SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1997       Commission File Number 0-22608


                               FFLC BANCORP, INC.
             (Exact name of registrant as specified in its charter)

        Delaware                                             59-3204891
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

800 North Boulevard West, Post Office Box 490420,         
          Leesburg, Florida                                 34749-0420
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:   (352) 787-3311

                                                       
          Securities registered pursuant to Section 12(b) of the Act:

                                      None

          Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. YES [ X ]   NO  [   ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of  registrant's  knowledge,  in  definitive  proxy  or  other  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]

The  aggregate  market  value of the voting stock held by  nonaffiliates  of the
registrant was  $57,497,496  and is based upon the last sales price as quoted on
the NASDAQ Stock Market for March 9, 1998.

The Registrant had 3,742,673 shares outstanding as of March 9, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     December 31, 1997. (Part II and IV)

2.   Portions of Proxy  Statement for the 1997 Annual  Meeting of  Stockholders.
     (Part III)
<PAGE>
                                      INDEX

PART I                                                              Page

Item I.           Description of Business

                           Business                                     3
                           Market Area and Competition                  3
                           Market Risk                                  4
                           Lending Activities                        4-10
                           Asset Quality                            10-15
                           Investment Activities                       16
                           Mortgage-Backed Securities               16-17
                           Investment Securities                    17-19
                           Sources of Funds                         20-22
                           Borrowings                                  23
                           Subsidiary Activities                       23
                           Personnel                                   24
                           Regulation and Supervision               24-30
                           Year 2000                                   30
                           Federal and State Taxation               31-32

Item 2.  Properties                                                    33

Item 3.  Legal Proceedings                                             34

Item 4.  Submission of Matters to a Vote of Security Holders           34

PART II

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

Item 6.  Selected Financial Data                                       34

Item 7.  Management's Discussion and Analysis of
                           Financial Condition
                           and Results of Operations                   34

Item 8.  Financial Statements and Supplementary Data                   34

Item 9.  Change In and Disagreements with Accountants on
                           Accounting and Financial Disclosure         34

PART III

Item 10. Directors and Executive Officers of the Registrant            35

Item 11. Executive Compensation                                        35

Item 12. Security Ownership of Certain Beneficial Owners and 
                           Management                                  35

Item 13. Certain Relationships and Related Transactions                35

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports 
                           on Form 8-K                                 36

SIGNATURES                                                             37



                                       2
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Business

The registrant,  FFLC Bancorp,  Inc.  ("FFLC" or the  "Company"),  completed its
public  offering of 4,603,032  shares  (adjusted  for stock split) of its common
stock and acquired  First  Federal  Savings  Bank of Lake County  ("the  Savings
Bank")  in  connection  with the  Savings  Bank's  conversion  from a  federally
chartered mutual savings association to a federally chartered stock savings bank
on January 4, 1994. The net conversion  proceeds  totaled $26.6 million of which
$13.3 million was invested in the Savings Bank and $13.3 million was retained by
the  registrant.  The  registrant  loaned  $2.2  million to the  Employee  Stock
Ownership  Plan and the remaining  $11.1  million has been invested  through the
Savings Bank. The  registrant,  which was  incorporated in Delaware on September
16, 1993, is a savings and loan holding  company and is subject to regulation by
the Office of Thrift Supervision  ("OTS"). The registrant has not transacted any
material  business  other than  through its  subsidiary,  the Savings  Bank.  At
December  31,  1997,  the  Company  had  total  assets  of  $400.2  million  and
stockholders' equity of $51.4 million.

The Savings Bank was established in 1934 as a federally-chartered mutual savings
and loan association. The Savings Bank is a member of the Federal Home Loan Bank
("FHLB")  System and its deposit  accounts are insured to the maximum  allowable
amount by the Federal Deposit Insurance  Corporation  ("FDIC").  At December 31,
1997,  the Savings  Bank had total  assets of $400.2  million and  stockholders'
equity of $44.5 million.

The principal  business of the Savings Bank is attracting  retail  deposits from
the general  public and  investing  those  deposits,  together with payments and
repayments  on loans  and  investments  and  funds  generated  from  operations,
primarily in mortgage loans secured by  one-to-four-family  owner-occupied homes
and  mortgage-backed  securities,  and, to a lesser extent,  construction loans,
consumer  and other loans,  and  multi-family  residential  mortgage  loans.  In
addition,  the Savings  Bank holds  investments  permitted  by federal  laws and
regulations  including  securities  issued by the U.S.  Government  and agencies
thereof.  The Savings Bank's revenues are derived  principally  from interest on
its mortgage loan and  mortgage-backed  securities  portfolios  and interest and
dividends on its investment securities.

Market Area and Competition

The Savings Bank is a community-oriented  savings institution offering a variety
of  financial  services  to meet the needs of the  communities  it  serves.  The
Savings Bank's deposit gathering and lending markets are primarily  concentrated
in the  communities  surrounding  its full service  offices  located in Lake and
Sumter  counties in central  Florida.  The Savings Bank's  competition for loans
comes  principally from commercial  banks,  savings  institutions,  and mortgage
banking  companies.  The Savings Bank's most direct  competition for savings has
historically come from commercial banks, savings institutions and credit unions.
The Savings  Bank faces  additional  competition  for savings  from money market
mutual funds and other corporate and government  securities  funds.  The Savings
Bank  also  faces  increased  competition  for  deposits  from  other  financial
intermediaries such as securities brokerage firms and insurance companies.


                                       3
<PAGE>
Market Risk 

Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from  interest-rate  risk inherent in
its lending and deposit  taking  activities.  To that end,  management  actively
monitors and manages its interest-rate risk exposure.  The measurement of market
risk associated  with financial  instruments is meaningful only when all related
and offsetting on- and  off-balance-sheet  transactions are aggregated,  and the
resulting  net  positions are  identified.  Disclosures  about the fair value of
financial instruments,  which reflect changes in market prices and rates, can be
found in Note 10 of Notes to Consolidated Financial Statements.

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

Lending Activities

Loan  Portfolio.  The  Savings  Bank's  loan  portfolio  consists  primarily  of
conventional first mortgage loans secured by one-to-four-family  residences.  At
December  31,  1997,  the Savings  Bank's  total loans  outstanding  were $329.0
million,  of which  $245.5  million or 74.6% of the  Savings  Bank's  total loan
portfolio  were  one-to-four-family  residential  first mortgage  loans.  Of the
one-to-four-family  residential  mortgage loans  outstanding at that date, 22.6%
were fixed rate loans and 77.4% were adjustable-rate  ("ARM") loans. At the same
date,  commercial  real estate  loans and other  loans on  improved  real estate
totaled  $38.0  million,  or 11.5% of the Savings  Bank's total loan  portfolio;
construction  (excluding  construction/permanent  loans) and land loans  totaled
$3.5  million  or  1.1%  of  the  Savings  Bank's  total  loan  portfolio;   and
multi-family  mortgage  loans totaled $4.5 million or 1.4% of the Savings Bank's
total loan portfolio.  Consumer,  commercial and other loans held by the Savings
Bank,  which  principally  consist  of home  equity  loans,  deposit,  consumer,
commercial and other loans, totaled $37.5 million or 11.4% of the Savings Bank's
total loan portfolio at December 31, 1997.




                                        4

<PAGE>
The  following  table sets forth the  composition  of the  Savings  Bank's  loan
portfolio in dollar amounts and percentages at the dates indicated:
<TABLE>
<CAPTION>
                                             1993                       1994                     1995            
                                   --------------------------------------------------------------------------- 
                                                    % of                      % of                      % of     
                                      Amount        Total       Amount        Total       Amount        Total    
                                                                                        (Dollars in thousands)
<S>                                 <C>             <C>       <C>            <C>       <C>            <C>        
Mortgage loans:
     One-to-four-family            $ 107,228         82.91%   $ 130,195       82.80%   $ 159,170        84.32%   
     Construction and land             2,886          2.23%       6,332        4.03%       5,343         2.83%   
     Multi-family                      2,160          1.67%       3,068        1.95%       3,098         1.64%   
     Commercial real estate            6,713          5.19%       6,153        3.91%       6,654         3.53%   
                                    --------       -------     --------     -------      -------     --------    

               Total mortgage
                     loans           118,987         92.00%     145,748       92.69%     174,265        92.32%   

Consumer loans                        10,352          8.00%      11,496        7.31%      14,493         7.68%   
Commercial loans                        -            -             -          -             -           -        
                                  ----------     ---------  -----------   ---------   ----------    ---------   

               Total loans
                     receivable      129,339        100.00%     157,244      100.00%     188,758       100.00%   
                                                    ======                   ======                    ======    

Less:
     Loans in process                  5,969                      7,833                    4,267                 
     Unearned discounts,
          premiums and
          deferred loan fees,
          net                            424                        256                       66                 
     Allowance for loan losses           735                        869                      977                 
                                    --------                   --------                  -------                 

               Loans receivable,
                     net           $ 122,211                  $ 148,286                $ 183,448                 
                                     =======                    =======                  =======                 

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                             1996                      1997           
                                   -------------------------------------------------  
                                                    % of                      % of    
                                      Amount        Total       Amount        Total   
                                                                                      
<S>                                <C>             <C>        <C>           <C>       
Mortgage loans:                                                                       
     One-to-four-family            $ 191,788        80.95%    $ 245,524       74.64%  
     Construction and land             5,489         2.32%        3,528        1.07%  
     Multi-family                      4,180         1.76%        4,464        1.36%  
     Commercial real estate           13,565         5.73%       37,975       11.54%  
                                     -------      -------       -------      ------   
                                                                                      
               Total mortgage                                                         
                     loans           215,022        90.76%      291,491       88.61%  
                                                                                      
Consumer loans                        21,899         9.24%       32,834        9.98%  
Commercial loans                        -           -             4,632        1.41%  
                                   ---------    ---------     ---------     -------   
                                                                                      
               Total loans                                                            
                     receivable      236,921        100.0%      328,957       100.0%  
                                                    =====                     =====   
                                                                                      
Less:                                                                                 
     Loans in process                  8,007                     12,253               
     Unearned discounts,                                                              
          premiums and                                                                
          deferred loan fees,                                                         
          net                            (97)                      (333)              
     Allowance for loan losses         1,063                      1,684               
                                     -------                   --------               
                                                                                      
               Loans receivable,   $ 227,948                  $ 315,353  
                     net             =======                    =======  
                                   
</TABLE>

                                        5
<PAGE>
Purchase of Mortgage Loans.  The Savings Bank has, from time to time,  purchased
mortgage loans originated by other lenders.  At December 31, 1997, $3.7 million,
or 1.1% of the  Savings  Bank's  total loan  portfolio  consisted  of  purchased
mortgage  loans  or loan  participations.  Purchased  mortgage  loans  consisted
primarily of one-to-four-family residential mortgage loans.

Secondary  Market  Activities.  The Savings Bank  participates  in the secondary
market  through  a  correspondent  relationship,  originating  loans  (primarily
30-year  fixed-rate  loans)  which  are  funded by the  investor  correspondent.
Funding by the correspondent eliminates the Savings Bank's interest-rate risk on
such loans.  Such loans are closed on the Savings  Bank's  documents  with funds
provided by the investor  correspondent  at closing  with all credit  conditions
established by the investor  correspondent being satisfied prior to the issuance
of a  loan  commitment.  The  Savings  Bank  receives  a  fee  for  originating,
processing  and  closing  the  loans and  reports  the loans to the OTS as loans
originated and sold. In the year ended December 31, 1997, such loans amounted to
$2.5 million or 2.1% of total mortgage loans originated.



                                        6

<PAGE>
Loan  Originations,  Purchases,  Sales and Principal  Repayments.  The following
table sets forth the Savings  Bank's  loan  originations,  purchases,  sales and
principal repayments for the periods indicated.
<TABLE>
<CAPTION>

                                                               Year Ended December 31,
                                                         1995           1996           1997
                                                       ---------      ---------      ---------
                                                                    (In thousands)
<S>                                                    <C>            <C>           <C>
Mortgage loans (gross):
     At beginning of year                              $ 145,748        174,265        215,022
     Mortgage loans originated:
          One-to-four-family (1)                          46,082         62,906         86,976
          Construction and land                            2,104          2,292          2,502
          Multi-family                                     1,026          1,222          2,759
          Commercial real estate                           1,047          7,982         25,142
                                                       ---------      ---------      ---------

               Total mortgage loans originated (1)        50,259         74,402        117,379

     Mortgage loans purchased                               --            2,106           --
                                                       ---------      ---------      ---------

               Total mortgage loans originated and
                         purchased                        50,259         76,508        117,379

     Transfer of loans to real estate owned                 (478)          (287)          (444)
     Principal repayments                                (20,113)       (31,540)       (37,997)
     Sales of loans (1)                                   (1,151)        (3,924)        (2,469)
                                                       ---------      ---------      ---------

               At end of year                          $ 174,265        215,022        291,491
                                                       =========      =========      =========

Consumer loans (gross):
     At beginning of year                                 11,496         14,493         21,899
     Loans originated                                      6,873         13,021         18,356
     Principal repayments                                 (3,876)        (5,615)        (7,421)
                                                       ---------      ---------      ---------

               At end of year                          $  14,493         21,899         32,834
                                                       =========      =========      =========

Commercial loans (gross):
     At beginning of year                                   --             --             --
     Loans originated                                       --             --            9,022
     Principal repayments                                   --             --           (4,390)
                                                       ---------      ---------      ---------

               At end of year                          $    --             --            4,632
                                                       =========      =========      =========
</TABLE>

(1)  Includes loans originated for and funded by correspondents of $1.2 million,
     $2.4 million and $2.5 million for 1995, 1996 and 1997, respectively.


                                        7
<PAGE>
Maturities of Loans. The following table shows the contractual maturities of the
Savings Bank's loan portfolio at December 31, 1997.  Loans that have  adjustable
rates are shown as  amortizing to final  maturity  rather than when the interest
rates are next  subject to change.  The table does not  include  prepayments  or
scheduled principal  repayments.  Prepayments and scheduled principal repayments
on the Savings  Bank's loans  totaled  $24.0  million,  $37.2  million and $49.8
million for the years ended December 31, 1995, 1996 and 1997, respectively.
<TABLE>
<CAPTION>

                                               Mortgage Loans
                                          ------------------------
                                            One-to-                                                  Total
                                             Four-                     Commercial       Consumer     Loans
                                            Family         Other          Loans           Loans    Receivable
                                                                              (In thousands)
<S>                                       <C>            <C>           <C>           <C>           <C>        
 Amounts due:
     Within 1 year                        $     246          3,952         2,327         2,214         8,739
                                          ---------      ---------     ---------     ---------     ---------

     1 to 3 years                             2,699          4,886           346         7,162        15,093
     3 to 5 years                             2,807          6,688         1,537         7,420        18,452
     5 to 10 years                           11,382          8,882           422         8,614        29,300
     10 to 20 years                          30,223         16,683          --           7,424        54,330
     Over 20 years                          198,167          4,876          --            --         203,043
                                          ---------      ---------     ---------     ---------     ---------

     Total due after 1 year                 245,278         42,015         2,305        30,620       320,218
                                          ---------      ---------     ---------     ---------     ---------

     Total amounts due                      245,524         45,967         4,632        32,834       328,957

Less:
     Loans in process                         9,267          2,982          --               4        12,253
     Unearned discounts, premiums
          and deferred loan fees, net          (333)          --            --            --            (333)
     Allowance for loan losses                  747            651            57           229         1,684
                                          ---------      ---------     ---------     ---------     ---------

Loans receivable, net                     $ 235,409         43,534         3,809        32,601       315,353
                                          =========      =========     =========     =========     =========
</TABLE>
<PAGE>
Loans Due After  December 31, 1998.  The following  table sets forth at December
31,  1997 the  dollar  amount of all loans due or  scheduled  to  reprice  after
December  31,  1998,  classified  according  to whether such loans have fixed or
adjustable interest rates.
<TABLE>
<CAPTION>

                                              Due after December 31, 1998
                                           -------------------------------------
                                            Fixed       Adjustable        Total
                                           -------        -------        -------
                                                      (In thousands)
<S>                                        <C>            <C>            <C>
Mortgage loans:
     One-to-four-family                    $55,699        189,579        245,278
     Construction and land                   3,212            662          3,874
     Multi-family                              136          4,026          4,162
     Commercial real estate                 10,543         23,436         33,979

Consumer loans                              26,025          4,595         30,620
Commercial loans                               710          1,595          2,305
                                           -------        -------        -------

          Total                            $96,325        223,893        320,218
                                           =======        =======        =======

</TABLE>
                                        8
<PAGE>
One-to-Four-Family Mortgage Lending. The Savings Bank's primary lending emphasis
is on the  origination  of first  mortgage  loans secured by  one-to-four-family
residences within its primary lending area. Such residences are primarily single
family homes,  including  condominium and townhouses,  that serve as the primary
residence  of the owner.  To a lesser  degree,  the Savings  Bank makes loans on
residences used as second homes or as investments.  The Savings Bank also offers
second mortgage loans which are underwritten  applying the same standards as for
first mortgage loans.

In the years ended  December 31, 1995,  1996 and 1997,  the Savings Bank's total
mortgage loan originations  amounted to $50.3 million,  $74.4 million and $118.1
million,  respectively, of which $46.1 million, $62.9 million and $87.7 million,
respectively, were secured by one-to-four-family properties.

At  December  31,   1997,   74.6%  of  total  loans   receivable   consisted  of
one-to-four-family residential loans, of which 77.4% were ARM loans. The Savings
Bank's ARM loans may carry an initial interest rate which is less than the fully
indexed rate for the loan.  The initial  discounted  rate is  determined  by the
Savings Bank in accordance with market and competitive factors. The Savings Bank
offers one-,  three- and five-year ARM loans which adjust by a maximum of 2% per
adjustment  period,  with lifetime caps on increases of 5% to 6%, depending upon
the program chosen.

The Savings  Bank's  policy on  one-to-four-family  residential  mortgage  loans
generally is to lend up to 80% of the appraised  value of property  securing the
loan,  or up to 95% if private  mortgage  insurance is obtained on the amount of
the loan which exceeds 80%.

Commercial and Multi-Family Real Estate Lending.  As of December 31, 1997, $38.0
million,  or 11.5% of the  Savings  Bank's  total loan  portfolio  consisted  of
commercial  real estate loans and $4.5  million,  or 1.4% of the Savings  Bank's
total loan portfolio, consisted of multi-family residential loans.

The  commercial  real estate loans in the Savings  Bank's  portfolio  consist of
fixed-rate and ARM loans which were originated at prevailing  market rates.  The
Savings  Bank's policy has been to originate  commercial or  multi-family  loans
only in its primary market area.  Commercial and multi-family  residential loans
are generally made in amounts up to 75% of the appraised  value of the property.
In making such loans,  the Savings Bank  primarily  considers  the net operating
income  generated by the real estate to support the debt service,  the financial
resources  and  income  level and  managerial  expertise  of the  borrower,  the
marketability of the property and the Savings Bank's lending experience with the
borrower.

Commercial  Loans.  As of December 31, 1997, $4.6 million or 1.4% of the Savings
Bank's total loan portfolio, consisted of commercial loans.

Construction  and Land Loans.  The Savings Bank originates  loans to finance the
construction  of  one-to-four-family   homes  and,  to  a  much  lesser  extent,
originates loans for the acquisition and development of land (either  unimproved
land or improved  lots) on which the purchaser  can then build.  At December 31,
1997,  construction  (excluding  construction/permanent  loans)  and land  loans
totaled $3.5 million or 1.1% of the Savings Bank's total loan portfolio.
<PAGE>

At December 31, 1997,  the Savings Bank had loans in process  (undisbursed  loan
proceeds of construction  loans) of $12.3 million.  Of that amount, $9.3 million
was secured by  residential  mortgages  and $3.0 million  secured by  commercial
mortgages.  The Savings Bank makes residential  construction loans to homeowners
on  a  long-term  basis  with  amortization   beginning  at  the  conclusion  of
construction,  usually a period of about six  months.  Such loans are carried in
the   one-to-four-family   category  and  are  not   separately   classified  as
construction  loans.  Residential  construction loans to builders are carried in
the construction and land category.




                                        9

<PAGE>
Construction   and   land   loans   also   include    construction   loans   for
one-to-four-family  residential  property  for which the  borrower  will  obtain
permanent  financing  from  another  lender.  Such  loans  bear a fixed  rate of
interest that equals prime plus 2.0% during the construction period. The Savings
Bank  obtains a commitment  for the  permanent  financing  from the other lender
prior to originating the construction loan.

Consumer  Lending.  At December 31, 1997,  $32.8 million or 10.0% of the Savings
Bank's total loan portfolio  consisted of consumer loans,  including home equity
loans and lines of credit for consumer  purposes and, to a lesser  extent,  home
improvement loans and secured and unsecured personal loans.

The Savings  Bank's  home  equity  loans are  originated  on  one-to-four-family
residences,  either on a  fixed-rate  basis with terms of up to 10 years or as a
balloon loan with terms up to five years with fifteen year amortization periods.
Those loans are generally limited to aggregate  outstanding  indebtedness on the
property  securing the loan of 80% of the loan to value ratio.  The Savings Bank
also offers  home  equity  lines of credit,  which bear  prime-based  adjustable
interest  rates with terms up to fifteen  years.  Such loans  generally  require
monthly payments of interest plus 1.5% of the balance outstanding.

Consumer loans are offered primarily on a fixed-rate,  short-term basis.  Except
for second  mortgage  loans which are  underwritten  pursuant  to the  standards
applicable to one-to-four-family  residential loans, the underwriting  standards
employed by the Savings Bank for consumer loans include a  determination  of the
applicant's  payment  history on other debts and an assessment of the borrower's
ability to make payments on the proposed loan and other indebtedness.

Loan  Approval  and  Authority.  Mortgage  loan  approval  authority  for  loans
exceeding  $750,000  has been  retained  by the Board of  Directors  which meets
weekly in its capacity as the Executive  Committee of the Board to consider loan
recommendations  of the Loan  Committee.  The Loan Committee is comprised of two
outside directors,  the President and the Senior Lending Officers of the Savings
Bank.  Management has been delegated  authority to approve mortgage loans,  home
equity  loans,  home  equity  lines of credit and secured  consumer  loans up to
$750,000.

The Savings  Bank's policy is to require title and hazard  insurance on all real
estate loans,  except home equity loans for which a title search is conducted in
lieu of obtaining title insurance. Borrowers may be permitted to pay real estate
taxes and hazard  insurance  premiums  applicable to the secured  property for a
mortgage  loan.  In some  instances,  borrowers may be required to advance funds
together  with each  payment of  principal  and  interest  to a mortgage  escrow
account from which the Savings Bank makes  disbursements  for items such as real
estate taxes, hazard insurance premiums and private mortgage insurance premiums.

Asset Quality

Delinquent  Loans  and  Nonperforming  Assets.  Loans  are  generally  placed on
nonaccrual  status when the  collection  of  principal or interest is 90 days or
more past due, or earlier if  collection is deemed  uncertain.  The Savings Bank
provides  an  allowance  for  accrued  interest  deemed  uncollectible.  Accrued
interest  receivable is reported net of the allowance for uncollected  interest.
Loans may be reinstated to accrual status when all payments are brought  current
and, in the opinion of  management,  collection of the remaining  balance can be
reasonably expected.


                                       10
<PAGE>
At December 31, 1995,  1996 and 1997,  delinquencies  in the Savings Bank's loan
portfolio were as follows:
<TABLE>
<CAPTION>
                                               At December 31, 1995                            At December 31, 1996             
                                     ----------------------------------------      ----------------------------------------    
                                        60-89 Days           90 Days or More             60-89 Days         90 Days or More    
                                     --------------------   -----------------      --------------------   -----------------    
                                     Number  Principal      Number   Principal     Number   Principal     Number   Principal   
                                       of      Balance        of      Balance        of       Balance       of       Balance   
                                      Loans   of Loans       Loans    of Loans      Loans    of Loans      Loans    of Loans   
                                      -----   --------       -----    --------      -----    --------      -----    --------   
                                                                                             (Dollars in thousands)
<S>                                    <C>      <C>         <C>       <C>           <C>       <C>         <C>        <C>       
One-to-four-family                      6         244          1          52          3          77          8         545      
Construction and land                   -          -           3         115          -           -          1          68      
Multi-family                            -          -           -          -           -           -          -          -       
Commercial real estate                  -          -           -          -           -           -          -          -       
                                      ---       -----        ---       -----         --        ----        ---        ----      

         Total mortgage loans           6         244          4         167          3          77          9         613      

Consumer loans                          7          35          2           7          2          46          4          53      
                                       --          --          -        ----          -         ---         --         ---      

         Total loans                   13         279          6         174          5         123         13         666      
                                       ==         ===          =         ===          =         ===         ==         ===      

Delinquent loans to total loans                   .15%                   .09%                   .05%                   .28%     
                                                 ====                   ====                    ===                    ===      
<CAPTION>
                                                      At December 31, 1997           
                                          -------------------------------------      
                                                60-89 Days      90 Days or More      
                                          -------------------- ----------------      
                                          Number   Principal   Number Principal      
                                            of       Balance     of     Balance           
                                           Loans    of Loans    Loans  of Loans      
                                           -----    --------    -----  --------                             
                                            <C>      <C>        <C>     <C>     
<S>                                     
One-to-four-family                            7        341        8       240   
Construction and land                        -          -         1         2   
Multi-family                                 -          -         -        -    
Commercial real estate                       -          -         -        -    
                                            ---      -----       --      ---    
                                                                                
         Total mortgage loans                 7        341        9       242   
                                                                                
Consumer loans                                4         24        -        -    
                                             --        ---        -     ----    
                                                                                
         Total loans                         11        365        9       242   
                                             ==        ===        =       ===   
                                                                                
Delinquent loans to total loans                        .11%               .07%  
                                                       ===                ===   
                                         
</TABLE>
                                       11
<PAGE>
Nonperforming Assets. The following table sets forth information with respect to
the Savings Bank's nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
                                                                  At December 31,
                                               ------------------------------------------------- 
                                                1993       1994       1995       1996       1997
                                                ----       ----       ----       ----       ----
                                                              (Dollars in thousands)
<S>                                             <C>       <C>        <C>        <C>        <C>
Nonaccrual mortgage loans                      $ 588        324         70        613        242

Nonaccrual consumer loans                         18          5        104         53       --
                                               -----      -----      -----      -----      -----

Total nonperforming loans                        606        329        174        666        242

Real estate owned                                 72         84        165        361        507
                                               -----      -----      -----      -----      -----

          Total nonperforming assets           $ 678        413        339      1,027        749
                                               =====      =====      =====      =====      =====

Nonperforming loans to total loans               .47%       .21%       .09%       .28%       .07%
                                               =====      =====      =====      =====      =====

Total nonperforming assets to total assets       .23%       .13%       .10%       .30%       .19%
                                               =====      =====      =====      =====      =====
</TABLE>
At  December  31,  1997,  the  Savings  Bank had no  accruing  loans  which were
contractually  past  due 90 days or more as to  principal  and  interest  and no
troubled  debt  restructurings  as defined by Statement of Financial  Accounting
Standards No. 15.  Nonaccrual  loans for which interest has been reduced totaled
approximately  $242,000,  $666,000 and $174,000 at December 31, 1997,  1996, and
1995,  respectively.  For the year ended December 31, 1997, interest income that
would  have  been  recorded  under the  original  terms of  nonaccrual  loans at
December 31, 1997 and interest income actually recognized is summarized below:


     Interest income that would have been recorded         $ 21,192
     Interest income recognized                              11,842
                                                             ------

     Interest income foregone                              $  9,350
                                                             ======

Classified Assets. Federal regulations and the Savings Bank's policy require the
classification  of loans and other assets,  such as debt and equity  securities,
considered  to be of  lesser  quality  as  "substandard",  "doubtful"  or "loss"
assets. An asset is considered  "substandard" if it is inadequately protected by
the  current net worth and paying  capacity of the obligor or of the  collateral
pledged,  if  any.  "Substandard"  assets  include  those  characterized  by the
"distinct  possibility"  that the  institution  will sustain  "some loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full", on the basis of currently existing facts, conditions, and values, "highly

<PAGE>

questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without  the  establishment  of a specific  loss  reserve is not  warranted.  In
addition, the Savings Bank's policies require that assets which do not currently
expose the insured  institution to sufficient risk to warrant  classification as
substandard  but possess other  weaknesses are designated  "special  mention" by
management.






                                       12

<PAGE>
If an asset is  classified,  the estimated fair value of the asset is determined
and if that  value is less  than  the then  carrying  value  of the  asset,  the
difference is  established as a specific  reserve.  If an asset is classified as
loss, the amount of the asset  classified as loss is reserved.  General reserves
or  general  valuation  allowances  represent  loss  allowances  which have been
established to recognize the inherent risk  associated  with lending  activities
but, unlike specific reserves, are not allocated to particular assets.

The  following  table sets forth  information  concerning  the number and dollar
amount of loans and real estate owned  classified as  "substandard" at the dates
indicated.  No loans or real estate  owned were  classified  "special  mention,"
"doubtful" or "loss" at those dates.
<TABLE>
<CAPTION>
                                                          Substandard
                                                      ---------------------
                                                       Number        Amount
                                                      (Dollars in thousands)
<S>                                                     <C>       <C>
     At December 31, 1997:
     Loans                                               26       $ 1,141

     Real estate owned:
          One-to-four-family properties                   4           285

          Other                                           3           222
                                                        ---        ------

               Total                                     33       $ 1,648
                                                         ==         =====

     At December 31, 1996:
     Loans                                               23         1,114

     Real estate owned:
          One-to-four-family properties                   1           208
          Other                                           3           153
                                                        ---         -----

               Total                                     27       $ 1,475
                                                         ==         =====
</TABLE>
Allowance  for Loan  Losses.  The Savings  Bank's  allowance  for loan losses is
established  and  maintained  through  a  provision  for  loan  losses  based on
management's  evaluation  of the risk  inherent  in its loan  portfolio  and the
condition  of the  local  economy  in  the  Savings  Bank's  market  area.  Such
evaluation,  which  includes a review of all loans on which full  collectibility
may not be reasonably  assured,  considers,  among other matters,  the estimated
fair value of the underlying collateral, economic and regulatory conditions, and
other  factors that warrant  recognition  in providing for an adequate loan loss
allowance.  Although management believes it uses the best information  available
to make  determinations  with respect to the Savings  Bank's  allowance for loan
losses,  future  adjustments  may  be  necessary  if  economic  conditions  vary
substantially from the economic conditions in the assumptions used in making the
initial determinations or if other circumstances change.


                                       13

<PAGE>
The following  table sets forth the Savings Bank's  allowance for loan losses at
the dates  indicated,  the provisions  made and the  charge-offs  and recoveries
effected during the years indicated.
<TABLE>
<CAPTION>


                                                At or For the Year Ended December 31,
                                            --------------------------------------------
                                            1993       1994      1995      1996     1997
                                            ----       ----      ----      ----     ----
                                                       (Dollars in thousands)
<S>                                         <C>       <C>        <C>       <C>      <C>

Balance at beginning of year                $ 520       735       869       977     1,063
Provision for loan losses                     250       138       124       107       649
Charge-offs:
     One-to-four-family                        21         2        --         9        12
     Construction and land                     --        --        16        --        --
     Multi-family                              --        --        --        --        --
     Commercial real estate                    --        --        --        --        --
     Consumer loans                            14         2      --          12        16
                                            -----     -----     -----     -----     -----

          Total charge-offs by category        35         4        16        21        28

Recoveries                                     --        --        --        --        --
                                            -----     -----     -----     -----     -----

Balance at end of year                      $ 735       869       977     1,063     1,684
                                            =====     =====     =====     =====     =====
</TABLE>
The following table sets forth the ratios of the Savings Bank's  charge-offs and
allowances for losses for the years indicated.
<TABLE>
<CAPTION>

                                                  1993          1994         1995          1996           1997
                                                  ----          ----         ----          ----           ----
<S>                                             <C>           <C>          <C>           <C>            <C>
Net charge-offs during the year
     as a percentage of average loans
     outstanding during the year                  0.02%           - %         .01%           .01%          .01%

Allowance for loan losses as a
     percentage of total loans receivable
     at end of year                               0.57%         0.55%         .52%           .45%          .51%

Allowance for loan losses as a
     percentage of total nonperforming
     assets at end of year                      108.41%       210.41%      288.48%        103.51%       224.83%

Allowance for loan losses as a
     percentage of nonperforming loans
     at end of year                             121.29%       264.13%      561.49%        159.61%       695.87%

</TABLE>
                                                          14

<PAGE>
The following table sets forth the Savings Bank's specific and general allowance
for possible loan losses by type of loan for the years indicated.
<TABLE>
<CAPTION>

                                                                          At December 31,
                               -----------------------------------------------------------------------------------------------------
                                     1993                1994                 1995                  1996                 1997
                               -----------------   -----------------   ------------------   --------------------   -----------------
                                          % of                % of                 % of                  % of                 % of
                                        Loans to            Loans to             Loans to              Loans to             Loans to
                                         Total               Total                Total                 Total                 Total
                               Amount    Loans     Amount    Loans      Amount    Loans       Amount    Loans       Amount    Loans
                                                                       (Dollars in thousands)
<S>                            <C>      <C>        <C>       <C>       <C>         <C>      <C>          <C>       <C>       <C>

At end of year allocated to:
     One-to-four-family        $ 175     82.91%    $ 240      82.80%   $ 275        84.32%  $   302       80.95%   $  507     74.64
     Construction and land        95      2.23       106       4.03      146         2.83       152        2.32       240      1.07
     Multi-family                140      1.67       165       1.95      183         1.64       169        1.76       268      1.36
     Commercial real estate      120      5.19       135       3.91      150         3.53       165        5.73       383     11.54
     Consumer loans              205      8.00       223       7.31      223         7.68       275        9.24       229      9.98
     Commercial loans             -       -           -        -          -          -           -         -           57      1.41
                               

          Total                $ 735    100.00%    $ 869     100.00%   $ 977       100.00%  $ 1,063      100.00%  $ 1,684    100.00%
                                 ===    ======       ===     ======      ===       ======     =====      ======     =====    ====== 
</TABLE>

                                       15

<PAGE>
Investment Activities

The investment  policy of the Savings Bank, which is established by the Board of
Directors and  implemented by the Chief  Executive  Officer who is designated as
the Investment Officer, is designed primarily to provide and maintain liquidity,
to generate a favorable return on investments  without  incurring undue interest
rate and credit risk, and to complement  the Savings Bank's lending  activities.
In  establishing  its  investment  strategies,  the Savings Bank  considers  its
business and growth plans, the economic environment,  the types of securities to
be held and other factors.  Federally  chartered  savings  institutions have the
authority  to  invest  in  various  types of  assets,  including  U.S.  Treasury
obligations,  securities of various federal  agencies,  certain  certificates of
deposit of insured banks and savings institutions,  certain bankers acceptances,
repurchase  agreements,  loans on federal funds, and, subject to certain limits,
commercial paper and mutual funds.

On January 1, 1994,  the  Company  adopted  Statement  of  Financial  Accounting
Standards  No. 115.  That  statement  requires  investment  and  mortgage-backed
securities  that the  Company  has the  positive  intent and  ability to hold to
maturity  to be  classified  as  held-to-maturity  securities  and  reported  at
amortized  cost.  Securities  that are held  principally for selling in the near
term are to be classified as trading securities and reported at fair value, with
unrealized  gains and losses included in earnings.  Securities not classified as
either held-to-maturity securities or trading securities are to be classified as
available-for-sale  securities and reported at fair value, with unrealized gains
and losses  excluded  from  earnings  and  reported in a separate  component  of
stockholders' equity.

Mortgage-Backed Securities

The Savings Bank invests in  collateralized  mortgage  obligations  ("CMOs") and
mortgage-backed  securities  such as government  pass-through  certificates.  At
December 31,  1997,  the Savings  Bank's  mortgage-backed  securities  portfolio
totaled $38.3 million,  or 9.6% of total assets. The  weighted-average  interest
rate on the total mortgage-backed  securities portfolio at December 31, 1997 was
6.78%. The mortgage-backed securities are not due at a single maturity date, and
accordingly, contractual maturity information is not presented herein. CMOs, net
of related  premiums  and  discounts,  totaled  $15.3  million or 39.9% of total
mortgage-backed securities.

CMOs are typically issued by a special purpose entity, which may be organized in
any  of  a  variety  of  legal  forms,  such  as a  trust,  a  corporation  or a
partnership.  The entity  combines pools of pass-through  securities,  which are
used to collateralize the mortgage related securities.  Once combined,  the cash
flows can be divided into  different  "tranches"  or  "classes"  of  securities,
thereby  creating  more  predictable  average  lives for each  security than the
underlying  pass-through  pools.  Under this  security  structure  all principal
repayments   from  the   various   mortgage   pools  can  be   allocated   to  a
mortgage-related  securities class or classes  structured to have priority until
it has been paid off.  Thus,  these  securities  are  designed  to  address  the
reinvestment  concerns associated with mortgage-backed  security  pass-throughs,
namely that they tend to pay off more  rapidly  when  interest  rates fall.  The
Savings  Bank's CMOs have  coupon  rates  ranging  from 4.00% to 7.53% and had a
weighted average yield of 6.14% at December 31, 1997.

The Savings  Bank's  policy is to purchase CMOs rated AA or better by nationally
recognized  rating services.  The majority of the CMOs owned by the Savings Bank
are insured or guaranteed either directly or indirectly, through mortgage-backed
securities underlying the obligations issued by the FNMA, FHLMC or GNMA.
<PAGE>

At December 31, 1997,  the Savings Bank had $15.3  million in CMOs  representing
3.8% of total assets.  Of that amount,  $9.1 million or 59.4% had floating rates
with caps ranging from 8.50% to 12.65% and which adjust on a monthly basis.




                                       16

<PAGE>
Other mortgage-backed  securities,  net, totaled $23.0 million or 60.1% of total
mortgage-backed   securities.   Other  mortgage-backed   securities  consist  of
pass-through certificates issued by the Government National Mortgage Association
("GNMA"),  the Federal Home Loan Mortgage Corporation  ("FHLMC") and the Federal
National Mortgage Association ("FNMA").

At December 31, 1997, the Savings Bank had mortgage-backed  securities available
for sale with an aggregate  carrying value of $9.3 million,  consisting of CMOs,
FHLMC five year balloons and FNMA certificates.

The  following  table  sets forth  mortgage-backed  security  purchases,  sales,
amortization and repayments during the periods indicated:
<TABLE>
<CAPTION>


                                                          Year Ended December 31,
                                                    1995           1996           1997
                                                 ---------      ---------      ---------
                                                             (In thousands)
<S>                                              <C>            <C>            <C>

     At beginning of year                        $ 117,003         93,883         65,736
     Purchases                                       6,038          8,596           --
     Amortization and repayments                   (29,883)       (36,617)       (27,566)
     Change in unrealized loss on securities
          available for sale                           725           (126)           121
                                                 ---------      ---------      ---------

               At end of year                    $  93,883         65,736         38,291
                                                 =========      =========      =========
</TABLE>
Investment Securities

At  December  31,  1997,  the  Savings  Bank held $20.3  million  in  investment
securities  consisting of $7.9 million in U.S. Government and agency securities,
classified as available for sale, and $9.2 million in mutual funds, $3.0 million
in  SBA-related  investment  securities,  classified  as held to  maturity,  and
$156,000 in other  investment  securities,  classified as available for sale. In
addition,  the Savings Bank holds $8.6 million in interest-earning  deposits and
$2.3 million of FHLB of Atlanta stock.


                                       17

<PAGE>
The following table sets forth certain information  regarding the amortized cost
and market values of the Savings Bank's  interest-earning  deposits,  FHLB stock
and investment securities at the dates indicated:
<TABLE>
<CAPTION>
                                                                           At December 31,
                                               ----------------------------------------------------------------------
                                                         1995                    1996                     1997
                                               ---------------------------------------------------------------------- 
                                               Amortized     Market    Amortized      Market    Amortized      Market
                                                 Cost        Value       Cost         Value       Cost         Value
                                                 ------      ------       ------       ------      ------      ------
                                                                                (In thousands)
<S>                                            <C>           <C>          <C>          <C>         <C>         <C>

Interest-earning deposits                      $  8,924       8,924        4,077        4,077       8,562       8,562
                                                 ======      ======       ======       ======      ======      ======

FHLB stock                                     $  1,928       1,928        1,939        1,939       2,304       2,304
                                                 ======      ======       ======       ======      ======      ======

Investment securities:
     Held-to-maturity:
          SBA-related investment securities    $  3,441       3,472        3,239        3,271       3,031       3,077
                                                 ======      ======       ======       ======      ======      ======

     Available-for-sale:
          U.S. Government and
               agency securities                 11,475      11,392       20,208       20,176       7,965       7,937
          Other investment securities             1,523       1,532          495          497         151         156
          Investment in mutual funds              8,939       8,900        9,035        8,920       9,258       9,183
                                                 ------      ------       ------       ------      ------      ------

          Total available-for-sale             $ 21,937      21,824       29,738       29,593      17,374      17,276
                                                 ======      ======       ======       ======      ======      ======

</TABLE>

                                       18

<PAGE>
     The following  table sets forth  information  concerning the amortized cost
     and weighted  average yields by maturity on investment  securities and FHLB
     stock at December 31, 1997.
<TABLE>
<CAPTION>


                                                        Due After            Due After
                                                      One Through          Five Through         Due After
                           Due Within One Year        Five Years            10 Years             10 Years            Total
                           -------------------- --------------------  ------------------- --------------------  --------------------
                                     Annualized           Annualized           Annualized           Annualized
                                       Weighted             Weighted             Weighted             Weighted           Approximate
                           Amortized   Average  Amortized   Average   Amortized  Average  Amortized    Average   Amortized    Market
                             Cost       Yield    Cost       Yield       Cost     Yield       Cost       Yield      Cost       Value
                             ----       -----    ----       -----       ----     -----       ----       -----      ----       -----
                                                                        (Dollars in thousands)
<S>                         <C>         <C>     <C>           <C>      <C>       <C>      <C>          <C>       <C>        <C>

FHLB stock                                                                                $ 2,304      7.25%     $  2,304   $  2,304
                                                                                          =======                ========   ========
                                                                                           
Investment securities:
     U.S. Government
         and agency
         obligations        $ 2,000     5.66%   $ 4,979       5.80%    $ 986     5.93%    $    -         -   %   $  7,965      7,937
     Other investment
         securities             -        -          -          -         -        -         3,182      6.68         3,182      3,233
     Mutual funds               -        -          -          -         -        -         9,258      5.92         9,258      9,183
                            -------     ----    -------       ----     -----     ----     -------                --------    -------

         Total investment
              securities    $ 2,000     5.66%   $ 4,979       5.80%    $ 986     5.93%    $12,440      6.11%     $ 20,405   $ 20,353
                            =======     ====    =======       ====     =====     ====     =======      ====      ========   ========
                               
</TABLE>

                                       19

<PAGE>
Sources of Funds

General. Repayments and maturities of mortgage-backed and investment securities,
loan  repayments,  deposits and cash flows  generated  from  operations  are the
primary  sources of the Savings  Bank's funds for use in lending,  investing and
for other general purposes.

Deposits.  The Savings Bank offers a variety of deposit  accounts having a range
of interest  rates and terms.  The Savings  Bank's  deposits  consist of regular
savings,   non-interest-bearing   checking,  NOW  checking,   money  market  and
certificate  accounts.  Of the  deposit  accounts at December  31,  1997,  $26.6
million or 8.4% consist of individual retirement accounts ("IRAs").

The Savings  Bank has  maintained  core  deposits  consisting  of  passbook  and
statement  savings,  money  market,   non-interest-bearing   checking,  and  NOW
checking,  which  has  contributed  to a low cost of funds.  Such core  deposits
represented 25.2%, 25.0% and 23.8% of total deposits at December 31, 1995, 1996,
and 1997, respectively.

The following  table shows the  distribution  of the Savings Bank's  deposits by
type at the dates indicated and the  weighted-average  nominal interest rates on
each category of deposits presented at December 31, 1997 (dollars in thousands).
<TABLE>
<CAPTION>
                                                                        At December 31,
                                      1995                      1996                      1997
                              ---------------------   -----------------------    -------------------------------------
                                          Percent                   Percent                    Percent      Weighted-
                                          of Total                  of Total                   of Total      Average
                                 Amount   Deposits       Amount     Deposits       Amount      Deposits        Rate
                                ------      ------      -------       ------       ------          -----         ----
<S>                          <C>            <C>       <C>            <C>         <C>              <C>            <C>
Demand accounts:
     Noninterest bearing
          checking           $   3,482        1.30%   $   4,103         1.46%    $  6,968           2.20%        -   %
     NOW and money
          market accounts       37,272       13.92       39,203        13.86       43,629          13.84         2.24
     Passbook and
          statement
          savings               26,811       10.02       27,412         9.70       24,503           7.77         2.74
                                ------      ------      -------       ------       ------          -----         ----


          Total                 67,565       25.24       70,718        25.02       75,100          23.81         2.38
                                ------      ------      -------       ------       ------          -----         ----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                        At December 31,
                                      1995                      1996                      1997
                              ---------------------   -----------------------    -------------------------------------
                                          Percent                   Percent                    Percent      Weighted-
                                          of Total                  of Total                   of Total      Average
                                 Amount   Deposits       Amount     Deposits       Amount      Deposits        Rate
                                ------      ------      -------       ------       ------          -----         ----
<S>                          <C>            <C>       <C>            <C>         <C>              <C>            <C>
Certificate accounts:
     1-3 months                  5,866        2.19        8,204         2.90        9,834           3.12         4.86
     91 days                       421        0.16          518          .18          538            .17         4.35
     182 day                    20,565        7.68       15,904         5.63       12,171           3.86         4.75
     9 months                   14,593        5.45       17,173         6.07       16,554           5.25         5.51
     10 months                    -           -            -            -          18,791           5.95         5.76
     12 months                  59,925       22.38       53,577        18.96       39,975          12.67         5.22
     12 month IRA               15,574        5.82       16,473         5.83       14,431           4.58         5.44
     18 months                   3,931        1.47        3,136         1.11        2,824            .90         5.36
     20 months                    -           -            -            -          23,152           7.34         5.98
     24 months                  19,946        7.45       46,770        16.55       60,477          19.18         5.86
     30 months                  15,225        5.69       10,628         3.76        8,841           2.80         5.35
     60 months                  44,092       16.47       39,563        13.99       32,702          10.37         5.96
                               -------      ------      -------       ------      -------         ------         ----

          Total                200,138       74.76      211,946        74.98      240,290          76,19         4.57
                               -------      ------      -------       ------      -------         ------         ----

          Total deposits     $ 267,703      100.00%     282,664       100.00%     315,390         100.00%        4.83%
                               =======     =======      =======       ======      =======         ======         ====

</TABLE>
                                       20
<PAGE>
The following  table  presents the deposit  activity of the Savings Bank for the
years indicated.
<TABLE>
<CAPTION>


                                               Year Ended December 31,
                                        ---------------------------------------
                                            1995           1996           1997
                                        ---------      ---------      ---------
                                                    (In thousands)
<S>                                     <C>            <C>            <C>

Deposits                                $ 472,591        542,019        744,064
Withdrawals                              (465,235)      (536,051)      (721,501)
                                        ---------      ---------      ---------

Deposits in excess of withdrawals           7,356          5,968         22,563

Interest credited on deposits               8,596          8,993         10,163
                                        ---------      ---------      ---------

Total increase in deposits              $  15,952         14,961         32,726
                                        =========      =========      =========
</TABLE>


The following  table presents the amount of time deposit  accounts in amounts of
$100,000 or more at December 31, 1997 maturing as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                     <C>
Maturity Period

One month through three months                          $   3,228
Over three through six months                                 659
Over six through 12 months                                  3,556
Over 12 months                                              4,753
                                                           ------

     Total                                               $ 12,196
                                                           ======

</TABLE>
                                       21

<PAGE>
The  following  table  presents,  by  various  rate  categories,  the  amount of
certificate  accounts  outstanding at December 31, 1995,  1996, and 1997 and the
periods to maturity of the  certificate  accounts  outstanding  at December  31,
1997.
<TABLE>
<CAPTION>

                                                                      Period to Maturity from December 31, 1997
                                  At December 31,             ----------------------------------------------------------
                        ---------------------------------     Within        1 to         2 to         3 to        4 to  
                          1995          1996        1997      1 Year       2 Years     3 Years       4 Years     5 Years    Total
                        ---------     -------     -------     -------       ------      ------        -----       -----    ------- 
                                                                        (In thousands)
<S>                     <C>           <C>         <C>         <C>           <C>         <C>           <C>         <C>      <C>
 4.01% to 5.00%         $  30,297      49,542      23,215      23,215         -           -            -          -         23,215
 5.01% to 6.00%           108,867     137,394     187,028     143,947       38,960        -           1,909       2,212    187,028
 6.01% to 8.00%            60,974      25,010      30,047        -          18,938      11,094           15       -         30,047
                        ---------     -------     -------     -------       ------      ------        -----       -----    ------- 

                        $ 200,138     211,946     240,290     167,162       57,898      11,094        1,924       2,212    240,290
                          =======     =======     =======     =======       ======      ======        =====       =====    =======

</TABLE>

                                       22

<PAGE>
Borrowings

The Savings Bank is authorized to obtain advances from the FHLB of Atlanta which
generally would be  collateralized  by a blanket lien against the Savings Bank's
mortgage  portfolio.  Such  advances may be made  pursuant to several  different
credit  programs,  each  of  which  has its  own  interest  rate  and  range  of
maturities.  The maximum  amount that the FHLB of Atlanta will advance to member
institutions,  including  the Savings  Bank,  for  purposes  other than  meeting
withdrawals, fluctuates from time to time in accordance with the policies of the
OTS and the FHLB of Atlanta.  At December 31,  1997,  the Savings Bank had $30.0
million in FHLB advances outstanding.

From time to time,  the  Savings  Bank enters into  agreements  with  nationally
recognized  primary  securities  dealers  under  which the  Savings  Bank  sells
securities subject to repurchase  agreements.  Such agreements are accounted for
as  borrowings  by the Savings Bank and are secured by the  securities  sold. At
December  31,  1997,  the  Savings  Bank  did  not  have  any  such   borrowings
outstanding.

The  following  table sets forth  certain  information  relating  to the Savings
Bank's borrowings at the dates indicated:
<TABLE>
<CAPTION>

                                                                           At or For the Year Ended
                                                                              Ended December 31,
                                                                    ---------------------------------------
                                                                     1995           1996           1997
                                                                    -------      ----------     -----------                   
                                                                            (Dollars in thousands)
<S>                                                                 <C>          <C>            <C>
FHLB advances:
     Average balance outstanding                                    $   150      $      150     $    13,226
                                                                    =======      ==========     ===========
     Maximum amount outstanding at any month end
          during the year                                           $   150      $      150     $    30,000
                                                                    =======      ==========     ===========
     Balance outstanding at end of year                             $   150      $      150     $    30,000
                                                                    =======      ==========     ===========
     Weighted average interest rate during the year                    7.17%           7.17%           6.15%
                                                                    =======      ==========     ===========
     Weighted average interest rate at end of year                     7.17%           7.17%           6.01%
                                                                    =======      ==========     ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                           At or For the Year Ended
                                                                              Ended December 31,
                                                                    ---------------------------------------
                                                                     1995           1996           1997
                                                                    -------      ----------     -----------                   
                                                                            (Dollars in thousands)
<S>                                                                 <C>          <C>            <C>
Securities sold under agreements to repurchase:
     Average balance outstanding                                    $   470      $      849     $     5,629
                                                                    =======      ==========     ===========
     Maximum amount outstanding at any month end
          during the year                                           $ 2,031      $    8,048     $    11,952
                                                                    =======      ==========     ===========
     Balance outstanding at end of year                             $  --        $    8,048     $      --
                                                                    =======      ==========     ===========
     Weighted average interest rate during the year                    6.20%           5.65%           5.74%
                                                                    =======      ==========     ===========
     Weighted average interest rate at end of year                       - %           5.63%             --%
                                                                    =======      ==========     ===========

Total borrowings:
     Average balance outstanding                                    $   620      $      999     $    18,855
                                                                    =======      ==========     ===========
     Maximum amount outstanding at any month end
          during the year                                           $ 2,181      $    8,198     $    41,952
                                                                    =======      ==========     ===========
     Balance outstanding at end of year                             $   150      $    8,198     $    30,000
                                                                    =======      ==========     ===========
     Weighted average interest rate during the year                    6.44%           5.68%           6.03%
                                                                    =======      ==========     ===========
     Weighted average interest rate at end of year                     7.17%           5.66%           6.01%
                                                                    =======      ==========     ===========
</TABLE>


Subsidiary Activities

The  Savings  Bank  has  one  wholly-owned   subsidiary,   Lake  County  Service
Corporation.  Lake County  Service  Corporation  was formed to develop a 100-lot
subdivision and is now substantially inactive, having sold all but one lot. Lake
County Service  Corporation  also owns an 8.4 acre  commercial  parcel and a one
acre lot adjoining the Savings Bank's main office.




                                       23
<PAGE>
Personnel

As of December 31,  1997,  the Savings Bank had 127  full-time  employees  and 9
part-time  employees.   The  employees  are  not  represented  by  a  collective
bargaining  unit  and the  Savings  Bank  considers  its  relationship  with its
employees to be good.

REGULATION AND SUPERVISION

General

The Company,  as a savings and loan holding company, is required to file certain
reports with, and otherwise  comply with the rules and regulations of the Office
of Thrift  Supervision  ("OTS") under the Home Owners' Loan Act, as amended (the
"HOLA").  In  addition,  the  activities  of savings  institutions,  such as the
Savings  Bank,  are governed by the HOLA and the Federal  Deposit  Insurance Act
("FDI Act").

The Savings Bank is subject to extensive regulation, examination and supervision
by the OTS,  as its  primary  federal  regulator,  and the FDIC,  as the deposit
insurer.  The Savings  Bank is a member of the Federal  Home Loan Bank  ("FHLB")
System and its  deposit  accounts  are  insured up to  applicable  limits by the
Savings  Association  Insurance  Fund ("SAIF")  managed by the FDIC. The Savings
Bank must file reports with the OTS and the FDIC  concerning  its activities and
financial  condition  in addition to  obtaining  regulatory  approvals  prior to
entering into certain  transactions  such as mergers with, or  acquisitions  of,
other  savings   institutions.   The  OTS  and/or  the  FDIC  conduct   periodic
examinations to test the Savings Bank's safety and soundness and compliance with
various regulatory  requirements.  This regulation and supervision establishes a
comprehensive  framework of activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors.  The
regulatory structure also gives the regulatory  authorities extensive discretion
in connection with their supervisory and enforcement  activities and examination
policies,  including  policies with respect to the  classification of assets and
the  establishment of adequate loan loss reserves for regulatory  purposes.  Any
change in such  regulatory  requirements  and policies,  whether by the OTS, the
FDIC or the Congress,  could have a material adverse impact on the Company,  the
Savings  Bank and  their  operations.  Certain  of the  regulatory  requirements
applicable  to the  Savings  Bank and to the  Company  are  referred to below or
elsewhere  herein.  The  description  of statutory  provisions  and  regulations
applicable to savings institutions and their holding companies set forth in this
Form 10-K does not purport to be a complete  description  of such  statutes  and
regulations and their effects on the Savings Bank and the Company.

Holding Company Regulation

The Company is a nondiversified  unitary savings and loan holding company within
the meaning of the HOLA.  As a unitary  savings and loan  holding  company,  the
Company  generally  is not  restricted  under  existing  laws as to the types of
business  activities  in which it may engage,  provided  that the  Savings  Bank
continues  to  be a  qualified  thrift  lender  ("QTL").  See  "Federal  Savings
Institution Regulation - QTL Test." Upon any non-supervisory  acquisition by the
Company of another  savings  institution or savings bank that meets the QTL test
and is deemed to be a savings institution by the OTS, the Company would become a

<PAGE>
multiple  savings and loan holding company (if the acquired  institution is held
as a separate  subsidiary) and would be subject to extensive  limitations on the
types of  business  activities  in which it could  engage.  The HOLA  limits the
activities of a multiple  savings and loan holding  company and its  non-insured
institution  subsidiaries  primarily to activities  permissible for bank holding
companies  under  Section  4(c)(8) of the Bank Holding  Company Act ("BHC Act"),
subject to the prior approval of the OTS, and certain  activities  authorized by
OTS  regulation,  and no multiple  savings and loan holding  company may acquire
more than 5% the voting stock of a company engaged in impermissible activities.


                                       24
<PAGE>
The HOLA prohibits a savings and loan holding  company,  directly or indirectly,
or through one or more  subsidiaries,  from acquiring more than 5% of the voting
stock of another savings  institution or holding company thereof,  without prior
written  approval of the OTS or acquiring  or retaining  control of a depository
institution  that is not  insured by the FDIC.  In  evaluating  applications  by
holding  companies to acquire  savings  institutions,  the OTS must consider the
financial  and  managerial  resources  and future  prospects  of the company and
institution involved, the effect of the acquisition on the risk to the insurance
funds, the convenience and needs of the community and competitive factors.

The OTS is  prohibited  from  approving any  acquisition  that would result in a
multiple savings and loan holding company  controlling  savings  institutions in
more than one state,  subject to two exceptions:  (i) the approval of interstate
supervisory  acquisitions  by savings and loan  holding  companies  and (ii) the
acquisition  of a savings  institution in another state if the laws of the state
of the target savings  institution  specifically  permit such acquisitions.  The
states  vary in the  extent to which they  permit  interstate  savings  and loan
holding company acquisitions.

Although savings and loan holding  companies are not subject to specific capital
requirements  or  specific  restrictions  on the payment of  dividends  or other
capital  distributions,  HOLA does  prescribe  such  restrictions  on subsidiary
savings  institutions as described  below.  The Savings Bank must notify the OTS
thirty days before  declaring  any  dividend to the Company.  In  addition,  the
financial impact of a holding company on its subsidiary  institution is a matter
that is evaluated by the OTS and the agency has authority to order  cessation of
activities or divestiture of subsidiaries  deemed to pose a threat to the safety
and soundness of the institution.

Federal Savings Institution Regulation

Capital  Requirements.  The OTS capital regulations require savings institutions
to meet three minimum  capital  standards:  a 1.5% tangible  capital ratio, a 3%
leverage  (core) capital ratio and an 8% risk-based  capital ratio. In addition,
the prompt  corrective  action  standards  discussed  below also  establish,  in
effect,  a minimum 2% tangible  capital  standard,  a 4% leverage (core) capital
ratio (3% for  institutions  receiving the highest rating on the CAMEL financial
institution  rating system),  and, together with the risk-based capital standard
itself,  a 4% Tier I  risk-based  capital  standard.  Core capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus,  and minority interests in equity
accounts  of  consolidated  subsidiaries  less  intangibles  other than  certain
mortgage  servicing  rights and credit card  relationships.  The OTS regulations
also require  that,  in meeting the  tangible,  leverage  (core) and  risk-based
capital  standards,  institutions must generally deduct investments in and loans
to subsidiaries  engaged in activities as principal that are not permissible for
a national bank.

The  risk-based   capital  standard  for  savings   institutions   requires  the
maintenance of Tier I (core) and total capital (which is defined as core capital
and  supplementary  capital)  to  risk-weighted  assets  of at  least 4% and 8%,
respectively.  In determining the amount of  risk-weighted  assets,  all assets,
including  certain  off-balance  sheet assets,  are  multiplied by a risk-weight
factor of 0% to 100%,  as assigned by the OTS  capital  regulation  based on the
risks OTS believes are inherent in the type of asset.  The  components of Tier I
(core)  capital are  equivalent to those  discussed  earlier.  The components of
supplementary  capital currently include cumulative  preferred stock,  long-term
perpetual preferred stock, mandatory convertible  securities,  subordinated debt
and  intermediate  preferred  stock and the  allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted  assets.  Overall,  the amount of
supplementary  capital  included as part of total capital  cannot exceed 100% of
core capital.

                                       25
<PAGE>
The OTS regulatory  capital  requirements also incorporate an interest rate risk
component.  Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating  their
risk-based capital requirements.  A savings institution's  interest rate risk is
measured  by the decline in the net  portfolio  value of its assets  (i.e.,  the
difference  between  incoming  and outgoing  discounted  cash flows from assets,
liabilities  and  off-balance   sheet   contracts)  that  would  result  from  a
hypothetical  200 basis point  increase or  decrease  in market  interest  rates
divided  by the  estimated  economic  value  of  the  institution's  assets.  In
calculating  its total  capital  under the  risk-based  capital  rule, a savings
institution whose measured interest rate risk exposure exceeds 2% must deduct an
amount equal to one-half of the difference  between the  institution's  measured
interest rate risk and 2%,  multiplied by the  estimated  economic  value of the
institution's  assets.  The  Director  of the OTS may  waive or defer a  savings
institution's  interest rate risk component on a  case-by-case  basis. A savings
institution with assets of less than $300 million and risk-based  capital ratios
in excess of 12% is not subject to the interest rate risk component,  unless the
OTS  determines   otherwise.   For  the  present  time,  the  OTS  has  deferred
implementation  of the interest rate risk  component.  At December 31, 1997, the
Savings Bank met each of its capital requirements and it is anticipated that the
Savings Bank will not be subject to the interest rate risk component.

The following table presents the Savings Bank's capital position at December 31,
1997.
<TABLE>
<CAPTION>


                                                   Excess                    Capital Ratios
                          Actual      Required  (Deficiency)       Actual      Required
                         Capital      Capital      Amount         Percent       Percent
                         -------      -------      ------         -------       -------
                                            (Dollars in thousands)
<S>                     <C>            <C>          <C>            <C>           <C>

Tangible                $ 44,349        6,003       38,346         11.08%        1.50%
Core (leverage)         $ 44,349       12,006       32,343         11.08         3.00
Risk-based:
     Tier I (core)      $ 44,349        8,486       35,863         20.90         4.00
     Total              $ 46,033       16,973       29,060         21.70         8.00
</TABLE>


Prompt  Corrective  Regulatory  Action.  Under the OTS prompt  corrective action
regulations,  the OTS is required to take certain  supervisory  actions  against
undercapitalized   institutions,   the  severity  of  which   depends  upon  the
institution's degree of undercapitalization. Generally, a savings institution is
considered  "well  capitalized"  if its ratio of total capital to  risk-weighted
assets is at least  10%,  its ratio of Tier I (core)  capital  to  risk-weighted
assets is at least 6%, its ratio of core capital to total assets is at least 5%,
and it is not  subject to any order or  directive  by the OTS to meet a specific
capital  level.  A  savings  institution  generally  is  considered  "adequately
capitalized" if its ratio of total capital to  risk-weighted  assets is at least
8%, its ratio of Tier I (core) capital to  risk-weighted  assets is at least 4%,
and its  ratio  of core  capital  to  total  assets  is at  least  4% (3% if the
institution receives the highest CAMEL rating). A savings institution that has a
ratio of total capital to risk-weighted  assets of less than 8%, a ratio of Tier

<PAGE>

I (core)  capital  to  risk-weighted  assets  of less than 4% or a ratio of core
capital to total  assets of less than 4% (3% or less for  institutions  with the
highest  examination rating) is considered to be  "undercapitalized."  A savings
institution  that has a total  risk-based  capital  ratio less than 6%, a Tier 1
capital  ratio  of less  than 3% or a  leverage  ratio  that is less  than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible  capital to assets ratio equal to or less than 2% is deemed to be
"critically  undercapitalized."  Subject  to a  narrow  exception,  the  banking
regulator is required to appoint a receiver or  conservator  for an  institution
that is  "critically  undercapitalized."  The  regulation  also  provides that a
capital restoration plan must be filed with the OTS within 45 days of the date a
savings   institution   receives   notice   that   it   is   "undercapitalized,"
"significantly  undercapitalized" or "critically  undercapitalized."  Compliance
with the plan must be guaranteed  by any parent  holding  company.  In addition,
numerous  mandatory  supervisory  actions  become  immediately  applicable to an
undercapitalized   institution,   including,   but  not  limited  to,  increased
monitoring by regulators and restrictions on growth,  capital  distributions and
expansion.  The OTS  could  also  take  any  one of a  number  of  discretionary
supervisory actions,

                                       26

<PAGE>
including  the issuance of a capital  directive  and the  replacement  of senior
executive officers and directors.

Insurance  of Deposit  Accounts.  Deposits  of the  Savings  Bank are  presently
insured by the SAIF.  On September 30, 1996,  the President  signed into law the
Deposit Insurance Funds Act of 1996 (the "Funds Act") which, among other things,
imposed a special one-time assessment on SAIF member institutions, including the
Savings  Bank,  to  recapitalize  the SAIF.  The SAIF was  undercapitalized  due
primarily to a statutory  requirement  that SAIF members make  payments on bonds
issued in the late 1980s by the Financing  Corporation  ("FICO") to recapitalize
the  predecessor  to the SAIF.  As required by the Funds Act, the FDIC imposed a
special  assessment of 65.7 basis points on SAIF assessable  deposits held as of
March 31, 1995, payable November 27, 1996 (the "SAIF Special  Assessment").  The
SAIF Special  Assessment was recognized by the Savings Bank as an expense in the
quarter ended  September 30, 1996 and was  generally  tax  deductible.  The SAIF
Special  Assessment  recorded by the Savings Bank  amounted to $1.7 million on a
pre-tax basis and $1.0 million on an after-tax basis.

The Funds Act also spreads the  obligations for payment of the FICO bonds across
all SAIF and Bank  Insurance  Fund  ("BIF")  members.  The BIF is the fund which
primarily  insures  commercial bank deposits.  Beginning on January 1, 1997, BIF
deposits  were  assessed  for a FICO  payment  of 1.3 basis  points,  while SAIF
deposits  pay 6.4  basis  points.  Full pro rata  sharing  of the FICO  payments
between BIF and SAIF members will occur on the earlier of January 1, 2000 or the
date the BIF and SAIF are merged.  The Funds Act specifies that the BIF and SAIF
will be merged on January 1, 1999, provided no savings associations remain as of
that time.

As a  result  of the  Funds  Act,  the  FDIC  voted to  effectively  lower  SAIF
assessments to 0 to 27 basis points as of January 1, 1997, a range comparable to
that of BIF members.  SAIF members will also  continue to make the FICO payments
described  above.   Management  cannot  predict  the  level  of  FDIC  insurance
assessments on an on-going basis,  whether the savings  association charter will
be eliminated or whether the BIF and SAIF will eventually be merged.

The Savings Bank's  assessment rate for fiscal 1997 was 6.4 basis points and the
premium paid for 1997 was  $147,000.  A significant  increase in SAIF  insurance
premiums  would  likely have an adverse  effect on the  operating  expenses  and
results of operations of the Savings Bank.

Under the FDI Act,  insurance of deposits may be  terminated  by the FDIC upon a
finding that the institution has engaged in unsafe or unsound  practices,  is in
an unsafe or unsound  condition  to  continue  operations  or has  violated  any
applicable law, regulation,  rule, order or condition imposed by the FDIC or the
OTS. The management of the Savings Bank does not know of any practice, condition
or violation that might lead to termination of deposit insurance.

Thrift  Rechartering  Legislation.  The Funds Act provides that the BIF and SAIF
will merge on January 1, 1999 if there are no more  savings  associations  as of
that date.  Various proposals to eliminate the federal thrift charter,  create a
uniform financial  institutions charter and abolish the OTS have been introduced
in Congress. Some bills would require federal savings institutions to convert to
a national bank or some type of state charter by a specified  date or they would
automatically  become national banks.  Under some proposals,  converted  federal

<PAGE>

thrifts  would  generally  be  required  to conform  their  activities  to those
permitted for the charter selected and divestiture of nonconforming assets would
be required over a two year period, subject to two possible one-year extensions.
State chartered  thrifts would become subject to the same federal  regulation as
applies  to state  commercial  banks.  A more  recent  bill  passed by the House
Banking  Committee  would  allow  savings  institutions  to continue to exercise
activities  being  conducted when they convert to a bank regardless of whether a
national  bank could  engage in the  activity.  Holding  companies  for  savings
institutions  would become subject to the same  regulation as holding  companies
that control commercial banks, with some limited grandfathering,  including some
savings and loan holding company  activities.  The grandfathering  would be lost
under  certain  circumstances  such as a change in control of the  Company.  The
Savings Bank is unable to predict whether such legislation would be enacted, the

                                       28
<PAGE>
extent to which the legislation would restrict or disrupt its operations.

Loans to One  Borrower.  Under  the HOLA,  savings  institutions  are  generally
subject to the limits on loans to one  borrower  applicable  to national  banks.
Generally, savings institutions may not make a loan or extend credit to a single
or related  group of  borrowers in excess of 15% of its  unimpaired  capital and
surplus.  An additional  amount may be lent, equal to 10% of unimpaired  capital
and surplus, if such loan is secured by readily-marketable  collateral, which is
defined to include certain  financial  instruments and bullion.  At December 31,
1997,  the Savings  Bank's limit on loans to one borrower was $6.9  million.  At
December 31, 1997, the Savings Bank's largest aggregate  outstanding  balance of
loans to one borrower was $4.2 million.

QTL Test. The HOLA requires  savings  institutions to meet a QTL test. Under the
QTL test,  a savings and loan  association  must  either  qualify as a "domestic
building  and loan  association"  as defined  in the  Internal  Revenue  Code or
maintain  at  least  65% of its  "portfolio  assets"  (total  assets  less:  (i)
specified liquid assets up to 20% of total assets;  (ii) intangibles,  including
goodwill;  and (iii) the value of property used to conduct  business) in certain
"qualified  thrift  investments"  (primarily  residential  mortgages and related
investments,  including certain mortgage-backed securities) in at least 9 months
out of each 12 month period.

A savings  institution  that fails the QTL test is subject to certain  operating
restrictions  and may be required to convert to a bank  charter.  As of December
31, 1997, the Savings Bank maintained 82.9% of its portfolio assets in qualified
thrift  investments and,  therefore,  met the QTL test.  Recent  legislation has
expanded  the  extent to which  education  loans,  credit  card  loans and small
business loans may be considered "qualified thrift investments."

Limitation on Capital Distributions. OTS regulations impose limitations upon all
capital distributions by savings institutions,  such as cash dividends, payments
to  repurchase  or otherwise  acquire its shares,  payments to  shareholders  of
another institution in a cash-out merger and other distributions charged against
capital.  The rule  establishes  three  tiers of  institutions,  which are based
primarily on the  institution's  capital levels. An institution that exceeds all
fully  phased-in  capital  requirements  before  and  after a  proposed  capital
distribution  ("Tier 1 Bank") and has not been  advised by the OTS that it is in
need of more than normal  supervision,  could,  after  prior  notice but without
obtaining approval of the OTS, make capital distributions during a calendar year
equal to the greater of (i) 100% of its net earnings to date during the calendar
year plus the amount that would reduce by one-half its "surplus  capital  ratio"
(the  excess  capital  over its fully  phased-in  capital  requirements)  at the
beginning  of the  calendar  year or (ii) 75% of its net income for the previous
four  quarters.   Any  additional  capital  distributions  would  require  prior
regulatory  approval.  In the event the Savings  Bank's  capital  fell below its
regulatory  requirements or the OTS notified it that it was in need of more than
normal  supervision,  the Savings Bank's  ability to make capital  distributions
could be  restricted.  In addition,  the OTS could  prohibit a proposed  capital
distribution  by any  institution,  which would  otherwise  be  permitted by the
regulation,  if the OTS determines that such  distribution  would  constitute an
unsafe or unsound practice. In December 1994, the OTS proposed amendments to its
capital  distribution  regulation that would generally  authorize the payment of
capital  distributions  without OTS approval  provided that the payment does not
cause the  institution to be  undercapitalized  within the meaning of the prompt
corrective  action  regulation.  However,  institutions  in  a  holding  company
structure would still have a prior notice requirement. At December 31, 1997, the
Savings Bank was a Tier 1 Bank.
<PAGE>

Liquidity.  The Savings Bank is required to maintain an average daily balance of
specified  liquid assets equal to a monthly average of not less than a specified
percentage of its net withdrawable deposit accounts plus short-term  borrowings.
This liquidity requirement was 5% for fiscal 1997, but is subject to change from
time to time by the OTS to any amount  within  the range of 4% to 10%  depending
upon economic conditions and the savings flows of member institutions.  In 1997,
OTS  regulations  also required each savings  institution to maintain an average
daily balance of short-term liquid assets of at least 1% of the total of its net
withdrawable deposit accounts and borrowings

                                       28

<PAGE>
payable in one year or less.  Monetary  penalties  may be imposed for failure to
meet these liquidity  requirements.  The OTS has recently  lowered the liquidity
requirement  from  5% to 4%  and  eliminated  the  1%  short-term  liquid  asset
requirement.  The Savings Bank's liquidity ratio for December 31, 1997 was 8.7%,
which  exceeded  the  applicable  requirement.  The Savings  Bank has never been
subject to monetary penalties for failure to meet its liquidity requirement.

Assessments.  Savings institutions are required to pay assessments to the OTS to
fund the agency's  operations.  The general  assessments,  paid on a semi-annual
basis,  are computed  upon the savings  institution's  total  assets,  including
consolidated  subsidiaries,  as reported in the Savings Bank's latest  quarterly
thrift financial report. The assessments paid by the Savings Bank for the fiscal
years  ended   December  31,  1997  and  1996  totalled   $87,000  and  $83,000,
respectively.

Branching.  OTS regulations permit nationwide  branching by federally  chartered
savings  institutions  to the extent  allowed by federal  statute.  This permits
federal   savings   institutions  to  establish   interstate   networks  and  to
geographically  diversify their loan  portfolios and lines of business.  The OTS
authority  preempts any state law  purporting  to regulate  branching by federal
savings institutions.

Transactions  with Related  Parties.  The Savings Bank's  authority to engage in
transactions  with  related  parties or  "affiliates"  (e.g..,  any company that
controls or is under common control with an  institution,  including the Company
and any non-savings institution subsidiaries) is limited by Sections 23A and 23B
of the Federal Reserve Act ("FRA").  Section 23A limits the aggregate  amount of
covered  transactions  with any  individual  affiliate to 10% of the capital and
surplus of the savings institution. The aggregate amount of covered transactions
with all affiliates is limited to 20% of the savings  institution's  capital and
surplus.  Certain  transactions  with  affiliates  are required to be secured by
collateral in an amount and of a type  described in Section 23A and the purchase
of low quality  assets from  affiliates  is  generally  prohibited.  Section 23B
generally  provides that certain  transactions with affiliates,  including loans
and asset purchases, must be on terms and under circumstances,  including credit
standards,  that are  substantially  the same or at  least as  favorable  to the
institution  as those  prevailing at the time for comparable  transactions  with
non-affiliated companies. In addition,  savings institutions are prohibited from
lending to any affiliate that is engaged in activities  that are not permissible
for  bank  holding  companies  and  no  savings  institution  may  purchase  the
securities of any affiliate other than a subsidiary.

The Savings Bank's authority to extend credit to executive  officers,  directors
and 10% shareholders ("insiders"),  as well as entities such persons control, is
governed by Sections  22(g) and 22(h) of the FRA and  Regulation  O  thereunder.
Among other  things,  such loans are required to be made on terms  substantially
the same as those offered to  unaffiliated  individuals  and not to involve more
than the normal risk of repayment.  Recent legislation  created an exception for
loans  made  pursuant  to a  benefit  or  compensation  program  that is  widely
available to all employees of the  institution  and does not give  preference to
insiders over other employees. Regulation O also places individual and aggregate
limits on the amount of loans the Savings  Bank may make to insiders  based,  in
part, on the Savings Bank's capital position and requires certain board approval
procedures to be followed.
<PAGE>

Enforcement.  Under the FDI Act, the OTS has primary enforcement  responsibility
over savings  institutions  and has the authority to bring  actions  against the
institution and all institution-affiliated  parties, including stockholders, and
any  attorneys,   appraisers  and   accountants   who  knowingly  or  recklessly
participate  in wrongful  action likely to have an adverse  effect on an insured
institution.  Formal enforcement action may range from the issuance of a capital
directive or cease and desist order to removal of officers  and/or  directors to
institution  of   receivership,   conservatorship   or  termination  of  deposit
insurance.  Civil  penalties  cover a wide range of violations and can amount to
$25,000 per day, or even $1 million per day in especially egregious cases. Under
the FDI Act, the FDIC has the  authority to recommend to the Director of the OTS
enforcement action to be taken with respect to a particular savings institution.
If action  is not taken by the  Director,  the FDIC has  authority  to take such
action  under  certain  circumstances.  Federal  law also  establishes  criminal
penalties for certain violations.

                                       29

<PAGE>
Standards for Safety and Soundness.  The federal  banking  agencies have adopted
Interagency   Guidelines   Prescribing   Standards   for  Safety  and  Soundness
("Guidelines")  and a final rule to  implement  safety and  soundness  standards
required  under the FDI Act. The  Guidelines  set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at  insured  depository   institutions  before  capital  becomes  impaired.  The
standards set forth in the Guidelines  address internal controls and information
systems;  internal  audit  system;  credit  underwriting;   loan  documentation;
interest  rate  risk  exposure;  asset  growth;  asset  quality;  earnings;  and
compensation,  fees and benefits.  If the  appropriate  federal  banking  agency
determines  that an  institution  fails to meet any standard  prescribed  by the
Guidelines,  the agency may require the  institution  to submit to the agency an
acceptable plan to achieve compliance with the standard,  as required by the FDI
Act. The final rule establishes  deadlines for the submission and review of such
safety and soundness compliance plans when such plans are required.

Federal Reserve System

The Federal Reserve Board regulations  require savings  institutions to maintain
non-interest  earning reserves against their transaction accounts (primarily NOW
and regular checking accounts).  The Federal Reserve Board regulations generally
required  for  most  of 1997  that  reserves  be  maintained  against  aggregate
transaction  accounts as follows: for accounts aggregating $49.3 million or less
(subject to adjustment by the Federal Reserve Board) the reserve requirement was
3%; and for  accounts  aggregating  greater  than  $49.3  million,  the  reserve
requirement  was $1.48  million plus 10% (subject to  adjustment  by the Federal
Reserve  Board  between 8% and 14%) against  that  portion of total  transaction
accounts  in excess  of $49.3  million.  The first  $4.4  million  of  otherwise
reservable  balances  (subject to adjustments by the Federal Reserve Board) were
exempted from the reserve  requirements.  The Savings Bank is in compliance with
the foregoing  requirements.  For 1998, the Federal  Reserve Board has decreased
from $49.3 to $47.8 million the amount of transaction accounts subject to the 3%
reserve  requirement and increased the amount of exempt reservable balances from
$4.4  million to $4.7  million.  The  balances  maintained  to meet the  reserve
requirements  imposed  by the  Federal  Reserve  Board  may be used  to  satisfy
liquidity requirements imposed by the OTS.

Year 2000

Management has an ongoing  program  designed to ensure that its  operational and
financial systems will not be adversely affected by year 2000 software failures,
due to processing  errors  arising from  calculations  using the year 2000 date.
Based on current estimates, the Savings Bank does not expect to incur a material
amount of expenses over the next two years on its program to redevelop, replace,
or repair its computer  applications to make them "year 2000  compliant."  While
management  believes it is doing everything  technologically  possible to assure
year 2000 compliance,  it is to some extent  dependent upon vendor  cooperation.
Management  is requiring its computer  system and software  vendors to represent
that the products provided are, or will be, year 2000 compliant, and has planned
a  program  of  testing  for  compliance.  It is  recognized  that any year 2000
compliance failures could result in additional expense to the Bank.



                                       30

<PAGE>
                           FEDERAL AND STATE TAXATION

Federal Taxation

General.  The Company and the Savings Bank report their income on a consolidated
basis using the accrual method of accounting,  and are subject to federal income
taxation  in the  same  manner  as  other  corporations  with  some  exceptions,
including particularly the Savings Bank's reserve for bad debts discussed below.
The  following  discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to the
Savings  Bank or the  Company.  The Savings Bank was last audited by the IRS for
the year ended December 31, 1989. For its 1997 taxable year, the Savings Bank is
subject to a maximum federal income tax rate of 34%.

Bad Debt Reserves. For fiscal years beginning prior to December 31, 1995, thrift
institutions  which  qualified  under  certain   definitional  tests  and  other
conditions of the Internal  Revenue Code of 1986 (the "Code") were  permitted to
use certain  favorable  provisions to calculate  their  deductions  from taxable
income  for  annual  additions  to their bad debt  reserve.  A reserve  could be
established for bad debts on qualifying real property loans  (generally  secured
by  interests  in  real  property  improved  or to be  improved)  under  (i) the
Percentage of Taxable  Income  Method (the "PTI Method") or (ii) the  Experience
Method.  The reserve for  nonqualifying  loans was computed using the Experience
Method.

The Small  Business  Job  Protection  Act of 1996 (the  "1996  Act"),  which was
enacted on August 20, 1996,  requires  savings  institutions to recapture (i.e.,
take into income) certain portions of their  accumulated bad debt reserves.  The
1996 Act repeals the reserve  method of accounting  for bad debts  effective for
tax years beginning  after 1995.  Thrift  institutions  that would be treated as
small banks are  allowed to utilize the  Experience  Method  applicable  to such
institutions,  while thrift  institutions that are treated as large banks (those
generally  exceeding  $500  million  in  assets)  are  required  to use only the
specific charge-off method.  Thus, the PTI Method of accounting for bad debts is
no longer available for any financial institution.

A thrift institution required to change its method of computing reserves for bad
debts will treat such change as a change in method of  accounting,  initiated by
the  taxpayer,  and having  been made with the  consent of the IRS.  Any Section
481(a)  adjustment  required to be taken into income with respect to such change
generally  will be taken into income  ratably  over a  six-taxable  year period,
beginning  with the first  taxable  year  beginning  after 1995,  subject to the
residential loan requirement.

Under the residential loan requirement provision,  the recapture required by the
1996 Act is suspended for each of two successive  taxable years,  beginning with
1996,  in which the Savings  Bank  originates  a minimum of certain  residential
loans based upon the average of the principal  amounts of such loans made by the
Savings Bank during its six taxable years  preceding  its current  taxable year.
Under the 1996 Act, for its current and future taxable  years,  the Savings Bank
is permitted to make  additions to its tax bad debt reserves.  In addition,  the
Savings Bank is required to recapture  (i.e.,  take into income) over a six year
period the excess of the balance of its tax bad debt reserves as of December 31,
1995 over the balance of such  reserves as of December 31, 1987. At December 31,
1997, the Savings Bank had  approximately  $910,000 of deferred tax  liabilities
recorded for the recapture of its bad debt reserves.
<PAGE>

Distributions.  Under the 1996 Act,  if the  Savings  Bank  makes  "non-dividend
distributions"  to the Company,  such  distributions  will be considered to have
been made from the Savings Bank's  unrecaptured tax bad debt reserves (including
the balance of its reserves as of December 31, 1987) to the extent thereof,  and
then from the Savings Bank's  supplemental  reserve for losses on loans,  to the
extent thereof, and an amount based on the amount distributed (but not in excess
of the amount of such  reserves)  will be included in the Savings Bank's income.
Non-dividend distributions include distributions in excess of the Savings Bank's
current and accumulated  earnings and profits,  as calculated for federal income
tax purposes, distributions in redemption of stock, and distributions in partial
or complete  liquidation.  Dividends  paid out of the Savings  Bank's current or
accumulated

                                       31

<PAGE>
earnings and profits will not be so included in the Savings Bank's income.

The amount of additional taxable income triggered by a non-dividend is an amount
that, when reduced by the tax attributable to the income, is equal to the amount
of the distribution. Thus, if the Savings Bank makes a non-dividend distribution
to the  Company,  approximately  one  and  one-half  times  the  amount  of such
distribution  (but  not in  excess  of the  amount  of such  reserves)  would be
includable  in income for federal  income tax  purposes,  assuming a 35% federal
corporate  income tax rate.  The Savings  Bank does not intend to pay  dividends
that would result in a recapture of any portion of its bad debt reserves.

SAIF Recapitalization  Assessment. The Funds Act levied a 65.7 cent fee on every
$100 of  thrift  deposits  held on  March  31,  1995.  For  financial  statement
purposes,  this  assessment  was  reported as an expense  for the quarter  ended
September  30, 1996.  The Funds Act  included a provision  which stated that the
amount of any special  assessment paid to capitalize SAIF under this legislation
was deductible under Section 162 of the Code in the year of payment.

Corporate Alternative Minimum Tax. The Code imposes a tax on alternative minimum
taxable income  ("AMTI") at a rate of 20%. For fiscal years  beginning  prior to
January  1,  1996,  the  excess  of the bad debt  reserve  deduction  using  the
percentage  of taxable  income  method over the  deduction  that would have been
allowable  under the  experience  method is  treated  as a  preference  item for
purposes of computing the AMTI.  Only 90% of AMTI can be offset by net operating
loss carryovers.  The adjustment to AMTI based on book income is an amount equal
to 75% of the amount by which a corporation's  adjusted current earnings exceeds
its AMTI  (determined  without regard to this  adjustment and prior to reduction
for net  operating  losses).  In addition,  for taxable  years  through 1995, an
environmental  tax of .12% of the  excess of AMTI (with  certain  modifications)
over $2.0  million is imposed  on  corporations,  including  the  Savings  Bank,
whether or not an Alternative Minimum Tax ("AMT") is paid. The Savings Bank does
not expect to be subject to the AMT.

Dividends Received Deduction and Other Matters. The Company may exclude from its
income 100% of dividends  received from the Savings Bank as a member of the same
affiliated group of corporations.  The corporate dividends received deduction is
generally 70% in the case of dividends  received from unaffiliated  corporations
with which the  Company and the Savings  Bank will not file a  consolidated  tax
return, except that if the Company and the Savings Bank own more than 20% of the
stock of a corporation  distributing a dividend,  80% of any dividends  received
may be deducted.

Florida  Taxation.  The Savings Bank files Florida  franchise  tax returns.  For
Florida  franchise tax purposes,  savings  institutions are presently taxed at a
rate  equal to 5.5% of  taxable  income.  For  this  purpose,  "taxable  income"
generally  means  federal  taxable  income,   subject  to  certain   adjustments
(including the addition of interest income on State and municipal  obligations).
The  Savings  Bank is not  currently  under  audit with  respect to its  Florida
franchise tax returns.


                                       32

<PAGE>
ITEM 2.        PROPERTIES

The Savings  Bank  conducts  its  business  through its main office and 8 branch
offices.  The  following  table sets forth  certain  information  regarding  the
Savings Bank's office properties:

                                                                Book Value
                                                               of Land and
                                            Date                 Buildings at
Location                                  Acquired           December 31, 1997
--------                                  --------           -----------------
                                                          (Dollars in thousands)
Main Office
800 North Boulevard, West
Leesburg, Florida  34749-0420                1961                  $ 397

Wildwood
837 South Main Street
Wildwood, Florida  34785-0006                1967                    253

Main Street
1409 West Main Street
Leesburg, Florida  34749-0330                1972                    182

Clermont
481 East Highway 50
Clermont, Florida  34712-0730                1982                    647

Eustis
2901 South Bay Street
Eustis, Florida  32727-1270                  1979                    374

Fruitland Park
410 Palm Street
Fruitland Park, Florida  34731               1983                    353

Lady Lake
431 US Highway 441/27
Lady Lake, Florida  32158                    1995                  1,288

Lake Square
10105 US Highway 441
Leesburg, Florida  34788                     1995                    500

South Leesburg (1)
27405 US Highway 27, Suite 123
Leesburg, Florida  34748                     1996                    181

South Leesburg (2)
US Highway 27
Leesburg, Florida  34748                     1996                    375

(1) Leased branch office opened February, 1997.
(2) Parcel of land  purchased  by the Savings  Bank for a future  branch  office
location.

     The Savings Bank owns and operates personal computers, teller terminals and
     associated  equipment.  At December 31, 1997, such equipment had a net book
     value of $739,000.

                                       33
<PAGE> 
ITEM 3.        LEGAL PROCEEDINGS

There are no material pending legal proceedings to which FFLC Bancorp,  Inc., or
any of its subsidiaries is a party or to which any of their property is subject.

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

No  matters  were  submitted  to a vote of the  stockholders  during  the fourth
quarter of the fiscal year ended December 31, 1997,  through the solicitation of
proxies or otherwise.

                                     PART II

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

The   above-captioned   information  appears  under  "Common  Stock  Prices  and
Dividends"  in the  Registrant's  1997  Annual  Report  to  Stockholders  and is
incorporated herein by reference.

ITEM 6.        SELECTED FINANCIAL DATA

The above-captioned  information appears under "Selected  Consolidated Financial
Data" on page 6 and 7 of the Registrant's 1997 Annual Report to Stockholders and
is incorporated herein by reference.

ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS

The  above-captioned  information  appears under  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations" in the  Registrant's
1997 Annual  Report to  Stockholders  on pages 8 through 18 and is  incorporated
herein by reference.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  Consolidated  Financial  Statements of FFLC Bancorp,  Inc. and  Subsidiary,
together with the report thereon by Hacker,  Johnson, Cohen & Grieb PA appear in
the  Registrant's  1997 Annual Report to Stockholders on pages 19 through 51 and
are incorporated herein by reference.

ITEM 9.        CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE.

There  have  been no  disagreements  with the  Registrant's  accountants  on any
matters  of   accounting   principles   or  practices  or  financial   statement
disclosures.


                                       34

<PAGE>

                                    PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information related to Directors and Executive Officers of the Registrant is
incorporated  herein by reference to the  Registrant's  Proxy  Statement for the
Annual Meeting of Stockholders to be held on May 7, 1998 at pages 5 through 8.

ITEM 11.       EXECUTIVE COMPENSATION

The information  relating to executive  compensation  is incorporated  herein by
reference  to the  Registrant's  Proxy  Statement  for  the  Annual  Meeting  of
Stockholders to be held on May 7, 1998 at pages 13 through 16.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

The information  relating to security ownership of certain beneficial owners and
management  is  incorporated  herein  by  reference  to the  Registrant's  Proxy
Statement for the Annual  Meeting of  Stockholders  to be held on May 7, 1998 at
pages 6 through 8.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  relating to certain  relationships and related  transactions is
incorporated  herein by reference to pages 16 and 17 of the  Registrant's  Proxy
Statement for the Annual Meeting of Stockholders to be held on May 7, 1998.



                                       35

<PAGE>



                                     PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
               8-K.

(a) The following documents are filed as a part of this report:

     (1)  Consolidated  Financial  Statements of the Company are incorporated by
     reference from the following  indicated  pages of the 1997 Annual Report to
     Stockholders.

                                                                      Page
                                                                      ----

     Independent Auditor's Report                                       51

     Consolidated Balance Sheets as of December 31, 1997 and 1996       19

     Consolidated Statements of Income for the Years Ended
          December 31, 1997, 1996 and 1995                              20

     Consolidated Statements of Stockholders' Equity for the
          Years Ended December 31, 1997, 1996 and 1995               21-23

     Consolidated Statements of Cash Flows for the Years
          Ended December 31, 1997, 1996 and 1995                     24-25

     Notes to Consolidated Financial Statements for the Years
          Ended December 31, 1997, 1996, and 1995                    26-49

     The remaining information appearing in the Annual Report to Stockholders is
     not deemed to be filed as part of this report, except as expressly provided
     herein.

     (2) All schedules are omitted  because they are not required or applicable,
     or  the  required  information  is  shown  in  the  consolidated  financial
     statements or the notes thereto.

     (3)  Exhibits

          (a) The following exhibits are filed as part of this report.

                3.1      Certificate of Incorporation of FFLC Bancorp, Inc.*
                3.2      Bylaws of FFLC Bancorp, Inc.*
                4.0      Stock Certificate of FFLC Bancorp, Inc.*
               10.1      First Federal  Savings Bank of Lake County  Recognition
                         and Retention Plan**
               10.2      First Federal  Savings Bank of Lake County  Recognition
                         and Retention Plan for Outside Directors**
               10.3      FFLC  Bancorp,  Inc.  Incentive  Stock Option Plans for
                         Officers and Employees**
               10.4      FFLC  Bancorp,  Inc.  Stock  Option  Plan  for  Outside
                         Directors**
               13.0      Annual Report to Stockholders (filed herewith)
               99        Proxy Statement for Annual Meeting (filed herewith)

     *    Incorporated  herein by reference into this document from the Exhibits
          to Form S-1, Registration Statement,  initially filed on September 27,
          1993, Registration No. 33-69466.
     **   Incorporated  herein by reference  into this  document  from the Proxy
          Statement for the Annual Meeting of Stockholders held on May 12, 1994.

          (b) Reports on Form 8-K.
               No  reports  on Form 8-K were  filed by the  Company  during  the
               fourth quarter.

                                       36
<PAGE>



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

                                      FFLC BANCORP, INC.


                                      By: /s/ Stephen T. Kurtz
                                          --------------------
                                      Stephen T. Kurtz
                                      Chief Executive Officer and President

                                      Dated: March 19, 1998


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report has been signed by the  following  persons in the  capacities  and on the
dates indicated.
<TABLE>
<CAPTION>

Name                           Title                                    Date
----                           -----                                    ----
<S>                            <C>                                    <C>

/s/ Joseph J. Junod            Chairman of the Board                  March 19, 1998
-------------------
Joseph J. Junod

/s/ Claron D. Wagner           Vice Chairman of the Board             March 19, 1998
--------------------
Claron D. Wagner

/s/ James P. Logan             Director                               March 19, 1998
------------------
James P. Logan

/s/ Ted R. Ostrander, Jr.      Director                               March 19, 1998
-------------------------
Ted R. Ostrander

/s/ H.D. Robuck, Jr.           Director                               March 19, 1998
--------------------
H.D. Robuck, Jr.

/s/ Stephen T. Kurtz           Chief Executive Officer,
Stephen T. Kurtz               President and Director                 March 19, 1998

/s/ Paul K. Mueller            Executive Vice President, Chief
Paul K. Mueller                Operating Officer and Treasurer
                               and Director                           March 19, 1998


</TABLE>
                                       37