SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C 20549

                                    FORM 10-K

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

                  For the fiscal year ended December 31, 1998

                         Commission File Number 0-22608


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

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

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

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

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

                                      None

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

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

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

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

The  aggregate  market  value of the voting stock held by  nonaffiliates  of the
registrant was  $53,182,885  and is based upon the last sales price as quoted on
the NASDAQ Stock Market for March 8, 1999.

The Registrant had 3,681,456 shares outstanding as of March 8, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     December 31, 1998. (Part II and IV)

2.   Portions of Proxy  Statement for the 1999 Annual  Meeting of  Stockholders.
     (Part III)

<PAGE>
                                INDEX

PART I                                                                    Page
------                                                                    ----
Item I.              Description of Business

                     Business                                                 3
                     Market Area and Competition                              3
                     Market Risk                                              4
                     Lending Activities                                    4-10
                     Asset Quality                                        10-15
                     Investment Activities                                   16
                     Mortgage-Backed Securities                           16-17
                     Investment Securities                                17-19
                     Sources of Funds                                     20-22
                     Borrowings                                              23
                     Subsidiary Activities                                   23
                     Personnel                                               24
                     Regulation and Supervision                           24-29
                     Year 2000                                            29-30
                     Federal and State Taxation                           31-32

Item 2.     Properties                                                       33

Item 3.     Legal Proceedings                                                34

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

PART II

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

Item 6.     Selected Financial Data                                          34

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

Item 8.     Financial Statements and Supplementary Data                      34

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

PART III

Item 10.    Directors and Executive Officers of the Registrant               35

Item 11.    Executive Compensation                                           35

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

Item 13.    Certain Relationships and Related Transactions                   35

PART IV

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

SIGNATURES                                                                   37

                                        2
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Business

The registrant,  FFLC Bancorp,  Inc.  ("FFLC" or the  "Company"),  completed its
public  offering of 4,603,032  shares  (adjusted  for stock split) of its common
stock and acquired  First  Federal  Savings  Bank of Lake County  ("the  Savings
Bank")  in  connection  with the  Savings  Bank's  conversion  from a  federally
chartered mutual savings association to a federally chartered stock savings bank
on January 4, 1994. The net conversion  proceeds  totaled $26.6 million of which
$13.3 million was invested in the Savings Bank and $13.3 million was retained by
the  registrant.  The  registrant  loaned  $2.2  million to the  Employee  Stock
Ownership  Plan and the remaining  $11.1  million has been invested  through the
Savings Bank. The  registrant,  which was  incorporated in Delaware on September
16, 1993, is a savings and loan holding  company and is subject to regulation by
the Office of Thrift Supervision  ("OTS"). The registrant has not transacted any
material  business  other than  through its  subsidiary,  the Savings  Bank.  At
December  31,  1998,  the  Company  had  total  assets  of  $463.8  million  and
stockholders' equity of $53.2 million.

The Savings Bank was established in 1934 as a federally-chartered mutual savings
and loan association. The Savings Bank is a member of the Federal Home Loan Bank
("FHLB")  System and its deposit  accounts are insured to the maximum  allowable
amount by the Federal Deposit Insurance  Corporation  ("FDIC").  At December 31,
1998,  the Savings  Bank had total  assets of $463.8  million and  stockholders'
equity of $46.3 million.

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

Market Area and Competition

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


                                        3
<PAGE>
Market Risk

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

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

Lending Activities

Loan  Portfolio.  The  Savings  Bank's  loan  portfolio  consists  primarily  of
conventional first mortgage loans secured by one-to-four-family  residences.  At
December  31,  1998,  the Savings  Bank's  total loans  outstanding  were $401.5
million,  of which  $283.4  million or 70.59% of the Savings  Bank's  total loan
portfolio  were  one-to-four-family  residential  first mortgage  loans.  Of the
one-to-four-family  residential  mortgage loans  outstanding at that date, 31.2%
were fixed rate loans and 68.8% were adjustable-rate  ("ARM") loans. At the same
date,  commercial  real estate  loans and other  loans on  improved  real estate
totaled $44.2  million,  or 11.01% of the Savings  Bank's total loan  portfolio;
construction  (excluding  construction/permanent  loans) and land loans  totaled
$11.7  million  or  2.91%  of the  Savings  Bank's  total  loan  portfolio;  and
multi-family  mortgage loans totaled $8.2 million or 2.04% of the Savings Bank's
total loan portfolio.  Consumer,  commercial and other loans held by the Savings
Bank,  which  principally  consist  of home  equity  loans,  deposit,  consumer,
commercial  and other  loans,  totaled  $54.0  million or 13.45% of the  Savings
Bank's total loan portfolio at December 31, 1998.




                                        4
<PAGE>
The  following  table sets forth the  composition  of the  Savings  Bank's  loan
portfolio in dollar amounts and percentages at the dates indicated:
<TABLE>
<CAPTION>
                                              1994                          1995                           1996           
                                    ----------------------------------------------------------------------------------- 
                                                      % of                         % of                           % of   
                                     Amount          Total          Amount        Total           Amount         Total   
                                    --------       -------        ---------      ------         ---------        -----   
                                                                  (Dollars in thousands)
<S>                                <C>               <C>          <C>             <C>           <C>              <C>        
Mortgage loans:
     One-to-four-family            $ 130,195         82.80%       $ 159,170       84.32%        $ 191,788        80.95%     
     Construction and land             6,332          4.03%           5,343        2.83%            5,489         2.32%  
     Multi-family                      3,068          1.95%           3,098        1.64%            4,180         1.76%  
     Commercial real estate            6,153          3.91%           6,654        3.53%           13,565         5.73%  
                                    --------       -------        ---------      ------         ---------        -----   
                                                                                                                         
               Total mortgage                                                                                            
                     loans           145,748         92.69%         174,265       92.32%          215,022        90.76%  
                                                                                                                         
Consumer loans                        11,496          7.31%          14,493        7.68%           21,899         9.24%  
Commercial loans                           -            -                 -           -                 -            -   
                                    --------       -------        ---------      ------         ---------        -----   
                                                                                                                         
               Total loans                                                                                               
                     receivable      157,244        100.00%         188,758      100.00%          236,921        100.0%  
                                                    ======                       ======                          =====   
                                                                                                                         
Less:                                                                                                                    
     Loans in process                  7,833                          4,267                         8,007                
     Unearned discounts,                                                                                                 
          premiums and                                                                                                   
          deferred loan fees,                                                                                            
          net                            256                             66                           (97)               
     Allowance for loan losses           869                            977                         1,063                
                                    --------                      ---------                     ---------                
                                                                                                                         
               Loans receivable,                                                                                         
                     net           $ 148,286                      $ 183,448                     $ 227,948                
                                   =========                      =========                     =========                
                                                                                                
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                               1997                     1998
                                    ------------------------------------------------
                                                      % of                      % of  
                                      Amount         Total       Amount        Total  
                                    ---------       ------     ---------      ------   
<S>                                 <C>              <C>       <C>             <C>     
Mortgage loans:                  
     One-to-four-family             $ 245,524        74.64%    $ 283,372       70.59%  
     Construction and land              3,528         1.07%       11,683        2.91   
     Multi-family                       4,464         1.36%        8,165        2.04   
     Commercial real estate            37,975        11.54%       44,211       11.01   
                                    ---------       ------     ---------      ------   
                                                                                       
               Total mortgage                                                          
                     loans            291,491        88.61%      347,431       86.55%  
                                                                                       
Consumer loans                         32,834         9.98%       43,490       10.83%  
Commercial loans                        4,632         1.41%       10,532        2.62%  
                                    ---------       ------     ---------      ------   
                                                                                       
               Total loans                                                             
                     receivable       328,957        100.0%      401,453       100.0%  
                                                     =====                     =====   
                                                                                       
Less:                                                                                  
     Loans in process                  12,253                     10,637               
     Unearned discounts,                                                               
          premiums and                                                                 
          deferred loan fees,                                                          
          net                            (333)                      (526)              
     Allowance for loan losses          1,684                      2,283               
                                    ---------                  ---------               
                                                                                       
               Loans receivable,                                                       
                     net            $ 315,353                  $ 389,059               
                                    =========                  =========               
                                   
</TABLE>
                                       5

<PAGE>
Purchase of Mortgage Loans.  The Savings Bank has, from time to time,  purchased
mortgage loans originated by other lenders.  At December 31, 1998, $2.5 million,
or .62% of the  Savings  Bank's  total loan  portfolio  consisted  of  purchased
mortgage  loans  or loan  participations.  Purchased  mortgage  loans  consisted
primarily of one-to-four-family residential mortgage loans.

Secondary  Market  Activities.  The Savings Bank  participates  in the secondary
market  through  a  correspondent  relationship,  originating  loans  (primarily
30-year  fixed-rate  loans)  which  are  funded by the  investor  correspondent.
Funding by the correspondent eliminates the Savings Bank's interest-rate risk on
such loans.  Such loans are closed on the Savings  Bank's  documents  with funds
provided by the investor  correspondent  at closing  with all credit  conditions
established by the investor  correspondent being satisfied prior to the issuance
of a  loan  commitment.  The  Savings  Bank  receives  a  fee  for  originating,
processing  and  closing  the  loans and  reports  the loans to the OTS as loans
originated and sold. In the year ended December 31, 1998, such loans amounted to
$8.4 million or 7.03% of total mortgage loans originated.



                                        6

<PAGE>
Loan  Originations,  Purchases,  Sales and Principal  Repayments.  The following
table sets forth the Savings  Bank's  loan  originations,  purchases,  sales and
principal repayments for the periods indicated.
<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                       ---------------------------------------
                                                          1996           1997           1998
                                                       ---------      ---------      ---------
                                                                   (In thousands)
<S>                                                    <C>              <C>            <C>    
Mortgage loans (gross):
     At beginning of year ........................     $ 174,265        215,022        291,491
     Mortgage loans originated:
          One-to-four-family (1) .................        62,906         86,976        107,418
          Construction and land ..................         2,292          2,502          1,193
          Multi-family ...........................         1,222          2,759            634
          Commercial real estate .................         7,982         25,142         10,230
                                                       ---------      ---------      ---------

               Total mortgage loans originated (1)        74,402        117,379        119,475

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

               Total mortgage loans originated and
                         purchased ...............        76,508        117,379        119,475

     Transfer of loans to real estate owned ......          (287)          (444)          (173)
     Principal repayments ........................       (31,540)       (37,997)       (54,979)
     Sales of loans (1) ..........................        (3,924)        (2,469)        (8,383)
                                                       ---------      ---------      ---------

               At end of year ....................     $ 215,022        291,491        347,431
                                                       =========      =========      =========

Consumer loans (gross):
     At beginning of year ........................        14,493         21,899         32,834
     Loans originated ............................        13,021         18,356         27,264
     Principal repayments ........................        (5,615)        (7,421)       (16,608)
                                                       ---------      ---------      ---------

               At end of year ....................     $  21,899         32,834         43,490
                                                       =========      =========      =========

Commercial loans (gross):
     At beginning of year ........................          --             --            4,632
     Loans originated ............................          --            9,022         13,055
     Principal repayments ........................          --           (4,390)        (7,155)
                                                       ---------      ---------      ---------

               At end of year ....................     $    --            4,632         10,532
                                                       =========      =========      =========
</TABLE>

(1)  Includes loans originated for and funded by correspondents of $2.4 million,
     $2.5 million and $8.4 million for 1996, 1997 and 1998, respectively.


                                       7
<PAGE>
Maturities of Loans. The following table shows the contractual maturities of the
Savings Bank's loan portfolio at December 31, 1998.  Loans that have  adjustable
rates are shown as  amortizing to final  maturity  rather than when the interest
rates are next  subject to change.  The table does not  include  prepayments  or
scheduled principal  repayments.  Prepayments and scheduled principal repayments
on the Savings  Bank's loans  totaled  $37.2  million,  $49.8  million and $77.8
million for the years ended December 31, 1996, 1997 and 1998, respectively.
<TABLE>
<CAPTION>
                                               Mortgage Loans
                                         -----------------------
                                             One-to-                                              Total
                                              Four-                  Commercial     Consumer      Loans
                                             Family       Other         Loans         Loans      Receivable
                                            --------     -------        ------      -------      --------
                                                                    (In thousands)
<S>                                       <C>            <C>            <C>            <C>           <C>  
 Amounts due:
     Within 1 year ..................     $   1,132          1,563          3,289          2,316          8,300
                                          ---------      ---------      ---------      ---------      ---------

     1 to 3 years ...................         3,448         14,760          3,304         14,650         36,162
     3 to 5 years ...................         5,696         10,419          3,939          6,289         26,343
     5 to 10 years ..................        13,740          8,387           --            9,775         31,902
     10 to 20 years .................        37,912         18,691           --           10,460         67,063
     Over 20 years ..................       221,444         10,239           --             --          231,683
                                          ---------      ---------      ---------      ---------      ---------

     Total due after 1 year .........       282,240         62,496          7,243         41,174        393,153
                                          ---------      ---------      ---------      ---------      ---------

     Total amounts due ..............       283,372         64,059         10,532         43,490        401,453

     Loans in process ...............       (10,621)          --             --              (16)       (10,637)
     Unearned discounts, premiums
          and deferred loan fees, net           526           --             --             --              526
     Allowance for loan losses ......          (575)        (1,198)          (206)          (304)        (2,283)
                                          ---------      ---------      ---------      ---------      ---------

Loans receivable, net ...............     $ 272,702         62,861         10,326         43,170        389,059
                                          =========      =========      =========      =========      =========
</TABLE>
Loans Due After  December 31, 1999.  The following  table sets forth at December
31,  1998 the  dollar  amount of all loans due or  scheduled  to  reprice  after
December  31,  1999,  classified  according  to whether such loans have fixed or
adjustable interest rates.
<PAGE>
<TABLE>
<CAPTION>
                                            Due after December 31, 1999
                                    --------------------------------------
                                       Fixed       Adjustable       Total
                                    ---------      ----------     --------
                                                  (In thousands)
<S>                                 <C>              <C>           <C>    
Mortgage loans:
     One-to-four-family             $  88,159        194,081       282,240
     Construction and land              3,909          1,879         5,788
     Multi-family                       1,348          6,817         8,165
     Commercial real estate            16,632         31,911        48,543

Consumer loans                         35,391          5,783        41,174
Commercial loans                        2,221          5,022         7,243
                                    ---------        -------       ------- 

          Total                     $ 147,660        245,493       393,153
                                    =========        =======       =======
</TABLE>



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

In the years ended  December 31, 1996,  1997 and 1998,  the Savings Bank's total
mortgage loan originations amounted to $74.4 million,  $118.5 million and $119.5
million, respectively, of which $62.9 million, $87.0 million and $107.4 million,
respectively, were secured by one-to-four-family properties.

At  December  31,  1998,   70.59%  of  total  loans   receivable   consisted  of
one-to-four-family residential loans, of which 68.8% were ARM loans. The Savings
Bank's ARM loans may carry an initial interest rate which is less than the fully
indexed rate for the loan.  The initial  discounted  rate is  determined  by the
Savings Bank in accordance with market and competitive factors. The Savings Bank
offers one-,  three- and five-year ARM loans which adjust by a maximum of 2% per
adjustment  period,  with lifetime caps on increases of 5% to 6%, depending upon
the program chosen.

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

Commercial and Multi-Family Real Estate Lending.  As of December 31, 1998, $44.2
million,  or 11.01% of the Savings  Bank's  total loan  portfolio  consisted  of
commercial  real estate loans and $8.2 million,  or 2.04% of the Savings  Bank's
total loan portfolio, consisted of multi-family residential loans.

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

Commercial Loans. As of December 31, 1998, $10.5 million or 2.62% of the Savings
Bank's total loan portfolio, consisted of commercial loans.

Construction  and Land Loans.  The Savings Bank originates  loans to finance the
construction  of  one-to-four-family   homes  and,  to  a  much  lesser  extent,
originates loans for the acquisition and development of land (either  unimproved
land or improved  lots) on which the purchaser  can then build.  At December 31,
1998,  construction  (excluding  construction/permanent  loans)  and land  loans
totaled $11.7 million or 2.91% of the Savings Bank's total loan portfolio.
<PAGE>
At December 31, 1998,  the Savings Bank had loans in process  (undisbursed  loan
proceeds  of  construction   loans)  of  $10.6  million  which  was  secured  by
residential mortgages.  The Savings Bank makes residential construction loans to
homeowners on a long-term basis with amortization beginning at the conclusion of
construction,  usually a period of about six  months.  Such loans are carried in
the   one-to-four-family   category  and  are  not   separately   classified  as
construction  loans.  Residential  construction loans to builders are carried in
the construction and land category.




                                        9
<PAGE>
Construction   and   land   loans   also   include    construction   loans   for
one-to-four-family  residential  property  for which the  borrower  will  obtain
permanent  financing  from  another  lender.  Such  loans  bear a fixed  rate of
interest that equals prime plus 2.0% during the construction period. The Savings
Bank  obtains a commitment  for the  permanent  financing  from the other lender
prior to originating the construction loan.

Consumer  Lending.  At December 31, 1998, $43.5 million or 10.83% of the Savings
Bank's total loan portfolio  consisted of consumer loans,  including home equity
loans and lines of credit for consumer  purposes and, to a lesser  extent,  home
improvement loans and secured and unsecured personal loans.

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

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

Loan  Approval  and  Authority.  Mortgage  loan  approval  authority  for  loans
exceeding  $1,000,000  has been  retained by the Board of Directors  which meets
weekly in its capacity as the Executive  Committee of the Board to consider loan
recommendations of the Loan Committee.  The Loan Committee is comprised of three
outside directors,  the President and the Senior Lending Officers of the Savings
Bank and has been delegated  authority to approve  mortgage  loans,  home equity
loans, home equity lines of credit and secured consumer loans up to $1,000,000.

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

Asset Quality

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


                                       10
<PAGE>
At December 31, 1996,  1997 and 1998,  delinquencies  in the Savings Bank's loan
portfolio were as follows:
<TABLE>
<CAPTION>
                                                    At December 31, 1996                            At December 31, 1997 
                                          ---------------------------------------------------------------------------------------
                                             60-89 Days           90 Days or More           60-89 Days           90 Days or More
                                          -----------------      ------------------     -----------------      ------------------
                                           Number  Principal      Number   Principal     Number   Principal     Number   Principal  
                                             of      Balance        of      Balance        of       Balance       of       Balance  
                                            Loans   of Loans       Loans    of Loans      Loans    of Loans      Loans    of Loans  
                                            -----   --------       -----    --------      -----    --------      -----    --------  
                                                                          (Dollars in thousands)

One-to-four-family                             3          77          8         545          7         341          8         240   
Construction and land                          -           -          1          68         -           -           1           2   
Multi-family                                   -           -          -          -          -           -           -          -    
Commercial real estate                         -           -          -          -          -           -           -          -    
                                              --        ----        ---        ----        ---       -----         --       -----   

         Total mortgage loans                  3          77          9         613          7         341          9         242   

Consumer loans                                 2          46          4          53          4          24          -          -    
                                               -         ---         --         ---         --         ---          -       -----   

         Total loans                           5         123         13         666         11         365          9         242   
                                               =         ===         ==         ===         ==         ===          =         ===   

Delinquent loans to total loans                          .05%                   .28%                   .11%                   .07%  
                                                         ===                    ===                    ===                    ===   
<CAPTION>
                                                              At December 31, 1998
                                                  ---------------------------------------- 
                                                       60-89 Days          90 Days or More  
                                                  -------------------      ----------------  
                                                   Number   Principal      Number Principal        
                                                     of       Balance        of     Balance        
                                                    Loans    of Loans       Loans  of Loans        
                                                    -----    --------       -----  --------        
<S>                                                  <C>     <C>           <C>      <C>          
One-to-four-family                                    -         -             3        87           
Construction and land                                 -         -             6       343    
Multi-family                                          -         -            -        -      
Commercial real estate                                -         -            -        -      
                                                     ---     ------        ----     ---      
                                                                                             
         Total mortgage loans                         -         -             9       430    
                                                                                             
Consumer loans                                         4         40           3        14    
                                                       -         --         ---      ----    
                                                                                             
         Total loans                                   4         40          12       444    
                                                       =         ==          ==       ===    
                                                                                             
Delinquent loans to total loans                                 .01%                  .11%   
                                                                ===                   ===    
</TABLE>
                                               
                                       11
<PAGE>
Nonperforming Assets. The following table sets forth information with respect to
the Savings Bank's nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
                                                                 At December 31,
                                               -------------------------------------------------
                                               1994        1995       1996       1997       1998
                                               ----        ----       ----       ----       ----
                                                            (Dollars in thousands)
<S>                                            <C>        <C>        <C>        <C>       <C>
Nonaccrual mortgage loans ................       324         70        613        242        434

Nonaccrual consumer loans ................         5        104         53       --           10
                                               -----      -----      -----      -----      -----

Total nonperforming loans ................       329        174        666        242        444

Real estate owned ........................        84        165        361        507        366
                                               -----      -----      -----      -----      -----

          Total nonperforming assets .....     $ 413        339      1,027        749        810
                                               =====      =====      =====      =====      =====

Nonperforming loans to total loans .......       .21%       .09%       .28%       .07%       .11%
                                               =====      =====      =====      =====      =====

Total nonperforming assets to total assets       .13%       .10%       .30%       .19%       .17%
                                               =====      =====      =====      =====      =====
</TABLE>
At  December  31,  1998,  the  Savings  Bank had no  accruing  loans  which were
contractually  past  due 90 days or more as to  principal  and  interest  and no
troubled  debt  restructurings  as defined by Statement of Financial  Accounting
Standards No. 15.  Nonaccrual  loans for which interest has been reduced totaled
approximately  $444,000,  $242,000 and  $666,000 at December 31, 1998,  1997 and
1996,  respectively.  For the year ended December 31, 1998, interest income that
would  have  been  recorded  under the  original  terms of  nonaccrual  loans at
December 31, 1998 and interest income actually recognized is summarized below:

     Interest income that would have been recorded                $ 39,950
     Interest income recognized                                     (8,457)
                                                                  --------

     Interest income foregone                                     $ 31,493
                                                                  ========

Classified Assets. Federal regulations and the Savings Bank's policy require the
classification  of loans and other assets,  such as debt and equity  securities,
considered  to be of  lesser  quality  as  "substandard",  "doubtful"  or "loss"
assets. An asset is considered  "substandard" if it is inadequately protected by
the  current net worth and paying  capacity of the obligor or of the  collateral
pledged,  if  any.  "Substandard"  assets  include  those  characterized  by the
"distinct  possibility"  that the  institution  will sustain  "some loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full", on the basis of currently existing facts, conditions, and values, "highly
<PAGE>
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without  the  establishment  of a specific  loss  reserve is not  warranted.  In
addition, the Savings Bank's policies require that assets which do not currently
expose the insured  institution to sufficient risk to warrant  classification as
substandard  but possess other  weaknesses are designated  "special  mention" by
management.

                                       12
<PAGE>
If an asset is  classified,  the estimated fair value of the asset is determined
and if that  value is less  than  the then  carrying  value  of the  asset,  the
difference is  established as a specific  reserve.  If an asset is classified as
loss, the amount of the asset  classified as loss is reserved.  General reserves
or  general  valuation  allowances  represent  loss  allowances  which have been
established to recognize the inherent risk  associated  with lending  activities
but, unlike specific reserves, are not allocated to particular assets.

The  following  table sets forth  information  concerning  the number and dollar
amount of loans  and real  estate  owned  classified  as  "special  mention"  or
"substandard"  at the  dates  indicated.  No loans  or real  estate  owned  were
classified ""doubtful" or "loss" at those dates.
<TABLE>
<CAPTION>
                                              Special Mention               Substandard
                                            --------------------        --------------------
                                            Number        Amount        Number        Amount
                                            ------        ------        ------        ------
                                                          (Dollars in thousands)
<S>                                         <C>           <C>           <C>           <C>   

At December 31, 1998:
Loans ..............................            14        $2,718             7        $  275

Real estate owned:
     One-to-four-family properties .          --            --               2            92

     Other .........................          --            --               5           274
                                            ------        ------        ------        ------

          Total ....................            14        $2,718            14        $  641
                                            ======        ======        ======        ======

At December 31, 1997:
Loans ..............................          --          $ --              26        $1,141

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

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

          Total ....................          --          $ --              33        $1,648
                                            ======        ======        ======        ======
</TABLE>

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


                                       13
<PAGE>
The following  table sets forth the Savings Bank's  allowance for loan losses at
the dates  indicated,  the provisions  made and the  charge-offs  and recoveries
effected during the years indicated.
<TABLE>
<CAPTION>
                                                         At or For the Year Ended December 31,
                                                  --------------------------------------------------
                                                   1994        1995      1996        1997       1998
                                                   ----        ----      ----        ----       ----
                                                                 (Dollars in thousands)

<S>                                               <C>           <C>        <C>      <C>        <C>  
Balance at beginning of year                      $ 735         869        977      1,063      1,684
Provision for loan losses                           138         124        107        649        682
Charge-offs:
     One-to-four-family                              (2)         -          (9)       (12)       (80)
     Construction and land                           -          (16)        -         -         -
     Multi-family                                    -           -          -         -         -
     Commercial real estate                          -           -          -         -         -
     Consumer loans                                  (2)         -         (12)       (16)        (6)
                                                    ---      ------     ------    -------    -------

          Total charge-offs by category              (4)        (16)       (21)       (28)       (86)

Recoveries                                           -           -          -         -            3
                                                   ----       -----    -------   --------    -------

Balance at end of year                            $ 869         977      1,063      1,684      2,283
                                                    ===         ===      =====      =====      =====
</TABLE>
The following table sets forth the ratios of the Savings Bank's  charge-offs and
allowances for losses for the years indicated.
<TABLE>
<CAPTION>
                                                         1994          1995         1996          1997           1998
                                                         ----          ----         ----          ----           ----
<S>                                                   <C>           <C>          <C>            <C>           <C>    
Net charge-offs during the year
     as a percentage of average loans
     outstanding during the year                          - %          .01%         .01%           .01%          .03%

Allowance for loan losses as a
     percentage of gross loans receivable
     at end of year                                     0.55%          .52%         .45%           .51%          .57%

Allowance for loan losses as a
     percentage of total nonperforming
     assets at end of year                            210.41%       288.48%      103.51%        224.83%       281.85%

Allowance for loan losses as a
     percentage of nonperforming loans
     at end of year                                   264.13%       561.49%      159.61%        695.87%       514.19%

</TABLE>
                                       14
<PAGE>
The following table sets forth the Savings Bank's specific and general allowance
for possible loan losses by type of loan for the years indicated.
<TABLE>
<CAPTION>
                                                                         At December 31,
                               -----------------------------------------------------------------------------------------------------
                                    1994                1995                  1996                  1997                1998
                               -----------------  -------------------  -------------------   -------------------  ------------------
                                         % of                 % of                  % of                 % of                 % of
                                       Loans to             Loans to              Loans to              Loans to            Loans to
                                        Total                Total                 Total                 Total               Total
                               Amount   Loans     Amount     Loans     Amount      Loans      Amount     Loans     Amount    Loans
                               ------   -----     ------     -----     ------      -----      ------     -----     ------    -----
                                                                        (Dollars in thousands)
<S>                             <C>      <C>       <C>       <C>      <C>          <C>        <C>        <C>      <C>         <C>   
At end of year allocated to:
     One-to-four-family         $ 240    82.80%    $ 275     84.32%   $   302      80.95%     $  507     74.64%   $   575     70.59%
     Construction and land        106     4.03       146      2.83        152       2.32         240      1.07        338      2.91
     Multi-family                 165     1.95       183      1.64        169       1.76         268      1.36        295      2.04
     Commercial real estate       135     3.91       150      3.53        165       5.73         383     11.54        565     11.01
     Consumer loans               223     7.31       223      7.68        275       9.24         229      9.98        304     10.83
     Commercial loans              -      -           -       -            -           -          57      1.41        206      2.62
                                -----   ------     -----    ------    -------     ------     -------    ------    -------    ------ 

          Total                 $ 869   100.00%    $ 977    100.00%   $ 1,063     100.00%    $ 1,684    100.00%   $ 2,283    100.00%
                                =====   ======     =====    ======    =======     ======     =======    ======    =======    ======

</TABLE>

                                       15
<PAGE>
Investment Activities

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

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

Mortgage-Backed Securities

The Savings Bank invests in  collateralized  mortgage  obligations  ("CMOs") and
mortgage-backed  securities  such as government  pass-through  certificates.  At
December 31,  1998,  the Savings  Bank's  mortgage-backed  securities  portfolio
totaled $24.8 million, or 5.3% of total assets. The  mortgage-backed  securities
are not due at a single  maturity date, and  accordingly,  contractual  maturity
information  is  not  presented  herein.  CMOs,  net  of  related  premiums  and
discounts, totaled $4.7 million or 18.9% of total mortgage-backed securities.

CMOs are typically issued by a special purpose entity, which may be organized in
any  of  a  variety  of  legal  forms,  such  as a  trust,  a  corporation  or a
partnership.  The entity  combines pools of pass-through  securities,  which are
used to collateralize the mortgage related securities.  Once combined,  the cash
flows can be divided into  different  "tranches"  or  "classes"  of  securities,
thereby creating more predictable average lives for each tranch or class than is
provided  by the  underlying  pass-through  pools.  Under  this  structure,  all
principal  repayments  from the various  mortgage  pools can be  allocated  to a
mortgage-related  securities class or classes  structured to have priority until
it has been paid off.  Thus,  these  securities  are  designed  to  address  the
reinvestment  concerns associated with mortgage-backed  security  pass-throughs,
namely that they tend to pay off more  rapidly  when  interest  rates fall.  The
Savings  Bank's CMOs have  coupon  rates  ranging  from 5.30% to 7.53% and had a
weighted average yield of 6.35% at December 31, 1998.
<PAGE>
The Savings  Bank's  policy is to purchase CMOs rated AA or better by nationally
recognized  rating services.  The majority of the CMOs owned by the Savings Bank
are insured or guaranteed either directly or indirectly, through mortgage-backed
securities underlying the obligations issued by the .

At December  31, 1998,  the Savings  Bank had $4.7 million in CMOs  representing
1.0% of total assets.  Of that amount,  $4.2 million or 89.6% had floating rates
with caps  ranging  from  8.50% to 12.65%  and which  adjust on a monthly  basis
Government  National  Mortgage  Association  ("GNMA"),  the  Federal  Home  Loan
Mortgage Corporation ("FHLMC") and the Federal National Mortgage
Association ("FNMA").


                                       16
<PAGE>
Other mortgage-backed  securities,  net, totaled $20.1 million or 81.1% of total
mortgage-backed   securities.   Other  mortgage-backed   securities  consist  of
pass-through certificates issued by the FNMA, FHLMC or GNMA.

At December 31, 1998, the Savings Bank had mortgage-backed  securities available
for sale with an aggregate  carrying  value of $8.9 million and  mortgage-backed
securities classified as held to maturity of $15.9 million,  consisting of CMOs,
FHLMC certificates, GNMA certificates and FNMA certificates.

The  following  table  sets forth  mortgage-backed  security  purchases,  sales,
amortization and repayments during the periods indicated:
<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                               ------------------------------------------
                                                 1996             1997              1998
                                               --------         --------         --------
                                                            (In thousands)

<S>                                            <C>                <C>              <C>   
At beginning of year ..................        $ 93,883           65,736           38,291
Purchases .............................           8,596             --              6,025
Amortization and repayments ...........         (36,617)         (27,566)         (19,553)
Change in unrealized loss on securities
     available for sale ...............            (126)             121               21
                                               --------         --------         --------

          At end of year ..............        $ 65,736           38,291           24,784
                                               ========         ========         ========
</TABLE>

Investment Securities

At  December  31,  1998,  the  Savings  Bank held $15.6  million  in  investment
securities  consisting of $4.1 million in U.S. Government and agency securities,
classified as available for sale, and $9.1 million in mutual funds, $2.3 million
in  SBA-related  investment  securities,  classified  as held to  maturity,  and
$99,000 in other  investment  securities,  classified  as available for sale. In
addition, the Savings Bank holds $13.4 million in interest-earning  deposits and
$2.8 million of FHLB of Atlanta stock.


                                       17

<PAGE>
The following table sets forth certain information  regarding the amortized cost
and market values of the Savings Bank's  interest-earning  deposits,  FHLB stock
and investment securities at the dates indicated:
<TABLE>
<CAPTION>
                                                                                  At December 31,
                                                -----------------------------------------------------------------------------------
                                                           1996                         1997                         1998
                                                -----------------------------------------------------------------------------------
                                                Amortized       Market       Amortized        Market       Amortized        Market
                                                   Cost          Value          Cost           Value          Cost           Value
                                                -------        -------        -------        -------        -------        -------
                                                                                  (In thousands)
<S>                                              <C>              <C>            <C>            <C>           <C>            <C>   
Interest-earning deposits .................      $ 4,077          4,077          8,562          8,562         13,413         13,413
                                                 =======        =======        =======        =======        =======        =======

FHLB stock ................................      $ 1,939          1,939          2,304          2,304          2,800          2,800
                                                 =======        =======        =======        =======        =======        =======

Investment securities:
     Held-to-maturity:
          SBA-related investment securities      $ 3,239          3,271          3,031          3,077          2,320          2,366
                                                 =======        =======        =======        =======        =======        =======

     Available-for-sale:
          U.S. Government and
               agency securities ..........       20,208         20,176          7,965          7,937          4,036          4,058
          Other investment securities .....          495            497            151            156             97             99
          Investment in mutual funds ......        9,035          8,920          9,258          9,183          9,238          9,131
                                                 -------        -------        -------        -------        -------        -------

          Total available-for-sale ........      $29,738         29,593         17,374         17,276         13,371         13,288
                                                 =======        =======        =======        =======        =======        =======
</TABLE>

                                       18
<PAGE>
     The following  table sets forth  information  concerning the amortized cost
     and weighted  average yields by maturity on investment  securities and FHLB
     stock at December 31, 1998.



<TABLE>
<CAPTION>



                                                                      Due After                   Due After
                                                                     One Through                 Five Through               
                                  Due Within One Year                Five Years                   10 Years                 
                                -----------------------      ------------------------    -------------------------  
                                             Annualized                    Annualized                   Annualized
                                              Weighted                      Weighted                     Weighted 
                                Amortized      Average        Amortized      Average      Amortized       Average 
                                  Cost          Yield           Cost          Yield          Cost          Yield  
                                  ----          -----           ----          -----          ----          -----  
                                                             (Dollars in thousands)
<S>                              <C>           <C>             <C>              <C>         <C>             <C>                    
FHLB stock                                                                                                          
                                                                                                                    
Investment securities:
     U.S. Government
         and agency
         obligations             $    -            -   %       $ 4,036          5.56%        $   -           -  %     
     SBA related investment                                                                                         
         securities                   -            -              -              -               -           -      
     Other investment                                                                                               
         securities                   -            -              -              -               97         7.88    
     Mutual funds                     -            -              -              -               -           -      
                                 -------                       -------                       ------
         Total investment                                                                                           
              securities         $    -            -   %       $ 4,036          5.56%        $   97         7.88%   
                                 =======       ======          =======          ====         ======         ====  
</TABLE>
<PAGE>
<TABLE>                                   
<CAPTION>
                                        Due After                                    
                                         10 Years                      Total       
                                -------------------------     ------------------------ 
                                               Annualized                              
                                                Weighted                   Approximate 
                                Amortized        Average      Amortized       Market   
                                  Cost             Yield         Cost          Value   
                                  ----             -----         ----          -----   
<S>                              <C>                <C>        <C>          <C>        
FHLB stock                  
                            
Investment securities:      
     U.S. Government        
         and agency         
         obligations             $   2,800          7.50%      $  2,800     $  2,800   
     SBA related investment      =========                       ======       ======   
         securities                                                                    
     Other investment                                                                  
         securities                                                                    
     Mutual funds                $    -             -   %       $ 4,036        4,058   
                                                                                       
                                     2,320          6.62          2,320        2,366   
         Total investment                                                              
              securities              -             -                97           99   
                                     9,238          5.43          9,238        9,131   
                                  --------                       ------       ------    
                                                                                       
                                  $ 11,558          5.67%      $ 15,691     $ 15,654   
                                  ========          ====         ======       ======   
</TABLE>

                                       19
<PAGE>
Sources of Funds

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

Deposits.  The Savings Bank offers a variety of deposit  accounts having a range
of interest  rates and terms.  The Savings  Bank's  deposits  consist of regular
savings,   non-interest-bearing   checking,  NOW  checking,   money  market  and
certificate  accounts.  Of the  deposit  accounts at December  31,  1998,  $29.7
million or 8.4% consist of individual retirement accounts ("IRAs").

The  Savings  Bank seeks to retain core  deposits  consisting  of  passbook  and
statement savings, money market, noninterest-bearing checking, and NOW accounts,
which contributed to a low cost of funds. Such core deposits  represented 25.0%,
23.8%  and  26.2% of total  deposits  at  December  31,  1996,  1997,  and 1998,
respectively.
<PAGE>
The following  table shows the  distribution  of the Savings Bank's  deposits by
type at the dates indicated and the  weighted-average  nominal interest rates on
each category of deposits presented at December 31, 1998 (dollars in thousands).
<TABLE>
<CAPTION>
                                                                  At December 31, 
                             -----------------------------------------------------------------------------------------
                                      1996                      1997                                    1998
                             -----------------------   ----------------------------------       ----------------------
                                           Percent                   Percent                    Percent      Weighted-
                                           of Total                  of Total                   of Total      Average
                                 Amount    Deposits      Amount      Deposits     Amount        Deposits        Rate
<S>                          <C>              <C>      <C>              <C>     <C>                 <C>               
Demand accounts:
     Noninterest-bearing
          checking           $   4,103        1.46%    $  6,968         2.20%   $   7,984           2.27%       -    %
     NOW and money-
          market accounts       39,203       13.86       43,629        13.84       60,832          17.33         2.25
     Passbook and
          statement
          savings               27,412        9.70       24,503         7.77       23,038           6.56         2.00
                               -------      ------       ------        -----      -------        -------         ----

          Total                 70,718       25.02       75,100        23.81       91,854          26.16         1.99
                               -------      ------       ------        -----      -------         ------         ----

Certificate accounts:
     1-3 months                  8,204        2.90        9,834         3.12        9,549           2.72         4.13%
     91 days                       518         .18          538          .17          379            .11         3.93
     182 day                    15,904        5.63       12,171         3.86       11,391           3.25         4.49
     9 months                   17,173        6.07       16,554         5.25       12,411           3.53         4.71
     10 months                    -           -          18,791         5.95          654            .19         5.72
     12 months                  53,577       18.96       39,975        12.67       31,697           9.03         5.02
     12 month IRA               16,473        5.83       14,431         4.58       12,527           3.57         5.16
     13 months                    -           -            -            -          24,835           7.07         5.47
     18 months                   3,136        1.11        2,824          .90        2,485            .71         5.21
     20 months                    -           -          23,152         7.34       93,181          26.55         5.70
     24 months                  46,770       16.55       60,477        19.18       29,429           8.38         5.73
     30 months                  10,628        3.76        8,841         2.80        6,482           1.85         5.34
     60 months                  39,563       13.99       32,702        10.37       24,156           6.88         6.14
                               -------      ------      -------       ------      -------        -------        -----

          Total                211,946       74.98      240,290        76,19      259,176          73.84         5.44
                               -------      ------      -------       ------      -------         ------         ----

          Total deposits     $ 282,664      100.00%     315,390       100.00%     351,030         100.00%        4.54%
                               =======      ======      =======       ======      =======         ======         ====
</TABLE>
                                       20
<PAGE>
The following  table  presents the deposit  activity of the Savings Bank for the
years indicated.
<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                         ---------------------------------------
                                            1996           1997          1998
                                         ---------      ---------      ---------
<S>                                      <C>              <C>          <C>      
Deposits ...........................     $ 542,019        744,064      1,003,698
Withdrawals ........................      (536,051)      (721,501)       979,194
                                         ---------      ---------      ---------

Deposits in excess of withdrawals ..         5,968         22,563         24,504

Interest credited on deposits ......         8,993         10,163         11,136
                                         ---------      ---------      ---------

Total increase in deposits .........     $  14,961         32,726         35,640
                                         =========      =========      =========
</TABLE>

The following  table presents the amount of time deposit  accounts in amounts of
$100,000 or more at December 31, 1998 maturing as follows (in thousands):
<TABLE>
<CAPTION>
<S>                                                                      <C>    
Maturity Period

One month through three months ............................              $ 3,763
Over three through six months .............................                3,692
Over six through 12 months ................................                4,546
Over 12 months ............................................                6,229
                                                                         -------

     Total ................................................              $18,230
                                                                         =======

</TABLE>


                                       21

<PAGE>
The  following  table  presents,  by  various  rate  categories,  the  amount of
certificate  accounts  outstanding at December 31, 1996,  1997, and 1998 and the
periods to maturity of the  certificate  accounts  outstanding  at December  31,
1998.
<TABLE>
<CAPTION>


                                                                       Period to Maturity from December 31, 1997
                                  At December 31,             ----------------------------------------------------------
                       ----------------------------------     Within         1 to        2 to         3 to        4 to  
                         1996           1997       1998       1 Year        2 Years     3 Years      4 Years     5 Years      Total
                       ---------      -------     -------     -------       ------       -----        -----       -----      -------
                                                                     (In thousands)
<S>                    <C>            <C>         <C>         <C>           <C>          <C>          <C>         <C>        <C>    
     3.01% to 4.00%    $       -            -         374         374            -           -            -           -          374
     4.01% to 5.00%       49,542       23,215      56,059      45,322        9,937         475            -         325       56,059
     5.01% to 6.00%      137,394      187,028     176,729     104,805       64,651       2,434        2,008       2,831      176,729
     6.01% to 8.00%       25,010       30,047      26,014      17,585        8,205         122           75          27       26,014
                       ---------      -------     -------     -------       ------       -----        -----       -----      -------

                       $ 211,946      240,290     259,176     168,086       82,793       3,031        2,083       3,183      259,176
                       =========      =======     =======     =======       ======       =====        =====       =====      =======
</TABLE>
                                       22

<PAGE>
Borrowings

The Savings Bank is  authorized  to obtain  advances  from the Federal Home Loan
Bank ("FHLB") of Atlanta which are  generally  collateralized  by a blanket lien
against  the  Savings  Bank's  mortgage  portfolio.  Such  advances  may be made
pursuant  to  several  different  credit  programs,  each of  which  has its own
interest  rate and range of  maturities.  The  maximum  amount  that the FHLB of
Atlanta will advance to member  institutions,  including the Savings  Bank,  for
purposes  other  than  meeting  withdrawals,  fluctuates  from  time  to time in
accordance  with the policies of the Federal  Housing Finance Board and the FHLB
of  Atlanta.  At December  31,  1998,  the Savings  Bank had $56 million in FHLB
advances outstanding.

From time to time,  the  Savings  Bank enters into  agreements  with  nationally
recognized  primary  securities  dealers  under  which the  Savings  Bank  sells
securities subject to repurchase  agreements.  Such agreements are accounted for
as  borrowings  by the Savings Bank and are secured by the  securities  sold. At
December  31,  1998,  the  Savings  Bank  did  not  have  any  such   borrowings
outstanding.  During  1998,  the  Savings  Bank  began  borrowing  under  retail
repurchase  agreements with customers of the Savings Bank.  These agreements are
also  accounted  for as borrowings  and are secured by  securities  owned by the
Bank.

The  following  table sets forth  certain  information  relating  to the Savings
Bank's borrowings at the dates indicated:
<TABLE>
<CAPTION>
                                                                       At or For the Year Ended
                                                                           Ended December 31,
                                                                  ------------------------------------
                                                                    1996         1997           1998
                                                                  ---------     -------     -----------
                                                                         (Dollars in thousands)
<S>                                                               <C>           <C>         <C>        
FHLB advances:
     Average balance outstanding ..................               $     150     $13,226     $    33,718
                                                                  =========     =======      ==========
     Maximum amount outstanding at any month end
          during the year .........................               $     150     $30,000     $    56,000
                                                                  =========     =======      ==========
     Balance outstanding at end of year ...........               $     150     $30,000     $    56,000
                                                                  =========     =======      ==========
     Weighted average interest rate during the year                    7.17%       6.15%           5.91%
                                                                  =========     =======      ==========
     Weighted average interest rate at end of year                     7.17%       6.01%           5.28%
                                                                  =========     =======      ==========

Other borrowed funds:
     Average balance outstanding ..................               $     849     $ 5,629     $        14
                                                                  =========     =======      ==========
     Maximum amount outstanding at any month end
          during the year .........................               $   8,048     $11,952     $       789
                                                                  =========     =======      ==========
     Balance outstanding at end of year ...........               $   8,048     $  --       $       789
                                                                  =========     =======      ==========
     Weighted average interest rate during the year                    5.65%       5.74%           4.65%
                                                                  =========     =======      ==========
     Weighted average interest rate at end of year                     5.63%         --%           4.65%
                                                                  =========     =======      ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                       At or For the Year Ended
                                                                           Ended December 31,
                                                                  ------------------------------------
                                                                    1996         1997           1998
                                                                  ---------     -------     -----------
                                                                         (Dollars in thousands)
<S>                                                               <C>           <C>         <C>        
Total borrowings:
     Average balance outstanding ..................               $     999     $18,855     $    33,732
                                                                  =========     =======      ==========
     Maximum amount outstanding at any month end
          during the year .........................               $   8,198     $41,952     $    56,789
                                                                  =========     =======      ==========
     Balance outstanding at end of year ...........               $   8,198     $30,000     $    56,789
                                                                  =========     =======      ==========
     Weighted average interest rate during the year                    5.68%       6.03%           5.89%
                                                                  =========     =======      ==========
     Weighted average interest rate at end of year                     5.66%       6.01%           5.27%
                                                                  =========     =======      ==========
</TABLE>

Subsidiary Activities

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

                                       23

<PAGE>
Personnel

As of February 22, 1999,  the Savings Bank had 149  full-time  employees  and 14
part-time  employees.   The  employees  are  not  represented  by  a  collective
bargaining  unit  and the  Savings  Bank  considers  its  relationship  with its
employees to be good.

REGULATION AND SUPERVISION

General

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

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

Holding Company Regulation

The Company is a nondiversified  unitary savings and loan holding company within
the meaning of the HOLA.  As a unitary  savings and loan  holding  company,  the
Company  generally  is not  restricted  under  existing  laws as to the types of
business  activities  in which it may engage,  provided  that the  Savings  Bank
continues  to  be a  qualified  thrift  lender  ("QTL").  See  "Federal  Savings
Institution Regulation - QTL Test." Upon any non-supervisory  acquisition by the
Company of another  savings  institution or savings bank that meets the QTL test
<PAGE>
and is deemed to be a savings institution by the OTS, the Company would become a
multiple  savings and loan holding company (if the acquired  institution is held
as a separate  subsidiary) and would be subject to extensive  limitations on the
types of  business  activities  in which it could  engage.  The HOLA  limits the
activities of a multiple  savings and loan holding  company and its  non-insured
institution  subsidiaries  primarily to activities  permissible for bank holding
companies  under  Section  4(c)(8) of the Bank Holding  Company Act ("BHC Act"),
subject to the prior approval of the OTS, and certain  activities  authorized by
OTS  regulation,  and no multiple  savings and loan holding  company may acquire
more than 5% the voting stock of a company engaged in impermissible activities.



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

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

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

Federal Savings Institution Regulation

Business Activities. The activities of federal savings institutions are governed
by federal law and regulations.  These laws and regulations delineate the nature
and extent of the  activities  in which  federal  associations  may  engage.  In
particular,  many types of lending  authority  for  federal  association,  e.g.,
commercial,  nonresidential  real property loans and consumer loans, are limited
to a specified percentage of the institution's capital or assets.

Capital  Requirements.  The OTS capital regulations require savings institutions
to meet three minimum  capital  standards:  a 1.5% tangible  capital ratio, a 3%
leverage  (core) capital ratio and an 8% risk-based  capital ratio. In addition,
the prompt  corrective  action  standards  discussed  below also  establish,  in
effect,  a minimum 2% tangible  capital  standard,  a 4% leverage (core) capital
ratio (3% for institutions  receiving the highest rating on the CAMELS financial
institution  rating system),  and, together with the risk-based capital standard
itself,  a 4% Tier I  risk-based  capital  standard.  Core capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus,  and minority interests in equity
accounts  of  consolidated  subsidiaries  less  intangibles  other than  certain
mortgage  servicing  rights and credit card  relationships.  The OTS regulations
also require  that,  in meeting the  tangible,  leverage  (core) and  risk-based
capital  standards,  institutions must generally deduct investments in and loans
to subsidiaries  engaged in activities as principal that are not permissible for
a national bank.
<PAGE>
The  risk-based   capital  standard  for  savings   institutions   requires  the
maintenance of Tier I (core) and total capital (which is defined as core capital
and  supplementary  capital)  to  risk-weighted  assets  of at  least 4% and 8%,
respectively.  In determining the amount of  risk-weighted  assets,  all assets,
including  certain  off-balance  sheet assets,  are  multiplied by a risk-weight
factor of 0% to 100%,  as assigned by the OTS  capital  regulation  based on the
risks OTS believes are inherent in the type of asset.  The  components of Tier I
(core)  capital are  equivalent to those  discussed  earlier.  The components of
supplementary  capital currently include cumulative  preferred stock,  long-term
perpetual preferred stock, mandatory convertible  securities,  subordinated debt
and  intermediate  preferred  stock and the  allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted  assets.  Overall,  the amount of
supplementary capital included as part of total capital cannot

                                       25
<PAGE>
exceed 100% of core capital.

The OTS regulatory  capital  requirements also incorporate an interest rate risk
component.  Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating  their
risk-based capital requirements.  A savings institution's  interest rate risk is
measured  by the decline in the net  portfolio  value of its assets  (i.e.,  the
difference  between  incoming  and outgoing  discounted  cash flows from assets,
liabilities  and  off-balance   sheet   contracts)  that  would  result  from  a
hypothetical  200 basis point  increase or  decrease  in market  interest  rates
divided  by the  estimated  economic  value  of  the  institution's  assets.  In
calculating  its total  capital  under the  risk-based  capital  rule, a savings
institution whose measured interest rate risk exposure exceeds 2% must deduct an
amount equal to one-half of the difference  between the  institution's  measured
interest rate risk and 2%,  multiplied by the  estimated  economic  value of the
institution's  assets.  The  Director  of the OTS may  waive or defer a  savings
institution's  interest rate risk component on a  case-by-case  basis. A savings
institution with assets of less than $300 million and risk-based  capital ratios
in excess of 12% is not subject to the interest rate risk component,  unless the
OTS  determines   otherwise.   For  the  present  time,  the  OTS  has  deferred
implementation  of the interest rate risk  component.  At December 31, 1998, the
Savings Bank met each of its capital requirements and it is anticipated that the
Savings Bank will not be subject to the interest rate risk component.

The following table presents the Savings Bank's capital position at December 31,
1998.
<TABLE>
<CAPTION>
                                                                Capital Ratios
                                                Excess       ------------------- 
                       Actual      Required  (Deficiency)     Actual    Required
                       Capital      Capital     Amount        Percent    Percent
                       -------      -------     ------        -------    -------
                                       (Dollars in thousands)

<S>                    <C>           <C>        <C>            <C>         <C>  
Tangible .........     $46,082       6,957      39,125         9.94%       1.50%
Core (leverage) ..     $46,082      13,913      32,169         9.94        3.00
Risk-based:
     Tier I (core)     $46,082      10,711      35,371        17.21        4.00
     Total .......     $48,243      21,422      26,821        18.02        8.00
</TABLE>

Prompt  Corrective  Regulatory  Action.  The OTS is  required  to  take  certain
supervisory actions against undercapitalized institutions, the severity of which
depends  upon the  institution's  degree of  undercapitalization.  Generally,  a
savings institution that has a ratio of total capital to risk weighted assets of
less than 8%, a ratio of Tier 1 (core) capital to  risk-weighted  assets of less
than 4% or a ratio of core  capital to total  assets of less than 4% (3% or less
for  institutions  with the  highest  examination  rating) is  considered  to be
"undercapitalized."  A savings  institution that has a total risk-based  capital
ratio less than 6%, a Tier 1 capital  ratio of less than 3% or a leverage  ratio
that is less than 3% is considered to be "significantly  undercapitalized" and a
savings  institution  that has a tangible  capital to assets ratio equal to less
than 2% is  deemed  to be  "critically  undercapitalized."  Subject  to a narrow
<PAGE>
exception,  the OTS is  required  to appoint a receiver  or  conservator  for an
institution that is "critically  undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the OTS within 45 days of the
date a  savings  institution  receives  notice  that  it is  "undercapitalized,"
"significantly  undercapitalized" or "critically  undercapitalized."  Compliance
with the plan must be guaranteed  by any parent  holding  company.  In addition,
numerous  mandatory  supervisory  actions  become  immediately  applicable to an
undercapitalized   institution,   including,   but  not  limited  to,  increased
monitoring by regulators and restrictions on growth,  capital  distributions and
expansion.  The OTS  could  also  take  any  one of a  number  of  discretionary
supervisory  actions,  including  the  issuance of a capital  directive  and the
replacement of senior executive officers and directors.

Insurance of Deposit Accounts. Deposits of the Bank are presently insured by the
SAIF. The FDIC maintains a risk-based  assessment  system by which  institutions
are assigned to one of three categories based on their capitalization and one of
three subcategories based on examination ratings and other

                                       26
<PAGE>
supervisory  information.  An  institution's  assessment  rate  depends upon the
categories  to  which  it  is  assigned.   Assessment   rates  for  SAIF  member
institutions  are determined  semiannually  by the FDIC and currently range from
zero basis  points for the  healthiest  institutions  to 27 basis points for the
riskiest.

In addition to the assessment for deposit  insurance,  institutions are required
to make payments on bonds issued in the late 1980s by the Financing  Corporation
("FICO") to recapitalize the predecessor to the SAIF. During 1998, FICO payments
for SAIF members  approximated  6.10 basis  points,  while Bank  Insurance  Fund
("BIF")  members paid 1.22 basis points.  By law, there will be equal sharing of
FICO payments  between SAIF and BIF members on the earlier of January 1, 2000 or
the date the SAIF and BIF are merged.

The Bank paid no  assessment  for 1998;  however,  its payments  toward the FICO
bonds  amounted  to  $194,760.  The FDIC has  authority  to  increase  insurance
assessments. A significant increase in SAIF insurance premiums would likely have
an adverse  effect on the  operating  expenses and results of  operations of the
Bank.  Management cannot predict what insurance  assessment rates will be in the
future.

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.

Thrift Rechartering  Legislation.  Legislation enacted in 1996 provided that the
BIF and SAIF  were to have  merged  on  January  1,  1999 if there  were no more
savings associations as of that date. Various proposals to eliminate the federal
savings association charter,  create a uniform financial  institutions  charter,
abolish the OTS and restrict  savings and loan holding  company  activities have
been  introduced  in  Congress.  The Bank is  unable  to  predict  whether  such
legislation  will be  enacted  or the  extent  to which  the  legislation  would
restrict or disrupt its operations.

Loans to One  Borrower.  Under  the HOLA,  savings  institutions  are  generally
subject to the limits on loans to one  borrower  applicable  to national  banks.
Generally, savings institutions may not make a loan or extend credit to a single
or related  group of  borrowers in excess of 15% of its  unimpaired  capital and
surplus.  An additional  amount may be lent, equal to 10% of unimpaired  capital
and surplus, if such loan is secured by readily-marketable  collateral, which is
defined to include certain  financial  instruments and bullion.  At December 31,
1998,  the Savings  Bank's limit on loans to one borrower was $7.2  million.  At
December 31, 1998, the Savings Bank's largest aggregate  outstanding  balance of
loans to one borrower was $4.9 million.
<PAGE>
QTL Test. The HOLA requires  savings  institutions to meet a QTL test. Under the
QTL test,  a savings and loan  association  must  either  qualify as a "domestic
building  and loan  association"  as defined  in the  Internal  Revenue  Code or
maintain  at  least  65% of its  "portfolio  assets"  (total  assets  less:  (i)
specified liquid assets up to 20% of total assets;  (ii) intangibles,  including
goodwill;  and (iii) the value of property used to conduct  business) in certain
"qualified  thrift  investments"  (primarily  residential  mortgages and related
investments,  including certain mortgage-backed securities) in at least 9 months
out of each 12 month period.

A savings  institution  that fails the QTL test is subject to certain  operating
restrictions  and may be required to convert to a bank  charter.  As of December
31, 1998, the Savings Bank maintained 83.3% of its portfolio assets in qualified
thrift  investments and,  therefore,  met the QTL test.  Recent  legislation has
expanded  the  extent to which  education  loans,  credit  card  loans and small
business loans may be considered "qualified thrift investments."

Limitation on Capital Distributions. OTS regulations impose limitations upon all
capital distributions

                                       27
<PAGE>
by a savings institution,  including cash dividends,  payments to repurchase its
shares and payments to shareholders of another institution in a cash-out merger.
The  rule  effective  in 1998  established  three  tiers of  institutions  based
primarily on an  institution's  capital level. An institution  that exceeded all
capital  requirements before and after a proposed capital  distribution ("Tier 1
Bank")  and had not been  advised  by the OTS  that it was in need of more  than
normal supervision,  could, after prior notice but without obtaining approval of
the OTS,  make  capital  distributions  during  the  calendar  year equal to the
greater of (i) 100% of its net  earnings to date during the  calendar  year plus
the amount that would  reduce by one-half  the excess  capital  over its capital
requirements at the beginning of the calendar year or (ii) 75% of its net income
for the previous four quarters.  Any additional capital  distributions  required
prior regulatory approval. At December 31, 1998, the Bank was a Tier 1 Bank.

Effective April 1, 1999, the OTS's capital distribution  regulation will change.
Under the new  regulation,  an  application to and the prior approval of the OTS
will be required prior to any capital  distribution if the institution  does not
meet  the  criteria  for  "expedited   treatment"  of  applications   under  OTS
regulations (i.e.,  generally,  examination  ratings in the two top categories),
the total capital distributions for the calendar year exceed net income for that
year plus the amount of retained  net income for the  preceding  two years,  the
institution  would  be  undercapitalized   following  the  distribution  or  the
distribution  would otherwise be contrary to a statute,  regulation or agreement
with OTS. If an application is not required,  the institution must still provide
prior notice to OTS of the capital distribution. In the event the Bank's capital
fell below its  regulatory  requirements  or the OTS  notified it that it was in
need of more  than  normal  supervision,  the  Bank's  ability  to make  capital
distributions  could be  restricted.  In  addition,  the OTS  could  prohibit  a
proposed  capital  distribution  by an  institution,  which would  otherwise  be
permitted by the regulation,  if the OTS determines that such distribution would
constitute an unsafe or unsound practice.

Liquidity.  The Savings Bank is required to maintain an average daily balance of
specified  liquid assets equal to a monthly average of not less than a specified
percentage of its net withdrawable deposit accounts plus short-term  borrowings.
This liquidity requirement was 4% for fiscal 1998, but is subject to change from
time to time by the OTS to any amount  within  the range of 4% to 10%  depending
upon economic conditions and the savings flows of member institutions.  Monetary
penalties may be imposed for failure to meet these liquidity  requirements.  The
Savings Bank's  liquidity  ratio for December 31, 1998 was 8.8%,  which exceeded
the applicable requirement.  The Savings Bank has never been subject to monetary
penalties for failure to meet its liquidity requirement.

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

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

                                       28
<PAGE>
The Savings Bank's authority to extend credit to executive  officers,  directors
and 10% shareholders ("insiders"),  as well as entities such persons control, is
governed by Sections  22(g) and 22(h) of the FRA and  Regulation  O  thereunder.
Among other  things,  such loans are required to be made on terms  substantially
the same as those offered to  unaffiliated  individuals  and not to involve more
than the normal risk of repayment.  Recent legislation  created an exception for
loans  made  pursuant  to a  benefit  or  compensation  program  that is  widely
available to all employees of the  institution  and does not give  preference to
insiders over other employees. Regulation O also places individual and aggregate
limits on the amount of loans the Savings  Bank may make to insiders  based,  in
part, on the Savings Bank's capital position and requires certain board approval
procedures to be followed.

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

Standards for Safety and Soundness.  The federal  banking  agencies have adopted
Interagency  Guidelines  Prescribing  Standards  for Safety and  Soundness.  The
guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions
before capital  becomes  impaired.  If the  appropriate  federal  banking agency
determines  that an  institution  fails to meet any standard  prescribed  by the
guidelines,  the agency may require the  institution  to submit to the agency an
acceptable plan to achieve compliance with the standard.

Federal Reserve System

The Federal Reserve Board regulations  require savings  institutions to maintain
non-interest  earning reserves against their transaction accounts (primarily NOW
and regular checking accounts).  The Federal Reserve Board regulations generally
required  for  most  of 1997  that  reserves  be  maintained  against  aggregate
transaction  accounts as follows: for accounts aggregating $46.5 million or less
(subject to adjustment by the Federal Reserve Board) the reserve requirement was
3%; and for  accounts  aggregating  greater  than  $46.5  million,  the  reserve
requirement  was $1.395  million plus 10% (subject to  adjustment by the Federal
Reserve  Board  between 8% and 14%) against  that  portion of total  transaction
accounts  in excess  of $46.5  million.  The first  $4.9  million  of  otherwise
reservable  balances  (subject to adjustments by the Federal Reserve Board) were
exempted from the reserve  requirements.  The Savings Bank is in compliance with
the foregoing requirements.
<PAGE>
Year 2000

The  Company  is  acutely  aware of the many  areas  affected  by the Year  2000
computer issue, as addressed by the Federal Financial  Institutions  Examination
Council  ("FFIEC") in its  interagency  statement  which provided an outline for
institutions  to manage the Year 2000 challenges  effectively.  A Year 2000 plan
has been  approved by the Board of Directors  which  includes  multiple  phases,
tasks to be completed, and target dates for completion.  Issues addressed in the
plan include  awareness,  assessment,  renovation,  validation,  implementation,
testing, and contingency planning.

The Company has formed a Year 2000  committee that is charged with the oversight
of completing the Year 2000 project on a timely basis. The Company has completed
its awareness, assessment and

                                       29
<PAGE>
renovation  phases and is actively  involved in validating and  implementing its
plan. At the present time, the Company has  substantially  completed its testing
phase, the results of which indicate that the Company's  internal systems appear
to be Year 2000 ready. Since it routinely upgrades and purchases technologically
advanced  software and hardware on a continual basis, the Company has determined
that the cost of making  modifications  to correct any Year 2000 issues will not
materially affect reported operating  results.  Management does not believe that
the Company has incurred or will incur material costs  associated  with the Year
2000 issue.

The Company's vendors and suppliers have been contacted for written confirmation
of their  product  readiness  for Year 2000  compliance.  Negative or  deficient
responses are analyzed and  periodically  reviewed to prescribe  timely  actions
within the Company's contingency  planning.  The Company's main service provider
has  completed  testing of its mission  critical  application  software and item
processing software; the test results, which have been documented and validated,
are  deemed to be Year 2000  compliant.  FFIEC  guidance  on  testing  Year 2000
compliance  of  service   providers  states  that  proxy  tests  are  acceptable
compliance  tests.  In  proxy  testing,   the  service  provider  tests  with  a
representative  sample of financial  institutions that use a particular service,
with the results of such testing shared with all similarly  situated  clients of
the service provider. The Company has authorized the acceptance of proxy testing
since the proxy tests have been conducted with financial  institutions  that are
similar  in type and  complexity  to its own using the same  version of the Year
2000 ready software and the same hardware and operating systems.

The Company also recognizes the importance of determining that its borrowers are
facing the Year 2000 problem in a timely  manner to avoid  deterioration  of the
loan portfolio  solely due to this issue. All material  relationships  have been
identified and questionnaires  have been completed to assess the inherent risks.
Deposit customers have received statement stuffers and informational material in
this regard.  The Company plans to work on a one-on-one  basis with any borrower
who has been identified as having high Year 2000 risk exposure.

Notwithstanding  our actions,  there can be no assurances  that all hardware and
software  that the  Company  will use will be Year  2000  compliant.  Management
cannot  predict  the  amount  of  financial  difficulties  it may  incur  due to
customers and vendors  inability to perform  according to their  agreements with
the  Company or the effects  that other  third  parties may cause as a result of
this issue.  Therefore,  there can be no assurance  that the failure or delay of
others to address the issue or that the costs  involved in such process will not
have a material adverse effect on the Company's business,  financial  condition,
and results of operations.

Based on  testing  results  to date (as  noted  above),  the  Company's  mission
critical  systems  have been  deemed to be Year 2000 ready.  However,  a written
contingency  plan has been  developed to address  problems  that might be caused
from Year 2000 system  failures.  Testing of the contingency plan is in progress
and is scheduled to be  completed by June 30, 1999.  With regard to  non-mission
critical internal systems, the Company's  contingency plans are to replace those
systems that test as being  noncompliant.  Alternatively,  some systems could be
handled  manually on an interim basis.  Should outside service  providers not be
able  to  provide   compliant   systems,   the  Company  will  terminate   those
relationships  and  transfer  to  other  vendors.  It is  anticipated  that  the
Company's  deposit  customers will have increased demands for cash in the latter
part of 1999 and,  correspondingly,  the Company will maintain higher  liquidity
levels.

                                       30
<PAGE>
                           FEDERAL AND STATE TAXATION

Federal Taxation

General.  The Company and the Savings Bank report their income on a consolidated
basis using the accrual method of accounting,  and are subject to federal income
taxation  in the  same  manner  as  other  corporations  with  some  exceptions,
including particularly the Savings Bank's reserve for bad debts discussed below.
The  following  discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to the
Savings  Bank or the  Company.  The Savings Bank was last audited by the IRS for
the year ended December 31, 1996. For its 1998 taxable year, the Savings Bank is
subject to a maximum federal income tax rate of 34%.

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

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

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

Under the residential loan requirement provision,  the recapture required by the
1996 Act is suspended for each of two successive  taxable years,  beginning with
1996,  in which the Savings  Bank  originates  a minimum of certain  residential
loans based upon the average of the principal  amounts of such loans made by the
Savings Bank during its six taxable years  preceding  its current  taxable year.
Under the 1996 Act, for its current and future taxable  years,  the Savings Bank
is permitted to make  additions to its tax bad debt reserves.  In addition,  the
Savings Bank is required to recapture  (i.e.,  take into income) over a six year
period the excess of the balance of its tax bad debt reserves as of December 31,
1995 over the balance of such  reserves as of December 31, 1987. At December 31,
1998, the Savings Bank had  approximately  $757,000 of deferred tax  liabilities
recorded for the recapture of its bad debt reserves.
<PAGE>
Distributions.  Under the 1996 Act,  if the  Savings  Bank  makes  "non-dividend
distributions"  to the Company,  such  distributions  will be considered to have
been made from the Savings Bank's  unrecaptured tax bad debt reserves (including
the balance of its reserves as of December 31, 1987) to the extent thereof,  and
then from the Savings Bank's  supplemental  reserve for losses on loans,  to the
extent thereof, and an amount based on the amount distributed (but not in excess
of the amount of such  reserves)  will be included in the Savings Bank's income.
Non-dividend distributions include distributions in excess of the Savings Bank's
current and accumulated  earnings and profits,  as calculated for federal income
tax purposes, distributions in redemption of stock, and distributions in partial
or complete  liquidation.  Dividends  paid out of the Savings  Bank's current or
accumulated

                                       31
<PAGE>
earnings and profits will not be so included in the Savings Bank's income.

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

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

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

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

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


                                       32
<PAGE>
ITEM 2.        PROPERTIES

The Savings Bank  conducts  its  business  through its main office and 12 branch
offices.  The  following  table sets forth  certain  information  regarding  the
Savings Bank's office properties:

                                                           Book Value of Land
                                         Date               and Buildings at
Location                                Acquired           December 31, 1998
--------                                --------           -----------------
                                                          (Dollars in thousands)
Main Office
800 North Boulevard, West
Leesburg, Florida  34748-5053              1961                   $ 368

Wildwood
837 South Main Street
Wildwood, Florida  34785-5302              1967                     240

Main Street
1409 West Main Street
Leesburg, Florida  34748-4854              1972                     175

Clermont
481 East Highway 50
Clermont, Florida  34711-4032              1982                     640

Eustis
2901 South Bay Street
Eustis, Florida  32726-6551                1979                     363

Fruitland Park
410 Palm Street
Fruitland Park, Florida  34731-4013        1983                     352

Lady Lake
431 US Highway 441/27
Lady Lake, Florida  32159-3046             1995                   1,246

Lake Square
10105 US Highway 441
Leesburg, Florida  34788-3952              1995                     487

South Leesburg (1)
27405 US Highway 27, Suite 123
Leesburg, Florida  34748-7914              1996                     150

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

Inverness (3)
2709 East Gulf to Lake Highway
Inverness, Florida 34453-3245              1998                     -
<PAGE>
Four Corners (4)
16550 Woodcrest Way
Clermont, Florida 34711-7004               1998                     -

Bushnell (5)
1128 North Main Street
Bushnell, Florida 33513                    1998                     -



(1)  Leased branch office opened February, 1997.
(2)  Parcel of land  purchased  by the Savings Bank for a future  branch  office
     location.
(3)  Leased branch office opened February, 1999.
(4)  Leased parcel of land and branch office scheduled to open May, 1999.
(5)  Leased branch office scheduled to open April, 1999.

The Savings Bank owns and operates  personal  computers,  teller  terminals  and
associated equipment.  At December 31, 1998, such equipment had a net book value
of $769,000.



                                       33

<PAGE>
ITEM 3.        LEGAL PROCEEDINGS

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

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

No  matters  were  submitted  to a vote of the  stockholders  during  the fourth
quarter of the fiscal year ended December 31, 1998,  through the solicitation of
proxies or otherwise.

                                     PART II

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

The   above-captioned   information  appears  under  "Common  Stock  Prices  and
Dividends"  in the  Registrant's  1998  Annual  Report  to  Stockholders  and is
incorporated herein by reference.

ITEM 6.        SELECTED FINANCIAL DATA

The above-captioned  information appears under "Selected  Consolidated Financial
Data" on page 6 and 7 of the Registrant's 1998 Annual Report to Stockholders and
is incorporated herein by reference.

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

The  above-captioned  information  appears under  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations" in the  Registrant's
1998 Annual  Report to  Stockholders  on pages 8 through 19 and is  incorporated
herein by reference.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  Consolidated  Financial  Statements of FFLC Bancorp,  Inc. and  Subsidiary,
together with the report thereon by Hacker,  Johnson, Cohen & Grieb PA appear in
the  Registrant's  1998 Annual Report to Stockholders on pages 20 through 51 and
are incorporated herein by reference.

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

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


                                       34

<PAGE>
                                    PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information related to Directors and Executive Officers of the Registrant is
incorporated  herein by reference to the  Registrant's  Proxy  Statement for the
Annual Meeting of Stockholders to be held on May 6, 1999 at pages 4 through 7.

ITEM 11.       EXECUTIVE COMPENSATION

The information  relating to executive  compensation  is incorporated  herein by
reference  to the  Registrant's  Proxy  Statement  for  the  Annual  Meeting  of
Stockholders to be held on May 6, 1999 at pages 12 through 15.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

The information  relating to security ownership of certain beneficial owners and
management  is  incorporated  herein  by  reference  to the  Registrant's  Proxy
Statement for the Annual  Meeting of  Stockholders  to be held on May 6, 1999 at
pages 5 through 7.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  relating to certain  relationships and related  transactions is
incorporated  herein by reference to pages 15 and 16 of the  Registrant's  Proxy
Statement for the Annual Meeting of Stockholders to be held on May 6, 1999.



                                       35

<PAGE>
                                     PART IV

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

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

     (1)  Consolidated  Financial  Statements of the Company are incorporated by
     reference from the following  indicated  pages of the 1998 Annual Report to
     Stockholders.

                                                                      Page
                                                                      ----

     Independent Auditor's Report                                       51

     Consolidated Balance Sheets as of December 31, 1998 and 1997       20

     Consolidated Statements of Income for the Years Ended
          December 31, 1998, 1997 and 1996                              21

     Consolidated Statements of Stockholders' Equity for the
          Years Ended December 31, 1998, 1997 and 1996               22-24

     Consolidated Statements of Cash Flows for the Years
          Ended December 31, 1998, 1997 and 1996                     25-26

     Notes to Consolidated Financial Statements for the Years
          Ended December 31, 1998, 1997 and 1996                     27-50

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

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

     (3)  Exhibits

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

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

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

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




                                       36

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



                                       FFLC BANCORP, INC.


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

                                           Dated: March 18, 1999


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

Name                         Title                                  Date
----                         -----                                  ----


/s/ Joseph J. Junod          Chairman of the Board                March 18, 1999
-------------------
Joseph J. Junod

/s/ Claron D. Wagner         Vice Chairman of the Board           March 18, 1999
--------------------
Claron D. Wagner

/s/ James P. Logan           Director                             March 18, 1999
------------------
James P. Logan

/s/ Ted R. Ostrander, Jr.    Director                             March 18, 1999
-------------------------
Ted R. Ostrander

/s/ H.D. Robuck, Jr.         Director                             March 18, 1999
--------------------
H.D. Robuck, Jr.

/s/ Stephen T. Kurtz         Chief Executive Officer,
--------------------         President and Director               March 18, 1999
Stephen T. Kurtz             

/s/ Paul K. Mueller          Executive Vice President, Chief
-------------------          Operating Officer and Treasurer   
Paul K. Mueller              and Director                         March 18, 1999
                             



                                       37