UNITED STATES SECURITIES AND EXCHANGE COMMISSION 
                           Washington, D.C.  20549 
 
                                  FORM 10-K 
 
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES  
      EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 
 
Commission file number 000-23904  
 
 
                            SLADE'S FERRY BANCORP 
           (Exact name of registrant as specified in its charter) 
 
 
              MASSACHUSETTS                             04-3061936 
     (State or other jurisdiction of                 (I.R.S. Employer  
     incorporation or organization)               Identification Number) 
 
 
        100 Slade's Ferry Avenue
        Somerset, Massachusetts                           02726 
(Address of principal executive offices)                (Zip Code) 
 
 
Registrant's telephone number, including area code:  (508) 675-2121 
 
Securities registered pursuant to Section 12(b) of the Act:  None 
 
Securities registered pursuant to Section 12(g) of the Act:  Common Stock, 
$.01 par value 
 
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 and (2) has been subject to such 
filing requirements for the past 90 days. 
 
                          Yes   [X]        No   [ ] 
 
 Check if there is no disclosure of delinquent filers in response to Item 
405 of Regulation S-K contained in this form, and no disclosure will be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.   [ ]

The aggregate market value of the voting stock of Slade's Ferry Bancorp, 
held by nonaffiliates of the registrant as of December 31, 1998 was 
approximately $41,718,715. On that date, there were 3,446,413.8 shares of 
Slade's Ferry Bancorp Common Stock, $.01 par value outstanding. 

                     DOCUMENTS INCORPORATED BY REFERENCE 
 
ANNUAL REPORT to security holders for fiscal year ended December 31, 1998 
incorporated by reference into Parts I and II. Proxy Statement for Annual 
Meeting of Stockholders April 12, 1999 incorporated by reference into Part 
III. 
 
 
                                   PART I 
 
                                   ITEM 1 
 
                                  BUSINESS 
 
Description of Business 
 
Business of Slade's Ferry Bancorp 
--------------------------------- 
 
      Slade's Ferry Bancorp ("the Company") is a business corporation that 
was organized under the laws of the Commonwealth of Massachusetts on June 
13, 1989 as Weetamoe Bancorp. The name Weetamoe Bancorp was changed to 
Slade's Ferry Bancorp effective January 1, 1997. The office of Slade's Ferry 
Bancorp is located at the office of the Bank at 100 Slade's Ferry Avenue, 
Somerset, Massachusetts, 02726, and its telephone number is the same as the 
Bank's: (508)675-2121. 
 
      The Company was organized for the purpose of becoming the holding 
company of the Bank. The Company's acquisition of the Bank was completed on 
April 1, 1990. The Bank (Slade's Ferry Trust Company) is a wholly-owned 
subsidiary of Slade's Ferry Bancorp. 
 
Competition 
----------- 
 
      The primary business of Slade's Ferry Bancorp is the ongoing business 
of the Bank. The competitive conditions to be faced by Slade's Ferry Bancorp 
will be the same as those faced by the Bank. It is likely that, as a holding 
company, it may compete with other holding companies engaged in bank-related 
activities. Thus, the Company will face competition in undertaking to 
acquire other banks, financial institutions or companies engaged in bank-
related activities, and in operating subsequent to any such acquisitions. 
 
      While the Company investigates opportunities to acquire other banks or 
bank facilities when they occur and may in the future acquire other banks, 
financial institutions, or bank facilities, it is not currently engaged in 
any such acquisition. 
 
Employees 
--------- 
 
      At present there are four employees of the Bank and the Company whose 
compensation is paid by the Company. Although the Company has no current 
plans to do so, if the Company should acquire other financial institutions 
or pursue other lines of business, it may at such time hire additional 
employees. 
 
Business of Slade's Ferry Trust Company 
--------------------------------------- 
 
      On September 30, 1959, the Slade's Ferry Trust Company opened for 
business as a state chartered trust company incorporated under the laws of 
the Commonwealth of Massachusetts and as a member of the Federal Deposit 
Insurance Corporation (FDIC). The founders were a group of individuals from 
Somerset, Swansea, Fall River and Seekonk, Massachusetts who recognized the 
need for a local bank committed to personalized services.  
 
      During the past three years, assets of the Bank increased by $107 
Million of which $49 Million is attributed to overall growth and $58 Million 
attributed to the acquisition of the National Bank of Fairhaven, which 
occurred in August 1996. The Bank currently has ten banking facilities 
extending east from Seekonk, Massachusetts to Fairhaven, Massachusetts. The 
Bank also provides limited banking services at the Somerset High School. The 
Bank employs 136 full-time employees and 54 part-time employees. 
 
      The Bank currently services numerous communities in Southeastern 
Massachusetts and contiguous areas of Rhode Island through its ten 
facilities in Fall River, Somerset, Swansea, Seekonk, New Bedford and 
Fairhaven. 
 
      The Bank's major customer base consists of almost 32,000 personal 
savings, checking and money market accounts and 8,200 personal certificates 
of deposit and individual retirement accounts. Its commercial base consists 
of over 3,200 checking, money market, corporate, and certificate of deposit 
accounts. 
 
      The Bank does not have any major target accounts, nor does it derive a 
material portion of its deposits from any single depositor. It is a retail 
bank that services the needs of the local communities, and its loans are not 
concentrated within any single industry or group of related industries that 
would have any possible adverse effect on the business of the Bank. The 
Bank's business is not seasonal and its loan demand is well diversified. As 
of December 31, 1998, commitments under standby letters of credit aggregate 
approximately $2,307,880. 
 
Services 
-------- 
 
      The Bank engages actively in a broad range of banking activities, 
including demand, savings, time deposits, related personal and commercial 
checking account services, real estate mortgages, commercial and installment 
lending, payroll services, money orders, travelers checks, Visa, Mastercard, 
safe deposit rentals, automatic teller machines and cash management 
services. The Bank offers a full range of commercial, installment, student, 
and real estate loans. The service area of the Bank is approximately 300 
square miles, including the southern geographic area of Bristol County, 
Massachusetts and extends over to the towns of Tiverton, Warren, Bristol and 
Barrington in the state of Rhode Island. 
 
Competition 
----------- 
 
      The banking business in the market area served by the Bank is highly 
competitive. The Bank actively competes with other banks, financial 
institutions, and credit unions, including major banks and bank holding 
companies which have numerous offices and affiliates operating over wide 
geographic areas. The Bank competes for deposits, loans, and other business 
with these institutions. 
 
      Many of the major commercial banks, or other affiliates in the service 
areas of the Bank, offer services such as international banking, and 
investment and trust services which are not offered directly by the Bank. 
 
Supervision and Regulation 
 
Holding Company Regulation 
-------------------------- 
 
      Under the Federal Bank Holding Company Act ("BHCA"), the prior 
approval of the Federal Reserve Board ("FRB") is required before a 
corporation may acquire control of a bank. FRB approval must also be 
obtained before a bank holding company acquires all or substantially all of 
the assets of a bank, or merges or consolidates with another bank holding 
company. In considering any applications for approval of an acquisition or 
merger, the FRB is required to consider the financial and managerial 
resources of the companies and banks concerned, and the convenience and 
needs of the communities to be served. 
 
      As a registered bank holding company, the Company is required to file 
with the FRB annual and periodic reports and such other additional 
information as the Board may require. The Company and its subsidiaries are 
also subject to continuing regulation, supervision and examinations by the 
FRB. 
 
      A bank holding company, with certain exceptions, may not acquire more 
than 5% of the voting shares of any company that is not a bank and may not 
engage, directly or through subsidiaries, in any activity other than 
banking, managing or controlling banks, or furnishing services to or 
performing services for its subsidiaries, without prior approval of the FRB. 
The FRB is authorized to approve the ownership by a bank holding company of 
voting shares of any company whose activities the FRB determines to be so 
closely related to banking or managing or controlling banks as to be a 
proper incident thereof. Under the FRB's current regulations, and subject to 
certain restrictions and limitations specified therein, bank holding 
companies and their subsidiaries may be permitted by the FRB to engage in 
such non-banking activities as: (1) making, acquiring, or servicing loans or 
other extensions of credit such as would be made by a mortgage, finance, 
credit card, or factoring company; (2) operating an industrial bank or 
industrial loan company; (3) performing the functions of a trust company; 
(4) acting as an investment or financial advisor; (5) leasing real or 
personal property or acting as an agent or broker in leasing such property 
or acting as an agent or broker in leasing property in certain situations; 
(6) making investments to promote community welfare; (7) providing certain 
data processing and transmission services; (8) acting as principal, agent, 
or broker with respect to insurance directly related to extensions of credit 
by the bank holding company or its subsidiaries, and engaging in certain 
other insurance activities subject to specified conditions and limitations; 
(9) providing courier services for checks and certain other instrument 
exchanges among banks, and for audit and accounting media of a banking or 
financial nature; (10) providing management consulting advice under 
specified conditions to banks not affiliated with the bank holding company; 
(11) issuing and selling retail money orders having a face value of not more 
than $1,000 and travelers checks and selling U.S. Savings Bonds; (12) 
performing appraisals of real and personal property; (13) arranging 
commercial real estate equity financing under certain circumstances; (14) 
providing securities brokerage services as agent for the accounts of 
customers; (15) underwriting and dealing in certain government obligations 
and money market instruments; (16) providing foreign exchange advisory and 
transactional services; (17) acting as a futures commission merchant in 
specified capacities or providing investment advice as a futures commission 
merchant or commodity trading advisor with respect to certain financial 
futures contracts and options; (18) providing consumer financial counseling 
services; (19) providing tax planning and preparation services; (20) 
providing check guaranty services to subscribing merchants; (21) operating a 
collection agency; and (22) operating a credit bureau. In addition, a bank 
holding company may file an application for FRB approval to engage, directly 
or through subsidiaries, in other nonbank activities that the holding 
company reasonably believes are so closely related to banking as to be a 
proper incident thereto. 
 
      In addition, pursuant to the Bank Export Services Act of 1982, a bank 
holding company may invest up to 5% of its consolidated capital and surplus 
in shares of an export trading company unless such investment is disapproved 
by the FRB after notice as provided in that Act. 
 
      As a bank holding company, the Company will be required to give the 
FRB prior written notice of any purchase or redemption of its outstanding 
equity securities if the gross consideration for the purchase or redemption, 
when combined with the net consideration paid for all such purchases or 
redemptions during the preceding 12 months, is equal to 10% or more of 
Bancorp's consolidated net worth. The FRB may disapprove such a purchase or 
redemption if it determines that the proposal would violate any law, 
regulation, FRB order, directive, or any condition imposed by, or written 
agreement with, the FRB. 
 
      The status of the Company as a registered bank holding company under 
the BHCA does not exempt it from certain federal and state laws and 
regulations applicable to corporations generally, including, without 
limitation, certain provisions of the federal securities laws. 
 
      Under Massachusetts law, Board of Bank Incorporation approval is 
required before any company may become a bank holding company by directly or 
indirectly owning, controlling or holding the power to vote 25% or more of 
the voting stock of two or more banks. Further, such approval is required 
prior to a bank holding company's (i) acquiring voting stock of another bank 
institution if, as a result of the acquisition, such acquirer would, 
directly or indirectly, own or control more than 5% of the voting stock of 
such institution, or (ii) engaging in certain other transactions. The 
Company is not considered a bank holding company under Massachusetts law 
since it does not control two or more banks. The activities of the Company, 
however, will be limited under Massachusetts law to activities described 
above which would be permissible for a bank holding company registered under 
the BHCA. In addition, the acquisition by the Company of 25% or more of the 
voting stock or the power to elect a majority of the directors of another 
commercial bank, savings bank, cooperative bank, or savings and loan 
association would subject the Company to regulation as a bank holding 
company under applicable Massachusetts law and would require the approval of 
the Massachusetts Board of Bank Incorporation. 
 
Bank Regulation 
--------------- 
 
      As a Massachusetts-chartered, FDIC-insured trust company, the Bank is 
subject to regulation and supervision by the Commissioner of Banks, the FDIC 
and the FRB. 
 
      The Massachusetts statutes and regulations govern, among other things, 
investment powers, deposit activities, borrowings, maintenance of surplus 
and reserve accounts, distribution of earnings, and payment of dividends. 
The Bank is also subject to state regulatory provisions covering such 
matters as issuance of capital stock, branching, and mergers and 
acquisitions. 
 
      Deposit accounts at the Bank are insured by the FDIC, generally up to 
a maximum of $100,000 per insured depositor. As an insurer of deposits of 
certain thrift institutions and commercial banks, the FDIC issues 
regulations, conducts examinations, requires the filing of reports, and 
generally supervises the operations of institutions to which it provides 
deposit insurance. The approval of the FDIC is required prior to any merger 
or consolidation with another financial institution, or the establishment or 
relocation of an office facility. This supervision is intended primarily for 
the protection of depositors. 
 
      As an FDIC-insured bank, the Bank is subject to certain FDIC 
requirements designed to maintain the safety and soundness of individual 
banks and the banking system. The FDIC periodically conducts examinations of 
insured institutions and, based upon appraisals, may revalue assets of an 
insured institution and require establishment of specific reserves in 
amounts equal to the difference between such revaluation and the book value 
of the assets. In addition, the FDIC has a regulation which defines and sets 
minimum requirements for capital adequacy. 
 
      Bank regulators have implemented risk based capital guidelines that 
require a bank to maintain certain minimum capital as a percent of such 
bank's assets and certain off-balance sheet items adjusted for predefined 
credit risk factors (risk adjusted assets). Under the requirements a minimum 
level of capital will vary among banks on safety and soundness of operation. 
At December 31, 1998 the minimum regulatory capital level of Risk Based 
Capital was 4% for Tier 1 Capital, 8% for Total Capital and Leverage Capital 
was 4%. 
 
      The Company, the Bank, the Slade's Ferry Realty Trust, and the Slade's 
Ferry Securities Corporation are "affiliates" within the meaning of the 
Federal Reserve Act. Certain provisions of the Federal Reserve Act, made 
applicable to the Bank by Section 18(j) of the Federal Deposit Insurance Act 
and administered with respect to the Bank by the FDIC, limit the amounts of 
and establish collateral requirements with respect to the Bank's loans or 
extensions of credit to and investments in affiliates. In addition, related 
provisions of the Federal Reserve Act and FRB regulations also administered 
with respect to the Bank by the FDIC limit the amounts of and establish 
required procedures and credit standards with respect to loans and other 
extensions of credit to officers, directors and principal stockholders of 
the Bank, of the Company, and of any subsidiaries of the Company, and to 
related interests of such persons. 
 
Recent Regulatory Examinations 
------------------------------ 
 
      During the most recent regulatory examinations of the Company and the 
Bank, encompassing year end 1997 and three months ending March 31, 1998, no 
major or consequential violations were found. 
 
Statistical Information 
----------------------- 
 
      The following supplementary information required under Guide 3 
(Statistical Disclosure by Bank Holding Companies) should be read in 
conjunction with the related financial statements and notes thereto, which 
are a part of this report. 
 
I.    DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY;  
      INTEREST RATES AND INTEREST DIFFERENTIAL 
 
      The following table sets forth the Company's average assets, 
liabilities, and stockholders' equity, interest income earned and interest 
paid, average rates earned and paid, and the net interest margin for the 
periods ending December 31, 1998, December 31, 1997, and December 31, 1996. 
Averages are daily averages. 
 
<TABLE>
<CAPTION>
                                           1998                             1997                             1996
--------------------------------------------------------------------------------------------------------------------------------
                               Average  Interest(1)  Avg. Int.  Average  Interest(1)  Avg. Int.  Average  Interest(1)  Avg. Int.
(Dollars in Thousands)         Balance    Inc/Exp      Rate     Balance    Inc/Exp      Rate     Balance    Inc/Exp      Rate
--------------------------------------------------------------------------------------------------------------------------------

<S>                            <C>        <C>         <C>       <C>        <C>         <C>      <C>        <C>          <C>
ASSETS:
Earning Assets (2)
  Commercial Loans             $ 42,244   $ 3,953      9.36%    $ 36,195   $ 3,466      9.58%    $ 23,440   $ 2,191      9.35%
  Commercial Real Estate        118,939    11,630      9.78      110,093    10,740      9.76       90,576     9,035      9.98
  Residential Real Estate        45,781     3,520      7.69       52,894     4,116      7.78       50,486     3,788      7.50
  Consumer Loans                  6,767       652      9.63        6,503       659     10.13        6,094       613     10.06
-----------------------------------------------------------------------------------------------------------------------------
  Total Loans                   213,731    19,755      9.24      205,685    18,981      9.23      170,596    15,627      9.16
  Federal Funds Sold             12,214       630      5.16       11,309       607      5.37       14,994       783      5.22
  U.S. Treas/Govt Agencies       54,842     3,366      6.14       49,682     3,099      6.24       43,871     2,715      6.19
  States & Political 
   Subdivisions                   9,763       649      6.65        6,948       477      6.87        5,959       400      6.71
  Mutual Funds                      209        14      6.70          301        15      4.98          241        13      5.39
  Marketable Equity Securities    2,761       105      3.80        2,518       120      4.77        1,946        75      3.85
  Other Investments                   6         0      0.00          126         8      6.35          197        15      7.61
-----------------------------------------------------------------------------------------------------------------------------
  Total Earning Assets          293,526   $24,519      8.35%     276,569   $23,307      8.43%     237,804   $19,628      8.25%
-----------------------------------------------------------------------------------------------------------------------------
  Allowance for Loan Losses      (3,602)                          (3,474)                          (2,958)
  Unearned Income                  (715)                            (665)                            (597)
  Cash and Due From Banks        12,186                           11,366                            9,565
  Other Assets                   15,376                           14,022                            9,489
-----------------------------------------------------------------------------------------------------------------------------
Total Assets                   $316,771                         $297,818                         $253,303
=============================================================================================================================

LIABILITIES & STOCKHOLDERS' EQUITY: 
  Savings                      $ 43,885   $ 1,075      2.45%    $ 42,642   $ 1,067      2.50%    $ 40,246   $ 1,006      2.50%
  NOW's                          38,764     1,196      3.09       37,739     1,202      3.19       28,788       858      2.98
  Money Market Accounts          13,777       273      1.98       14,116       281      1.99       13,326       270      2.03
  CD's > $100M                   22,945     1,266      5.52       23,162     1,256      5.42       18,813     1,104      5.87
  Other Time Deposits           119,118     6,700      5.62      109,278     6,460      5.91       97,957     5,754      5.87
  Other Borrowings                2,933       201      6.85        2,114       146      6.91        1,374        86      6.26
-----------------------------------------------------------------------------------------------------------------------------
  Total Interest-bearing 
   Liabilities                  241,422   $10,711      4.44%     229,051   $10,412      4.55%     200,504   $ 9,078      4.53%
-----------------------------------------------------------------------------------------------------------------------------
  Demand Deposits                46,217                           43,724                           33,572
  Other Liabilities               1,063                            1,847                              493
-----------------------------------------------------------------------------------------------------------------------------
  Total Liabilities             288,702                          274,622                          234,569
-----------------------------------------------------------------------------------------------------------------------------
  Common Stock                       34                               30                               28
  Paid-in Capital                21,448                           16,899                           14,393
  Retained Earnings               6,395                            6,308                            4,486
  Net Unrealized (Loss) Gain
   on Available-for-Sale
   Securities                       192                              (41)                            (173)
-----------------------------------------------------------------------------------------------------------------------------
  Total Stockholders' Equity     28,069                           23,196                           18,734
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities & 
 Stockholders' Equity          $316,771                         $297,818                         $253,303
=============================================================================================================================
Net Interest Income                       $13,808                          $12,895                          $10,550
=============================================================================================================================
Net Interest Spread                                    3.91%                            3.88%                            3.72%
=============================================================================================================================
Net Yield on Earning Assets                            4.70%                            4.66%                            4.44%
=============================================================================================================================

<FN>
<F1>  On a fully taxable equivalent basis based on tax rate of 34%. Interest 
      income on investments and net interest income includes a fully taxable 
      equivalent adjustment of $212,000 in 1998, $157,000 in 1997 and 
      $133,000 in 1996. 
<F2>  Average balance includes non-accruing loans. The effect of including 
      such loans is to reduce the average rate earned on the Company's 
      loans. 
</FN>
</TABLE>

           NET INTEREST INCOME - CHANGES DUE TO VOLUME AND RATE (1)

<TABLE>
<CAPTION>
                                            1998 vs 1997                   1997 vs 1996
                                              Increase                       Increase
                                             (Decrease)                     (Decrease)
----------------------------------------------------------------------------------------------
                                     Total     Due to    Due to     Total     Due to    Due to
(Dollars in Thousands)             Change(2)   Volume     Rate    Change(2)   Volume     Rate
----------------------------------------------------------------------------------------------

<S>                                 <C>        <C>        <C>      <C>        <C>        <C>
Interest Income: 
  Federal Funds Sold                $    23    $    48    $ (25)   $  (176)   $  (195)   $  19
  US Treas/Govt Agencies                267        320      (53)       384        361       23
  States & Political Subdivisions       172        190      (18)        77         67       10
  Mutual Funds                           (1)        (5)       4          2          3       (1)
  Marketable Securities                 (15)        10      (25)        45         24       21
  Other Investments                      (8)        (4)      (4)        (7)        (5)      (2)
  Commercial Loans                      487        574      (87)     1,275      1,207       68
  Commercial Real Estate                890        864       26      1,705      1,926     (221)
  Residential Real Estate              (596)      (550)     (46)       328        184      144
  Consumer Loans                         (7)        26      (33)        46         41        5
----------------------------------------------------------------------------------------------
  Total Interest Income               1,212      1,473     (261)     3,679      3,613       66
----------------------------------------------------------------------------------------------

Interest Expense: 
  Savings Accounts                        8         31      (23)        61         61      -0-
  NOW Accounts                           (6)        32      (38)       344        275       69
  Money Market Accounts                  (8)        (7)      (1)        11         16       (5)
  CD's > 100 M                           10        (12)      22        152        246      (94)
  Other Time Deposits                   240        568     (328)       706        667       39
  Other Borrowings                       55         56       (1)        60         49       11
----------------------------------------------------------------------------------------------
  Total Interest Expense                299        668     (369)     1,334      1,314       20
----------------------------------------------------------------------------------------------
Net Interest Income                 $   913    $   805    $ 108     $2,345     $2,299     $ 46
==============================================================================================
 
<FN>
<F1>  Changes in interest income and interest expense attributable to 
      changes in both volume and rate have been allocated equally to changes 
      due to volume and changes due to rate.
<F2>  The change in interest income on investments and net interest income 
      includes interest on a fully taxable equivalent basis based on a tax 
      rate of 34%. 
</FN>
</TABLE>

 
Interest Rate Risk 
------------------ 
 
      The Company considers interest rate risk to be a significant market 
risk as it could potentially have an effect on the Company's financial 
condition and results of operation. The definition of interest rate risk is 
the exposure of the Company's earnings to adverse movements in interest 
rates. Volatility in interest rates requires the Company to manage interest 
rate risk which arises from the differences in the timing of repricing of 
assets and liabilities. 
 
      The Company's Asset-Liability Management Committee, comprised of the 
Bank's Executive Management team, has the responsibility of managing 
interest rate risk, and monitoring and evaluating the difference between 
interest-sensitive assets and interest-sensitive liabilities within various 
time periods. 
 
      The Company's objective is to reduce and control the volatility of its 
net interest income by managing the relationship of interest-earning assets 
and interest-bearing liabilities. In order to manage this relationship, the 
Committee utilizes a monthly GAP report. This report for the period ending 
December 31, 1998 is set forth below. 
 
      The GAP report provides a static analysis of repricing opportunities 
of rate-sensitive assets and rate-sensitive liabilities. It is prepared by 
categorizing these assets and liabilities into time periods based upon 
either their contractual or anticipated maturity or repricing. The analysis 
determines the net dollar amount of assets less liabilities that are 
repricing in various time frames. This, in conjunction with certain 
assumptions and other related factors, such as anticipated changes in 
interest rates, projected cash flows from loans, investments and deposits, 
provides a means of evaluating interest rate risk. Management also takes 
into consideration that certain assets and liabilities react differently to 
changes in interest rates. 
 
      The interest sensitivity gap is determined by subtracting the amount 
of liabilities from the amount of assets that reprice in a particular time 
period. When more liabilities than assets reprice or mature within a given 
time frame, a liability sensitive position results (negative gap). A 
negative gap position would tend to increase net interest income when 
interest rates are falling, and decrease net interest income when rates are 
rising. Conversely, an asset sensitive position (positive gap) results when 
more assets than liabilities reprice within a given period. In this 
scenario, net interest income would increase when interest rates rise and 
decrease when rates fall. 
 
      At December 31, 1998, the GAP report shown below indicates the 
Company's interest rate risk to have a reliance on short term liabilities. 
This position would have an adverse effect on earnings in a rising rate 
environment and a positive effect on earnings in a decreasing rate 
environment. 
 
Interest Sensitivity GAP Report 
------------------------------- 
 
Repricing period at December 31, 1998 
------------------------------------- 
 
<TABLE>
<CAPTION>
                                 3 Months    4 Months    1 Year to   2 Year to    5 Years
(Dollars in Thousands)           or Less     to 1 Year    2 Years     5 Years      & Over      Total
-----------------------------------------------------------------------------------------------------
 
<S>                              <C>         <C>         <C>         <C>         <C>         <C>
INTEREST-EARNING ASSETS(1) 
Loans                            $ 65,650    $ 73,003    $ 28,328    $ 31,725    $ 16,193    $214,899
Investments                         3,636       6,394       6,956      24,875      37,583      79,444
Federal Funds Sold                 14,500         ---         ---         ---         ---      14,500
-----------------------------------------------------------------------------------------------------
Total Interest-Earning Assets    $ 83,786    $ 79,397    $  5,284    $ 56,600    $ 53,776    $308,843
-----------------------------------------------------------------------------------------------------
Cumulative RSA                   $ 83,786    $163,183    $198,467    $255,067    $308,843
=====================================================================================================
 
INTEREST-BEARING LIABILITIES 
Regular Savings                  $ 48,360         ---         ---         ---         ---    $ 48,360
NOW Accounts                       39,882         ---         ---         ---         ---      39,882
Money Market Accounts              12,437         ---         ---         ---         ---      12,437
Time Deposits $100,000 & Over       9,822      12,440       2,168       1,576         ---      26,006
Other Time Deposits                39,278      60,801      16,668      12,073         ---     128,820
-----------------------------------------------------------------------------------------------------
Total Deposits                    149,779      73,241      18,836      13,649         ---     255,505
Federal Funds Purchased               ---         ---         ---         ---         ---         ---
Other Interest-Bearing
 Liabilities                           67         920         103         354       3,921       5,365
-----------------------------------------------------------------------------------------------------
Total Interest-Bearing
 Liabilities                     $149,846    $ 74,161    $ 18,939    $ 14,003    $  3,921    $260,870
=====================================================================================================
Cumulative RSL                   $149,846    $224,007    $242,946    $256,949    $260,870
=====================================================================================================
Gap                               (66,060)      5,236      16,345      42,597      49,855      47,973
Cumulative Gap                    (66,060)    (60,824)    (44,479)     (1,882)     47,973
RSA/RSL                              (.56)%      1.07 %      1.86 %      4.04 %     13.71%
Cumulative RSA/RSL                   (.56)%      (.73)%      (.82)%      (.99)%      1.18%
 
<FN>
<F1>  Nonaccrual loans amounting to $3.3 Million have been eliminated from  
      the loan balances. 
</FN>
</TABLE>

 
      In addition to the GAP report, the Company also uses an analysis to 
measure the exposure of net interest income to changes in interest rates 
over a relatively short time period (i.e. 12 months). This analysis involves 
projecting future interest income and expenses from the Company's earning 
assets and interest-bearing liabilities. Depending on the GAP position, the 
Company's policy limit on interest rate risk specifies that if interest 
rates were to change immediately up or down 200 basis points, the effect on 
estimated net interest income for the next 12 months that would be tolerated 
would be not more than a ten percent decrease. The following table reflects 
the Company's estimated exposure as a percentage of estimated net interest 
income for the next 12 months, assuming an immediate change in interest 
rates: 
 
<TABLE>
<CAPTION>
        Rate Change            Estimated Exposure as a 
       (Basis Points)    Percentage of Net Interest Income 
-------------------------------------------------------------------
 
           <C>                         <C>
           +200                        1.52%
           -200                       (4.83%)
</TABLE>
 
      The model used to monitor earnings-at-risk provides management a 
measurement tool to assess the effect of changes in interest rates on the 
Company's current and future earnings. The Company's 10% limit establishes 
an internal tolerance level to control the Company's interest rate risk 
exposure and is monitored on a quarterly basis.  
 
II.   INVESTMENT PORTFOLIO 
 
      The following table shows the book value of the major categories of 
investment securities Held-to-Maturity for the years indicated: 
 
<TABLE>
<CAPTION>
                                                At December 31,
----------------------------------------------------------------------
                                        1998         1997         1996
----------------------------------------------------------------------
 
<S>                                   <C>          <C>          <C>
US Treasury Securities and 
 Obligations of US Government 
 Corporations and Agencies            $ 8,810      $ 9,415      $13,193
Obligations of States and 
 Political Subdivisions                11,997        7,976        6,131
Mortgage-backed securities                114          209          257
Other Debt Securities                     -0-            1            6
-----------------------------------------------------------------------
Total                                 $20,921      $17,601      $19,587
=======================================================================
</TABLE>
 
      In the following table, the carrying value of Held-to-Maturity 
securities maturing within stated periods as of December 31, 1998, is shown 
with the weighted average interest yield from securities falling within the 
range of maturities: 
 
<TABLE>
<CAPTION>
                          US Treasury      Obligations
                          & Government      of States &        Mortgage         Other
                          Corporations       Political          Backed          Debt
(Dollars in Thousands)      Agencies      Subdivisions(1)    Securities(2)    Securities    Total
-------------------------------------------------------------------------------------------------
 
<S>                          <C>             <C>               <C>              <C>        <C>
Due in 1 year or less: 
  Amount                     $5,365          $ 1,703           $  ---           $  ---     $ 7,068
  Yield                        5.27%            5.76%             ---              ---        5.39%
 
Due in 1 to 5 years: 
  Amount                     $3,195          $ 4,298           $  114           $  ---     $ 7,607
  Yield                        5.76%            6.74%            6.81%             ---        6.33%
 
Due in 5 to 10 years: 
  Amount                     $  250          $ 5,664           $  ---              ---     $ 5,914
  Yield                        7.00%            6.58%             ---              ---        6.60%
 
Due after 10 years: 
  Amount                        ---          $   332              ---              ---     $   332
  Yield                         ---             7.70%             ---              ---        7.70%
--------------------------------------------------------------------------------------------------
 
  Amount                     $8,810          $11,997           $  114             $  0     $20,921
==================================================================================================
  Yield                        5.50%            6.55%            6.81%             ---        6.11%
==================================================================================================

<FN>
<F1>  Rates of tax exempt securities are shown assuming a 34% tax rate.
<F2>  Mortgage-backed securities stated using average life.
</FN>
</TABLE>

      The following table shows the amortized cost basis of the major 
categories of Available-for-Sale securities for the years indicated: 
 
<TABLE>
<CAPTION>
                                                 At December 31,
------------------------------------------------------------------------
(Dollars in Thousands)                    1998         1997         1996
------------------------------------------------------------------------
 
<S>                                     <C>          <C>          <C>
US Treasury Securities and 
 Obligations of US Government 
 Corporations and Agencies              $44,620      $30,402      $32,793
 
Mortgage-backed Securities               10,862        7,747        2,469
Asset-backed Securities                     222          234          246
Marketable Equity Securities (net)        1,918        1,565        1,775
-------------------------------------------------------------------------
Total                                   $57,622      $39,948      $37,283
=========================================================================
</TABLE>
 
      In the following table, the amortized cost basis of Available-for-Sale 
securities (other than equity securities) maturing within stated periods as 
of December 31, 1998, is shown with the weighted average interest yield from 
securities falling within the range of maturities: 
 
<TABLE>
<CAPTION>
                          US Treasury
                          & Government      Mortgage         Asset-
                          Corporations       Backed          Backed
(Dollars in Thousands)      Agencies      Securities(2)    Securities    Total
------------------------------------------------------------------------------
 
<S>                          <C>            <C>              <C>        <C>
Due in 1 year or less: 
  Amount                     $   500        $ 2,037          $  ---     $ 2,537
  Yield                         5.69%          6.18%            ---        6.08%
 
Due in 1 to 5 years: 
  Amount                      23,175          6,497             ---      29,672
  Yield                         5.79%          6.17%            ---        5.87%
 
Due in 5 to 10 years: 
  Amount                      20,945          2,052             222      23,219
  Yield                         6.09%          6.14%           6.64%       6.10%
 
Due after 10 years: 
  Amount                                        276             ---         276
  Yield                                        6.00%            ---        6.00%
-------------------------------------------------------------------------------
 
  Amount                     $44,620        $10,862          $  222     $55,704
===============================================================================
  Yield                         5.93%          6.16%           6.64%       5.98%
===============================================================================

<FN>
<F1>  Mortgage backed securities stated using average life.
</FN>
</TABLE>

      The following table shows the amortized cost basis and fair value of 
the major categories of Held-to-Maturity securities as of December 31, 1998: 
 
<TABLE>
<CAPTION>
                                                                            Gross
                                                            Gross         Unrealized
                                          Amortized       Unrealized       Holding
(Dollars in Thousands)                    Cost Basis     Holding Gains      Losses      Fair Value
--------------------------------------------------------------------------------------------------
 
<S>                                         <C>               <C>            <C>         <C>
Debt securities issued by the U.S.  
 Treasury and other U.S. Government  
 corporations and agencies                  $ 8,810           $117           $  0        $ 8,927
 
Debt securities issued by states of 
 the United States and political  
 subdivisions of the states                  11,997            257             13         12,241
 
Mortgage-backed securities                      114              1              0            115
------------------------------------------------------------------------------------------------
 
Total                                       $20,921           $375           $ 13        $21,283
================================================================================================
</TABLE>
 
      Investments in Available-for-Sale securities are carried at fair value 
on the balance sheet and are summarized as follows as of December 31, 1998. 

<TABLE>
<CAPTION>
                                                                            Gross
                                                            Gross         Unrealized
                                          Amortized       Unrealized       Holding
(Dollars in Thousands)                    Cost Basis     Holding Gains      Losses      Fair Value
--------------------------------------------------------------------------------------------------
 
<S>                                         <C>               <C>            <C>         <C>
Debt securities issued by the U.S. 
 Treasury and other U.S. Government  
 corporations and agencies                  $44,620           $211           $ 54        $44,777
 
Marketable Equity                             1,918            551            161          2,308
 
Mortgage-backed securities                   10,862             52             23         10,891
 
Asset-backed securities                         222              1              0            223
------------------------------------------------------------------------------------------------
 
Total                                       $57,622           $815           $238        $58,199
================================================================================================
</TABLE>

Increase in Stockholder's Equity: 
  (In Whole Dollars) 
 
<TABLE>
<S>                                                            <C>
Net unrealized gain on Available-for-Sale Securities           $577,119
Less tax effect                                                 212,175
                                                               --------
                                                               $364,944
                                                               ========
</TABLE>
 
III.   LOAN PORTFOLIO 
 
      The following table shows the Company's amount of loans by category at 
the end of each of the last five years. 
 
<TABLE>
<CAPTION>
                                                                        At December 31
----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)                                1998        1997        1996        1995        1994
----------------------------------------------------------------------------------------------------------
 
<S>                                                <C>         <C>         <C>         <C>         <C>
Commercial, financial and agricultural             $ 43,777    $ 36,641    $ 31,244    $ 16,744    $ 17,123
Real estate - construction and land development       3,773       6,678       6,891       6,865       2,290
Real estate - residential                            51,220      55,477      59,500      50,472      50,938
Real estate - commercial                            112,913     108,008      94,545      70,749      59,625
Consumer                                              6,477       6,747       6,681       6,149       6,097
Obligations of states and political subdivisions          3           9          16          23          29
Other                                                    67         176         109          85          89
-----------------------------------------------------------------------------------------------------------
                                                    218,230     213,736     198,986     151,087     136,191
 
Allowance for Loan Losses                            (3,569)     (3,694)     (3,354)     (2,498)     (2,306)
 
Unamortized adjustment to fair value                    (32)        (42)        (54)          0           0
 
Unearned Income                                        (691)       (690)       (643)       (520)       (403)
-----------------------------------------------------------------------------------------------------------
Net Loans                                          $213,938    $209,310    $194,935    $148,069    $133,482
===========================================================================================================
</TABLE>

 
      The following table shows the maturity distributions and interest rate 
sensitivity of selected loan categories at December 31, 1998. 

<TABLE>
<CAPTION>
                                           Within One    One to Five     After Five
(Dollars in Thousands)                        Year          Years          Years          Total
-----------------------------------------------------------------------------------------------
 
<S>                                          <C>           <C>             <C>           <C>
Commercial, financial, and agricultural      $25,070       $12,713         $5,994        $43,777
Real Estate - construction                         2            12          3,759          3,773
------------------------------------------------------------------------------------------------
Total                                        $25,072       $12,725         $9,753        $47,550
================================================================================================
</TABLE>
 
      The following table shows the amounts, included in the table above, 
which are due after one year and which have fixed interest rates and 
adjustable rates: 
 
<TABLE>
<CAPTION>
                                                   Total Due After One Year
----------------------------------------------------------------------------------
(Dollars in Thousands)                     Fixed Rate    Adjustable Rate     Total
----------------------------------------------------------------------------------
 
<S>                                          <C>             <C>            <C>
Commercial, financial, and agricultural      $5,455          $13,252        $18,707
Real Estate - construction                      134            3,637          3,771
-----------------------------------------------------------------------------------
Total                                        $5,589          $16,889        $22,478
===================================================================================
</TABLE>
 
                 NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
 
<TABLE>
<CAPTION>
                                                       December 31
-----------------------------------------------------------------------------------
(Dollars in Thousands)                 1998      1997      1996      1995      1994
-----------------------------------------------------------------------------------
 
<S>                                   <C>       <C>       <C>       <C>       <C>
Nonaccrual loans                      $3,331    $4,597    $4,352    $2,695    $3,238
 
Loans 90 days or more past due 
 and still accruing                      317       147       112        23       204
 
Real estate acquired by foreclosure 
 or substantively repossessed          1,026       159       308       633       888
------------------------------------------------------------------------------------
 
Total nonperforming assets            $4,674    $4,903    $4,772    $3,351    $4,330
====================================================================================
 
Percentage of nonaccrual loans
 to total loans                         1.53%     2.15%     2.19%     1.78%     2.38%
 
Percentage of nonaccrual loans,
 restructured loans and real estate
 acquired by foreclosure
 or substantively repossessed to
 total assets                           1.54%     2.00%     1.88%     1.62%     2.20%
 
Percentage of Allowance for Loan
 Losses to Nonaccrual Loans           107.15%    80.36%    77.07%    92.69%    71.22%
</TABLE>
 
      Nonaccrual loans include restructured loans of $0 at December 31, 
1998; $263,000 at December 31, 1997; $398,000 at December 31, 1996; $425,000 
at December 31, 1995; and $286,000 at December 31, 1994. 
 
      Information with respect to nonaccrual and restructured loans for the 
past five years ending December 31 is as follows: 
 
<TABLE>
<CAPTION>
                                                          December 31
--------------------------------------------------------------------------------------
(Dollars in Thousands)                    1998      1997      1996      1995      1994
--------------------------------------------------------------------------------------
 
<S>                                      <C>       <C>       <C>       <C>       <C>
Nonaccrual loans                         $3,331    $4,597    $4,352    $2,695    $3,238
 
Interest income that would have been 
 recorded under original terms           $  318    $  394    $  361    $  243    $  242
 
Interest income recorded during the
 period                                  $   37    $   58    $   62    $   21    $   19
</TABLE>
 
      Nonperforming assets include nonaccrual loans, loans past due 90 days 
or more and still accruing, restructured loans not performing in accordance 
with amended terms, and other real estate acquired through foreclosure. 
Nonperforming assets as a total decreased to $4.7 Million at year end 1998, 
from $4.9 Million reported at year end 1997. Nonaccrual loans at December 
31, 1998 were down by $1.3 Million to $3.3 Million from $4.6 Million 
reported on December 31, 1997. Included in the $3.3 Million of nonaccrual 
loans is a $1.3 Million commercial real estate loan that was classified as 
nonaccrual in March 1997. The real estate collateralizing this loan was 
appraised in December 1997 at $2.7 Million. Due to the excess collateral 
value, the Bank does not anticipate any loss on this loan. Loans that became 
nonaccrual during the current year, amounted to $1,797,493. Offsetting this 
increase were receipts of loan payments of $629,032 and loans of $753,485 
that were deemed uncollectible and charged off to the Allowance for Loan 
Losses. There was a transfer to Other Real Estate Owned of $1,049,634, 
property sold at auction of $156,000 and a transfer to accrual status of 
loans totaling $474,457. 
 
      The Company places a loan on nonaccrual status when, in the opinion of 
management, the collectibility of the principal and interest becomes 
doubtful. Generally, when a commercial loan, commercial real estate loan or 
a residential real estate loan becomes past due 90 days or more, the Company 
discontinues the accrual of interest and reverses previously accrued 
interest. The loan remains in the nonaccrual status until the loan is 
current and six consecutive months of payments are made, then it is 
reclassified as an accruing loan. When it is determined that the 
collectibility of the loan no longer exists, it is charged off to the 
Allowance for Loan Losses or, if applicable, any real estate that is 
collateralizing the loan is acquired through foreclosure, at which time it 
is categorized as Other Real Estate Owned. The nonaccrual category is 
comprised of $1,035,145 of residential real estate loans, $1,966,307 of 
commercial real estate loans, $292,080 of commercial loans and $37,885 of 
other types of loans. 
 
      Real Estate acquired by foreclosure increased to $1,026,000 at 
December 31, 1998 compared to $159,000 reported at year end 1997. This 
amount consists of five separate parcels of property. Annual appraisals are 
performed on these properties and if the appraised value is less than the 
carrying value of the property, the carrying value is written down by a 
charge to the Writedown on Other Real Estate Owned expense account. The Bank 
currently has one purchase and sales agreement on hand for an early 1999 
sale. 
 
IV.   SUMMARY OF LOAN LOSS EXPERIENCE 
 
      The table below illustrates the changes in the Allowance for Loan 
Losses for the periods indicated. 
 
<TABLE>
<CAPTION>
(Dollars in Thousands)               1998      1997      1996      1995      1994
---------------------------------------------------------------------------------
 
<S>                                 <C>       <C>       <C>       <C>       <C>
Balance at January 1                $3,694    $3,354    $2,498    $2,306    $1,954
----------------------------------------------------------------------------------
 
Charge-offs: 
  Commercial                            (0)      (40)     (144)     (184)      (22)
  Real estate-construction              (0)       (0)       (0)       (0)       (0)
  Real estate-mortgage                (716)     (147)     (136)      (79)     (246)
  Installment/Consumer                 (76)      (68)     (159)     (134)      (93)
----------------------------------------------------------------------------------
                                      (792)     (255)     (439)     (397)     (361)
----------------------------------------------------------------------------------
 
Recoveries: 
  Commercial                             8        41       332         1        51
  Real estate-construction               0         0         0         0         0
  Real estate-mortgage                  43        16         0        16         2
  Installment/Consumer                  16        38       107        22        15
----------------------------------------------------------------------------------
                                        67        95       439        39        68
----------------------------------------------------------------------------------
 
Net Charge-offs                       (725)     (160)        0      (358)     (293)
----------------------------------------------------------------------------------
 
Additions charged to operations        600       500       400       550       645
 
Allowance attributable to
 acquisition                             0         0       456         0         0
----------------------------------------------------------------------------------
 
Balance at December 31:             $3,569    $3,694    $3,354    $2,498    $2,306
==================================================================================
 
Allowance for Loan Losses as a
 percent of year end loans            1.64%     1.73%     1.69%     1.65%     1.70%
 
Ratio of net charge-offs to
 average loans outstanding            0.34%     0.08%     0.00%     0.25%     0.23%
</TABLE>
 
      The Allowance for Loan Losses at year end December 31, 1998 was 
$3,569,282; and $3,693,865, $3,354,311, $2,497,774 and $2,305,860, for years 
ending 1997, 1996, 1995 and 1994 respectively. The Allowance for Loan Losses 
as a percent of year end loans was 1.64% in 1998, 1.73% in 1997, 1.69% in 
1996, 1.65% in 1995 and 1.70% in 1994. 
 
      The level of the Allowance for Loan Losses is evaluated by management 
and encompasses several factors. These factors include but are not limited 
to recent trends in the nonperforming loans, the adequacy of the assets 
which collateralize the nonperforming loans, current economic conditions in 
the market area and various other external and internal factors. 
Management's assessment of the adequacy of the Allowance for Loan Losses is 
reviewed by regulators and by the Company's independent accountants. 
 
      The Company's provision for loan losses, which is a deduction from 
earnings, in 1998 was $600,000. Prior years' provisions were $500,000, 
$400,000, $550,000 and $645,000 for years ending 1997, 1996, 1995 and 1994 
respectively. In 1998, the Company realized recoveries of previously 
charged-off loans of $67,000. Recoveries recorded in previous years were 
$95,000, $439,000, $39,000 and $68,000 in 1997, 1996, 1995 and 1994 
respectively. 
 
      The amount provided to the Allowance for Loan Losses was deemed 
appropriate by management after full consideration of the value of the 
assets securing the nonaccrual loans. 
 
      This table shows an allocation of the allowance for loan losses as of 
the end of each of the last five years. 
 
                 ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
 
<TABLE>
<CAPTION>
                     December 31, 1998     December 31, 1997     December 31, 1996     December 31, 1995     December 31, 1994
--------------------------------------------------------------------------------------------------------------------------------
                            Percent of            Percent of            Percent of            Percent of             Percent of
                             Loans in              Loans in              Loans in              Loans in               Loans in
                               Each                  Each                  Each                  Each                   Each
                            Category to           Category to           Category to           Category to            Category to
                    Amount  Total Loans   Amount  Total Loans   Amount  Total Loans   Amount  Total Loans   Amount   Total Loans
--------------------------------------------------------------------------------------------------------------------------------
                                                              (Dollars in Thousands)
 
<S>                <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>        <C>        <C>
Commercial         $1,249(1)   20.06%    $  984(1)   17.14%    $  789(1)   15.70%    $  597(1)   11.35%     $  588     12.82%
Real estate
 Construction          27       1.73         44       3.12         41       3.46         40       4.55          14      1.68
Real estate
 Mortgage           1,964(2)   75.21      2,311(2)   76.50      2,150(2)   77.42      1,581(2)   80.04       1,374     81.03
Consumer(3)           329(4)    3.00        355(4)    3.24        374(4)    3.42        280       4.06         330      4.47
----------------------------------------------------------------------------------------------------------------------------
                   $3,569     100.00%    $3,694     100.00%    $3,354     100.00%    $2,498     100.00%     $2,306    100.00%
============================================================================================================================
 
<FN>
<F1>  Includes amounts specifically reserved for impaired loans of $128,207  
      as of December 31, 1998, of $42,937 as of December 31, 1997, $0.00 as  
      of December 31, 1996 and $214,542 as of December 31, 1995, as required  
      by Financial Accounting Standard No. 114, Accounting for Impairment of  
      Loans. 
<F2>  Includes amounts specifically reserved for impaired loans of $187,554  
      as of December 31, 1998, of $566,220 as of December 31, 1997, $838,290  
      as of December 31, 1996 and $240,500 as of December 31, 1995, as  
      required by Financial Accounting Standard No. 114, Accounting for  
      Impairment of Loans. 
<F3>  Includes consumer, obligations of states and political subdivisions  
      and other. 
<F4>  Includes amounts specifically reserved for impaired loans of $9,126 as  
      of December 31, 1998, of $14,413 as of December 31, 1997, $0.00 as of  
      December 31, 1996 and $0.00 as of December 31, 1995 as required by  
      Financial Accounting Standard No. 114, Accounting for Impairment of  
      Loans. 
</FN>
</TABLE>

 
      The loan portfolio's largest segment of loans is commercial real 
estate loans, which represent 51.7% of gross loans. Residential real estate, 
which is the second largest segment of the loan portfolio, represents 23.5% 
of gross loans. The Company requires a loan to value ratio of 80% in both 
commercial and residential mortgages. These mortgages are secured by real 
properties which have a readily ascertainable value. 
 
      Generally, commercial real estate loans have a higher degree of credit 
risk than residential real estate loans because they depend primarily on the 
success of the business. When granting these loans, the Company evaluates 
the financial statements of the borrower(s), the location of the real 
estate, the quality of management, and general economic and competitive 
conditions. When granting a residential mortgage, the Company reviews the 
borrower(s) repayment history on past debts, and assesses the borrower(s) 
ability to meet existing obligations and payments on the proposed loans. 
 
      Commercial loans consist of loans predominantly collateralized by 
inventory, furniture and fixtures, and accounts receivable. In assessing the 
collateral for this type of loan, management applies a 40% liquidation value 
to inventories; 25% to furniture, fixtures and equipment; and 60% to 
accounts receivable. Commercial loans represent 20.1% of the loan portfolio. 
 
      Consumer loans are generally unsecured borrowings and represent 3.0% 
of the total loan portfolio. These loans have a higher degree of risk than 
residential mortgage loans. The underlying collateral of a secured consumer 
loan tends to depreciate in value. Consumer loans are typically made based 
on the borrower's ability to repay the loan through continued financial 
stability. The Company endeavors to minimize risk by reviewing the 
borrower's repayment history on past debts, and assessing the borrower's 
ability to meet existing obligations on the proposed loans. 
 
      Charge-offs in 1998 amounted to $792,000, up by $537,000 when compared 
to losses incurred in 1997 of $255,000. The Company had charge-offs of 
$439,000 in 1996, $397,000 in 1995 and $361,000 in 1994. The real estate-
mortgage category incurred losses of $716,000 in 1998 compared to $147,000 
in 1997, $136,000 in 1996, $79,000 in 1995 and $246,000 in 1994.  
 
V.   DEPOSITS 
 
      Deposits are obtained from individuals and from small and medium sized 
businesses in the local market area. The Bank also attracts deposits from 
municipalities and other government agencies. The Bank does not solicit or 
accept brokered deposits. 
 
      The following table sets forth the average amount and the average rate 
paid on deposits for the periods indicated. 
 
<TABLE>
<CAPTION>
                                             1998                 1997                 1996
--------------------------------------------------------------------------------------------------
                                       Average   Average    Average   Average    Average   Average
(Dollars in Thousands)                 Balance     Rate     Balance     Rate     Balance     Rate
--------------------------------------------------------------------------------------------------
 
<S>                                    <C>         <C>      <C>         <C>      <C>         <C>
Noninterest-bearing Demand Deposits    $ 46,217    0.00%    $ 43,724    0.00%    $ 33,572    0.00%
Interest-bearing Demand Deposits         38,764    3.09       37,739    3.19       28,788    2.98
Savings Deposits                         43,885    2.45       42,642    2.50       40,246    2.50
Money Market Deposits                    13,777    1.98       14,116    1.99       13,326    2.03
Time Deposits $100,000 or More           22,945    5.52       23,162    5.42       18,813    5.87
Other Time Deposits                     119,118    5.62      109,278    5.91       97,957    5.87
-------------------------------------------------------------------------------------------------
Totals                                 $284,706    3.69%    $270,661    3.79%    $232,702    3.87%
=================================================================================================
</TABLE>

      As of December 31, 1998, time certificates of deposit in amounts of 
$100,000 or more had the following maturities: 
 
<TABLE>
<CAPTION>
                                                 (Dollars in Thousands)
 
<S>                                                     <C>
Three months or less                                    $ 9,822
Over three months through six months                      6,614
Over six months through twelve months                     5,826
Twelve months and over                                    3,745
                                                        -------
                                                        $26,007
                                                        =======
</TABLE>
 
VI.   RETURNS ON EQUITY AND ASSETS 
 
      The following table shows consolidated operating and capital ratios of 
the Company for each of the last three years: 
 
<TABLE>
<CAPTION>
                                   Year Ended December 31,
                                 ---------------------------
                                  1998      1997       1996
                                 ---------------------------
 
      <S>                         <C>       <C>        <C>
      Return on Assets            1.06%     0.96%      0.94%
      Return on Equity           11.98%    12.27%     12.69%
      Dividend Payout Ratio      28.54%    27.57%     27.95%
      Equity to Assets Ratio      8.86%     7.79%      7.40%
</TABLE>
 
VII.  SHORT TERM BORROWINGS 
 
      The following table shows the Company's short-term borrowings at the 
end of each of the last three years along with the maximum amount of 
borrowings and average amounts outstanding as well as weighted average 
interest rates for the last three years. 
 
<TABLE>
<CAPTION>
(Dollars in Thousands)                1998        1997        1996
-------------------------------------------------------------------
 
<S>                                  <C>         <C>         <C>
Balance at December 31               $   42      $1,200      $1,200
Maximum Amount Outstanding
 at Any Month's End                  $1,365      $1,725      $2,141
Average Amount Outstanding
 During the Year                     $  813      $1,067       $ 987
Weighted Average Interest
 Rate During the Year                  5.65%       4.91%       5.71%
</TABLE>
 
      The Bank has the ability to borrow funds from correspondent banks and 
the Federal Home Loan Bank, as well as the Federal Reserve Bank of Boston, 
by pledging various investment securities as collateral. The Company did not 
borrow during 1998 and 1997. Tax payments made by our customers, which are 
owed to the Federal Reserve Bank Treasury Tax and Loan account, are 
classified as borrowed funds. The Company has notes payable of $847,990 due 
to Fleet Bank with a final maturity in November 1999. This note was assumed 
from Fairbank, Inc. at the time of the acquisition. Because of the term of 
the note, including applicable prepayment fees, management determined it 
advantageous for the Bank not to pay off the note. There is also $4,475,454 
in borrowings from the Federal Home Loan Bank which represent the match 
funding program that is available to qualified borrowers. 
 
Accounting for Deferred Income Taxes 
 
      The net deferred tax asset at year end 1998 was $1,461,166. The amount 
of taxable income required to be generated to fully realize such net 
deferred tax asset will be approximately $3.7 Million. The taxable income 
earned by the Company in 1998 was $5,579,202. 
 
                                   ITEM 2
 
                                 PROPERTIES
 
      The main office of the Bank is located at 100 Slade's Ferry Avenue, 
Somerset, Massachusetts at the junctions of U.S. Routes 6, 138, and 103. The 
Bank has nine additional branches located in Fairhaven, Fall River, New 
Bedford, Seekonk, Somerset and Swansea, Massachusetts. As of December 31, 
1998, the following Bank properties are owned either directly by the Bank or 
through its subsidiary, the Slade's Ferry Realty Trust: 
 
<TABLE>
<CAPTION>
                      Location                                       Sq. Footage
--------------------------------------------------------------------------------
 
<S>                   <C>                           <C>                 <C>
Main Office           100 Slade's Ferry Avenue      Somerset, MA        37,000
North Somerset        2722 County Street            Somerset, MA         3,025
Linden Street         244-253 Linden Street         Fall River, MA       1,750
Brayton Avenue        855 Brayton Avenue            Fall River, MA       3,325
North Swansea         2388 G.A.R. Highway           Swansea, MA          2,960
Seekonk               1400 Fall River Avenue        Seekonk, MA          2,300
Fairhaven             75 Huttleston Avenue          Fairhaven, MA       13,000
South Main Street     1601 South Main Street        Fall River, MA       6,604

 
Offices listed below are leased properties which indicate the applicable 
lease expiration date. 
 
Swansea Mall 
 (expires 2003)       Rt 118                        Swansea, MA          2,250
Brayton Avenue 
 Drive Up Complex 
 (expires 2000)       16 Stevens St.                Fall River, MA         549
Walgreens Drug Store
 (expires 2004)       838 Pleasant St.              New Bedford, MA        835
</TABLE>
 
      The main office building contains approximately 42,000 square feet of 
usable space, of which the Bank occupies approximately 37,000 square feet 
and the remainder is rented to local businesses as warehouse and office 
space. The Bank also has a school banking facility located in the Somerset 
High School, Grandview Avenue, Somerset, Massachusetts that consists of 200 
square feet which provides basic banking services to students and school 
staff. The Seekonk office is an 8,800 square foot building of which the Bank 
is utilizing 2,300 square feet and leasing out the remainder. 
 
                                   ITEM 3
 
                              LEGAL PROCEEDINGS
 
      The Bank is involved in a civil suit brought in Plymouth Superior 
Court by a former employee of the National Bank of Fairhaven, which 
primarily alleged a breach of contract. The original demand by the plaintiff 
was $550,000 to settle the case which was lowered to $250,000 by the 
plaintiff in 1998. Discovery has been completed, and the case is currently 
scheduled for trial on April 22, 1999. The Company believes there are 
meritorious defenses to the plaintiff's claim, and it intends to vigorously 
defend the suit. The Company believes that the suit will not have a material 
adverse effect on the Company's financial condition, results of operation or 
liquidity, and no reserves have been accrued to cover the potential 
liability. 
 
                                   ITEM 4
 
             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
During the fourth quarter of 1998, no matters were submitted to a vote of 
stockholders of the Company. 
 
                                   PART II
 
                                   ITEM 5
 
           MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
      Reference is hereby made to Company's Annual Report to Stockholders 
for the year ended December 31, 1998, attached as an exhibit hereto. The 
information set forth on page 9 of such Annual Report with respect to the 
Market for the Registrant's Common Stock and Related Stockholder Matters is 
incorporated herein by reference. 
 
                                   ITEM 6
 
                           SELECTED FINANCIAL DATA
 
      Reference is hereby made to the Company's Annual Report to 
Stockholders for the year ended December 31, 1998, attached as an exhibit 
hereto. The information set forth on page 10 of such Annual Report under 
this heading is incorporated herein by reference. 
 
                                   ITEM 7
 
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS
 
      Reference is hereby made to Company's Annual Report to Stockholders 
for the year ended December 31, 1998, attached as an exhibit hereto. The 
information entitled "Management's Discussion and Analysis" and set forth on 
pages 11 through 20 of such Annual Report is incorporated herein by 
reference. 
 
                                   ITEM 7A
 
         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
      The most significant market risk factor affecting the financial 
condition and operating results of Slade's Ferry Bancorp is interest rate 
risk. Refer to this Form 10-K, page 9, under "Interest Rate Risk" for a 
discussion of market risk. 
 
                                   ITEM 8
 
                 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
      Reference is hereby made to Company's Annual Report to Stockholders 
for the year ended December 31, 1998, attached as an exhibit hereto. The 
consolidated balance sheets at December 31, 1998 and 1997, and the 
consolidated statements of income, changes in stockholders' equity and cash 
flows for each of the years in the three-year period ended December 31, 1998 
and the related notes with the report of Shatswell, MacLeod and Company, 
P.C., independent auditors, which appear on pages 21 through 43 of such 
Annual Report to Stockholders, are incorporated herein by reference. 
 
                                   ITEM 9
 
                CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                   ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
      The Company had no disagreements with its independent accountants on 
accounting and financial disclosure matters. 
 
                                  PART III
 
                                   ITEM 10
 
        DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
        COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
 
      Reference is hereby made to the Company's definitive Proxy Statement 
for the Annual Meeting of Stockholders April 12, 1999. The information set 
forth under the heading "Directors and Executive Officers" on pages 10 
through 13 and under the heading "Section 16(a) Beneficial Ownership 
Reporting Compliance" on page 16 of such Proxy Statement is incorporated 
herein by reference. 
 
                                   ITEM 11
 
                           EXECUTIVE COMPENSATION
 
      Reference is hereby made to the Company's definitive Proxy Statement 
for the Annual Meeting of Stockholders April 12, 1999. The information set 
forth under this heading on pages 19 through 22 of such Proxy Statement is 
incorporated herein by reference. 
 
                                   ITEM 12
 
       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
      Reference is hereby made to the Company's definitive Proxy Statement 
for the Annual Meeting of Stockholders April 12, 1999. The information set 
forth under this heading on pages 13 through 16 of such Proxy Statement is 
incorporated herein by reference. 
 
                                   ITEM 13
 
            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
      Reference is hereby made to the Company's definitive Proxy Statement 
for the Annual Meeting of Stockholders April 12, 1999. The information set 
forth under this heading on page 25 of such Proxy Statement is incorporated 
herein by reference. 
 
                                   ITEM 14
 
      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(a)   The following documents are filed as part of the Company's Annual 
Report to stockholders for the year ended December 31, 1998, attached as an 
exhibit hereto. 
 
      (1)   Consolidated Financial Statements 
                                                              Page
            Report of Independent Auditors                     21
            Consolidated Balance Sheets                        22
            Consolidated Statements of Income                  23
            Consolidated Statements of Changes in 
             Stockholders' Equity                              24
            Consolidated Statements of Cash Flows              25
            Notes to Consolidated Financial Statements         27
 
      (2)   Financial Statement Schedules 
            All financial statement schedules required by Item 14(a)(2)
            have been omitted because they are inapplicable or because
            the required information has been included in the Consolidated
            Financial Statements or Notes thereto. 
 
      (3)   Exhibits: see attached Exhibits Index 
 
(b)   Reports on Form 8-K: None 
 
                                 SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant 
has duly caused this report to be signed on its behalf by the undersigned, 
thereunto duly authorized on March 31, 1999. 
 
                                       Slade's Ferry Bancorp 
 
                                       By  /s/ Kenneth R. Rezendes 
                                           Kenneth R. Rezendes, President/ 
                                           Chief Executive Officer and
                                           Director 
 
In accordance with the requirements of the Exchange Act, this report has 
been signed by the following persons on behalf of the registrant and in the 
capacities and on the dates indicated. 
 
<TABLE>
 
<S>                             <C>        <S>                                <C>
/s/ Thomas B. Almy              3/31/99    /s/ Ralph S. Borges                3/31/99
Thomas B. Almy                             Ralph S. Borges 
Director                                   Treasurer/Chief Financial Officer/ 
                                           Chief Accounting Officer 
 
/s/ James D. Carey              3/31/99    /s/ Peter G. Collias               3/31/99
James D. Carey                             Peter G. Collias 
Executive Vice President                   Director
and Director
 
/s/ Donald T. Corrigan          3/31/99    /s/ Melvyn A. Holland              3/31/99
Donald T. Corrigan                         Melvyn A. Holland 
Chairman of the Board                      Director
 and Director
 
/s/ William Q. MacLean Jr.      3/31/99    /s/ Francis A. Macomber            3/31/99
William Q. MacLean Jr.                     Francis A. Macomber 
Director                                   Director

/s/ Majed Mouded, MD            3/31/99    /s/ Shaun O'Hearn Sr.              3/31/99
Majed Mouded, MD                           Shaun O'Hearn Sr.
Director                                   Director
 
/s/ Lawrence J. Oliveira, DDS   3/31/99    /s/ Peter Paskowski                3/31/99
Lawrence J. Oliveira, DDS                  Peter Paskowski
Director                                   Director
 
/s/ Kenneth R. Rezendes         3/31/99    /s/ William J. Sullivan            3/31/99
Kenneth R. Rezendes                        William J. Sullivan 
President and Chief Executive              Director
 Officer
 
/s/ Charles Veloza              3/31/99    /s/ David F. Westgate              3/31/99
Charles Veloza                             David F. Westgate 
Director                                   Director
</TABLE>
 
                                Exhibit Index 
 
<TABLE>
<CAPTION>
Exhibit
  No.                 Description                                     Page
-------               -----------                                     ---- 
 
<C>   <S>                                                              <C>
 3.1  Articles of Incorporation of Slade's Ferry                       (1) 
      Bancorp as amended 
 
 3.2  By-laws of Slade's Ferry Bancorp as amended                      (2) 
 
10.1  Agreement and Plan of Merger by and between                      (3) 
      Slade's Ferry (formerly Weetamoe) Bancorp and Fairbank, Inc. 
 
10.2  Slade's Ferry (formerly Weetamoe) Bancorp                        (3) 
      1996 Stock Option Plan 
 
10.3  Noncompetition Agreement between Slade's                         (4) 
      Ferry Trust Company and Edward S. Machado 
      (A substantially identical contract exists 
      with Peter Paskowski) 
 
10.4  Supplemental Executive Retirement Agreement                      (5) 
between Slade's Ferry (formerly Weetamoe) 
Bancorp and Donald T. Corrigan 
 
10.5  Supplemental Executive Retirement Agreement                      (2) 
      between Slade's Ferry (formerly Weetamoe) Bancorp 
      and James D. Carey 
 
10.6  Supplemental Executive Retirement Agreement                      (2) 
      between Slade's Ferry (formerly Weetamoe) Bancorp 
      and Manuel J. Tavares 
 
10.7  Swansea Mall Lease                                               (4) 
 
13    Annual report to security-holders for fiscal year ended 
      December 31, 1998 
 
21    List of subsidiaries of Slade's Ferry Bancorp.                   (2) 
 
23    Consent of Independent Public Accountants 
 
27    Financial Data Schedule 
 
<FN>
<F1>  Incorporated by reference to the Registrant's Registration Statement 
      on Form SB-2 filed with the Commission on April 14, 1997. 
<F2>  Incorporated by reference to the Registrant's Form 10-KSB for the 
      fiscal year ended December 31, 1996. 
<F3>  Incorporated by reference to the Registrant's Form 10-QSB for the 
      quarter ended March 31, 1996. 
<F4>  Incorporated by reference to the Registrant's Registration Statement 
      on Form S-4 File No. 33-32131. 
<F5>  Incorporated by reference to the Registrant's Form 10-KSB for the 
      fiscal year ended December 31, 1994. 
</FN>
</TABLE>