ----------------------

<S>                                                               <C>                      <C>             
      Total stockholders' equity                                  $         97,877         $        107,183

      Less: liquidation value of preferred stock                                                            
      ($25 per share, 984,727 shares  outstanding at                                                        
      December 31, 1998 and 1,400,000 outstanding                                                           
      at June 30, 1998                                                      24,618                   35,000
                                                            ----------------------   ----------------------
      Net stockholders' equity                                    $         73,259         $         72,183
                                                            ======================   ======================

      Total shares of Common Stock issued and                                                               
      outstanding                                                        7,100,000                7,100,000

                  Book value per share                            $        10.32           $        10.17
                                                            ======================   ======================

</TABLE>


                                       22

<PAGE>



Results of Operations:

General.  The  Company  reported  net income  attributable  to common  shares of
$242,000, or $0.03 per share and $692,000, or $0.10 per share, for the three and
six months ended December 31, 1998, respectively.  For the same periods in 1997,
the Company  reported net losses of $1.2 million,  or $(0.18) per share and $1.6
million, or $(0.23) per share, respectively.

The primary  reason for the increase in the Company's net operating  results for
the quarter and six months  ended  December  31,  1998,  as compared to the same
three and six month  periods in the previous  year,  was the  recording of other
property income of $1.3 million and $1.8 million, respectively, in the three and
six months  ended  December  31,  1998,  an  increase  of $1.4  million and $3.2
million,  respectively,  as  compared  with  a  net  loss  from  other  property
operations of $89,000 and $1.4 million,  respectively, in the same three and six
month  periods of the  previous  year.  In  addition,  contingent  participation
revenues increased $231,000 to $1.0 million in the six months ended December 31,
1998, as compared to $769,000 in the same six month period of the previous year.

Interest  expense  also  declined  $548,000 and  $775,000,  in the three and six
months ended December 31, 1998, respectively,  as compared with the same periods
in the  previous  year.  Interest  expense  declined  from $1.6 million and $3.2
million  in  the  three  and  six  month  periods   ended   December  31,  1997,
respectively,  to $1.0  million and $2.4  million  during the same three and six
month periods of the current year.

Other  expenses  also  declined  $262,000  and $1.1 million in the three and six
months ended December 31, 1998, respectively,  as compared with the same periods
in the previous year. Other expenses declined from $1.6 million and $3.3 million
in the three and six month periods  ended  December 31, 1997,  respectively,  to
$1.3 million and $2.2 million during the same three and six month periods of the
current year.

Partially  offsetting the effects of increased other property income,  increased
contingent participation revenues and reduced interest and operating expenses on
the results of operations  reported for the three and six months ended  December
31,  1998,  as compared to the same three and six month  periods of the previous
year,  were  reductions  in net  rental  operations  and net  gains  on sales of
investment  securities  of $61,000 and $2.1  million,  respectively.  Net rental
operations  declined  from  $571,000 and $1.5 million in the three and six month
periods ended December 31, 1997,  respectively,  to $510,000 and $1.1 million in
the same six month period of the current year,  respectively.  In addition,  net
gains on sales of  investment  securities  declined from $1.7 million in the six
month period  ended  December 31, 1997 to $0 during the same six month period in
1998

Net Rental Operations.  For the three months ended December 31, 1998, net rental
operations resulted in income of $510,000, a decrease of $61,000, or 10.7%, from
$571,000  for the same three  month  period in the  previous  year.  The primary
reason for the decline in net rental  operations  income was the  recognition of
$554,000 in depreciation expense attributable to real estate held for investment
in excess of the amount  recognized  in the same  period of the  previous  year.
Excluding the $554,000 increase in depreciation  charges recorded in the quarter
ended December 31, 1998, as compared with the same quarter in the previous year,
income from rental operations increased $493,000, or 86.3%, in the quarter ended
December  31, 1998,  as compared to the quarter  ended  December 31, 1997.  This
increase was due to various, individually immaterial operating factors affecting
aggregate rental income and expenses within the Company's rental properties.

For the three months ended December 31, 1998,  depreciation  charges  associated
with real estate held for investment were $608,000,  an increase of $554,000, or
1,025.9%, as compared with depreciation charges associated with real estate held
for  investment  in the  quarter  ended  December  31,  1997 of  $52,000.  Under
SFAS-121,  the Company is required to depreciate real estate held for investment
over the estimated useful life of the assets.  No depreciation  charges are made
for the portion of the assets  attributable  to land values.  Of the $608,000 in
depreciation  charges  recorded in the three  months  ended  December  31, 1998,
approximately  $554,000 represents  depreciation of the capitalized costs of the
real estate held for investment  (less land value) for five of the Company's six
real estate assets from the period  October 1, 1998,  to December 31, 1998.  The
remaining  $54,000 in  depreciation  charges  recorded  during the quarter ended
December  31, 1998 were for the sixth  property,  consistent  with  depreciation
charges  taken in  prior  periods  for  that  property.  On May 22,  1998,  as a
consequence  of the  Reorganization,  the Company  was no longer  subject to the
categorization  and  depreciation  regulations  for  investments  in real estate
previously imposed by the Predecessor Bank's  regulators.  Accordingly,  on that
date, the Company began to record depreciation


                                       23

<PAGE>



charges, as required by SFAS-121,  for all real estate held for investment,  net
that had not been subject to depreciation charges in prior periods.

For the six months ended  December 31, 1998, net rental  operations  resulted in
income of $1.1 million, a decrease of $391,000,  or 25.6%, from $1.5 million for
the same six month  period in the  previous  year.  The  primary  reason for the
decline in net rental  operations  income was the recognition of $1.1 million in
depreciation  expense  attributable to real estate held for investment in excess
of the amount recognized in the same period of the previous year.  Excluding the
$1.1 million  increase in  depreciation  charges  recorded in the quarter  ended
December 31,  1998,  as compared  with the same  quarter in the  previous  year,
income from rental operations increased $690,000, or 45.1%, in the quarter ended
December  31, 1998 as compared to the quarter  ended  December  31,  1997.  This
increase was due to various, individually immaterial operating factors affecting
aggregate rental income and expenses within the Company's rental properties.

For the six months ended December 31, 1998, depreciation charges associated with
real estate held for investment were $1.2 million,  an increase of $1.1 million,
or 1,039.4%,  as compared with depreciation  charges associated with real estate
held for investment in the six months ended December 31, 1997 of $104,000. Under
SFAS-121,  the Company is required to depreciate real estate held for investment
over the estimated useful life of the assets.  No depreciation  charges are made
for the portion of the assets  attributable to land values.  Of the $1.2 million
in  depreciation  charges  recorded in the six months  ended  December 31, 1998,
approximately $1.1 million  represents  depreciation of the capitalized costs of
the real estate held for investment  (less land value) for five of the Company's
six real estate assets from the period July 1, 1998,  to December 31, 1998.  The
remaining  $104,000 in  depreciation  charges  recorded during the quarter ended
December  31, 1998 were for the sixth  property,  consistent  with  depreciation
charges  taken in  prior  periods  for  that  property.  On May 22,  1998,  as a
consequence  of the  Reorganization,  the Company  was no longer  subject to the
categorization  and  depreciation  regulations  for  investments  in real estate
previously imposed by the Predecessor Bank's regulators.

Other Property Income (Expense).  Total other property income (expense) was $1.3
million for the quarter ended December 31, 1998, an increase of $1.4 million, as
compared with a net loss of $89,000 in the quarter ended  December 31, 1997. For
the quarter  ended  December 31, 1998,  the $1.2  million  income was  primarily
attributable to the sale of $2.7 million of real estate held for investment,  of
which $2.3  million  related to a shopping  center  complex in New York City for
which a net gain in the amount of $304,000 was recognized,  $496,000  related to
the sale of a  condominium  unit at one of the  Company's  multi-family  housing
projects for which a gain in the amount of $354,000 was recognized, and the sale
of multi-car parking garage adjacent to the Company's office complex real estate
investment  in Atlanta,  GA for  approximately  $1.7 million for which a gain of
$523,000 was recognized. In addition, during the three months ended December 31,
1998,  the  Company  recorded  a gain in the amount of  $106,000  related to the
recovery of certain sales  proceeds  related to a real estate joint venture that
had been fully written off in prior years.

Total other property income  (expense) was $1.8 million for the six months ended
December 31, 1998, an increase of $3.2  million,  as compared with a net loss of
$1.4  million in the six months ended  December  31,  1997.  The $1.8 million in
other property income (expense)  recorded in the six month period ended December
31, 1998 was due to the $1.2 million in gains from sales of real estate recorded
during  the  quarter  ended  December  31,  1998  (described  above)  and to the
recognition  of a gain of $500,000,  in the quarter  ended  September  30, 1998,
resulting from the full satisfaction of a junior subordinated participation loan
secured by real estate which had been fully  reserved for in prior  periods.  In
addition,  during the three months ended December 31, 1998, the Company recorded
a gain in the amount of  $106,000  related  to the  recovery  of  certain  sales
proceeds  related to a real estate joint venture that had been fully written off
in prior years.

For the six months  ended  December  31,  1997,  the net loss of $1.4 million in
other property  income was primarily  attributable to losses on the sale of real
estate in the amount of $914,000 and a write down of a real estate joint venture
asset in the amount of $350,000.  The loss on the sale of real estate,  recorded
in the quarter ended September 30, 1997, was primarily  attributable to the sale
of one real estate property with a book value of $3.3 million, which resulted in
a net loss of $932,000.

Interest  Income.  For the three months ended December 31, 1998,  total interest
income, net of provisions for possible credit losses, was $859,000, a decline of
$605,000, or 41.3%, from $1.5 million for the same quarter in the previous year.
Loan interest  declined  $636,000,  or 46.5%,  in the quarter ended December 31,
1998 as  compared  with the same  quarter  in the  previous  year due to reduced
average balances for loan assets resulting from  dispositions and the effects of
normal amortization and repayment activity. This decline in

                                       24

<PAGE>



interest income from loan assets was partially  offset by other interest income,
which increased  $31,000 in the quarter ended December 31, 1998 as compared with
the quarter ended December 31, 1997.  The increase in other  interest  income in
the quarter  ended  December 31, 1998,  as compared with the same quarter in the
previous  year was  primarily  due to  increased  average  cash  balances in the
quarter ended December 31, 1998,  partially offset by declines in the prevailing
money market interest rates earned on those assets.

For the six months ended  December  31,  1998,  total  interest  income,  net of
provisions for possible credit losses,  was $1.7 million, a decline of $619,000,
or 26.4%,  from $2.3 million for the same six month period in the previous year.
Loan  interest  declined  $763,000,  or  35.7%,  in the six month  period  ended
December  31, 1998 as compared  with the same six month  period in the  previous
year due to reduced average balances for loan assets resulting from dispositions
and the effects of normal amortization and repayment  activity.  This decline in
interest income from loan assets was partially  offset by other interest income,
which  increased  $199,000 in the six month  period  ended  December 31, 1998 as
compared  with the six month  period ended  December  31, 1997.  The increase in
other  interest  income in the six months ended  December 31, 1998,  as compared
with the  same six  month  period  in the  previous  year was  primarily  due to
increased  average  cash  balances  in the  quarter  ended  December  31,  1998,
partially  offset by declines in the  prevailing  money  market  interest  rates
earned on those assets.

Contingent Participation Revenues. The Company realized contingent participation
revenues of $1.0 million and $769,000 in the six months ended  December 31, 1998
and 1997, respectively.  The Company may realize contingent participation income
when a loan secured by real estate's  underlying  collateral property achieves a
level of predetermined  economic performance  sufficient to activate contingency
clauses  in the loan  agreement  that allow the  Company to share,  on a limited
basis,  in the economic  performance  of the  collateral  property.  The Company
recognizes  such revenues in the period when the loan is repaid and the terms of
all additional contingent payments are finalized.

Contingent  participation  revenues  of  $1.0  million  were  recognized  on one
subordinated  participation loan and one junior subordinated  participation loan
made to the same  borrower  with a combined  principal  balance of $1.3 million.
These loans were paid in full during the quarter  ended  September  30,  1998. A
portion of the subordinated participation loan and the junior participation loan
had  been  sold  to  Marine  on  June  28,  1996  and  the  junior  subordinated
participation  loan was fully reserved for on the Company's  books following the
Branch Sale. The full repayment of the junior  subordinated  participation  loan
resulted  in the  recognition  of an  additional  gain in the amount of $500,000
during  the  quarter  ended  September  30,  1998.  See "Other  Property  Income
(Expense)," above.

During the quarter ended September 30, 1997, contingent  participation  revenues
of $769,000 were realized on one junior  participation  loan,  which was paid in
full  during the  period.  A portion of the loan had been sold to Marine on June
28,  1996 as part of the Branch  Sale.  The Company  had  retained a  contingent
interest in the underlying  property's  economic  performance and an interest in
the loan's unpaid principal  balance  approximating  $10.1 million following the
Branch Sale.

At December 31,  1998,  the Company had a remaining  contingent  interest in two
junior subordinated participation loans in which the Company retains an interest
of approximately $2.4 million in principal amount,  which are fully reserved for
(100%) by the Company.  All of such loans have been modified  since  origination
and are currently performing in accordance with their terms.

Interest  Expense.  During the three months ended December 31, 1998, the Company
recorded interest expenses in the amount of $1.0 million, a decline of $548,000,
or 35.0%, as compared with interest expenses of $1.6 million in the same quarter
of the previous year.  Interest  expenses declined in the quarter ended December
31, 1998 as compared  with the quarter ended  December 31, 1997,  primarily as a
result of declines in the average  amount  borrowed by the  Company.  During the
quarter  ended  December  31,  1998,  the  Company  borrowed an average of $68.8
million, a decline of $6.6 million, or 8.8%, as compared with average borrowings
of $75.4 million  during the quarter ended December 31, 1997. The decline in the
average  amount  of  borrowed  funds  was   attributable  to  the  repayment  of
outstanding  obligations  which occurred in fiscal 1998 primarily as a result of
asset dispositions.

During the six months ended  December 31, 1998,  the Company  recorded  interest
expenses in the amount of $2.4  million,  a decline of  $775,000,  or 24.0%,  as
compared with interest  expenses of $3.2 million in the same six month period of
the previous year.  Interest expenses declined in the quarter ended December 31,
1998 as compared with the quarter ended December 31, 1997, primarily as a result
of declines in the average

                                       25

<PAGE>



amount  borrowed by the Company.  During the six months ended December 31, 1998,
the Company borrowed an average of $68.8 million, a decline of $8.6 million,  or
10.8%,  as compared  with average  borrowings  of $77.5  million  during the six
months ended  December 31, 1997.  The decline in the average  amount of borrowed
funds  was  attributable  to the  repayment  of  outstanding  obligations  which
occurred in fiscal 1998 primarily as a result of asset dispositions.

The average  interest rate paid to Marine on borrowed  funds declined from 8.15%
and 8.19% for the three and six months ended December 31, 1997, respectively, to
6.57% and 7.02% for the same three and six month  periods in the  current  year,
respectively.  The  decline  in rates  paid to Marine in the three and six month
periods  ended  December  31,  1998,  as compared  with the same  periods in the
previous year, was primarily due to a negotiated  restructuring of the Company's
interest rate schedules with Marine.  Under the terms of the  restructured  rate
schedule  agreements with Marine,  which became  effective  October 1, 1998, the
Company  will  receive  interest  rate  reductions  against its  borrowed  funds
interest  expense for certain  compensating  balances held in bank accounts with
Marine.  The  interest  expense  rate  reductions  received  under  the new rate
schedule  agreement  with  Marine will be in lieu of  interest  income  formerly
earned on those deposited  funds.  This new rate schedule  agreement with Marine
reduced the  Company's  interest  earned on deposits  with Marine  approximately
$225,000 in the quarter  ended  December 31, 1998 as compared  with the previous
quarter.  This was more than  offset  by a  reduction  in  interest  expense  on
borrowed funds of approximately  $270,000, as compared with the interest expense
that would have been paid to Marine under the previous rate schedule  agreement.
The new rate  schedule  agreement  with  Marine  is  expected  to have a similar
positive  effect on the  Company's  net interest  margin  (interest  income less
interest expense) in future periods.

Other Expenses. During the quarter ended December 31, 1998, the Company recorded
total other  expenses in the amount of $1.3 million,  a decline of $262,000,  or
16.6%,  as compared  with other  expenses of $1.6 million in the same quarter of
the previous  year.  Other  expenses  declined in the quarter ended December 31,
1998,  as compared  with the quarter  ended  December 31,  1997,  primarily as a
result of declines in salaries and employee benefits expenses of $167,000.

Salaries  and  employee  benefits  expense  declined in the three  months  ended
December 31, 1998, as compared  with the same period in the previous  year, as a
result of the continued  reduction of staff employed by the Company. At December
31, 1998, the Company employed one full time employee engaged in  administrative
duties.

During the six months ended December 31, 1998, the Company  recorded total other
expenses in the amount of $2.2 million, a decline of $1.1 million,  or 31.9%, as
compared with other expenses of $3.3 million in the same six month period of the
previous year.  Other expenses  declined in the quarter ended December 31, 1998,
as compared with the quarter ended  December 31, 1997,  primarily as a result of
declines in salaries and employee  benefits  expenses and legal and professional
fees of $322,000 and $570,000, respectively.

Salaries and employee benefits expense declined in the six months ended December
31, 1998, as compared with the same period in the previous  year, as a result of
the continued  reduction of staff employed by the Company. At December 31, 1998,
the Company employed one full time employee engaged in administrative duties.

Legal and professional  fees expense decreased  $570,000,  or 42.5%, to $771,000
during the six months ended  December 31, 1998 from $1.3 million during the same
six month period in the previous year, primarily as a result of the reduction of
professional  fees incurred in connection with the  Reorganization  described in
Note 1. The Company accrued and paid $290,000 and $159,000, respectively, in the
quarter ended December 31, 1997 and $0 and $0, respectively in the quarter ended
December  31,  1998,  for  legal  and  professional  fees  associated  with  the
Reorganization.  In addition to this $290,000 reduction in accrued  professional
fees related to the Reorganization,  the Company incurred approximately $253,000
more in other  professional  fees during the six months ended  December 31, 1997
than in the same quarter of the current year.  The  additional  fees incurred in
the six months ended December 31, 1997, as compared with the same quarter of the
current year,  primarily  related to services such as actuarial  evaluations and
tax  preparation  which  were  primarily  related  to  the  finalization  of the
Company's  employee-  and  tax-related  affairs  as a business  entity  that had
operated as an insured depository institution.

The Company engaged RB Management  Company,  LLC (the  "Management  Company") to
manage the  operations  of the  Company  after the Branch  Sale,  including  the
management and disposition of Company

                                       26

<PAGE>



assets.  The  Management  Company  was a newly  formed,  privately-owned  entity
controlled by Alvin Dworman,  who owns 39.0% of the outstanding  Common Stock of
the Company.  During the quarter ended  December 31, 1998,  the Company  accrued
$670,000 in fees payable to the Management  Company, of which $57,000 related to
fees incurred for the successful disposition of assets. During the quarter ended
December  31,  1997,  the  Company  accrued  $678,000  in  fees  payable  to the
Management Company, of which $19,000 related to fees incurred for the successful
disposition of assets.

During the six months ended December 31, 1998, the Company  accrued $1.3 million
in fees payable to the Management  Company,  of which  $102,000  related to fees
incurred for the successful  disposition of assets.  During the six months ended
December  31,  1997,  the Company  accrued  $1.5  million in fees payable to the
Management  Company,  of  which  $140,000  related  to  fees  incurred  for  the
successful  disposition of assets.  At December 31, 1998 the Company had accrued
fees  payable  to the  Management  Company  and  its  affiliate,  Fintek,  Inc.,
aggregating approximately $1.4 million.

Other Income (Expense). The Company did not recognize any other income (expense)
in the three or six months  ended  December 31, 1998, a decrease of $1.7 million
as compared  with the same six month period of the previous  year.  Other income
(expense) in the six months ended  December  31, 1997 was  primarily  due to the
$1.8 million  recorded gain on sale of the  Company's  largest  preferred  stock
holding, with a book value of approximately $5.0 million.

Provision for Income Taxes.  Statement of Financial Accounting Standards No. 109
(SFAS-109),  "Accounting for Income Taxes,"  requires the Company to recognize a
deferred  tax asset  relating  to the  unrecognized  benefit  for all  temporary
differences that will result in future tax deductions and for all unused NOL and
tax credit carryforwards, subject to, in certain circumstances, reduction of the
asset by a valuation allowance.  A valuation allowance is recorded if it is more
likely than not that some  portion or all of the  deferred tax asset will not be
realized  based on a review of available  evidence.  Realization of tax benefits
for deductible temporary differences and unused NOL and tax credit carryforwards
may  be  based  upon  the  future  reversals  of  existing   taxable   temporary
differences,  future taxable income exclusive of reversing temporary differences
and carryforwards,  taxable income in prior carryback years and, if appropriate,
from tax planning strategies.

The high  levels  of loan  charge-offs  and other  losses,  which  were  largely
responsible for losses during the periods, effectively eliminated federal income
tax liability  for the three and six month  periods ended  December 31, 1998 and
1997. The Company's  income tax provision  includes state and local taxes on the
greater of combined entire net income, combined alternative entire net income or
combined taxable assets.  Certain subsidiaries provide for state and local taxes
on a separate company basis on income, capital, assets or an alternative minimum
tax.

The provision for income taxes differs from the amount  computed by applying the
statutory  Federal income tax rate of 35% to the reported loss before  provision
for income taxes primarily due to state and local income and franchise taxes and
limitations on the recognition of tax benefits of net operating  losses.  During
the three and six months ended  December 31,  1998,  the Company  recorded a net
provision  for income taxes of $145,000 and $314,000,  respectively.  During the
three and six  months  ended  December  31,  1997,  the  Company  recorded a net
provision for income taxes of $50,000 and $101,000,  respectively.  The increase
in income taxes  recorded  during the three and six month periods ended December
31, 1998 as compared  with the same three and six month  periods of the previous
year, primarily reflects the effects of operations and asset dispositions on its
current  state and local income tax  liabilities  at December 31, 1998 and 1997,
respectively.


Liquidity and Capital Resources

The Company must maintain sufficient  liquidity to meet its funding requirements
for scheduled debt  repayments,  operating  expenses  (including  current income
taxes  payable)  and for  development  costs  related  to  certain  real  estate
projects.

At  December  31,  1998,  the Company had $68.8  million in borrowed  funds.  In
connection  with the Branch Sale,  the Company  obtained  financing  with Marine
(Initial  Facilities)  totaling  $89.8  million.  At  September  30,  1998,  the
remaining  outstanding balance of the Initial Facilities due to Marine was $60.6
million.

                                       27

<PAGE>



Borrowed  Funds related to Asset Sale  Transactions  amounted to $8.2 million at
December 31, 1998.  The Company  actively  monitors and manages its cash inflows
and outflows in an attempt to maximize payment of its debt obligations to Marine
and to invest, to the extent possible, all cash balances.

The  Company  seeks to maintain  liquidity  within a range of 5% to 10% of total
assets.  Liquidity for this purpose is defined as unrestricted cash. At December
31, 1998, the Company's  liquidity ratio, as so defined,  amounted to 7.5% which
was within the maintenance range.


Recent Accounting Developments

From time to time the  Financial  Accounting  Standards  Board  ("FASB")  adopts
accounting   standards   (generally  referred  to  as  Statements  of  Financial
Accounting  Standards,  or "SFASs") which set forth required  generally accepted
accounting  principles.  Set forth  below is a  description  of  certain  of the
accounting  standards  recently  adopted  by the  FASB  which  are  relevant  to
financial institutions such as the Company.

SFAS No. 130. As of July 1, 1998, the Company  adopted SFAS No. 130,  "Reporting
Comprehensive  Income"  ("SFAS-130").  SFAS-130  establishes  new  rules for the
reporting and display of comprehensive  income and its components.  However, the
adoption  of this  Statement  has had no effect on the  Company's  net income or
stockholders'  equity.  SFAS-130  requires  unrealized  gains or  losses  on the
Company's  available-for-sale  securities, which prior to adoption were reported
separately  in  shareholders'  equity,  to be  included  in other  comprehensive
income.

SFAS No. 133. On June 15, 1998,  the FASB issued SFAS No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities" (SFAS-133). SFAS-133 is effective
for all fiscal  quarters  of all fiscal  years  beginning  after June 15,  1999.
SFAS-133  requires that all  derivative  instruments  be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current  earnings or other  comprehensive  income,  depending  on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction.  Management of the Company  anticipates that, due
to the Company's limited use of derivative instruments, the adoption of SFAS-133
will not have a significant effect on the Company's results of operations or its
financial condition.


Impact of Inflation

The consolidated  financial  statements and related  consolidated data presented
herein have been  prepared in  accordance  with  generally  accepted  accounting
principles,  which require the measurement of financial  positions and operating
results in terms of historical  dollars  without  considering the changes in the
relative  purchasing  power of dollars over time due to  inflation.  The primary
impact of inflation on the  operations  of the Company is reflected in increased
operating costs and increases in interest rates paid on borrowed funds. Over any
given  term,  however,  interest  rates  do not  necessarily  move  in the  same
direction or in the same magnitude as changes in prices for goods and services.


Impact of Year 2000

General  Description  of the Year 2000 Issue and the  Nature and  Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems. The Year 2000 issue
is the result of computer  programs  being  written using two digits rather than
four  digits  to define  the  applicable  year.  Any of the  Company's  computer
programs or hardware that have date-sensitive software or embedded computer chip
technology may recognize a date using "00" as the year 1900 rather than the Year
2000.  This  could  result  in  a  system  failure  or  miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process transactions or engage in similar normal business activities.

The Company believes that  modifications to existing software and conversions to
new software, the Year 2000 issue will not pose significant operational problems
for its computer systems.  Further,  due to the limited number of assets managed
by the Company and the limited  scope of the  Company's  continuing  operations,
which could be managed and  accounted for by methods not relying on the computer
systems currently  employed by the Company,  if such modifications are not made,
or if such modifications and

                                       28

<PAGE>



conversions  are not  completed  in a  timely  manner,  the Year  2000  issue is
unlikely  to have a  material  impact on the  operations,  liquidity  or capital
resources  of  the  Company.   In  addition,   the  Company  believes  that  the
implementation of modifications to components of the building systems, affecting
the operations of its properties held as investments in real estate, is unlikely
to have a material affect on the operations,  liquidity or capital  resources of
the Company.

Status of Progress in Becoming  Year 2000  Compliant,  Including  Timetable  for
Completion of Each Remaining  Phase. The Company's plan to resolve the Year 2000
issue  involves  four  phases:  assessment,  and where  necessary,  remediation,
testing and implementation.

To date,  the Company has  completed an  assessment of all systems that could be
significantly  affected by the Year 2000.  The  Company's  completed  assessment
indicated  the need to modify or replace  portions  of its  software so that its
computer  systems will function  properly with respect to dates in the year 2000
and  thereafter.  Since the  Company's  accounting  software is  maintained  and
supported by a third party,  the total Year 2000 cost has been,  and is expected
to be, minimal.


In addition,  the Company has completed the assessment of all systems related to
the  operations  of its  properties  held as  investments  in real estate.  Such
assessments  were  performed to ensure that  remediation  of building  equipment
(such as security  systems and elevators) could be completed and tested prior to
the year 2000. The Company's completed  assessment  indicated the need to modify
or  replace  portions  of its  buildings'  systems so that  these  systems  will
function  properly  with respect to dates in the year 2000 and  thereafter.  All
necessary  remediation  is  expected  to be  completed  as an  integral  part of
regularly scheduled building maintenance and repair activities. As a result, the
cost of  such  remediation  is  expected  to be  immaterial  to the  operations,
liquidity or capital resources of the Company.

Nature and Level of Third Parties and their Exposure to the Year 2000 Issue. The
Company has queried its significant  suppliers and  subcontractors  that provide
accounting or information  processing services to the Company (external agents).
To date,  the Company is not aware of any external  agent with a Year 2000 issue
that would materially impact the Company's  results of operations,  liquidity or
capital resources. However, the Company has no means of absolutely ensuring that
external  agents  will be Year 2000 ready.  Due to the limited  number of assets
managed  by the  Company  and the  limited  scope  of the  Company's  continuing
operations,  which could be managed and  accounted for by methods not relying on
the computer systems and services currently provided by external agents employed
by the Company, if such modifications are not made, or if such modifications and
conversions  are not  completed  in a  timely  manner,  the Year  2000  issue is
unlikely  to have a  material  impact on the  operations,  liquidity  or capital
resources of the Company.

Contingency   Plans.  The  Company  has  contingency   plans  for  all  critical
applications and systems.  These contingency plans involve,  among other planned
actions,  the  use  of  alternative  manual  procedures,  the  temporary  use of
increased or alternative third party services and adjusting staffing strategies.


Risks Associated with Forward-Looking Statements

This  Form  10-Q,  together  with  other  statements  and  information  publicly
disseminated by the Company, contains certain forward-looking  statements within
the  meaning of Section  27A of the  Securities  Act of 1933,  as  amended,  and
Section 21E of the  Securities  Exchange Act of 1934, as amended.  Such forward-
looking  statements  involve  known and unknown  risk,  uncertainties  and other
factors which may cause the actual  results,  performance or achievements of the
Company or industry results to be materially  different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  Such  factors  include,  among  others,  the  following,  which are
discussed  in greater  detail in the "Risk  Factors"  section  of the  Company's
Registration   Statement  on  Form  S-4  (File  No.   333-386730  and  File  No.
333-386730-01)  filed  with the  Securities  and  Exchange  Commission  ("SEC"),
general economic  conditions,  which will among other things,  affect demand for
commercial and residential  properties,  availability  and credit  worthiness of
prospective tenants,  lease rents and the availability of financing:  difficulty
of locating suitable investments; competition; risks of real estate acquisition,
development,  construction  and  renovation;  vacancies  at existing  commercial
properties; dependence on rental income from real property; adverse consequences
of debt financing; risks of investments in debt instruments,  including possible
payment defaults and reductions in the value of collateral;  illiquidity of real
estate investments; lack of prior operating history; and other risks listed from
time to time in the  Company's  reports  filed with the SEC.  Therefore,  actual
results could differ materially from those projected in such statements.

                                       29

<PAGE>



PART II - OTHER INFORMATION


Item 1. Legal Proceedings

On October 27, 1998, 11  holders  of  Series  A  Preferred  Stock  who  claim to
beneficially own, in the aggregate,  849,000 shares  (approximately 60.6% of the
then  outstanding  shares) of Series A Preferred Stock (the  "Organized  Group")
commenced  a lawsuit  entitled  Strome  Global  Income Fund et al. v. River Bank
America et. al. ( the  "Complaint"  ) in Supreme Court of the State of New York,
County of New York,  Index No.  605226198  (the "Action" ), against the Company,
certain of its  predecessors  and certain of its  directors  (collectively,  the
"Defendants").  The complaint in the Action (the "Allegations")  alleged,  among
other things,  that (i) the Defendants  breached the Certificate of Designations
relating to the Series A Preferred Stock by fraudulently  transferring assets of
River Bank America  ("River Bank") and by illegally  amending the Certificate of
Designations,  (ii) the  Defendants  fraudulently  conveyed  the assets of River
Bank,  thereby  depriving the holders of a liquidating  distribution,  (iii) the
Defendants  violated the New York Banking Law (the "NYBL") by liquidating  River
Bank without  making the  liquidating  distribution  required by the NYBL and by
denying holders  appraisal  rights to which they were entitled by the NYBL, (iv)
the  Defendants  breached  their  fiduciary duty to holders by depriving them of
their  liquidating  distribution,  (v) the  Defendants  breached  their  duty of
disclosure  by omitting from the Proxy  Statement  dated March 27, 1998 material
facts  relating to the holders'  rights to receive a  liquidating  distribution,
their appraisal rights for their shares and the requirement that holders vote as
a class with respect to the amendment of the Certificate of  Designations,  (vi)
the  Defendants'  implementation  of the  liquidation  of  River  Bank  and  the
amendment  of the  Certificate  of  Designations  were ultra vires and should be
declared void and (vii) the  intentionally  tortious  nature of the  Defendants'
conduct bars them from seeking indemnification for their actions and, therefore,
the Defendants  should be enjoined from seeking  indemnification  for damages or
attorney's fees relating to the Action.

The Company  believes  that the  Allegations  are  without  merit and intends to
vigorously oppose the Action. Consequently, the Company and the other defendants
responded to the Action by filing a motion to dismiss on December 21, 1998.  The
plaintiffs  responded  to the motion and the motion is scheduled to be addressed
by the court on February 23, 1999.


Item 2. Changes in Securities

(c) On  December  30,  1998,  the Company  issued an  aggregate  of  $10,771,000
principal  amount of its newly-authorized  Increasing  Rate Junior  Subordinated
Notes due 2006  ("Subordinated  Notes") in exchange  for  415,273  shares of the
Company's  outstanding 15% Non-Cumulative  Perpetual  Preferred Stock, Series A,
par value $1.00 ("Series A Preferred  Stock") upon  consummation  of an Exchange
Offer  made by the  Company  to holders  of the  Series A  Preferred  Stock.  No
commissions or other  remuneration were paid or given directly or indirectly for
soliciting  such exchange which was made with existing  security  holders of the
Company  exclusively.  Exemption  from  the  registration  requirements  of  the
Securities Act of 1933, as amended (the "Act"),  with respect to the issuance of
the Subordinated Notes is claimed pursuant to Section 3 (a) (9) of the Act.


Item 3. Defaults Upon Senior Securities

None.


Item 4. Submission of Matters to a Vote of Securities Holders

None.


Item 5. Other Information

None.



                                       30

<PAGE>



Item 6. Exhibits and Reports on Form 8-K


         (a)     Exhibits.  The  following  exhibits  are  filed as part of,  or
                 incorporated  by reference into this  Quarterly  Report on Form
                 10-Q:

                 4.1      Conformed Copy of Indenture,  dated as of December 30,
                          1998, by and between the Company and LaSalle  National
                          Bank,  as Trustee (the  "Indenture"  (filed as Exhibit
                          (b)  (2)  to the  Company's  Schedule  13-E4/A  Issuer
                          Tender  Offer  Statement  Dated  December 31, 1998 and
                          incorporated herein by reference).

                 4.2      First Supplemental Indenture,  dated as of February 1,
                          1999, to the Indenture.

                 27.1     Financial Data Schedule


         (b)     Reports on Form 8-K

                 (1)     Form 8-K, dated October 27, 1998,  reporting under Item
                         5 information  disclosed in Part II, Item 1 of the Form
                         10-Q, as filed on November 4, 1998.

                 (2)     Form 8-K, dated January 6, 1999,  reporting  under Item
                         5,  information  with respect to the  completion of the
                         Preferred Stock Exchange Offer.




SIGNATURES

Pursuant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934,  the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                   RB ASSET, INC.
                                    (Registrant)


Date: February 10, 1999     By: /s/ Nelson L. Stephenson 
      -----------------        ------------------------
                               Nelson L. Stephenson
                               President and Chief Executive Officer (principal
                               executive and principal financial officer)





                                       31