FFLC BANCORP, INC.
                               1999 ANNUAL REPORT


                                MISSION STATEMENT


Our mission is to operate in a manner  consistent with the high  expectations of
our stockholders,  customers and employees. We will achieve attractive financial
results for our stockholders, provide quality financial services and products to
our customers,  and offer  rewarding  careers to our employees by increasing the
use of  technology  while  maintaining  a high  level of  personal  service  and
integrity. We exist in order to:

     o    provide an attractive return to our stockholders,
     o    provide a competitive,  progressive and profitable  array of financial
          services and products,
     o    attract and retain highly-motivated, top-quality employees, and
     o    make a positive impact on the communities that we serve.


                           FORWARD-LOOKING STATEMENTS


The  Private  Securities  Litigation  Reform  Act of  1995  evidences  Congress"
determination  that the disclosure of  forward-looking  information is desirable
for  investors  and  encourages  such  disclosure by providing a safe harbor for
forward-looking   statements  by  corporate  management.   This  Annual  Report,
including  the  Letter  to  Stockholders  and the  Management"s  Discussion  and
Analysis  of   Financial   Condition   and  Results  of   Operations,   contains
forward-looking statements that involve risk and uncertainty. In order to comply
with the terms of the safe harbor,  the Company  notes that a variety of factors
could cause the Company"s  actual  results and  experience to differ  materially
from the anticipated  results or other  expectations  expressed in the Company"s
forward-looking  statements.  The risks and  uncertainties  that may  affect the
operations,  performance,  development,  growth  projections  and results of the
Company"s  business include,  but are not limited to, the growth of the economy,
interest  rate  movements,  timely  development  by the  Company  of  technology
enhancements for its products and operating  systems,  the impact of competitive
products,  services and pricing,  customer business requirements,  Congressional
legislation  and similar  matters.  Readers of this report are  cautioned not to
place  undue  reliance  on  forward-looking  statements  which  are  subject  to
influence  by the named risk factors and  unanticipated  future  events.  Actual
results, accordingly, may differ materially from management expectations.
<PAGE>

                                    CONTENTS

                                                                           Page
                                                                           ----

Corporate Profile, Corporate Organization and General Information ........  1
Office Locations and Common Stock Prices and Dividends ...................  2
Consolidated Financial Highlights ........................................  3
Letter to Stockholders ...................................................  4-5
Selected Consolidated Financial Data and Financial Ratios.................  6-7
Management's Discussion and Analysis of Financial
    Condition and Results of Operations ..................................  8-18
Consolidated Financial Statements ........................................ 19-49
Independent Auditors' Report..............................................    50
Directors and Officers of FFLC Bancorp, Inc. .............................    51
Directors and Officers of First Federal Savings Bank of Lake County.......    52
Employees ................................................................    53





                                  Inside Cover


<PAGE>
CORPORATE PROFILE

FFLC  Bancorp,  Inc.  ("FFLC" or the  "Holding  Company")  was  incorporated  in
Delaware on September 16, 1993, and acquired First Federal  Savings Bank of Lake
County (the "Bank")  (together,  the  "Company") in  connection  with the Bank's
conversion  to stock form on January 4, 1994.  The Holding  Company is a savings
and  loan  holding  company  subject  to  regulation  by the  Office  of  Thrift
Supervision  ("OTS") which transacts its business  through its  subsidiary,  the
Bank.  The  Bank is a  community-oriented  savings  institution  which  offers a
variety of financial services to individuals and businesses primarily located in
Lake County, Sumter County and Citrus County,  Florida. The deposits of the Bank
are insured by the Federal Deposit  Insurance  Corporation  ("FDIC") through the
Savings Association Insurance Fund ("SAIF").

CORPORATE ORGANIZATION

Holding Company
    FFLC Bancorp, Inc.

Thrift Subsidiary
    First Federal Savings Bank of Lake County

Affiliate of Thrift Subsidiary
    Lake County Service Corporation

GENERAL INFORMATION

Corporate Headquarters
    800 North Boulevard West, Post Office Box 490420, Leesburg, Florida 34749
    -0420

Annual Meeting
    The  Annual  Meeting  of the  Stockholders  will  be  held  at the  Leesburg
    Community Building located at 109 East Dixie Avenue in Leesburg at 2:00 p.m.
    on May 4, 2000.

Form 10-K
    A copy  of the  Form  10-K,  as  filed  with  the  Securities  and  Exchange
    Commission,  may be obtained by  stockholders  without  charge upon  written
    request to Sandra L.  Rutschow,  Vice  President - Secretary,  FFLC Bancorp,
    Inc., Post Office Box 490420,  Leesburg,  Florida 34749-0420.  The Company's
    SEC filings are also available at our web site, http://www.1stfederal.com.

Stockholder Assistance
    Stockholders  requiring a change of address,  records or  information  about
    lost certificates, dividend checks or dividend reinvestment should contact:

       Registrar and Transfer Company
       10 Commerce Drive
       Cranford, New Jersey 07016
       800-368-5948

Corporate Counsel
    George W. Murphy, Jr.
    Muldoon, Murphy & Faucette LLP
    5101 Wisconsin Avenue
    Washington, D.C. 20016
<PAGE>
Independent Auditors
    Hacker, Johnson, Cohen & Grieb PA
    Certified Public Accountants
    930 Woodcock Road, Suite 211
    Orlando, Florida 32803




Visit FFLC's  Internet  Site at  http://www.1stfederal.com.  This site  provides
up-to-date  rates for  certificates  of deposit and mortgage  loans,  as well as
access to FFLC's current stock quotes and SEC filings.



                                       1
<PAGE>
                             FIRST FEDERAL LOGO HERE


OFFICE LOCATIONS

MAP INSERT MAP - HALF PAGE





COMMON STOCK PRICES AND DIVIDENDS

FFLC's  common stock is traded in the  over-the-counter  market and is quoted on
the National  Association of Securities  Dealers Automated  Quotation - National
Market System  ("NASDAQ - National  Market  System")  under the symbol FFLC. The
following table sets forth market price information, based on closing prices, as
reported by the NASDAQ -National Market System for the common stock high and low
closing  sales prices and the amount of  dividends  paid on the common stock for
the periods indicated.  See Note 19 of the Consolidated Financial Statements for
a summary of quarterly financial data.

                                                                         Cash
                                                                       Dividends
                                                                         Paid
                                                 High       Low        Per Share
         Quarter Ended:

         March 31, 1998.....................    21 3/4     18 3/4        .09
         June 30, 1998......................    21 3/4     19            .09
         September 30, 1998.................    20         16 1/2        .09
         December 31, 1998..................    17 3/8     14 3/4        .09
         March 31, 1999.....................    18 1/2     15 1/2        .11
         June 30, 1999......................    19         16            .11
         September 30, 1999.................    18 1/8     17 1/2        .11
         December 31, 1999..................    17 7/8     13 1/4        .11

As of February 1, 2000, the Company had 810 holders of record of common stock.



                                       2

<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL  HIGHLIGHTS
(Dollars in thousands, except per share amounts)

AT YEAR END:                                                                         1999          1998        1997
                                                                                 -----------    ---------   ---------
<S>                                                                              <C>            <C>         <C>
Total assets..................................................................   $   590,432      463,820     400,237
Loans receivable, net.........................................................   $   501,131      389,059     315,353
Securities ...................................................................   $    36,909       40,392      58,598
Deposits......................................................................   $   429,274      351,030     315,390
Equity........................................................................   $    55,637       53,223      51,429
Book value per share..........................................................   $     15.52        14.56       13.74
Shares outstanding ...........................................................     3,583,938    3,655,620   3,743,988
Equity-to-assets ratio........................................................         9.42%        11.47%      12.85%
Nonperforming assets to total assets..........................................          .47%          .17%        .19%

FOR THE YEAR:

Interest income...............................................................    $   38,612       32,173      28,156
Net interest income after provision for loan losses...........................    $   16,679       14,220      12,091
Net income....................................................................    $    5,402        4,397       3,754
Basic income per share........................................................    $     1.52         1.22        1.01
Diluted income per share......................................................    $     1.47         1.16         .96
Loan originations funded......................................................    $  195,034      151,411     143,538
Return on average assets......................................................         1.03%        1.05%        1.00%
Return on average equity......................................................         9.89%        8.37%        7.18%
Average equity to average assets ratio........................................        10.45%       12.52%       13.93%
Noninterest expense to average assets.........................................         1.97%        2.01%        1.99%
<CAPTION>

YIELDS AND RATES:
                                                                  Weighted Average
                                                                   Rate or Yield           Average Rate or Yield During
                                                                  at December 31,              Year Ended December 31,
                                                              ----------------------       ----------------------------
                                                              1999              1998        1999        1998      1997
                                                              ----              ----        ----        ----      ----
<S>                                                           <C>              <C>         <C>         <C>         <C>
Loans ..................................................      7.88%            7.96%       7.99%       8.27%       8.31%
Securities..............................................      6.22%            6.37%       5.83%       6.32%      6.35%
All interest-earning assets ............................      7.66%            7.72%       7.73%       7.96%      7.80%
Deposits................................................      4.53%            4.58%       4.56%       4.78%      4.87%
All interest-bearing liabilities .......................      4.84%            4.67%       4.70%       4.88%      4.94%
Interest-rate spread (1)................................      2.82%            3.05%       3.03%       3.08%      2.86%
Net yield on average interest-earning assets (2)........       N/A              N/A        3.48%       3.69%      3.53%
</TABLE>
<PAGE>
(1)   Average yield on all interest-earning assets less average rate paid on all
      interest-bearing liabilities.
(2)   Net interest income divided by average interest-earning assets.


                                       3
<PAGE>
                                    LOGO HERE


Dear Stockholders:

Once again, I am pleased to have the opportunity to present to our stockholders,
customers and friends,  information about the Company's  operations for the past
year.  We have again  enjoyed a successful  year,  and I would like to take this
opportunity  to  thank  all  of  you  - our  stockholders,  our  customers,  our
communities,  and our  employees  - for your  efforts  and  support  as we moved
through 1999 and into the year 2000.

We all had high  expectations for the transition to the new millennium,  and the
Company did indeed  experience a most eventful year. We enjoyed record  earnings
for the year,  opened three new branches,  and approved the  establishment  of a
dividend  reinvestment  plan for  stockholders.  First Federal Savings Bank, the
Company's subsidiary, again set records for total assets, total loan volume, and
total deposits. And, of course, we successfully navigated the Y2K transition!

For 1999,  the Company  earned $5.4 million,  a 23% increase over 1998. On a per
share  basis,  basic net income per share for 1999 was $1.52,  compared to $1.22
for 1998. As we previously reported to you, the 1999 consolidated  earnings were
positively impacted in the first quarter of 1999 by a $553,000 after-tax gain on
the  sale of  commercial  land  owned  by Lake  County  Service  Corporation,  a
subsidiary of the Bank.  Excluding  that gain,  the Company's  consolidated  net
income would have been $4.8 million for the year ended  December 31, 1999, a 10%
increase  when compared to 1998.  Basic income per share for 1999  excluding the
gain would have been $1.36, an increase of 11% over 1998.

Asset  growth  continues to be an  important  focal point for the  Company.  The
Company's  total assets grew from $463.8  million at December 31, 1998 to $590.4
million at December 31, 1999. During 1999, the Bank's loan originations  totaled
$238.2 million,  a 20% increase over the $198.7 million of originations in 1998.
Originations  of residential  loans were $133.3 million,  commercial  loans were
$59.2  million,  and consumer  loans were $45.7  million for 1999.  Those volume
levels  compare  to  $109.2   million,   $58.9   million,   and  $31.0  million,
respectively, for 1998.

The Company's  growth was funded by increases in the Bank's deposits and Federal
Home Loan Bank  advances.  During  1999,  the Bank's  deposits  grew from $351.0
million  to  $429.3  million,  an  increase  of 22%.  Of the total  increase  in
deposits,  checking and other transaction  accounts grew $17.6 million (or 19%),
while certificates of deposit grew $60.6 million (or 23%). During 1999, advances
from the Federal Home Loan Bank grew $43 million (77%),  from $56 million to $99
million.


                                       4
<PAGE>
As we look forward to 2000, we are excited about the  opportunity we have to add
interactive  Internet  banking  to our list of  banking  products.  We have been
working on the  development of our interactive  Internet  banking  product,  and
expect to be able to launch this project in the second  quarter of 2000.  We are
also  excited  about  the  opening  in mid 2000 of our new  Loan  Administration
building,  located  immediately  behind our Main Office,  which will allow us to
continue to grow our Lending activities. When that building is finished, we plan
to begin  remodeling our Main Office in order to continue to serve our customers
in the most efficient and convenient manner.

We are also very pleased to offer our  stockholders  the opportunity to reinvest
dividends automatically on the Company's common stock, through the FFLC Bancorp,
Inc. Dividend  Reinvestment Plan (the "Plan").  That Plan, which was established
in January 2000, allows registered  stockholders of at least 50 shares of common
stock to reinvest  regular  dividends  on all or a portion of their common stock
into additional shares. The Plan also allows  participants to make optional cash
purchases of common stock, and all costs, including brokerage  commissions,  are
paid by the  Company.  A booklet  describing  the Plan in detail  was  mailed to
stockholders  in January.  If you would like a copy of that booklet,  there is a
reply card included in this Annual Report that you can complete and return.

In spite of the success we enjoyed this year,  the  performance of the Company's
stock did not reflect our  profitability  and growth.  Perhaps because of all of
the attention directed toward the Y2K transition, or toward "technology" stocks,
or the uncertainty  the market has felt toward future interest rates,  financial
stocks - including the Company's - were at best  neglected by the market.  While
we wish the market would fully  credit us with the success we are  experiencing,
we remain  convinced that our best strategy for creating  long-term value to our
stockholders is to focus on profitability and excellence in customer service. We
truly appreciate the loyalty and support of our stockholders, our customers, and
our  employees.  We  remain  committed  to  doing  what we can to  increase  the
long-term value of our Company.  That commitment  includes meeting our customers
needs,  the  investment  needs  of  our  stockholders,  and  the  needs  of  the
communities  in which we have the  privilege to serve.  We believe FFLC Bancorp,
Inc.  is well  positioned  to meet  those  needs,  and we  look  forward  to the
opportunities before us.

Cordially yours,



Stephen T. Kurtz
President and Chief Executive Officer


                                       5
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
                                                                                      At December 31,
                                                                -----------------------------------------------------
                                                                   1999        1998        1997      1996      1995
                                                                   ----        ----        ----      ----      ----

<S>                                                             <C>           <C>         <C>       <C>       <C>
Total assets.................................................   $ 590,432     463,820     400,237   346,442   325,832
Loans receivable, net........................................     501,131     389,059     315,353   227,948   183,448
Cash and cash equivalents....................................      34,339      22,928      15,684    10,157    13,929
Securities ..................................................      36,909      40,392      58,598    98,568   119,148
Deposits   ..................................................     429,274     351,030     315,390   282,664   267,703
Borrowed funds...............................................     102,914      56,789      30,000     8,198       150
Stockholders' equity.........................................      55,637      53,223      51,429    53,626    55,360

<CAPTION>
                                                                         For the Year Ended December 31,
                                                              -------------------------------------------------------
                                                                 1999       1998          1997      1996       1995
                                                                 ----       ----          ----      ----       ----
<S>                                                           <C>            <C>         <C>        <C>        <C>
Interest income...........................................    $  38,612      32,173      28,156     24,218     22,493
Interest expense..........................................       21,214      17,271      15,416     12,959     12,183
Net interest income.......................................       17,398      14,902      12,740     11,259     10,310
Provision for loan losses.................................          719         682         649        107        124
Net interest income after provision for loan losses.......       16,679      14,220      12,091     11,152     10,186
Noninterest income........................................        2,332       1,264       1,219        809        709
Noninterest expense.......................................       10,313       8,446       7,473      8,299      5,874
Income before provision for income taxes..................        8,698       7,038       5,837      3,662      5,021
Provision for income taxes................................        3,296       2,641       2,083      1,478      1,928
Net income ...............................................        5,402       4,397       3,754      2,184      3,093
Basic income per share (1)................................         1.52        1.22        1.01        .54        .73
Weighted average number of common
      shares outstanding for basic (1)....................    3,548,568   3,592,253   3,700,220  4,069,825  4,232,498
Diluted income per share (1)..............................      $  1.47        1.16         .96        .51        .70
Weighted average number of common shares
      outstanding for diluted (1).........................    3,677,038   3,777,085   3,911,256  4,267,992  4,427,098
</TABLE>

-----------
(1)   All per share amounts have been restated to reflect the five-for-three
      stock split in November, 1997.


                                       6
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL RATIOS
AND OTHER DATA:
                                                                           At or For the Year Ended December 31,
                                                                   ---------------------------------------------------
                                                                    1999       1998        1997      1996        1995
                                                                    ----       ----        ----      ----        ----

<S>                                                                  <C>        <C>        <C>        <C>         <C>
Return on average assets.....................................        1.03%      1.05%      1.00%      0.65%       0.98%
Return on average equity.....................................        9.89%      8.37%      7.18%      3.94%       5.59%
Dividend payout ratio .......................................       28.95%     29.51%     28.51%     44.71%      25.86%
Average equity to average assets.............................       10.45%     12.52%     13.93%     16.62%      17.46%
Total equity to total assets.................................        9.42%     11.47%     12.85%     15.48%      16.99%
Interest rate spread during year(1)..........................        3.03%      3.08%      2.86%      2.73%       2.54%
Net interest margin (2)......................................        3.48%      3.69%      3.53%      3.50%       3.35%
Nonperforming assets to total assets (3).....................        0.47%      0.17%      0.19%      0.30%       0.10%
Nonperforming loans to total loans (4).......................        0.46%      0.11%      0.07%      0.28%       0.09%
Allowance for loan losses to non-performing loans............      119.01%    514.19%    695.87%    159.61%     561.49%
Allowance for loan and REO
      losses to nonperforming assets.........................      101.77%    281.85%    224.83%    103.51%     288.48%
Allowance for loan losses to gross loans.....................        0.54%      0.57%      0.51%      0.45%       0.52%
Operating expenses to average assets.........................        1.97%      2.01%      1.99%      2.49%       1.85%
Average interest-earning assets to
      average interest-bearing liabilities...................        1.11       1.14       1.16       1.18        1.20
Net interest income to noninterest expenses..................        1.69       1.76       1.70       1.36        1.76
Total shares outstanding (5).................................   3,583,938  3,655,620  3,743,988  4,062,895   4,395,593
Book value per common share outstanding (5)..................     $ 15.52      14.56      13.74      13.20       12.59
Number of banking offices (all full-service).................          12          9          9          9           8

</TABLE>
-----------
(1)  Difference  between weighted average yield on all  interest-earning  assets
     and weighted average rate on all interest-bearing liabilities.
(2)  Based upon net interest income before  provision for loan losses divided by
     average interest-earning assets.
(3)  Nonperforming  assets consist of  nonperforming  loans and foreclosed  real
     estate.
(4)  Nonperforming loans consist of loans 90 days or more delinquent.
(5)  All per share  amounts  have been  restated to reflect  the  five-for-three
     stock split in November, 1997.

                                       7
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

GENERAL

First Federal Savings Bank of Lake County, the subsidiary of FFLC, was organized
in 1934 as a federally chartered savings and loan association and converted to a
federally  chartered stock savings bank on January 4, 1994. The Bank's principal
business  continues to be attracting retail deposits from the general public and
investing  those  deposits,  together  with  principal  repayments  on loans and
investments  and funds  generated from  operations,  primarily in mortgage loans
secured  by   one-to-four-family,   owner-occupied   homes,   commercial  loans,
securities  and, to a lesser  extent,  construction  loans,  consumer  and other
loans, and multi-family  residential mortgage loans. In addition, the Bank holds
investments  permitted  by federal  laws and  regulations  including  securities
issued by the U.S.  Government  and agencies  thereof.  The Bank's  revenues are
derived  principally  from interest on its loan and  mortgage-backed  securities
portfolios and interest and dividends on its investment securities.

The Bank is a  community-oriented  savings  institution  offering  a variety  of
financial  services to meet the needs of the  communities it serves.  The Bank's
deposit  gathering  and  lending  markets  are  primarily  concentrated  in  the
communities  surrounding its full service  offices  located in Lake,  Sumter and
Citrus  counties in central  Florida.  Management  believes that its offices are
located in communities  that generally can be characterized as rural service and
retirement communities with residential neighborhoods comprised predominately of
one-to-four-family   residences.  The  Bank  is  the  largest  (by  asset  size)
locally-based  financial  institution in Lake County, and serves its market area
with a wide selection of residential  mortgage loans and other retail  financial
services.  Management considers the Bank's reputation for financial strength and
customer  service as a major advantage in attracting and retaining  customers in
its market area and believes it benefits from its community  orientation as well
as its established deposit base and level of core deposits.

The Company had net income of $5.4 million for the year ended December 31, 1999,
compared to net income of $4.4 million for the year ended  December 31, 1998. At
December 31, 1999, the Bank had total assets of $590.4  million,  an increase of
27.3% over total assets of $463.8  million at December 31, 1998.  That  increase
resulted  primarily  from an $112.0  million,  or 28.8%,  increase  in net loans
receivable  from  $389.1  million  at  December  31,  1998 to $501.1  million at
December  31,  1999,  reflecting  increased  local  loan  demand.  Cash and cash
equivalents  increased  $11.4  million  or 49.8%  from  $22.9  million  to $34.3
million.  Securities  decreased  $3.5  million  or 8.7%  during  1999.  Deposits
increased $78.2 million,  or 22.3%,  from $351.1 million at December 31, 1998 to
$429.3  million at December 31, 1999.  Advances  from the Federal Home Loan Bank
increased $43.0 million, while other borrowed funds increased $3.1 million for a
net  increase  of $46.1  million or 81.2% in  borrowings.  Stockholders'  equity
increased $2.4 million.




                                       8
<PAGE>
REGULATION AND LEGISLATION

General

The operating  results of the Bank are affected by Federal laws and  regulations
and the Bank is subject to extensive regulation,  examination and supervision by
the Office of Thrift  Supervision  ("OTS"),  as its chartering  agency,  and the
Federal Deposit Insurance Corporation ("FDIC"), as the deposit insurer. The Bank
is a member of the  Federal  Home  Loan Bank  ("FHLB")  System  and its  deposit
accounts  are  insured  up to  applicable  limits  by the  FDIC  under  the SAIF
("Savings  Association Insurance Fund"). The 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 financial  institutions.  The OTS and
the FDIC  conduct  periodic  examinations  to test the  Bank's  compliance  with
various regulatory requirements.  The activities of the Company and the Bank are
governed by the Home Owner's Loan Act, as amended (the "HOLA"),  and, in certain
respects,  the Federal  Deposit  Insurance  Act (the  "FDIA").  A more  complete
description of the HOLA and FDIA is included in the Form 10-K.

Capital Requirements

The OTS capital regulations  require savings  institutions to meet three capital
standards: a 1.5% tangible capital standard; a 3% leverage (core capital) ratio;
and an 8% risk-based  capital  standard.  Under the OTS final rule  implementing
FDICIA,  generally, a well-capitalized  institution is defined as one that meets
the following capital standards:  a 5% tangible capital standard;  a 6% leverage
(core capital) ratio; and a 10% risk-based  capital  standard,  and has not been
notified by its federal banking agency that it is in a "troubled  condition." At
December 31,  1999,  the Bank met each of its capital  requirements  and met the
criteria of a "well-capitalized" institution as defined above.

Insurance of Deposit Accounts

The FDIC has adopted a risk-based deposit insurance system that assesses deposit
insurance  premiums  according to the level of risk involved in an institution's
activities. An institution's risk category is based upon whether the institution
is  classified as "well  capitalized,"  "adequately  capitalized"  or "less than
adequately  capitalized" and one of three supervisory  subcategories within each
capital group.  The supervisory  subgroup to which an institution is assigned is
based on a supervisory  evaluation and information  which the FDIC determines to
be relevant to the institution's  financial  condition and the risk posed to the
deposit  insurance fund.  Effective January 1, 1997, the FDIC lowered the annual
assessment  rates  for  SAIF  members  to 0 to 27  basis  points.  The  FDIC has
authority to raise  premiums if deemed  necessary.  If such action is taken,  it
could have an adverse effect on the earnings of the institution.

Under the FDIA,  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 Bank does not know of any  practice,  condition or
violation that might lead to termination of deposit insurance.
<PAGE>
CREDIT RISK

The Bank's primary business is lending on residential  real estate,  an activity
with the inherent  risk of  generating  potential  loan losses the  magnitude of
which depend on a variety of factors  affecting  borrowers  which are beyond the
control of the Bank.  The Bank has  underwriting  guidelines  and credit  review
procedures designed to minimize such credit losses.

                                       9
<PAGE>
RESULTS OF OPERATIONS

The  Company's  results of operations  are  dependent  primarily on net interest
income,   which  is  the   difference   between   the   income   earned  on  its
interest-earning  assets,  primarily its loans,  mortgage-backed  securities and
investment  securities,  and its  interest-bearing  liabilities,  consisting  of
deposits  and  borrowings.  The  operating  expenses of the Company  principally
consist of employee compensation,  occupancy expenses, federal deposit insurance
premiums and other general and administrative expenses. The Company's results of
operations are also  significantly  affected by general economic and competitive
conditions,  particularly changes in market interest rates,  government policies
and actions of regulatory authorities.

Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing  liabilities. Net interest income depends
upon the volume of interest-earning assets and interest-bearing  liabilities and
the interest rates earned or paid on them.

                                       10
<PAGE>
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend  income of the Company from
interest-earning  assets and the resultant average yields; (ii) the total dollar
amount of interest  expense on  interest-bearing  liabilities  and the resultant
average costs; (iii) net  interest/dividend  income; (iv) interest-rate  spread;
(v) net interest margin;  and (vi) weighted average yields and rates at December
31,  1999.  Yields and costs were  derived by dividing  income or expense by the
average balance of assets or liabilities,  respectively,  for the periods shown.
The average balance of loans receivable  includes loans on which the Company has
discontinued  accruing  interest.  The yields and costs  include  fees which are
considered to constitute adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                          ---------------------------------------------------------------
                                                                       1999                              1998
                                                          ---------------------------------------------------------------
                                            Yield At                           Average                            Average
                                         December 31,     Average              Yield/       Average               Yield/
                                            1999          Balance    Interest   Cost        Balance     Interest   Cost
                                            ----          -------    --------   ----        -------     --------   ----
                                                                                    (Dollars in thousands)
Interest-earning assets:
<S>                                         <C>         <C>           <C>       <C>       <C>            <C>       <C>
    Loans receivable...................     7.88%       $ 442,213     35,315    7.99%     $ 343,967      28,450    8.27%
    Securities.........................     6.22           37,951      2,213    5.83         44,533       2,814    6.32
    Other interest-earning assets (1)..     5.03           19,404      1,084    5.59         15,606         909    5.82
                                                        ---------     ------              ---------      ------
         Total interest-earning assets.     7.66          499,568     38,612    7.73        404,106      32,173    7.96
                                                                      ------                             ------
Noninterest-earning assets.............                    23,062                            15,130
                                                        ---------                         ---------

         Total assets..................                 $ 522,630                         $ 419,236
                                                        =========                         =========
Interest-bearing liabilities:
    NOW and money market
       accounts........................     2.67           66,892      1,631    2.44         49,862       1,088    2.18
    Passbook and statement savings
       accounts........................     2.00           22,170        485    2.19         23,683         517    2.18
    Certificates.......................     5.30          285,898     14,967    5.24        246,375      13,674    5.55
    FHLB advances......................     5.64           74,515      4,038    5.42         33,718       1,991    5.90
    Other borrowings...................     4.75            1,916         93    4.85             14           1    7.14

         Total interest-bearing
           liabilities.................     4.84          451,391     21,214    4.70        353,652      17,271    4.88
                                                                      ------                             ------
Noninterest-bearing deposits...........                    10,411                             7,602
Noninterest-bearing liabilities........                     6,202                             5,473
Stockholders' equity...................                    54,626                            52,509
                                                        ---------                         ---------

         Total liabilities and equity..                 $ 522,630                         $ 419,236
                                                        =========                         =========
Net interest-earning assets and
    interest-rate spread (2)...........     2.82%       $  48,177               3.03%     $  50,454                3.08%
                                            ====        =========               ====      =========                ====
Net interest income and net
    margin (3).........................                             $ 17,398    3.48%                  $  14,902  3.69%
Ratio of interest-earning assets
    to interest-bearing liabilities....                      1.11                                           1.14
                                                             ====                                           ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                         1997
                                            ---------------------------
                                                                Average
                                             Average             Yield/
                                             Balance  Interest    Cost
                                             -------  --------    ----
<S>                                         <C>        <C>        <C>
Interest-earning assets:
    Loans receivable...................     $ 268,425  22,318     8.31%
    Securities.........................        82,720   5,250     6.35
    Other interest-earning assets (1)..        10,000     588     5.88
                                            ---------  ------
         Total interest-earning assets.       361,145  28,156     7.80
                                                       ------
Noninterest-earning assets.............        14,160
                                            ---------

         Total assets..................     $ 375,305
                                            =========

Interest-bearing liabilities:
    NOW and money market
       accounts........................        40,819     991     2.43
    Passbook and statement savings
       accounts........................        24,963     687     2.75
    Certificates.......................       227,271  12,601     5.54
    FHLB advances......................        13,226     814     6.15
    Other borrowings...................         5,629     323     5.74
                                            ---------  ------
         Total interest-bearing
           liabilities.................       311,908  15,416     4.94
                                                       ------
Noninterest-bearing deposits...........         5,838
Noninterest-bearing liabilities........         5,285
Stockholders' equity...................        52,274
                                            ---------

         Total liabilities and equity..     $ 375,305
                                            =========

Net interest-earning assets and
    interest-rate spread (2)...........     $  49,237             2.86%
                                            =========             ====

Net interest income and net
    margin (3).........................                $ 12,740   3.53%
                                                       ========   ====
Ratio of interest-earning assets
    to interest-bearing liabilities....          1.16
                                                 ====

</TABLE>
-----------
(1)    Includes interest-bearing deposits, federal funds sold and FHLB Stock.
(2)    Interest-rate  spread represents the difference between the average yield
       on  interest-earning  assets and the  average  cost of  interest  bearing
       liabilities.
(3)    Net interest margin is net  interest income divided  by average interest-
       earning assets.

                                       11
<PAGE>
The following  table discloses the extent to which changes in interest rates and
changes  in  the  volume  of   interest-earning   assets  and   interest-bearing
liabilities  have affected the Company's  interest  income and interest  expense
during the periods  indicated.  Information  is provided in each  category  with
respect to (i)  changes  attributable  to changes in volume  (changes  in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate multiplied by prior volume) and (iii) changes attributable to changes in
rate/volume (changes in rate multiplied by changes in volume).
<TABLE>
<CAPTION>

                                               Year Ended December 31,                  Year Ended December 31,
                                                     1999 vs. 1998                           1998 vs. 1997
                                                  Increase (Decrease)                     Increase (Decrease)
                                            ----------------------------------      ---------------------------------
                                                        Due to                                  Due to
                                            ----------------------------------      ---------------------------------
                                                               Rate/                                  Rate/
                                            Rate    Volume     Volume      Net      Rate   Volume     Volume      Net
                                            ----    ------     ------      ---      ----   ------     ------      ---
                                                                          (Dollars in thousands)
<S>                                        <C>        <C>      <C>       <C>        <C>     <C>         <C>     <C>
Interest-earning assets:
    Loan receivable, net.................  $  (981)   8,126    (280)     6,865      (116)   6,281       (33)    6,132
    Securities...........................     (217)    (416)     32       (601)      (23)  (2,424)       11    (2,436)
    Other interest-earning (1)...........      (37)     221      (9)       175        (6)     330        (3)      321
                                            ------   ------    ----     ------      ----   ------        --    ------

           Total.........................   (1,235)   7,931    (257)     6,439      (145)   4,187       (25)    4,017
                                             -----    -----     ---      -----       ---    -----        --     -----

Interest-bearing liabilities:
    NOW and money market accounts........      128      371      44        543      (100)     219       (22)       97
    Passbook and
        statement savings accounts.......        1      (33)   -           (32)     (142)     (35)        7      (170)
    Certificates.........................     (776)   2,193    (124)     1,293        13    1,059         1     1,073
    FHLB advances........................     (164)   2,409    (198)     2,047       (24)   1,219       (18)    1,177
    Other borrowings.....................      -        136     (44)        92       -       (322)      -        (322)
                                             -----   ------    ----    -------      ----   ------      ----    ------

           Total.........................     (811)   5,076    (322)     3,943      (253)   2,140       (32)    1,855
                                            ------    -----     ---      -----       ---    -----        --     -----

Net change in net interest
    income ...............................  $ (424)    2,855       65   2,496        108     2,047        7     2,162
                                            ======     =====       ==   =====        ===     =====        =     =====
</TABLE>
-----------

(1) Includes interest-bearing deposits, federal funds sold and FHLB Stock.

                                       12

<PAGE>
LIQUIDITY AND CAPITAL  RESOURCES

The Bank is required to maintain  minimum  levels of liquid assets as defined by
OTS regulations.  That  requirement,  which varies  periodically  depending upon
economic  conditions and deposit  flows,  is based upon a percentage of deposits
and  short-term  borrowings.   The  current  required  ratio  is  4%.  The  Bank
historically has maintained a level of liquid assets in excess of the regulatory
requirement.  Liquid assets  consist of cash,  cash  equivalents  and short- and
intermediate-term   U.S.  Government  and  government  agency  securities.   The
maintenance  of liquid assets allows for the  possibility  of  disintermediation
when interest rates  fluctuate.  The Bank's liquidity ratios were 18.7% and 8.8%
at December 31, 1999 and December 31, 1998, respectively.

The Bank's  sources of funds include  proceeds from payments and  prepayments on
mortgage loans and mortgage-backed  securities,  proceeds from the maturities of
investment securities and deposits.  While maturities and scheduled amortization
of loans and investment  securities are  predictable  sources of funds,  deposit
inflows and mortgage  prepayments  are greatly  influenced by local  conditions,
general interest rates, and regulatory changes.

At December 31, 1999,  the Bank had  outstanding  commitments  to originate $7.8
million of loans,  to fund unused lines of credit of $33.6 million,  to fund the
undisbursed  portion  of loans in process of $15.9  million  and $.7  million in
outstanding  standby  letters of  credit.  The Bank  believes  that it will have
sufficient  funds  available  to meet its  commitments.  At December  31,  1999,
certificates  of  deposit  which  were  scheduled  to mature in one year or less
totaled $205.6 million.  Management believes,  based on past experience,  that a
significant portion of these funds will remain with the Bank.

REGULATORY  CAPITAL  REQUIREMENTS

As a federally-chartered financial institution, the Bank is required to maintain
certain  minimum  amounts of  regulatory  capital.  Regulatory  capital is not a
valuation  allowance and has not been created by charges against  earnings.  The
following  table  provides a summary  of the  capital  requirements,  the Bank's
regulatory capital and the amounts in excess at December 31, 1999:
<TABLE>
<CAPTION>

                                                         Tangible                Core                    Risk-Based
                                                     ----------------       ------------------        ----------------
                                                               % of                      % of               % of Risk-
                                                             Adjusted                 Adjusted               Weighted
                                                     Amount    Assets        Amount     Assets        Amount   Assets
                                                     ------    ------        ------     ------        ------   ------
                                                                          (Dollars in thousands)
<S>                                                <C>          <C>        <C>           <C>        <C>          <C>
      Regulatory capital.......................... $ 51,177     8.68%      $ 51,177      8.68%      $ 53,894     14.92%
      Requirement.................................    8,841     1.50         17,681      3.00         28,893      8.00
                                                    -------     ----         ------      ----         ------     -----

      Excess...................................... $ 42,336     7.18%      $ 33,496      5.68%      $ 25,001      6.92%
                                                     ======     ====         ======      ====         ======     =====
</TABLE>
<PAGE>
MARKET RISK

Market  risk is the risk of loss from  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 9 of Notes to Consolidated Financial Statements.

The Company"s  primary objective in 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  management  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.

                                       13
<PAGE>
ASSET /LIABILITY MANAGEMENT

The Bank's primary  mission is to provide home  ownership by offering  permanent
and  construction  residential  mortgage  loans and  consumer  financing  and by
providing  conveniently located depository facilities with transaction,  savings
and   certificate   accounts.   The  Bank's   goal  is  to   continue  to  be  a
well-capitalized   and  profitable  operation  that  provides  service  that  is
professional, efficient and courteous. The Bank seeks to fulfill its mission and
accomplish  its goals by pursuing  the  following  strategies:  (i)  emphasizing
lending in the one-to-four-family  residential mortgage market; (ii) controlling
interest-rate  risk;  (iii)  managing  deposit  pricing and asset  growth;  (iv)
emphasizing  cost  control;  and (v)  maintaining  asset quality by investing in
mortgage-backed  securities which, in management's  judgment,  provide a balance
between  yield  and  safety  in  a  home  mortgage  related  investment.  It  is
management's   intention  to  continue  to  employ  these  strategies  over  the
foreseeable future.

The Bank's profitability, like that of most financial institutions, is dependent
to a large extent upon its net interest income,  which is the difference between
its interest income on interest-earning  assets, such as loans,  mortgage-backed
securities   and   investment   securities,   and  its   interest   expense   on
interest-bearing liabilities,  such as deposits and other borrowings.  Financial
institutions  continue to be  affected by general  changes in levels of interest
rates and other economic factors beyond their control. At December 31, 1999, the
Bank's one-year interest  sensitivity gap (the difference  between the amount of
interest-earning assets anticipated by the Bank, to mature or reprice within one
year and the amount of interest-bearing  liabilities anticipated by the Bank, to
mature  or  reprice  within  one year) as a  percentage  of total  assets  was a
negative 2.98%. Generally, an institution with a negative gap would experience a
decrease  in net  interest  income in a period of  rising  interest  rates or an
increase  in net  interest  income  in a period  of  declining  interest  rates.
However, certain shortcomings are inherent in the sensitivity analysis presented
above.  For example,  although  certain assets and  liabilities may have similar
maturities  or  periods to  repricing,  they may react in  different  manners to
changes in market interest rates.  Therefore, no assurance can be given that the
Bank will be able to maintain its net  interest-rate  spread as market  interest
rates fluctuate.

The Bank monitors its interest-rate risk through the  Asset/Liability  Committee
which meets weekly and reports the results of such  monitoring  quarterly to the
Board of Directors.  The Bank's policy is to seek to maintain a balance  between
interest-earning  assets  and  interest-bearing  liabilities  so that the Bank's
cumulative  one-year  gap ratio is within a range which  management  believes is
conducive to maintaining  profitability  without  incurring undue risk. The Bank
has  increased  its  investment  in  adjustable-rate  and shorter  average life,
fixed-rate  mortgage-related  securities in order to position itself against the
consequences of rising interest rates.  The Bank also maintains liquid assets in
excess  of  the  regulatory   requirement,   allowing  for  the  possibility  of
disintermediation  when interest rates fluctuate.  The Bank's liquidity ratio of
18.7%  at  December  31,  1999  is  significantly  higher  than  the  regulatory
requirement  of 4% due in part to the  preparation  of the  Company  for Y2K. In
addition,  the  Bank's  large  stable  core  deposit  base  resulting  from  its
continuing  commitment to quality customer service has historically  provided it
with a steady source of funds.



                                       14
<PAGE>
The  following  table sets  forth the  amounts  of  interest-earning  assets and
interest-bearing  liabilities outstanding at December 31, 1999 that are expected
to reprice, based upon certain assumptions, in each of the future periods shown.
<TABLE>
<CAPTION>
                                              More        More       More      More      More
                                              than        than      than       than      than
                                              Three      Six         One       Three     Five       More
                                  Three       Months      Months    Year        Years    Years      than
                                  Months      to Six    to 12       to 3       to 5      to 10      Ten
                                  or Less     Months      Months    Years      Years     Years      Years     Total
                                  -------     ------      ------    -----      -----     -----      -----     -----
<S>                               <C>          <C>        <C>       <C>         <C>       <C>        <C>       <C>
Rate-sensitive assets:
   Mortgage loans, net of LIP..   $ 85,967     44,682     60,024    124,728     46,628    34,261     27,271    423,561
   Commercial and consumer
    loans......................     21,137      6,029     10,142     25,906     12,008     1,998        350     77,570
   Mortgage-backed
    securities.................      6,885      4,316      2,226      2,463      1,200       400       -        17,490
   Interest-earning deposits...     17,026       -          -          -          -         -          -        17,026
   Investment securities.......     1,608        -         2,991      4,946        982        63       -        10,590
   Mutual funds................      8,829       -          -          -          -         -          -         8,829
   FHLB stock .................      4,950       -          -          -          -         -          -         4,950
                                  --------     ------     ------    -------     ------    ------     ------    -------

       Total interest-earning
         assets................    146,402     55,027     75,383    158,043     60,818    36,722     27,621    560,016
                                  --------     ------     ------    -------     ------    ------     ------    -------
Rate-sensitive liabilities:
   Deposits:
       Savings accounts........      1,465      1,363      2,449      6,926      3,897     3,821      1,189     21,110
   NOW and money
    market accounts............      5,363      4,992      8,968     25,361     14,265    13,989      4,355     77,293
   Certificates................     62,644     76,012     67,208    110,148     3,759       -          -       319,771
   Borrowed funds..............     42,914     15,000      6,000     25,000     14,000      -          -       102,914
                                  --------     ------     ------    -------     ------    ------     ------    -------
       Total interest-bearing
         liabilities...........    112,386     97,367     84,625    167,435     35,921    17,810      5,544    521,088
                                  --------     ------     ------    -------     ------    ------     ------    -------

Interest-sensitivity gap.......  $  34,016    (42,340)    (9,242)    (9,392)    24,897    18,912     22,077     38,928
                                 =========    =======     ======     ======     ======    ======     ======     ======
Cumulative interest-
    sensitivity gap............  $  34,016     (8,324)   (17,566)   (26,958)    (2,061)   16,851     38,928
                                 =========    =======     ======     ======     ======    ======     ======
Cumulative interest-earning
    assets.....................  $ 146,402    201,429    276,812    434,855    495,673   532,395    560,016
                                 =========    =======     ======     ======     ======    ======     ======
Cumulative interest-bearing
    liabilities................  $ 112,386    209,753    294,378    461,813    497,734   515,544    521,088
                                 =========    =======     ======     ======     ======    ======     ======
Cumulative interest-sensitivity
    gap as a percentage of
    total assets...............       5.76%     (1.41)%    (2.98)%    (4.57)%   (0.35)%     2.85%      6.59%
                                      ====       ====       ====       ====     =====       ====       ====
Cumulative interest-earning
    assets as a percentage of
    cumulative interest-bearing
    liabilities................     130.27%     96.03%     94.03%     94.16%     99.59%   103.27%    107.47%
                                    ======      =====      =====      =====      =====    ======     ======
</TABLE>

                                       15
<PAGE>
         COMPARISON OF YEARS ENDED DECEMBER 31, 1999 TO DECEMBER 31, 1998

         General Operating  Results.  Net income for the year ended December 31,
            1999, was $5.4 million or $1.52 per basic income per share, compared
            to net income for the year ended  December  31, 1998 of $4.4 million
            or $1.22 per basic income per share.  The increase in net income was
            primarily  the result of an increase of $2.5 million in net interest
            income before  provision for loan losses for 1999,  partially offset
            by an increase of $1.9 million in noninterest expenses in 1999.

         Interest Income. Interest income increased $6.4 million, or 20.0%, from
            $32.2 million for the year ended  December 31, 1998 to $38.6 million
            for the year ended  December  31,  1999.  The increase was due to an
            increase in the average  balance of total  interest-earning  assets,
            primarily loans, from $404.1 million for the year ended December 31,
            1998 to $499.6  million for the year ended  December  31,  1999,  an
            increase of $95.5 million, or 23.6%,  partially offset by a decrease
            in the average yield on  interest-earning  assets from 7.96% for the
            year ended  December  31, 1998 to 7.73% for the year ended  December
            31, 1999.  The average yield on loans  decreased  from 8.27% for the
            year ended  December  31, 1998 to 7.99% for the year ended  December
            31, 1999.  The average yield on securities  decreased from 6.32% for
            the  year  ended  December  31,  1998 to 5.83%  for the  year  ended
            December  31,  1999.  The average  yield on other  interest  earning
            assets  decreased from 5.82% for the year ended December 31, 1998 to
            5.59% for the year ended December 31, 1999.

         Interest Expense.  Interest  expense  increased $3.9 million from $17.3
            million at December 31, 1998 to $21.2  million at December 31, 1999.
            The  increase  was due to a $97.7  million or 27.6%  increase in the
            average balance of total  interest-bearing  liabilities  from $353.7
            million for the year ended  December 31, 1998 to $451.4  million for
            the year ended December 31, 1999 offset in part by a decrease in the
            weighted-average  rate  paid on  interest-bearing  liabilities  from
            4.88% during 1998 to 4.70% in 1999.

         Provision  for Loan  Losses.  The  Bank's  provision  for  loan  losses
            increased  from  $682,000  for the year ended  December  31, 1998 to
            $719,000  for the year ended  December  31,  1999.  The  increase of
            $37,000  reflects the Bank's  continuing  policy of  evaluating  the
            adequacy of its allowance for loan losses and  prevailing  standards
            within the thrift  industry.  Generally,  such  evaluation  includes
            consideration of the level of nonperforming  loans and the level and
            composition of the Bank's loan portfolio.

         Noninterest Income.  Noninterest income increased from $1.3 million for
            the year ended  December 31, 1998 to $2.3 million for the year ended
            December 31, 1999. The increase was primarily due to a $886,000 gain
            recognized in 1999 from the sale of real estate held for development
            and a $117,000 increase in other service charges and fees.

         Noninterest Expense. Noninterest expense consists primarily of salaries
            and employee  benefits and occupancy  expense.  Noninterest  expense
            increased $1.9 million for the year ended December 31, 1999 compared
            to 1998.  The increase was primarily  due to a $998,000  increase in
            salaries and employee  benefits and a $459,000 increase in occupancy
            expense resulting from the growth of the Company.
<PAGE>
         Provision for Income Taxes.  The provision for federal and state income
            taxes  increased  from $2.6 million for the year ended  December 31,
            1998 to $3.3  million  for the year ended  December  31,  1999.  The
            effective tax rate  increased from 37.5% for the year ended December
            31, 1998 to 37.9% for the year ended December 31, 1999.




                                       16
<PAGE>
         COMPARISON OF YEARS ENDED DECEMBER 31, 1998 TO DECEMBER 31, 1997

         General Operating  Results.  Net income for the year ended December 31,
            1998, was $4.4 million or $1.22 per basic income per share, compared
            to net income for the year ended  December  31, 1997 of $3.8 million
            or $1.01 per basic income per share.  The increase in net income was
            primarily  the result of an increase of $2.2 million in net interest
            income before provision for loan losses for 1998.

         Interest Income.  Interest income increased $4.0 million,  or 14%, from
            $28.2 million for the year ended  December 31, 1997 to $32.2 million
            for the year ended  December  31,  1998.  The increase was due to an
            increase in the average  balance of total  interest-earning  assets,
            primarily loans, from $361.1 million for the year ended December 31,
            1997 to $404.1  million for the year ended  December  31,  1998,  an
            increase of $43 million, or 12% and an increase in the average yield
            on  interest-earning  assets from 7.80% for the year ended  December
            31, 1997 to 7.96% for the year ended  December 31, 1998. The average
            yield on loans  decreased from 8.31% for the year ended December 31,
            1997 to 8.27% for the year ended  December  31,  1998.  The  average
            yield on securities decreased from 6.35% for the year ended December
            31, 1997 to 6.32% for the year ended  December 31, 1998. The average
            yield on other interest  earning assets decreased from 5.88% for the
            year ended  December  31, 1997 to 5.82% for the year ended  December
            31, 1998.

         Interest Expense.  Interest  expense  increased $1.9 million from $15.4
            million at December 31, 1997 to $17.3  million at December 31, 1998.
            The  increase  was due to a $41.7  million  or 13%  increase  in the
            average balance of total  interest-bearing  liabilities  from $311.9
            million for the year ended  December 31, 1997 to $353.6  million for
            the year ended December 31, 1998 offset in part by a decrease in the
            weighted-average  rate  paid on  interest-bearing  liabilities  from
            4.94% during 1997 to 4.88% in 1998.

         Provision  for Loan  Losses.  The  Bank's  provision  for  loan  losses
            increased  from  $649,000  for the year ended  December  31, 1997 to
            $682,000  for the year ended  December  31,  1998.  The  increase of
            $33,000  reflects the Bank's  continuing  policy of  evaluating  the
            adequacy of its allowance for loan losses and  prevailing  standards
            within the thrift  industry.  Generally,  such  evaluation  includes
            consideration of the level of nonperforming  loans and the level and
            composition of the Bank's loan portfolio.

         Noninterest Income.  Noninterest income increased from $1.2 million for
            the year ended  December 31, 1997 to $1.3 million for the year ended
            December  31, 1998.  The increase was due to a $258,000  increase in
            other  service  charges  and fees and a $73,000  increase in deposit
            account fees, which was partially  offset by a $302,000  decrease in
            gain on sale of other assets.

         Noninterest Expense. Noninterest expense consists primarily of salaries
            and employee  benefits and occupancy  expense.  Noninterest  expense
            increased  $973,000 for the year ended December 31, 1998 compared to
            1997.  This  increase was  primarily  due to a $544,000  increase in
            salaries and employee  benefits and a $130,000 increase in occupancy
            expense, caused by growth of the Company.
<PAGE>
         Provision for Income Taxes.  The provision for federal and state income
            taxes  increased  from $2.1 million for the year ended  December 31,
            1997 to $2.6  million  for the year ended  December  31,  1998.  The
            effective tax rate  increased from 35.7% for the year ended December
            31, 1997 to 37.5% for the year ended December 31, 1998.

                                       17
<PAGE>
IMPACT OF INFLATION AND CHANGING PRICES

The Consolidated  Financial  Statements and Notes thereto  presented herein have
been  prepared in  accordance  with GAAP,  which  requires  the  measurement  of
financial  position and operating results in terms of historical dollars without
considering the changes in the relative  purchasing power of money over time due
to inflation.  The impact of inflation is reflected in the increased cost of the
Bank's operations.  Unlike most industrial companies,  nearly all the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a greater impact on the Bank's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services.



                                       18

<PAGE>
<TABLE>
<CAPTION>
                                                 FFLC BANCORP, INC.

                                             Consolidated Balance Sheets
                                     ($ in thousands, except per share amounts)


                                                                                                 December 31,
                                                                                           1999             1998
                                                                                         --------          --------
            Assets
<S>                                                                                   <C>                    <C>
Cash and due from banks...........................................................    $   17,313             9,515
Interest-bearing deposits.........................................................        17,026            13,413
                                                                                        --------          --------

            Cash and cash equivalents.............................................        34,339            22,928

Securities available for sale.....................................................        36,909            22,165
Securities held to maturity (market value of $18,425 in 1998).....................        -                 18,227
Loans receivable, net of allowance for loan losses of $2,811 in 1999
    and $2,283 in 1998............................................................       501,131           389,059
Accrued interest receivable:
    Securities  ..................................................................           407               352
    Loans receivable..............................................................         2,408             1,890
Premises and equipment, net.......................................................         9,386             5,597
Foreclosed real estate............................................................           400               366
Real estate held for development..................................................        -                    122
Federal Home Loan Bank stock, at cost.............................................         4,950             2,800
Other assets    ..................................................................           502               314
                                                                                       ---------         ---------

            Total.................................................................     $ 590,432           463,820
                                                                                         =======           =======

            Liabilities and Stockholders' Equity

Liabilities:
    Noninterest-bearing demand deposits...........................................        11,100             8,379
    NOW and money market accounts.................................................        77,293            60,437
    Savings accounts..............................................................        21,110            23,038
    Certificates..................................................................       319,771           259,176
                                                                                         -------           -------

            Total deposits........................................................       429,274           351,030
                                                                                         -------           -------

Advances from Federal Home Loan Bank..............................................        99,000            56,000
Other borrowed funds..............................................................         3,914               789
Deferred income taxes.............................................................           102               284
Accrued expenses and other liabilities............................................         2,505             2,494
                                                                                        --------          --------

            Total liabilities.....................................................       534,795           410,597
                                                                                         -------           -------

Commitments and contingencies (Notes 4, 9, 12 and 20)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                   <C>                    <C>
Stockholders' equity:
    Preferred stock, $.01 par value, 1,000,000 shares authorized,
        none outstanding..........................................................        -                  -
    Common stock, $.01 par value, 9,000,000 shares authorized,
        4,447,461 in 1999 and 4,372,041 in 1998 shares issued.....................            44                44
    Additional paid-in-capital....................................................        30,273            29,286
    Retained income...............................................................        43,539            39,714
    Accumulated other comprehensive income (loss).................................          (182)              (65)
    Treasury stock, at cost (863,523 shares in 1999 and
        716,421 shares in 1998)...................................................       (17,721)          (15,125)
    Stock held by Incentive Plan Trusts...........................................          (316)             (631)
                                                                                       ---------          --------

            Total stockholders' equity............................................        55,637            53,223
                                                                                         -------           -------

            Total.................................................................     $ 590,432           463,820
                                                                                         =======           =======

</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                  FFLC BANCORP, INC.

                                          Consolidated Statements of Income
                                      ($ in thousands, except per share amounts)

                                                                                   Year Ended December 31,
                                                                             1999            1998            1997
                                                                          -----------   ------------     -----------
<S>                                                                     <C>                   <C>             <C>
Interest income:
    Loans receivable................................................... $      35,315         28,450          22,318
    Securities available for sale......................................         1,798          1,169           2,440
    Securities held to maturity........................................           415          1,645           2,810
    Other interest-earning assets......................................         1,084            909             588
                                                                          -----------   ------------     -----------

        Total interest income..........................................        38,612         32,173          28,156
                                                                          -----------    -----------      ----------

Interest expense:
    Deposits...........................................................        17,083         15,279          14,279
    Borrowed funds.....................................................         4,131          1,992           1,137
                                                                          -----------    -----------     -----------

        Total interest expense.........................................        21,214         17,271          15,416
                                                                           ----------     ----------      ----------

        Net interest income............................................        17,398         14,902          12,740

Provision for loan losses..............................................           719            682             649
                                                                          -----------    -----------     -----------

        Net interest income after provision for loan losses............        16,679         14,220          12,091
                                                                           ----------      ---------      ----------

Noninterest income:
    Deposit account fees...............................................           624            558             485
    Other service charges and fees.....................................           735            618             360
    Gain on sale of real estate held for development...................           886           -             -
    Gain on sale of securities available for sale......................        -                -                11
    Gain on sale of other assets.......................................        -                -                302
    Other..............................................................            87             88              61
                                                                         ------------    -----------    ------------

        Total noninterest income.......................................         2,332          1,264           1,219
                                                                          -----------     ----------      ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>                   <C>             <C>
Noninterest expense:
    Salaries and employee benefits.....................................         6,216          5,218           4,674
    Occupancy expense..................................................         1,519          1,060             930
    Deposit insurance premium..........................................           214            195             147
    Advertising and promotion..........................................           333            278             224
    Data processing expense............................................           612            477             429
    Professional services..............................................           282            303             229
    Other..............................................................         1,137            915             840
                                                                         ------------    -----------     -----------

        Total noninterest expense......................................        10,313          8,446           7,473
                                                                          -----------     ----------     -----------

Income before income taxes.............................................         8,698          7,038           5,837

        Income taxes...................................................         3,296          2,641           2,083
                                                                          -----------     ----------     -----------

Net income.............................................................    $    5,402          4,397           3,754
                                                                           ==========     ==========     ===========

Basic income per share of common stock.................................   $      1.52           1.22            1.01
                                                                          ===========    ===========     ===========

Weighted-average number of shares outstanding for basic................     3,548,568      3,592,253       3,700,220
                                                                            =========      =========       =========

Diluted income per share of common stock...............................   $      1.47           1.16             .96
                                                                          ===========    ===========    ============

Weighted-average number of shares outstanding for diluted..............     3,677,038      3,777,085       3,911,256
                                                                            =========      =========       =========

</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                                         20
<PAGE>
<TABLE>
<CAPTION>
                                                         FFLC BANCORP, INC.

                                     Consolidated Statements of Changes in Stockholders' Equity
                                             ($ in thousands, except per share amounts)

                                                                                Stock
                                                                                 Held
                                                                                  By                    Accumulated
                                                      Additional               Incentive                   Other           Total
                                             Common    Paid-In     Treasury      Plan       Retained   Comprehensive   Stockholders'
                                             Stock     Capital       Stock      Trusts        Income   Income  (Loss)     Equity
                                             -----     -------       -----      ------        ------   ------  ------     ------
<S>                                          <C>       <C>         <C>         <C>          <C>             <C>           <C>
Balance at December 31, 1996...........      $ 28      27,386      (6,295)     (1,262)      33,962          (193)         53,626
                                                                                                                          ------

Comprehensive income:

     Net income........................        -          -          -           -           3,754           -             3,754

     Change in unrealized gains
       (losses) on securities available
       for sale, net of income taxes
       of $63..........................        -          -          -           -            -              105             105
                                                                                                                          ------
Comprehensive income...................                                                                                    3,859
                                                                                                                          ------

Net proceeds from the issuance of
     34,825 shares of common
     stock.............................        -          283        -            -           -               -              283

Shares committed to participants
     in incentive plans (162,399
     shares remain uncommitted
     at December 31, 1997).............        -          596        -            315         -               -              911

Dividends paid, net of $61 of
     dividends on ESOP shares
     recorded as compensation
     expense...........................        -          -          -           -          (1,079)           -           (1,079)

Purchase of treasury stock,
     228,502 shares....................        -          -        (6,171)       -           -                -           (6,171)

Five-for-three stock split in
     November, 1997....................        15         -          -           -             (15)           -             -
                                               --   ---------   ---------      ------     --------          ----       ------

Balance at December 31, 1997...........        43      28,265     (12,466)       (947)      36,622           (88)         51,429
                                               ==      ======      ======         ===       ======           ===          ======
</TABLE>
                                       21


<PAGE>
<TABLE>
<CAPTION>
                                                         FFLC BANCORP, INC.

                                Consolidated Statements of Changes in Stockholders' Equity, Continued
                                             ($ in thousands, except per share amounts)


                                                                                Stock
                                                                                 Held
                                                                                  By                     Accumulated
                                                     Additional                Incentive                  Other            Total
                                            Common    Paid-In     Treasury       Plan       Retained   Comprehensive   Stockholders'
                                            Stock     Capital       Stock       Trusts        Income  Income  (Loss)       Equity
                                            -----     -------       -----       ------        ------  ------  ------       ------
<S>                                          <C>        <C>        <C>            <C>        <C>            <C>             <C>
Balance at December 31, 1997...........      $ 43       28,265     (12,466)       (947)      36,622         (88)            51,429
                                                                                                                            ------

Comprehensive income:

     Net income........................       -           -           -            -          4,397          -               4,397

     Change in unrealized gains
       (losses) on securities available
       for sale, net of income taxes
       of $14..........................       -           -           -            -           -             23                 23
                                                                                                                          --------

Comprehensive income...................                                                                                      4,420
                                                                                                                            ------

Net proceeds from the issuance of
     58,895 shares of common
     stock.............................         1          359        -             -          -             -                 360

Shares committed to participants
     in incentive plans (109,794
     shares remain uncommitted
     at December 31, 1998).............       -            662        -            316          -            -                 978

Dividends paid, net of $38 of
     dividends on ESOP shares
     recorded as compensation
     expense...........................       -           -           -            -         (1,305)         -              (1,305)

Purchase of treasury stock,
     148,263 shares....................       -           -         (2,659)        -           -             -              (2,659)
                                             ----    ---------      ------       -----     --------         ---             ------

Balance at December 31, 1998...........      $ 44       29,286     (15,125)       (631)      39,714         (65)            53,223
                                             ====       ======     =======        ====       ======         ===             ======
</TABLE>
                                                                     (continued)
                                       22
<PAGE>
<TABLE>
<CAPTION>
                                                         FFLC BANCORP, INC.

                                Consolidated Statements of Changes in Stockholders' Equity, Continued
                                             ($ in thousands, except per share amounts)


                                                                                Stock
                                                                                 Held
                                                                                  By                     Accumulated
                                                     Additional                Incentive                  Other            Total
                                            Common    Paid-In     Treasury       Plan       Retained   Comprehensive   Stockholders'
                                            Stock     Capital       Stock       Trusts        Income   Income (Loss)       Equity
                                            -----     -------       -----       ------        ------   -------------       ------
<S>                                          <C>        <C>        <C>            <C>        <C>            <C>             <C>
Balance at December 31, 1998...........      $ 44       29,286     (15,125)       (631)      39,714         (65)            53,223
                                                                                                                            ------

Comprehensive income:

     Net income........................       -           -           -            -          5,402        -                 5,402

     Change in unrealized gains
       (losses) on securities available
       for sale, net of income taxes
       of $70..........................        -          -           -            -           -           (117)              (117)
                                                                                                                           -------

Comprehensive income...................                                                                                      5,285
                                                                                                                            ------

Net proceeds from the issuance of
     75,420 shares of common
     stock.............................        -           453        -           -            -           -                   453

Shares committed to participants
     in incentive plans (57,355
     shares remain uncommitted
     at December 31, 1999).............        -           534        -            315         -           -                   849

Dividends paid, net of $23 of
     dividends on ESOP shares
     recorded as compensation
     expense...........................        -          -           -            -         (1,577)        -               (1,577)

Purchase of treasury stock,
     147,102 shares....................        -          -         (2,596)        -           -            -               (2,596)
                                              ---    ---------      ------       -----    ---------       -----             ------

Balance at December 31, 1999...........      $ 44       30,273     (17,721)       (316)      43,539        (182)            55,637
                                             ====       ======     =======        ====       ======        ====             ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.


                                       23
<PAGE>
<TABLE>
<CAPTION>
                                                  FFLC BANCORP, INC.

                                        Consolidated Statements of Cash Flows
                                                   ($ in thousands)

                                                                                        Year Ended December 31,
                                                                              ---------------------------------------
                                                                                1999              1998           1997
                                                                                ----              ----           ----
<S>                                                                           <C>                 <C>           <C>
Cash flows from operating activities:
    Net income  ............................................................. $   5,402           4,397         3,754
    Adjustments to reconcile net income
        to net cash provided by operations:
            Provision for loan losses........................................       719             682           649
            Depreciation.....................................................       575             406           395
            Gain on sale of securities available for sale....................     -                -              (11)
            Gain on sale of foreclosed real estate...........................       (34)            (36)          (11)
            Gain on sale of real estate held for development.................      (886)           -             -
            Credit for deferred income taxes.................................      (112)           (467)         (256)
            Shares committed and dividends to incentive
                plan participants............................................       872           1,016           972
            Net amortization of premiums and discounts on securities.........        69             (10)          (44)
            Net deferral of loan fees and costs..............................      (372)           (193)         (236)
            Increase in accrued interest receivable..........................      (573)           (108)         (115)
            Increase in other assets.........................................      (188)            (92)          (38)
            Increase (decrease) in accrued expenses and other liabilities....        11            (187)        1,657
                                                                             ----------       ---------       -------

                    Net cash provided by operating activities................     5,483           5,408         6,716
                                                                               --------        --------       -------

Cash flows from investing activities:
    Proceeds from principal repayments and maturities of securities
        held to maturity.....................................................     3,428          13,788        18,135
    Purchase of securities available for sale................................   (10,483)         (9,555)       (7,490)
    Proceeds from principal repayments and maturities of securities
        available for sale...................................................    10,282          14,020        28,590
    Proceeds from sales of securities available for sale.....................     -                -              958
    Loan disbursements.......................................................  (195,034)       (151,411)     (143,538)
    Principal repayments on loans............................................    82,465          77,353        55,330
    Purchase of premises and equipment, net..................................    (4,364)           (690)         (564)
    Purchase of Federal Home Loan Bank stock.................................    (2,150)           (496)         (365)
    Proceeds from sales of foreclosed real estate............................       150              40           255
    Proceeds from sale of real estate held for development...................     1,008            -             -
                                                                              ---------      ----------   --------

                    Net cash used in investing activities....................  (114,698)        (56,951)      (48,689)
                                                                                -------         -------       -------
</TABLE>
                                       24
                                                                     (continued)
<PAGE>
<TABLE>
<CAPTION>
                                                  FFLC BANCORP, INC.

                                   Consolidated Statements of Cash Flows, Continued
                                                   ($ in thousands)

                                                                                        Year Ended December 31,
                                                                               ---------------------------------------
                                                                                  1999            1998          1997
                                                                                  ----            ----          ----
<S>                                                                              <C>             <C>           <C>
Cash flows from financing activities:
    Net increase in deposits................................................     78,244          35,640        32,726
    Net increase in Federal Home Loan Bank advances.........................     43,000          26,000        29,850
    Net increase (decrease) in other borrowed funds.........................      3,125             789       (8,048)
    Stock options exercised.................................................        453             360           283
    Purchase of treasury stock..............................................     (2,596)         (2,659)       (6,171)
    Cash dividends paid.....................................................     (1,600)         (1,343)       (1,140)
                                                                               --------          ------        ------

                Net cash provided by financing activities...................    120,626          58,787        47,500
                                                                                -------          ------        ------

Net increase in cash and cash equivalents...................................     11,411           7,244         5,527

Cash and cash equivalents at beginning of year..............................     22,928          15,684        10,157
                                                                                -------          ------        ------

Cash and cash equivalents at end of year....................................    $34,339          22,928        15,684
                                                                                =======          ======        ======
Supplemental disclosures of cash flow information
Cash paid during the year for:
        Interest............................................................    $20,795          17,564        15,125
                                                                                                =======        ======

        Income taxes........................................................    $ 3,456           3,076         2,212
                                                                                =======         =======        ======
    Noncash investing and financing activities:

        Accumulated other comprehensive income (loss), net change in
            unrealized loss on securities available for sale, net of tax....    $  (117)             23           105
                                                                                =======         =======        ======

        Transfers from loans to foreclosed real estate......................    $   425             193           444
                                                                                =======         =======        ======

        Loans originated on sales of foreclosed real estate.................    $   275             297            54
                                                                                =======         =======        ======

        Loans funded by and sold to correspondent...........................    $ 6,988           8,383         2,469
                                                                                =======         =======        ======
        Transfer securities from held to maturity to available for
            sale upon adoption of FAS 133...................................  $  14,784                -             -
                                                                                =======         =======        ======

</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                       25
<PAGE>
                               FFLC BANCORP, INC.

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997

(1)  Summary of Significant Accounting Policies
    FFLCBancorp,  Inc. (the "Holding  Company") was  incorporated in Delaware on
        September  16, 1993,  and acquired  First  Federal  Savings Bank of Lake
        County (the "Bank") in  connection  with the Bank's  conversion to stock
        form on January  4,  1994.  The  Holding  Company is a savings  and loan
        holding   company   subject  to  regulation  by  the  Office  of  Thrift
        Supervision ("OTS") which transacts its business through its subsidiary,
        the Bank. The Bank is a  community-oriented  savings  institution  which
        offers a variety of financial  services to  individuals  and  businesses
        primarily  located in Lake  County,  Sumter  County  and Citrus  County,
        Florida.  The  deposits of the Bank are  insured by the Federal  Deposit
        Insurance Corporation ("FDIC") through the Savings Association Insurance
        Fund ("SAIF").

    Principles of Consolidation.  The consolidated  financial statements include
        the  accounts  of  the  Holding  Company,   the  Bank,  and  the  Bank's
        wholly-owned  subsidiary,  Lake County Service Corporation (the "Service
        Corporation").  All significant  intercompany  transactions and balances
        have been eliminated in consolidation.

    General. The accounting and reporting policies of FFLC Bancorp, Inc. and its
        subsidiaries  (together,  the "Company")  conform to generally  accepted
        accounting  principles  and  to  general  practices  within  the  thrift
        industry.  All per share  amounts  presented  reflect  the effect of the
        five-for-three  stock split in November,  1997. The following summarizes
        the significant accounting policies of the Company:

    Use of  Estimates.   In  preparing   consolidated  financial  statements  in
        conformity with generally accepted accounting principles,  management is
        required to make  estimates  and  assumptions  that affect the  reported
        amounts of assets and  liabilities  as of the date of the balance  sheet
        and  reported  amounts of revenues  and  expenses  during the  reporting
        period.  Actual  results  could  differ from those  estimates.  Material
        estimates that are particularly susceptible to significant change in the
        near term relate to the  determination  of the allowance for loan losses
        and foreclosed real estate.

    Cash and Cash Equivalents.  For purposes of the  consolidated  statements of
        cash flows, cash and cash equivalents include cash and balances due from
        banks and interest-bearing deposits.

        The Bank is  required  to  maintain  certain  average  reserve  balances
        pursuant to  regulations of the Federal  Reserve  Board.  These balances
        must be  maintained  in the form of vault  cash or  noninterest  bearing
        deposits at a Federal Reserve Bank. The Bank exceeded this  requirement,
        which was $2.9  million and $1.1  million at December 31, 1999 and 1998,
        respectively.
<PAGE>
    Securities. The Company may classify its securities as either trading,  held
        to  maturity  or  available  for  sale.   Trading  securities  are  held
        principally  for resale and  recorded at their fair  values.  Unrealized
        gains and losses on  trading  securities  are  included  immediately  in
        earnings.  Held-to-maturity  securities  are those which the Company has
        the positive  intent and ability to hold to maturity and are reported at
        amortized cost.  Available-for-sale securities consist of securities not
        classified as trading  securities  nor as  held-to-maturity  securities.
        Unrealized holding gains and losses,  net of tax, on  available-for-sale
        securities are excluded from income and reported in other  comprehensive
        income.  Gains and losses on the sale of  available-for-sale  securities
        are   recorded   on  the   trade   date   and   determined   using   the
        specific-identification  method.  Premiums and  discounts on  securities
        available  for sale and held to  maturity  are  recognized  in  interest
        income using the interest method over the period to maturity.


                                       26
<PAGE>
    Loans  Receivable.  Loans  receivable  that  management  has the  intent and
        ability to hold for the foreseeable  future or until maturity or pay-off
        are   reported  at  their   outstanding   principal   adjusted  for  any
        charge-offs,  the  allowance  for loan losses,  and any deferred fees or
        costs on originated loans.

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

        The accrual of interest on loans is discontinued at the time the loan is
        90 days delinquent  unless the credit is well-secured  and in process of
        collection.  In all cases, loans are placed on nonaccrual or charged-off
        at an earlier date if  collection of principal or interest is considered
        doubtful.

        All  interest  accrued  but not  collected  for loans that are placed on
        nonaccrual or  charged-off  is reversed  against  interest  income.  The
        interest  on  these  loans  is  accounted  for  on  the   cash-basis  or
        cost-recovery method, until qualifying for return to accrual.  Loans are
        returned to accrual  status when all the principal and interest  amounts
        contractually due are brought current and future payments are reasonably
        assured.

    Allowance for Loan Losses.  The allowance for loan losses is  established as
        losses are  estimated  to have  occurred  through a  provision  for loan
        losses  charged  to  earnings.  Loan  losses  are  charged  against  the
        allowance  when  management  believes  the  uncollectibility  of a  loan
        balance is confirmed. Subsequent recoveries, if any, are credited to the
        allowance.

        The  allowance  for loan  losses  is  evaluated  on a  regular  basis by
        management  and  is  based  upon  management's  periodic  review  of the
        collectibility  of the  loans  in light of  historical  experience,  the
        nature and volume of the loan  portfolio,  adverse  situations  that may
        affect  the  borrower's  ability  to  repay,   estimated  value  of  any
        underlying   collateral  and  prevailing   economic   conditions.   This
        evaluation is inherently  subjective as it requires  estimates  that are
        susceptible  to  significant   revision  as  more  information   becomes
        available.

        A loan is considered  impaired when,  based on current  information  and
        events,  it is probable  that the Company  will be unable to collect the
        scheduled  payments of principal or interest  when due  according to the
        contractual  terms  of  the  loan  agreement.   Factors   considered  by
        management in determining impairment include payment status,  collateral
        value,  and  the  probability  of  collecting  scheduled  principal  and
        interest payments when due. Loans that experience  insignificant payment
        delays and payment shortfalls  generally are not classified as impaired.
        Management  determines  the  significance  of payment delays and payment
        shortfalls on a case-by-case basis, taking into consideration all of the
        circumstances  surroundings  the loan and the  borrower,  including  the
        length of the delay,  the reasons for the delay,  the  borrower's  prior
        payment  record,  and the amount of the  shortfall  in  relation  to the
<PAGE>
        principal  and interest  owed.  Impairment is measured on a loan by loan
        basis for  commercial  loans by either  the  present  value of  expected
        future cash flows discounted at the loan's effective  interest rate, the
        loan's  obtainable  market price, or the fair value of the collateral if
        the loan is collateral dependent.

        Large  groups of  smaller  balance  homogeneous  loans are  collectively
        evaluated for impairment.  Accordingly,  the Company does not separately
        identify  individual  consumer  and  residential  loans  for  impairment
        disclosures.

    Foreclosed Real Estate.  Real estate properties acquired through, or in lieu
        of, loan  foreclosure are to be sold and are initially  recorded at fair
        value at the date of foreclosure  establishing  a new cost basis.  After
        foreclosure, valuations are periodically performed by management and the
        real  estate is  carried at the lower of  carrying  amount or fair value
        less cost to sell.  Revenue and expenses from  operations and changes in
        the valuation  allowance are included in the consolidated  statements of
        income.


                                       27
<PAGE>
    Premises and  Equipment.  Land is carried at cost.  The Company's  premises,
        furniture and equipment and leasehold  improvements are carried at cost,
        less  accumulated  depreciation and  amortization  computed  principally
        using the straight-line method.

    Transfer of Financial  Assets.  Transfers of financial  assets are accounted
        for as sales, when control over the assets has been surrendered. Control
        over transferred  assets is deemed to be surrendered when (1) the assets
        have been  isolated  from the Company,  (2) the  transferee  obtains the
        right (free of  conditions  that  constrain it from taking  advantage of
        that right) to pledge or exchange the  transferred  assets,  and (3) the
        Company does not maintain  effective control over the transferred assets
        through an agreement to repurchase them before their maturity.

    Income Taxes.  Deferred tax assets and liabilities are determined  using the
        liability (or balance sheet) method. Under this method, the net deferred
        tax asset or  liability  is  determined  based on the tax effects of the
        temporary  differences  between  the book and tax  bases of the  various
        balance sheet assets and  liabilities  and gives current  recognition to
        changes in tax rates and laws.

    Stock Compensation Plans. Statement of Financial Accounting Standards (SFAS)
        No.  123,  Accounting  for  Stock-Based  Compensation,   encourages  all
        entities to adopt a fair value based method of  accounting  for employee
        stock compensation plans,  whereby  compensation cost is measured at the
        grant  date based on the value of the award and is  recognized  over the
        service period,  which is usually the vesting period.  However,  it also
        allows an entity to  continue  to  measure  compensation  cost for those
        plans using the intrinsic value based method of accounting prescribed by
        Accounting  Principles Board Opinion No. 25, Accounting for Stock Issued
        to Employees,  whereby  compensation  cost is the excess, if any, of the
        quoted market price of the stock at the grant date (or other measurement
        date) over the amount an employee  must pay to acquire the stock.  Stock
        options  issued under the Company's  stock option plan have no intrinsic
        value at the grant date, and under Opinion No. 25 no  compensation  cost
        is  recognized  for them.  The Company has elected to continue  with the
        accounting  methodology in Opinion No. 25 and, as a result, has provided
        proforma  disclosures  of net  income  and  income  per  share and other
        disclosures,  as if the fair value based method of  accounting  had been
        applied. (See Note 16).

    Off-Balance  Sheet  Instruments.  In the ordinary  course of  business,  the
        Company has entered into  off-balance-sheet  instruments  consisting  of
        commitments to extend credit, unused lines of credit,  undisbursed loans
        in process and standby letters of credit. Such financial instruments are
        recorded in the financial statements when they are funded.

    Fair Values of  Financial  Instruments.   The  fair  value  of  a  financial
        instrument is the current amount that would be exchanged between willing
        parties,  other  than  in a  forced  liquidation.  Fair  value  is  best
        determined based upon quoted market prices.  However, in many instances,
        there are no quoted market prices for the  Company's  various  financial
        instruments. In cases where quoted market prices are not available, fair
        values are based on estimates  using  present  value or other  valuation
        techniques.   Those  techniques  are   significantly   affected  by  the
        assumptions  used,  including  the discount rate and estimates of future
<PAGE>
        cash flows. Accordingly, the fair value estimates may not be realized in
        an immediate  settlement of the  instrument.  SFAS 107 excludes  certain
        financial   instruments  and  all  nonfinancial   instruments  from  its
        disclosure requirements.  Accordingly,  the aggregate fair value amounts
        presented may not necessarily represent the underlying fair value of the
        Company.  The following methods and assumptions were used by the Company
        in estimating fair values of financial instruments:

        Cash and Cash  Equivalents.  The carrying amounts of cash and short-term
        instruments approximate their fair value.

        Securities.  Fair values for  securities  held to maturity and available
        for sale are based on quoted market prices,  where available.  If quoted
        market prices are not available,  fair values are based on quoted market
        prices of  comparable  instruments.  The carrying  value of Federal Home
        Loan Bank stock approximates fair value.

                                       28
<PAGE>
        Loans Receivable.  For variable-rate  loans that reprice  frequently and
        have no  significant  change in credit  risk,  fair  values are based on
        carrying  values.  Fair values for  certain  fixed-rate  mortgage  (e.g.
        one-to-four family  residential),  commercial real estate and commercial
        loans are estimated using discounted cash flow analyses,  using interest
        rates  currently being offered for loans with similar terms to borrowers
        of similar credit quality.

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

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

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

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

                                       29
<PAGE>
    Income Per Share of Common  Stock.  During  1997,  the  Company  adopted the
        provisions  of Financial  Accounting  Standards  No. 128,  "Earnings Per
        Share" (SFAS No. 128).  SFAS No. 128 provides  accounting  and reporting
        standards for calculating  earnings per share. Basic income per share of
        common  stock has been  computed by dividing the net income for the year
        by the weighted-average  number of shares outstanding.  Shares of common
        stock  purchased  by the  Employee  Stock  Option Plan  ("ESOP") and the
        Retention and Recognition Plan ("RRP") incentive plans (see Note 16) are
        only considered outstanding when the shares are released or committed to
        be released for allocation to participants. The ESOP initially purchased
        368,242  shares,  of which 4,383 shares were released for  allocation to
        participants  each month  beginning in January,  1994. The RRP initially
        purchased  184,122  shares,  of which 179,541,  179,541 and 179,373 were
        allocated to participants  and are considered  outstanding for the years
        ended December 31, 1997,  1998 and 1999,  respectively.  At December 31,
        1999,  57,355  shares  remain  uncommitted  under both plans and are not
        considered outstanding for purposes of the computation of net income per
        share of common stock.  Diluted income per share is computed by dividing
        net  income  by  the  weighted  average  number  of  shares  outstanding
        including  the dilutive  effect of stock  options (see Note 16) computed
        using  the  treasury  stock  method  prescribed  by SFAS  No.  128.  The
        following  table  presents  the  calculation  of net income per share of
        common stock:
<PAGE>
<TABLE>
<CAPTION>

                                                                                       Year Ended December 31,
                                                                              --------------------------------------
                                                                                1999           1998            1997
                                                                                ----           ----            ----
<S>                                                                           <C>             <C>           <C>
           Weighted-average shares of common stock issued
                and outstanding before adjustments for ESOP,
                RRP and common stock options................................  3,632,058       3,728,350     3,890,019

            Adjustment to reflect the effect of unallocated
                ESOP and RRP shares.........................................    (83,490)       (136,097)     (189,799)
                                                                             ----------       ---------     ---------

            Weighted average shares for basic income per share..............  3,548,568       3,592,253     3,700,220
                                                                              =========       =========     =========

            Basic income per share..........................................  $     1.52           1.22          1.01
                                                                              ==========    ===========   ===========

            Total weighted-average common shares and equivalents
                outstanding for basic income per share
                computation.................................................  3,548,568       3,592,253     3,700,220

            Additional  dilutive  shares using the average  market value
                for the  period utilizing the treasury stock
                 method regarding stock options.............................    128,470         184,832       211,036
                                                                              ---------      ----------    ----------

            Weighted-average common shares and equivalents
                outstanding for diluted income per share....................  3,677,038       3,777,085     3,911,256
                                                                              =========       =========     =========

            Diluted income per share........................................  $    1.47            1.16           .96
                                                                              =========      ==========    ==========
</TABLE>
        Reclassifications.  Certain  amounts  in the 1997 and 1998  consolidated
        financial   statements   have  been   reclassified  to  conform  to  the
        presentation for 1999.



                                       30
<PAGE>
(2)  Securities
    Securities  have been  classified  according  to  management's  intent.  The
        carrying amounts of securities and their approximate fair values were as
        follows:
<TABLE>
<CAPTION>
                                                                               Gross          Gross
                                                                 Amortized   Unrealized     Unrealized        Fair
                                                                   Cost        Gains          Losses          Value
                                                                   ----        -----          ------          -----
                                                                                   (In thousands)
<S>                                                             <C>                           <C>              <C>
        Securities available for sale:
        At December 31, 1999:
            Mutual funds......................................  $  9,065          -           (236)            8,829
            U.S. Government and agency securities.............     8,998          -            (79)            8,919
            Mortgage-backed securities........................    17,471          155         (136)           17,490
            Other investment securities.......................     1,666            5         -               1,671
                                                                 -------        -----      -------          -------

                Total.........................................  $ 37,200          160         (451)          36,909
                                                                  ======          ===          ===           ======
        At December 31, 1998:
            Mutual funds......................................     9,238          -           (107)            9,131
            U.S. Government and agency securities.............     4,036           22          -               4,058
            Mortgage-backed securities........................     8,898          -            (21)            8,877
            Other investment securities.......................        97            2          -                  99
                                                                 -------         ----       ------          --------

                Total.........................................  $ 22,269           24         (128)           22,165
                                                                  ======          ===          ===            ======
        Securities held to maturity-
        At December 31, 1998:
            Mortgage-backed securities........................    15,907          152          -              16,059
            Other investment securities.......................     2,320           46          -               2,366
                                                                  ------          ---        -----            ------

                Total.........................................  $ 18,227          198          -              18,425
                                                                  ======          ===        =====            ======
</TABLE>
    The scheduled  maturities  of securities  available for sale at December 31,
1999 were as follows:
<TABLE>
<CAPTION>
                                                    Amortized        Fair
                                                     Cost            Value
                                                     ----            -----
                                                      (In thousands)
<S>                                               <C>                 <C>
        Due in less than one year...............  $   3,021           2,991
        Due from one year to five years.........      5,977           5,928
        Due from five years to ten years........         63              63
        Due after ten years.....................      1,603           1,608
        Mortgage-backed securities..............     17,471          17,490
        Mutual funds............................      9,065           8,829
                                                    -------         -------

            Total   ............................   $ 37,200         36,909
                                                     ======         ======
</TABLE>
                                       31
<PAGE>
    Securities  with a carrying  value of  approximately  $4.0  million and $2.9
        million at December  31, 1999 and 1998,  respectively,  were  pledged to
        secure  public  funds and tax  deposits.  The Company  has also  pledged
        securities  with a carrying value of $7.9 million for  borrowings  under
        retail  repurchase  agreements  with customers at December 31, 1999 (See
        Note 6).

    There were no sales of securities  during the years ended  December 31, 1999
        or 1998.  In  1997,  the  Company  realized  gross  gains on the sale of
        securities available for sale of $11,000.

    The Company's portfolio of mortgage-backed securities include collateralized
        mortgage  obligations  (CMOs).  CMOs are generally divided into tranches
        whereby  principal  repayments  from the  underlying  mortgages are used
        sequentially  to retire the securities  according to the priority of the
        tranches. The Company invests in the following  collateralized  mortgage
        obligation tranches:  sequential,  planned amortization class,  targeted
        amortization class or support or companion  floating-rate tranches. Such
        tranches  have  stated  maturities  ranging  from 1-22  years;  however,
        because of  prepayments,  the  expected  weighted-average  life of these
        securities at December 31, 1999 is approximately 2.8 years. The majority
        of the CMOs  owned by the  Company  are  insured or  guaranteed,  either
        directly or indirectly,  through  mortgage-backed  securities underlying
        the  obligations  by either the FNMA,  FHLMC or GNMA.  Depending  on the
        amount of the Company's  available-for-sale  mortgage-backed securities,
        fluctuations  in the interest rate  environment  and other factors,  the
        Company may experience  material effects on its capital resources due to
        categorizing  these securities as available for sale. The Company's CMOs
        may be subject to price movements which typically result from prepayment
        on the underlying  obligations.  The Company's CMOs of $2.3 million have
        coupon rates ranging from 6.09% to 7.00% and had a weighted-average rate
        of 6.54% at December 31, 1999. The Company  purchases only CMOs rated AA
        or better by nationally recognized rating services.

    The Company  adopted  FAS 133  effective  July 1,  1999.  As allowed by this
        standard,  the Company reclassified all securities held to maturity with
        a book  value of  $14,784,000  and a  market  value  of  $14,969,000  to
        available for sale on July 1, 1999.
<PAGE>
(3)  Loans Receivable
    The components of loans were as follows:
<TABLE>
<CAPTION>
                                                                             At December 31,
                                                                          1999           1998
                                                                          ----           ----
                                                                             (In thousands)
<S>                                                                     <C>             <C>
            First mortgage loans secured by:
                One-to-four-family residential........................  $  354,317      283,372
                Construction and land.................................      11,861       11,683
                Multi-family units....................................      13,394        8,165
                Commercial real estate, churches and other............      61,052       44,211
            Consumer loans............................................      64,042       43,490
            Commercial loans..........................................      14,285       10,532
                                                                          --------     --------

                    Subtotal..........................................     518,951      401,453

                Undisbursed portion of loans in process...............     (15,907)     (10,637)
                Net deferred loan costs...............................         898          526
                Allowance for loan losses.............................      (2,811)      (2,283)
                                                                          --------     --------

                    Loans receivable, net.............................   $ 501,131      389,059
                                                                         =======       ========
</TABLE>

                                       32
<PAGE>
    An analysis of the change in the allowance for loan losses follows:

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                     1999           1998           1997
                                                     ----           ----           ----
                                                             (In thousands)
<S>                                               <C>               <C>           <C>
            Balance at January 1................  $ 2,283           1,684         1,063
            Net loans charged-off...............     (191)            (83)          (28)
            Provision for loan losses...........      719             682           649
                                                  -------          ------        ------

            Balance at December 31..............  $ 2,811           2,283         1,684
                                                  =======          ======        ======
</TABLE>
    There were no impaired  loans  recognized  under SFAS 114 and 118 during the
        years ended  December 31, 1998 or 1997.  The  following  summarizes  the
        amount  of  impaired  loans at  December  31,  1999,  all of  which  are
        collateral dependent (in thousands):
<TABLE>
<CAPTION>
<S>                                                                                       <C>
            Loans identified as impaired:
                Gross loans with no related allowance for losses.....................     $    -
                Gross loans with related allowance for losses recorded...............       1,348
                Less:  Allowances on these loans.....................................        (202)
                                                                                          -------

            Net investment in impaired loans.........................................     $ 1,146
                                                                                          =======

    The average net investment in impaired loans and interest income  recognized
        and received on impaired  loans during the year ended  December 31, 1999
        was as follows (in thousands):

            Average net investment in impaired loans.................................     $ 1,152
                                                                                          =======

            Interest income recognized on impaired loans.............................     $    84
                                                                                          =======

            Interest income received on impaired loans...............................     $    84
                                                                                          =======
</TABLE>

    The Company  originates or purchases  nonresidential  real  property  loans.
        These loans are considered by management to be of somewhat  greater risk
        of uncollectibility due to the dependency on income production or future
        development  of the  real  estate.  Nearly  all of  the  Company's  real
        property loans were  collateralized by real property in Lake, Sumter and
        Citrus Counties, Florida.
<PAGE>
    Nonaccrual  loans at  December  31,  1999 and 1998  totaled  $2,362,000  and
        $444,000,  respectively.  For the year ended December 31, 1999, interest
        income on loans would have been increased  approximately  $99,000 if the
        interest  on  nonaccrual  loans at December  31, 1999 had been  recorded
        under the original terms of such loans.

    Loans serviced for others, consisting solely of participations sold, are not
        included in the  accompanying  consolidated  balance sheets.  The unpaid
        principal  balances of these  loans were  approximately  $1,040,000  and
        $930,000 at December 31, 1999 and 1998, respectively.


                                       33
<PAGE>
(4)  Premises and Equipment
    Components of premises and equipment were as follows:
<TABLE>
<CAPTION>

                                                             At December 31,
                                                           1999          1998
                                                           ----          ----
                                                            (In thousands)
<S>                                                    <C>               <C>
        Cost:
            Land.....................................  $  2,937          1,754
            Building and improvements................     6,475          4,357
            Furniture and equipment..................     2,731          2,193
            Construction in progress.................       931            424
                                                       =-------         ------

                Total cost...........................    13,074          8,728

        Less accumulated depreciation................    (3,688)        (3,131)
                                                       ==------          -----

            Net book value...........................  $  9,386          5,597
                                                       ========          =====
</TABLE>

    Certain Company facilities are leased under various operating leases. Rental
        expense  was  $195,000,  $101,000  and  $51,000 in 1999,  1998 and 1997,
        respectively.  At December 31, 1999,  future minimum rental  commitments
        under noncancellable leases were as follows (in thousands):

            Year Ending
            December 31,                            Amount

                2000............................     $ 141
                2001............................       145
                2002............................       149
                2003............................       154
                2004............................       159
                                                     -----

                                                     $ 748
                                                     =====

(5)  Deposits
    The aggregate amount of short-term jumbo certificates of deposit,  each with
        a minimum denomination of $100,000,  was approximately $37.3 million and
        $18.2 million in 1999 and 1998, respectively.

    At December 31, 1999, the scheduled  maturities of  certificates  of deposit
were as follows (in thousands):
<PAGE>
            Year Ending

                2000............................. $ 205,590
                2001.............................   107,713
                2002.............................     2,708
                2003.............................     3,113
                2004.............................       647
                                                  ---------

                                                  $ 319,771
                                                  =========

                                       34
<PAGE>
(6)  Advances from Federal Home Loan Bank and Other Borrowings
    As  of December  31, 1999,  the Bank had $99.0  million in Federal Home Loan
        Bank of Atlanta  ("FHLB")  advances  outstanding.  These  advances had a
        weighted-average   interest  rate  of  5.64%  and  interest   rates  and
        maturities as follows (dollars in thousands):
<TABLE>
<CAPTION>
                                                  Interest             At December 31,
            Year Ending December 31,                Rate             1999        1998
            ------------------------              --------           ----        ----
<S>             <C>                                  <C>       <C>                <C>
                2000.............................    4.30%     $      -           6,000
                2000.............................    5.95%           12,000        -
                2000.............................    5.98%           15,000        -
                2002.............................    6.10%            5,000       5,000
                2002.............................    6.26%            5,000       5,000
                2002.............................    6.09%           10,000      10,000
                2002.............................    5.75%             -         10,000
                2003.............................    3.90%             -          5,000
                2003.............................    4.90%           10,000      10,000
                2003.............................    4.30%            6,000        -
                2004.............................    6.05%           10,000        -
                2008.............................    4.19%             -          5,000
                2009.............................    4.17%           12,000        -
                2009.............................    6.39%           14,000        -
                                                                   --------      ------

                Total............................                  $ 99,000      56,000
                                                                   ========      ======
</TABLE>

    The security  agreement with FHLB includes a blanket floating lien requiring
        the Bank to maintain first  mortgage  loans as pledged  collateral in an
        amount equal to at least, when discounted at 75% of the unpaid principal
        balances,  100% of these  advances.  The FHLB  stock is also  pledged as
        collateral  for these  advances.  At December 31,  1999,  the Bank could
        borrow up to $148.7 million under the FHLB security agreement.

    Other borrowed  funds were  composed of retail  repurchase  agreements  with
        customers.  The Company enters into retail  repurchase  agreements  with
        customers in which the funds received are accounted for as borrowings to
        the Company.  The total amount  outstanding  under these  agreements  at
        December 31, 1999 and 1998 were $3.9 million and $789,000, respectively.
        The Company has pledged securities with a carrying value of $7.9 million
        and $3.1 million as collateral for these agreements at December 31, 1999
        and 1998, respectively.


                                       35
<PAGE>
(7)  Income Taxes
    The Holding Company and its subsidiaries file consolidated federal and state
        income tax returns.  Income taxes are  allocated  proportionally  to the
        Holding  Company and each of the  subsidiaries as though separate income
        tax returns were filed.

    The income tax provision is summarized as follows:
<TABLE>
<CAPTION>

                                                 Year Ended December 31,
                                             ------------------------------
                                             1999       1998         1997
                                             ----       ----         ----
                                                     (In thousands)
<S>                                          <C>           <C>        <C>
            Current .......................  $ 3,408       3,108      2,339
            Deferred.......................     (112)       (467)      (256)
                                             -------      ------     ------

                                             $ 3,296       2,641      2,083
                                             =======       =====      =====
</TABLE>

     The effective tax rate on income  before income taxes differs from the U.S.
        statutory  rate of 34%. The following  summary  reconciles  taxes at the
        U.S. statutory rate with the effective rates:
<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                            --------------------------------------------------------------------------
                                                     1999                       1998                         1997
                                            ----------------------     --------------------        -------------------
                                             Amount           %         Amount           %         Amount           %
                                             ------           -         ------           -         ------           -
                                                                 (Dollars in thousands)
<S>                                         <C>             <C>        <C>             <C>        <C>             <C>
            Taxes on income at U.S.
                statutory rate........      $ 2,957         34.0%      $ 2,393         34.0%      $ 1,985         34.0%
            State income taxes, net of
                federal tax benefit...          297          3.4           240          3.4           192          3.3
            Other, net................           42         .5               8           .1           (94)        (1.6)
                                            -------         ----         -------      ------      -------         -----

            Taxes on income at
                effective rates.......      $ 3,296         37.9%      $ 2,641         37.5%      $ 2,083         35.7%
                                            =======         ====       =======         ====       =======          ====
</TABLE>
<PAGE>
    Temporary differences  between the financial  statement carrying amounts and
        tax  bases of assets  and  liabilities  that  gave  rise to  significant
        portions of the deferred tax liability relate to the following:

<TABLE>
<CAPTION>
                                                                                At December 31,
                                                                            1999             1998
                                                                            ----             ----
                                                                                 (In thousands)
<S>                                                                         <C>                <C>
            Deferred tax liabilities:
                Building and land........................................   $ 334               -
                FHLB stock dividends.....................................     340               304
                Accumulated depreciation.................................     188               181
                Deferred loan costs......................................      23                25
                Other....................................................       4                83
                                                                             ----              ----

            Gross deferred tax liabilities...............................     889               593
                                                                              ---               ---

            Deferred tax assets:
                Allowance for loan losses................................     490               140
                Unrealized loss on securities available for sale.........     109                39
                Deferred loan fees.......................................      71                33
                RRP incentive plan.......................................      90                97
                Accrued interest.........................................      27               -
                                                                             ----             ---

            Gross deferred tax assets....................................     787               309
                                                                              ---               ---

            Net deferred tax liabilities.................................   $ 102               284
                                                                            =====               ===
</TABLE>
                                       36

<PAGE>
    Retained  earnings at  December  31,  1999 and 1998  includes  approximately
        $5,810,000  for which no deferred  federal income tax liability has been
        recognized.  This amount  represents an allocation of income to bad debt
        deductions for tax purposes only.  Reduction of amounts so allocated for
        purposes  other than tax bad debt  losses or  adjustments  arising  from
        carryback of net  operating  losses would create income for tax purposes
        only,  which would be subject to the then current  corporate  income tax
        rate. The unrecorded  deferred  income tax liability on the above amount
        was approximately $2,186,000 at December 31, 1999 and 1998.

    The Small  Business Job  Protection  Act of 1996 (the "1996 Act") enacted on
        August 2,  1996  requires  savings  institutions,  such as the Bank,  to
        recapture certain portions of their  accumulated bad debt reserves,  and
        eliminated the Percentage of Taxable Income Method of accounting for bad
        debts for tax  purposes.  The Bank was  required to change its method of
        accounting for bad debts for tax purposes  effective January 1, 1996. In
        addition,  the Bank was required to recapture the excess of its bad debt
        reserves  at December  31, 1995 over its base year  reserves at December
        31, 1987,  ratably over a six-year period beginning in 1998. At December
        31,  1999,  the  Bank  had   approximately   $606,000  of  deferred  tax
        liabilities recorded for the recapture of its excess bad debt reserves.

(8)  Pension Plan
    The Company  has a defined  contribution  profit  sharing  401(k)  plan (the
        "401(k) Plan"). All employees who have met a minimum service requirement
        (1,000 hours of service in a twelve-month period) may participate in the
        Plan. Under the 401(k) Plan, a participant may elect to contribute up to
        15% of their annual  compensation,  subject to IRS  limitations on total
        annual contributions.  The Company will make contributions to the 401(k)
        Plan on a monthly  basis at two percent of  participants'  compensation.
        Contributions  to the 401(k) Plan for the years ended December 31, 1999,
        1998 and 1997 were $54,000, $46,000 and $37,000, respectively.

(9)  Financial Instruments
    The Company is a party to financial instruments with  off-balance-sheet risk
        in the normal  course of  business  to meet the  financing  needs of its
        customers  and to reduce its own  exposure to  fluctuations  in interest
        rates.  These  financial  instruments  are commitments to extend credit,
        unused lines of credit, undisbursed loans in process and standby letters
        of credit and may involve,  to varying  degrees,  elements of credit and
        interest-rate   risk  in  excess  of  the  amount   recognized   in  the
        consolidated  balance sheet. The contract  amounts of these  instruments
        reflect the extent of  involvement  the  Company has in these  financial
        instruments.

    The Company's  exposure to credit loss in the event of nonperformance by the
        other party to the financial instrument for commitments to extend credit
        is  represented  by the  contractual  amount of those  instruments.  The
        Company uses the same credit  policies in making  commitments as it does
        for on-balance-sheet instruments.

    Commitments to extend credit are agreements to lend to a customer as long as
        there is no  violation of any  condition  established  in the  contract.
        Commitments  generally have fixed expiration dates or other  termination
        clauses and may require  payment of a fee. Since some of the commitments
        are expected to expire  without being drawn upon,  the total  commitment
        amounts do not  necessarily  represent  future  cash  requirements.  The

<PAGE>

        Company  evaluates each customer's  credit  worthiness on a case-by-case
        basis.  The amount of  collateral  obtained if deemed  necessary  by the
        Company  upon  extension  of  credit  is  based on  management's  credit
        evaluation of the counterparty.

    Standby letters of credit are conditional  commitments issued by the Company
        to guarantee the performance of a customer to a third party.  The credit
        risk involved in issuing  letters of credit is  essentially  the same as
        that involved in extending loans to customers.



                                       37
<PAGE>
    The estimated  fair values of the Company's  financial  instruments  were as
follows:
<TABLE>
<CAPTION>
                                                                     At December 31, 1999       At December 31, 1998
                                                                    ----------------------      --------------------
                                                                    Carrying       Fair         Carrying      Fair
                                                                      Amount       Value          Amount      Value
                                                                      ------       -----          ------      -----
                                                                                (In thousands)
<S>                                                                 <C>             <C>           <C>          <C>
              Financial assets:
                  Cash and cash equivalents.........................$  34,339       34,339        22,928       22,928
                  Securities held to maturity.......................    -            -            18,227       18,425
                  Securities available for sale.....................   36,909       36,909        22,165       22,165
                  Loans receivable..................................  501,131      499,874       389,059      391,616
                  Accrued interest receivable.......................    2,815        2,815         2,242        2,242
                  Federal Home Loan Bank stock......................    4,950        4,950         2,800        2,800

              Financial liabilities:
                  Deposit liabilities...............................  429,274      426,909       351,030      350,801
                  Advances from FHLB................................   99,000       99,314        56,000       56,000
                  Other borrowed funds..............................    3,914        3,914           789          789
</TABLE>

     A   summary of the notional amounts of the Company's financial  instruments
         which approximates fair value, with  off-balance-sheet risk at December
         31, 1999, follows:

                                                                   Notional
                                                                     Amount
                                                                (In thousands)

              Commitments to extend credit......................   $  7,753
                                                                   ========

              Unused lines of credit............................   $ 33,579
                                                                   =======

              Undisbursed portion of loans in process ..........   $ 15,907
                                                                     ======

              Standby letters of credit.........................   $    698
                                                                   ========
(10)  Significant Group Concentration of Credit Risk
     The Company grants real estate,  commercial and consumer loans to customers
         primarily  in the State of Florida  with the  majority of such loans in
         the Lake,  Sumter and Citrus  County  area.  Therefore,  the  Company's
         exposure  to credit  risk is  significantly  affected by changes in the
         economy of the Lake,  Sumter and Citrus County area.  In addition,  the
         Company has a concentration of single-family residential mortgage loans
         in a specific residential  retirement community of approximately $107.4
         million.

     The contractual  amounts of credit related  financial  instruments  such as
         commitments  to  extend  credit  represent  the  amounts  of  potential
         accounting  loss should the contract be fully drawn upon,  the customer
         default and the value of any existing collateral become worthless.


                                       38
<PAGE>
(11)  Related Parties
     Loans to directors and  executive  officers of the Company were made in the
         ordinary  course of business  and did not involve more than normal risk
         of collectibility or present other  unfavorable  features.  Activity in
         loans to directors and executive officers were as follows:
<TABLE>
<CAPTION>
                                                                     Year Ended
                                                                    December 31,
                                                                1999            1998
                                                                ----            ----
                                                                   (In thousands)
<S>                                                            <C>             <C>
            Beginning balance................................  $ 3,406         1,728
            Loans originated.................................    1,675         2,043
            Principal repayments.............................      (98)         (365)
                                                               -------       -------

                Ending balance...............................  $ 4,983         3,406
                                                               =======       =======
</TABLE>

(12)  Commitments and Contingencies
    In  the  ordinary  course of business,  the Company has various  outstanding
        commitments  and  contingent  liabilities  that are not reflected in the
        accompanying consolidated financial statements. In addition, the Company
        is a  defendant  in  certain  claims  and legal  actions  arising in the
        ordinary  course  of  business.  In the  opinion  of  management,  after
        consultation  with legal  counsel,  the  ultimate  disposition  of these
        matters  is not  expected  to  have a  material  adverse  effect  on the
        consolidated financial condition of the Company.

(13)  Restrictions on Retained Earnings
    The Bank is subject to certain  restrictions on the amount of dividends that
        it may declare without prior regulatory approval.  At December 31, 1999,
        approximately  $21.4  million of retained  earnings  were  available for
        dividend declaration without prior regulatory approval.

(14)  Regulatory Matters
    The Bank is subject to various regulatory capital  requirement  administered
        by the  federal  banking  agencies.  Failure  to  meet  minimum  capital
        requirements  can initiate  certain  mandatory-and  possibly  additional
        discretionary-actions  by regulators  that, if undertaken,  could have a
        direct  material  effect on the Company's  financial  statements.  Under
        capital  adequacy  guidelines  and the  regulatory  framework for prompt
        corrective  action,  the Bank must meet specific capital guidelines that
        involve  quantitative  measures of the Bank's assets,  liabilities,  and
        certain   off-balance-sheet   items  as  calculated   under   regulatory
        accounting practices.  The Bank's capital amounts and classification are
        also  subject  to  qualitative   judgements  by  the  regulators   about
        components, risk weightings, and other factors.

    Quantitative  measures  established by regulation to ensure capital adequacy
        require the Bank to  maintain  minimum  amounts  (set forth in the table
        below) of total and Tier I capital  (as defined in the  regulations)  to
        risk-weighted assets (as defined).  Management believes,  as of December
        31, 1999, that the Bank meets all capital adequacy requirements to which
        it is subject.
<PAGE>

    As  of  December  31,  1999,  the  most  recent  notification  from  the OTS
        categorized the Bank as well capitalized under the regulatory  framework
        for prompt corrective action. To be categorized as well capitalized, the
        Bank must maintain minimum tangible,  tier I (core), tier I (risk-based)
        and total risk-based capital ratios as set forth in the table. There are
        no conditions or events since that notification that management believes
        have changed the institution's category.


                                       39
<PAGE>
    The Bank's actual capital  amounts and  percentages at December 31, 1999 and
1998 are also presented in the tables.
<TABLE>
<CAPTION>
                                                                                                        To Be Well
                                                                              Minimum                  Capitalized
                                                                            For Capital                 For Prompt
                                                                             Adequacy               Corrective Action
                                                Actual                         Purposes                   Provisions
                                           -------------------        --------------------          ------------------
                                             %         Amount            %         Amount            %         Amount
                                           ------    ---------        ------    ---------           -----    ---------
         As of December 31, 1999:                                     (Dollars in thousands)
<S>                                        <C>          <C>            <C>      <C>                <C>      <C>
         Stockholders' equity,
             and ratio to total
             assets....................     8.87%    $  52,356
         Less: investment in
             nonincludable
             subsidiary................                 (1,214)
         Add back: unrealized loss on
             available-for-sale
             securities................                     35
                                                      --------

         Tangible capital,
             and ratio to adjusted
             total assets..............     8.68%   $   51,177         1.5%     $  8,841
                                                    ==========                  ========

         Tier 1 (core) capital, and
             ratio to adjusted total
             assets....................     8.68%   $   51,177         3.0%     $ 17,681           5.0%     $ 29,469
                                                    ==========                  ========                    ========

         Tier 1 capital, and ratio
             to risk-weighted assets...    14.17%       51,177         4.0%     $ 14,447           6.0%     $ 21,670
                                                                                ========                    ========
         Less: nonincludable
             investment in 80%
             land loans................                   (93)

         Tier 2 capital (allowance for
             loan losses)..............                 2,810
                                                    ---------
         Total risk-based capital,
             and ratio to risk-
             weighted assets...........    14.92%   $  53,894         8.0%      $ 28,893          10.0%     $ 36,117
                                                    =========                                               ========

         Total assets..................             $ 590,562
                                                    =========

         Adjusted total assets.........             $ 589,383
                                                    =========

         Risk-weighted assets..........             $ 361,168
                                                    =========
</TABLE>

                                       40
<PAGE>
<TABLE>
<CAPTION>
                                                                                                        To Be Well
                                                                              Minimum                  Capitalized
                                                                            For Capital                 For Prompt
                                                                             Adequacy               Corrective Action
                                                Actual                         Purposes                   Provisions
                                           -------------------        --------------------          ------------------
                                             %         Amount            %         Amount            %         Amount
                                           ------    ---------        ------    ---------           -----    ---------
         As of December 31, 1998:                                     (Dollars in thousands)
<S>                                        <C>          <C>            <C>      <C>                <C>      <C>
         Stockholders' equity,
             and ratio to total
             assets....................    9.97%   $    46,270
         Less: investment in
             nonincludable
             subsidiary................                   (187)
         Add back: unrealized loss on
             available-for-sale
             securities................                     (1)
                                                    ----------
         Tangible capital,
             and ratio to adjusted
             total assets..............    9.94%    $   46,082         1.5%      $  6,957
                                                    ==========                   ========
         Tier 1 (core) capital, and
             ratio to adjusted total
             assets....................    9.94%    $   46,082         3.0%      $ 13,913           5.0%      $ 23,189
                                                    ==========                   ========                     ========
         Tier 1 capital, and ratio
             to risk-weighted assets...   17.21%        46,082         4.0%      $ 10,711           6.0%      $ 16,067
                                                                                 ========                     ========
         Less: nonincludable
             investment in 80%
             land loans................                   (122)

         Tier 2 capital (allowance for
             loan losses)..............                  2,283
                                                     ---------

         Total risk-based capital,
             and ratio to risk-
             weighted assets...........   18.02%    $   48,243         8.0%      $ 21,422          10.0%      $ 26,778
                                                      ========                     ======                       ======

         Total assets..................              $ 463,962
                                                       =======

         Adjusted total assets.........              $ 463,774
                                                       =======

         Risk-weighted assets..........              $ 267,778
                                                       =======
</TABLE>
                                       41

<PAGE>
(15)  Conversion to Stock Savings Bank
    The  Bank  successfully  completed a conversion  from a federally  chartered
         mutual savings  association to a federally chartered stock savings bank
         on  January 4, 1994  pursuant  to the Plan of  Conversion.  The Plan of
         Conversion  provided for the  establishment  of a  Liquidation  Account
         equal to the retained  income of the Bank as of September 30, 1993 (the
         date of the most  recent  financial  statement  presented  in the final
         conversion  prospectus).  The  Liquidation  Account is  established  to
         provide  a  limited  priority  claim  to  the  assets  of the  Bank  to
         qualifying  depositors  as of  September  30,  1992  (Eligible  Account
         Holders)  who   continue  to  maintain   deposits  in  the  Bank  after
         conversion.  In the  unlikely  event of a complete  liquidation  of the
         Bank,  and only in such  event,  each  Eligible  Account  Holder  would
         receive from the Liquidation  Account a liquidation  distribution based
         on their  proportionate  share of the then total  remaining  qualifying
         deposits.

    Current  regulations  allow the Bank to pay dividends on its stock after the
         conversion if its regulatory capital would not thereby be reduced below
         the amount then required for the  aforementioned  Liquidation  Account.
         Also, capital distribution regulations limit the Bank's ability to make
         capital  distributions  which include dividends,  stock redemptions and
         repurchases, cash-out mergers, interest payments on certain convertible
         debt and other  transactions  charged to the capital  account  based on
         their capital level and supervisory condition. Federal regulations also
         preclude any repurchase of the stock by the Bank or its holding company
         for three years after  conversion  except for  purchases of  qualifying
         shares of a director and repurchases pursuant to an offer made on a pro
         rata basis to all stockholders and with prior approval of the Office of
         Thrift  Supervision  or pursuant  to an  open-market  stock  repurchase
         program that complies with certain regulatory  criteria.  See also Note
         18 for information regarding the Bank's Stock Repurchase Program.

                                       42
<PAGE>
(16)  Stock Benefit Plans
    The  Company  follows the  provisions  of Statement of Financial  Accounting
         Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
         123").  SFAS No. 123  applies  to  stock-based  compensation  under the
         Company's incentive stock option plan (the "Option Plan") and under the
         Company's Recognition and Retention Plan discussed below. As allowed by
         SFAS No. 123, the Company  elected to continue to measure  compensation
         cost for the  options or shares  granted  under  either  plan using the
         intrinsic value method of accounting  prescribed by APB Opinion No. 25,
         "Accounting for Stock Issued to Employees." SFAS No. 123 does not apply
         to the Employee Stock Ownership Plan discussed below.

    During the years ended December 31, 1999, 1998 and 1997, 16,250,  18,000 and
         10,867 options were granted under the Option Plan,  and in 1997,  2,014
         shares were awarded under the  Recognition and Retention Plan. SFAS No.
         123 requires pro forma fair value  disclosures  if the intrinsic  value
         method is being  utilized.  In order to calculate the fair value of the
         options,  it was assumed that the risk-free  interest rate was 7.0% for
         each period, an annualized  dividend yield of approximately  2.0% would
         apply over the exercise period,  the expected life of the options would
         be the entire  exercise  period and the expected  stock  volatility was
         36%, 42% and 23%,  respectively,  for 1999, 1998 and 1997. For purposes
         of pro forma  disclosures,  the  estimated  fair value was  included in
         expense in the period vesting occurs. The proforma information has been
         determined  as if the Company had  accounted  for its stock options and
         share  awards  under the fair  value  method of SFAS No.  123 and is as
         follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                                  1999           1998          1997
                                                                                  ----           ----          ----
 <S>                                                                              <C>                 <C>            <C>
            Weighted-average grant-date fair value of options
                  issued during the year.....................................    $    133            166            84
                                                                                 ========         ======            ==

             Proforma net earnings...........................................    $  5,288          4,303         3,663
                                                                                 ========         ======            ==

             Proforma basic earnings per share...............................    $   1.49           1.20           .99
</TABLE>
    Stock Option Plan. The Company has a Stock  Option Plan under which  460,303
         common shares are  authorized to be granted to directors,  officers and
         employees  of the  Bank.  Shares  granted  under  the  Option  Plan are
         exercisable  at the market price at the date of grant.  Such  incentive
         stock  options  granted to officers and employees  are  exercisable  in
         three equal annual  installments,  with the first installment  becoming
         exercisable one year from the date of grant. Options granted to outside
         directors are exercisable  immediately,  but any common shares obtained
         from exercise of the options may not be sold prior to one year from the
         date of  grant.  All  options  expire at the  earlier  of ten years for
         officers and employees or twenty years for  directors  from the date of
         grant or one  year  following  the date  which  the  outside  director,
         officer or employee  ceases to serve in such capacity.  At December 31,
         1999,  38,749  shares remain  available for grant to future  directors,
         officers and employees.


                                       43
<PAGE>
    The following is a summary of option transactions:
<TABLE>
<CAPTION>

                                                                                                            Weighted-
                                                                                          Range of           Average
                                                                           Number         Per Share         Per Share
                                                                         of Shares       Option Price        Price
                                                                         ---------       ------------        -----
<S>                                                                       <C>          <C>                  <C>
            Outstanding, December 31, 1996......................           365,813      $  6.00-12.00       $  6.19
            Granted ............................................            10,867        15.30-21.25         18.06
            Exercised...........................................           (46,252)         6.00-9.52          6.13
                                                                           -------

            Outstanding, December 31, 1997......................           330,428         6.00-21.25          6.58
            Granted ............................................            18,000        16.25-19.25         18.08
            Exercised...........................................           (59,895)              6.00          6.00
            Forfeited...........................................           (15,333)       12.00-19.25         17.84
                                                                           -------

            Outstanding, December 31, 1998......................           273,200         6.00-21.25          6.83
            Granted ............................................            16,250        16.75-17.63         17.56
            Exercised...........................................           (75,420)              6.00          6.00
                                                                           -------

            Outstanding, December 31, 1999......................           214,030      $  6.00-21.25      $  7.93
                                                                           =======      =============      =======
</TABLE>

    The weighted-average  remaining  contractual  life of the outstanding  stock
        options at December 31, 1999,  1998 and 1997 was 8.6, 5.3 and 6.2 years,
        respectively.  The increase in 1999 was due to the Company  approving an
        amendment to the Plan to extend the life of options  issued to directors
        to twenty years from ten years.

    The outstanding options at December 31, 1999 were exercisable as follows:
<TABLE>
<CAPTION>

                                                             Number                                Weighted-Average
                                                             of          Weighted-Average            Remaining
            Year Ending                                      Shares     Exercise Price             Contractual Life
            -----------                                      ------     --------------             ----------------
                                                                                                      (In years)
<S>                                                         <C>            <C>                           <C>
                Currently exercisable...................    189,558        $   6.76                      8.5
                2000....................................      8,528           16.44                      9.1
                2001....................................      8,528           16.44                      9.4
                2002....................................      7,416           16.62                      9.7
                                                            -------

                                                            214,030        $   7.93                      8.6
                                                            =======        ========                      ===
</TABLE>

                                    44
<PAGE>
    Employee Stock  Ownership  Plan. The Company  sponsors a leveraged ESOP that
        covers eligible  employees who have a twelve-month  period of employment
        with the Bank during which they worked at least 1,000 hours and who have
        attained  age 21. The Bank  makes  quarterly  contributions  to the ESOP
        equal to the  ESOP's  debt  service.  The ESOP Trust  purchased  368,242
        shares of common stock in the Company's initial public offering with the
        proceeds  from a loan from the  Company.  This loan bears  interest at a
        fixed-rate of six percent with  principal and interest  payable in equal
        quarterly  installments over seven years. The ESOP shares initially were
        pledged as collateral  for its debt.  As the debt is repaid,  shares are
        released from collateral and allocated to active  employees based on the
        proportion  of debt service paid during the year.  The Company  accounts
        for its ESOP in accordance with Statement of Position 93-6. Accordingly,
        the debt of the  ESOP is  recorded  as debt  and the cost of the  shares
        pledged as collateral are reported as a contra equity account. As shares
        are released from collateral,  the Company records compensation expense,
        and an offsetting  credit to capital,  equal to the current market price
        of the shares,  and the shares become outstanding for earnings per share
        computations.  Dividends on all ESOP shares are recorded as compensation
        expense as it is management's  intention to allocate the dividends along
        with the shares when allocated. Compensation expense for the years ended
        December 31, 1999,  1998 and 1997  included the  following  ESOP related
        costs:
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                          ---------------------------
                                                                          1999       1998        1997
                                                                          ----       ----        ----
                                                                                (In thousands)
<S>                                                                      <C>           <C>        <C>
            Amortization of the original cost, $6 per share............. $  315        316        315
            Market appreciation of the FFLC shares......................    534        662        596
            Dividends on ESOP shares....................................     23         38         61
                                                                          -----      -----       ----

                Total...................................................  $ 872      1,016        972
                                                                          =====      =====        ===
</TABLE>

    The ESOP shares were as follows:
<TABLE>
<CAPTION>
                                                                                  At December 31,
                                                                          --------------------------
                                                                             1999              1998
                                                                             ----              ----
                                                                                ($ in thousands)
 <S>                                                                      <C>               <C>
           Allocated shares and shares released for allocation......       282,781           238,413
            Unreleased shares........................................       52,606           105,212
                                                                          --------           -------

            Total ESOP shares........................................      335,387           343,625
                                                                          ========           =======

            Fair value of unreleased shares..........................     $    802             1,710
                                                                          ========          ========
</TABLE>
<PAGE>
    Recognition and Retention Plan. The Company  adopted,  and the  shareholders
        approved,  an RRP for  directors,  officers and  employees to enable the
        Bank to attract and retain experienced and capable personnel. On January
        4,  1994,  the  conversion  date,  184,122  shares of common  stock were
        purchased for the RRP which  included  8,067 shares  reserved for future
        directors, officers and employees. The shares are granted in the form of
        restricted  stock  to be  earned  in  three  equal  annual  installments
        beginning  April 4, 1995.  The RRP shares  purchased  in the  conversion
        initially  were  excluded  from   stockholders'   equity.   The  Company
        recognized  compensation  expense in the amount of the fair market value
        of the common stock at the grant date of $6 per share, pro rata over the
        years  (1996,  1995 and 1994)  during  which the shares  were earned and
        payable and recorded a credit to  shareholders'  equity.  The shares are
        entitled  to all voting and other  shareholder  rights,  except that the
        shares, while restricted,  cannot be sold, pledged or otherwise disposed
        of, and are required to be held in escrow.


                                       45
<PAGE>
    If  a holder of restricted  stock under the RRP  terminated  employment  for
        reasons other than death, disability, retirement or change of control in
        the Company,  such employee  forfeits all rights to any allocated shares
        which  are  still  restricted.   If  termination  is  caused  by  death,
        disability,  retirement  or  change  in  control  of  the  Company,  all
        allocated  shares become  unrestricted.  Forfeitures  are reallocated to
        eligible  participants  annually.  At December  31,  1999,  4,749 shares
        remain reserved for future directors, officers and employees.

(17)  Parent Company Only Financial Statements
    Condensed  financial  statements  of the Holding  Company as of December 31,
        1999 and 1998 and for each of the years in the  three-year  period ended
        December 31, 1999 are presented below. Amounts shown as cash, investment
        in subsidiary,  loans to subsidiary and equity in earnings of subsidiary
        are eliminated in consolidation.

<TABLE>
<CAPTION>
                           Condensed Balance Sheets

                                                               At December 31,
                                                            --------------------
                                                             1999          1998
                                                            -------      -------
                                                               (In thousands)
<S>                                                         <C>              <C>
            Assets

Cash, deposited with subsidiary                             $   481          825
Investment in subsidiary                                     52,356       46,270
Loans to subsidiary                                           2,816        6,131
                                                            -------      -------

        Total assets                                        $55,653       53,226
                                                            =======      =======

    Liabilities and Stockholders' Equity

Accrued expense and other liabilities                            16            3
Stockholders' equity                                         55,637       53,223
                                                            -------      -------

        Total liabilities and stockholders' equity          $55,653       53,226
                                                            =======      =======
</TABLE>


                                       46
<PAGE>
<TABLE>
<CAPTION>
                         Condensed Statements of Income

                                                         Year Ended December 31,
                                                     -----------------------------
                                                       1999       1998        1997
                                                     -------      -----      -----
                                                            (In thousands)
<S>                                                  <C>        <C>       <C>
Revenues                                             $   261        410        532
Expenses                                                 190        243        280
                                                     -------      -----      -----

        Income before earnings of subsidiary              71        167        252
        Earnings of subsidiary                         5,331      4,230      3,502
                                                     -------      -----      -----

        Net income                                   $ 5,402      4,397      3,754
                                                     =======      =====      =====
<CAPTION>

                                          Condensed Statements of Cash Flows
                                                                                             Year Ended December 31,
                                                                                        -----------------------------
                                                                                         1999        1998        1997
                                                                                         ----        ----        ----
                                                                                               (In thousands)
<S>                                                                                     <C>          <C>        <C>
    Cash flows from operating activities:
        Net income....................................................................  $ 5,402      4,397      3,754
        Adjustments to reconcile net income to net cash
          provided by operations:
            Equity in earnings of subsidiary..........................................   (5,331)    (4,230)    (3,502)
            Decrease (increase) in other assets.......................................     -             2        (2)
            Increase (decrease) in accrued expenses and other liabilities.............       13          4        (12)
                                                                                        -------   --------    -------

                Net cash provided by operating activities.............................       84        173        238
                                                                                        -------    -------    -------
    Cash flows from investing activities-
            Repayment of loan to subsidiary...........................................    3,315        316      4,815
                                                                                          -----    -------      -----
    Cash flows from financing activities:
            Purchase of treasury stock................................................   (2,596)    (2,659)    (6,171)
            Stock options exercised...................................................      453        360        283
            Cash dividends paid.......................................................   (1,600)    (1,344)    (1,141)
            Cash dividends received...................................................     -         3,502      1,808
                                                                                        -------      -----      -----

                Net cash used in financing activities.................................   (3,743)      (141)    (5,221)
                                                                                          -----     ------      -----

    Net (decrease) increase in cash...................................................     (344)       348       (168)

    Cash at beginning of year.........................................................      825        477        645
                                                                                         ------     ------     ------

    Cash at end of year...............................................................  $   481        825        477
                                                                                          =====     ======     ======
</TABLE>
                                       47

<PAGE>
(18)  Stock Repurchase Program
    In  January and August 1996, the Company's Board of Directors approved stock
        repurchase programs which allowed the Company to acquire common stock in
        the open market.  The Company received OTS approval for the programs and
        began repurchasing shares within one month of approval.  During the year
        ended December 31, 1996,  all 132,000 shares  approved under the January
        1996 program were repurchased.  During the years ended December 31, 1996
        and 1997, all 126,000 shares approved under the August 1996 program were
        repurchased.

    In  January 1997, the Company"s Board of Directors  approved a program which
        allowed  the  Company to  acquire  additional  common  stock in the open
        market. During the year ended December 31, 1997, 178,690 shares or 60.6%
        of the 294,928 shares approved under that program were repurchased.

    In  September  1998,  the  Company"s  Board of Directors  approved a program
        which allowed the Company to acquire 369,285  additional common stock in
        the open market.  During the year ended December 31, 1998, the remaining
        shares approved under the January 1997 program were repurchased.  During
        the year ended  December 31, 1998 32,025 shares or 8.7% of the September
        1998 program were repurchased.

    During 1999,  the  Company  repurchased  147,102  shares or 43.6%  under the
        September  1998  program.  At December 31,  1999,  the Company can still
        repurchase up to an additional  190,158  shares under the September 1998
        program.

(19) Quarterly Financial Data (unaudited)
    The following tables present summarized quarterly data (in thousands, except
     per share amounts):
<PAGE>
<TABLE>
<CAPTION>


                                                                          Year Ended December 31, 1999
                                                            --------------------------------------------------------
                                                             First       Second      Third       Fourth
                                                            Quarter      Quarter     Quarter     Quarter      Total
                                                            -------      -------     -------     -------      -----

<S>                                                         <C>            <C>          <C>        <C>        <C>
            Interest income...............................  $ 8,851        9,317        9,801      10,643     38,612
            Interest expense..............................    4,748        5,005        5,365       6,096     21,214
                                                              -----        -----        -----      ------     ------

            Net interest income...........................    4,103        4,312        4,436       4,547     17,398

            Provision for loan losses.....................      200          150          150         219        719
                                                             ------       ------       ------      ------    -------
            Net interest income after provision
                for loan losses...........................    3,903        4,162        4,286       4,328     16,679
                                                             ------        -----        -----      ------     ------

            Noninterest income............................    1,289          370          319         354      2,332
            Noninterest expense...........................    2,374        2,562        2,642       2,735     10,313
                                                              -----        -----        -----      ------     ------

            Income before income taxes....................    2,818        1,970        1,963       1,947      8,698

            Income taxes..................................    1,084          739          739         734      3,296
                                                              -----        -----       ------      ------     ------

            Net income....................................  $ 1,734        1,231        1,224       1,213      5,402
                                                              =====        =====        =====      ======     ======

            Basic income per common share.................$     .49          .34          .35         .34       1.52
                                                            =======      =======      =======     =======    =======

            Diluted income per common share...............$     .47          .33          .33         .34       1.47
                                                            =======      =======      =======     =======    =======
</TABLE>
                                       48

<PAGE>
<TABLE>
<CAPTION>
                                                                      Year Ended December 31, 1998
                                                            ---------------------------------------------
                                                             First       Second       Third       Fourth
                                                            Quarter      Quarter      Quarter     Quarter       Total
                                                            -------      -------      -------     -------       -----
<S>                                                         <C>            <C>          <C>         <C>        <C>
            Interest income...............................  $ 7,753        7,889        8,110       8,421      32,173
            Interest expense..............................    4,144        4,195        4,367       4,565      17,271
                                                              -----        -----        -----       -----      ------

            Net interest income...........................    3,609        3,694        3,743       3,856      14,902

            Provision for loan losses.....................      148          225          154         155         682
                                                             ------       ------       ------      ------     -------
            Net interest income after provision
                for loan losses...........................    3,461        3,469        3,589       3,701      14,220
                                                              -----        -----        -----       -----      ------

            Noninterest income............................      228          326          318         392       1,264
            Noninterest expense...........................    2,017        2,049        2,139       2,241       8,446
                                                              -----        -----        -----       -----      ------

            Income before income taxes....................    1,672        1,746        1,768       1,852       7,038

            Income taxes..................................      681          650          636         674       2,641
                                                             ------       ------      -------      ------      ------

            Net income.................................... $    991        1,096        1,132       1,178       4,397
                                                             ======        =====        =====       =====      ======

            Basic income per common share................. $    .28          .30          .31         .33        1.22
                                                             ======      =======      =======     =======     =======

            Diluted income per common share............... $    .26          .29          .30         .31        1.16
                                                             ======      =======       ======     =======     =======
</TABLE>

(20)  Year 2000 Issues
     The Company's  operating  and  financial  systems  have  been  found  to be
         compliant;  the "Y2K Problem" has not adversely  affected the Company's
         operations nor does management expect that it will.

(21)       Dividend Reinvestment Plan
     On  January 7, 2000, the Company  established a Dividend  Reinvestment Plan
         (the  "Plan").  The Plan was  approved  by the  Board of  Directors  on
         December 30, 1999 and is intended to provide  stockholders of record of
         at  least  50  shares  with  a  convenient   and   economical   way  to
         automatically  reinvest all or a portion of their cash dividends and to
         invest optional cash payments,  subject to minimum and maximum purchase
         limitations,  in additional shares of common stock. Stockholders pay no
         service  charges or brokerage  commissions  for common stock  purchased
         under the Plan.

                                      49
<PAGE>

                         Independent Auditors' Report



The Board of Directors
FFLC Bancorp, Inc.
Leesburg, Florida:

We have audited the  accompanying  consolidated  balance sheets of FFLC Bancorp,
Inc. and Subsidiary (the "Company") (the parent company of First Federal Savings
Bank of  Lake  County)  as of  December  31,  1999  and  1998  and  the  related
consolidated  statements  of income,  changes in  stockholders'  equity and cash
flows for each of the years in the  three-year  period ended  December 31, 1999.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 1999 and 1998 and the results of its  operations and its cash flows
for each of the  years in the  three-year  period  ended  December  31,  1999 in
conformity with generally accepted accounting principles.






/s/HACKER, JOHNSON, COHEN & GRIEB PA
------------------------------------
HACKER, JOHNSON, COHEN & GRIEB PA
Orlando, Florida
January 14, 2000
<PAGE>

                               FFLC BANCORP, INC.

                             DIRECTORS AND OFFICERS


Directors:                   Occupation
----------                   ----------
Joseph J. Junod              Retired, General Manager, Avesta Sheffield Pipe
Chairman of the Board

Claron D. Wagner             President, Woody Wagner, Inc.
Vice Chairman

James P. Logan               President/Owner, Logan Sitework Contractors, Inc.
Ted R. Ostrander, Jr.        President, Lassiter-Ware, Inc.
H.D. Robuck, Jr.             Attorney; CEO, Ro-Mac Lumber & Supply, Inc.
Stephen T. Kurtz             President, FFLC Bancorp, Inc. & Subsidiary
Paul K. Mueller              Executive Vice President, FFLC Bancorp, Inc.
                               & Subsidiary


Advisory Directors:
-------------------

James R. Gregg               President, Jarol Company
James H. Herlong             General Partner, A.S. Herlong, Ltd.
Horace D. Robuck             President, Ro-Mac Lumber & Supply, Inc.

Officers:
---------

Stephen T. Kurtz
President and Chief Executive Officer

Paul K. Mueller
Executive Vice President and Treasurer

Sandra L. Rutschow
Vice President and Secretary

                                       51
<PAGE>

                           FIRST FEDERAL SAVINGS BANK
                                 OF LAKE COUNTY

                        DIRECTORS, OFFICERS AND MANAGERS


DIRECTORS

Joseph J. Junod
Chairman of the Board

Claron D. Wagner
Vice Chairman

James P. Logan
Ted R. Ostrander, Jr.
H.D. Robuck, Jr.
Stephen T. Kurtz
Paul K. Mueller

Advisory Directors

James R. Gregg
James H. Herlong
Horace D. Robuck

OFFICERS

Stephen T. Kurtz
President
Chief Executive Officer

Paul K. Mueller
Executive Vice President
and Treasurer

Dwight L. Hart
Senior Vice President and Mortgage Loan Manager

Joseph D. Cioppa
Senior Vice President and Commercial Loan Manager

Paul S. Allen
Senior Vice President, Audit and Planning

Jay Bartholomew
Vice President and Retail Banking Manager

Susan L. Berkebile
Vice President and Area Loan Manager

Michael J. Cox
Vice President and Area Loan Manager

Jankie Dhanpat
Vice President, SEC Reporting & Controller
<PAGE>
Brenda M. Grubb
Vice President and Human Resources Manager

James D. Haug
Vice President and Lady Lake Branch Manager

Lawrence E. Hoag
Vice President and Operations Manager

Brian R. Hofer
Vice President and Commercial Loan Officer

Karen Hollister
Vice President and Loan Operations Manager

Dennis R. Rogers
Vice President and Wildwood Branch Manager

Sandra L. Rutschow
Vice President and Corporate Secretary

Sandra L. Seaton
Vice President and South Leesburg Branch Manager

Raynard S. (Ray) Taylor
Vice President and Commercial Loan Officer

Phil Tompetrini
Vice President and Inverness Branch Manager

Lynda F. Wemple
Vice President and Accounting Manager

Vickie S. Baxter
Assistant Vice President and Loan Officer

Donna Boyett
Assistant Vice President and Branch
Operations Coordinator

Stephanie Hodges
Assistant Vice President and Secondary Market Manager

Penny Hollis
Assistant Vice President and Compliance Officer

Cindy Lay
Assistant Vice President and Data Manager &
MIS Coordinator

Charles L. Lee
Assistant Vice President and Security Officer

Debra L. McFarlane
Assistant Vice President and Deposit Administrator

Carmen C. Passwaters
Assistant Vice President and Benefits Administrator
<PAGE>
Sandra A. Rowe
Assistant Vice President and Loan Servicing Manager

Victoria Boren
Eustis Branch Manager

James M. Combs
Indirect Loan Manager

James R. Cummings
Collections Manager

Barbara A. Cordes
Information Systems Manager

Karen A. Dixon
Inverness Loan Officer

Lori Farfaglia
Four Corners Branch Manager

Linda C. Gallop
Clermont Branch Manager

Greg Heckler
Main Street Office Manager

Doris E. Hyatt
Loan Closing Manager

Jennifer Kitchens
Bushnell Branch Manager

Marilyn Leugers
Main Office Branch Manager

Catherine M. Wallin
Lake Square Office Manager

Michael J. Price
Eustis Loan Officer

Leigh S. Skehan
Marketing Coordinator

Craig Smith
Fruitland Park Branch Manager

Betty Wolcott
Facilities & Purchasing Manager

                                       52
<PAGE>
                    FIRST FEDERAL SAVINGS BANK OF LAKE COUNTY
                     is Proud of the Outstanding Service its
           Employees Provide to the Community and the People it Serves



MAIN OFFICE:

Annette McCullough
Barbara A. Cordes
Barbara Boscana
Betty J. Leech
Betty L. Wolcott
Bobby H. Inscoe
Brenda M. Grubb
Carlos E. Colon
Carmen C. Passwaters
Carol A. Dewey
Carol B. Holley
Charles L. Lee
Cheryl A. Davis
Cleire M. Geidel
Craig S. Cannon
Cynthia A. Lord
Cynthia M. Lay
Dawn Rene Davison
Debra L. McFarlane
Deena M. Bryant
Diane S. Cook
Dorene K. Shahan
Doris E. Hyatt
Dwight L. Hart
Erika R. Morgan
Ginger L. Devine
Jacqueline E. Widows
James M. Combs
James R. Cummings
James Schaeffer
Jankie Dhanpat
Jay R. Bartholomew
Jeffrey W. Wright
Jennette L. Roode
Jennifer Grovesteen
Jewel M. Correll
Jill S. Spires
Joan P. Gibson
John LaVallie
Joseph D. Cioppa
Juanita F. Jackson
Judith A. Cook
Karen L. Hollister
Kathy E. Bauer
Kathy Mantlo
Keri L. Morris
Lacey A. Lee
<PAGE>
Landa A. Russell
Lawrence E. Hoag
Leigh S. Skehan
Leslie A. Leach
Linda B. Law
Linda J. Giggey
Linda N. Landers
Lisa K. Woolwine
Lynda F. Wemple
Lynn P. Stoffel
Margaret H. Locke
Margaret M. Siegel
Margaret R. White
Marilyn A. Leugers
Mary A. Durre
Maryann D. Chantos
Michelle M. Thompson
Michelle Williams
Nancy J. Lane
Natalie L. Rojas
Norma J. Caron
Orpha M. Vogt
Pamela A. O"Neal
Pamela J. Linville
Patricia B. Inman
Patti L. Martel-Spencer
Paul K. Mueller
Paul S. Allen
Peggy L. Harris
Penny M. Hollis
Raynard S. Taylor
Ruth E. Fielding
Sandra A. Rowe
Sandra L. Rutschow
Sheila C. Coffey
Shu Een Chen
Sondra Jones
Stephanie Hodges
Stephen T. Kurtz
Terry J. French
Tina R. Clancy
Tricka M. Parker
Vickie S. Baxter
Victoria J. Langford
Virgina D. Vann
Virginia I. Grantham
Yvonne K. Ross
Zoann Goodman
<PAGE>
FRUITLAND PARK OFFICE:

Brandi L. Shaw
Craig R. Smith
Delphine C. Williams
Michelle E. Odell

LADY LAKE OFFICE:

Betty T. Woods
Constance Merrell-Kasch
Deedee A. Dye
Estelle E. Crawley
Heather L. Varner
James D. Haug
Julie A. Hankins
Karen Bednarik
Mindy L. Tritt
Patricia L. Sizemore
Shanda R. Gamble

MAIN STREET OFFICE:

Angela Nicole Phillips
Celeste A. James
Cynthia M. Page
Donna L. Boyett
Gregory F. Heckler
Kari K. Caulk
Rhonda L. Wilkerson

LAKE SQUARE
MALL OFFICE:

Catherine M. Wallin
Melissa J. Asbury
Regina D. Shiver
Shannon J. Peters

CLERMONT OFFICE:

Arthur E. Middleton
Brian R. Hofer
Donna L. Franklin
Holly Ogg
Janna R. Michell
Judy L. Garafola
Karen M. Seddon
Kris R. Helms
Linda Gallop
Lynda S. Cole
Rebecca A. Gibson
Sharon M. Slack
Susan Lynn Berkebile
<PAGE>
EUSTIS OFFICE:

Amanda L. Leap
Erin M. Moore
Hilda Lozano
Michael Cox
Michael J. Price
Natasha L. Pender
Stephanie L. Freer
Tamika J. Rolle
Victoria M. Boren
Vivian R. Curry

WILDWOOD OFFICE:

Carla A. McAllister
Cheryl P. Yates
Crystal L. Schmidt
Dana L. Fields
Dennis R. Rogers
Elaine C. Buzzard
Latahna J. Green
Mona M. Riggs
Paula D. Williams
Shirley A. Davis
Sophia A. Hamilton

SOUTH LEESBURG OFFICE:

Brandi M. Simko
Carol A. Sieder
Cynthia M. Deeb
Eva J. Snead
Sandra L. Seaton

INVERNESS:

Jamie R. Daniels
Jean Reese
Judith Latmontagne
Karen A. Dixon
Lillian G. Russo
Phil P. Tompetrini
Suzanne Mission
Teresa A. Kuechle

FOUR CORNERS

Janis K. Spencer
Lori M. Farfaglia
Sarah L. Williams
Stephany M. Barr
Trinia C. McClendon
Whitney L. White
<PAGE>

BUSHNELL:

Betty J. Hewett
Inge Pelfrey
Jennifer Kitchens
Natalie D. Langford
Sylvie M. Zimmerman