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, 2001 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 incorporation             (I.R.S. Employer
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 $64,115,829 and is based upon the last sales price as quoted on
the NASDAQ Stock Market for March 7, 2002.

The Registrant had 3,572,712 shares outstanding as of March 7, 2002.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the Annual Report to Stockholders for the Fiscal Year Ended
     December 31, 2001. (Part II and IV)
2.   Portions of Proxy Statement for the 2001 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                                             4-9
             Asset Quality                                                 9-14
             Investment Activities                                           15
             Mortgage-Backed Securities                                      15
             Investment Securities                                        15-17
             Sources of Funds                                             18-20
             Borrowings                                                      21
             Subsidiary Activities                                        21-22
             Personnel                                                       22
             Regulation and Supervision                                   22-28
             Federal and State Taxation                                   29-30

Item 2.    Properties                                                     31-32

Item 3.    Legal Proceedings                                                 33

Item 4.    Submission of Matters to a Vote of Security Holders               33

PART II

Item 5.    Market for Registrant's Common Equity and Related
                             Stockholder Matters                             33

Item 6.    Selected Financial Data                                           33

Item 7.    Management's Discussion and Analysis of Financial Condition
                             and Results of Operations                       33

Item 8.    Financial Statements and Supplementary Data                       33

Item 9.    Change In and Disagreements with Accountants on
                             Accounting and Financial Disclosure             33

PART III

Item 10.   Directors and Executive Officers of the Registrant                33

Item 11.   Executive Compensation                                            34

Item 12.   Security Ownership of Certain Beneficial Owners and Management    34

Item 13.   Certain Relationships and Related Transactions                    34

PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K   35

SIGNATURES                                                                   36

                                       2

<PAGE>



                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS

Business

FFLC Bancorp, Inc., ("FFLC" or the "Company") was incorporated in Delaware on
September 16, 1993, and acquired First Federal Savings Bank of Lake County (the
"Bank") in connection with the Bank's conversion to stock form on January 4,
1994. The Company is a savings and loan holding company subject to regulation by
the Office of Thrift Supervision ("OTS") which mainly transacts its business
through its subsidiary, the Bank. At December 31, 2001, the Company had total
assets of $823.2 million and stockholders' equity of $64.1 million.

The Bank was established in 1934 as a federally-chartered mutual savings and
loan association. The 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, 2001, the
Bank had total assets of $822.9 million and stockholders' equity of $60.1
million.

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

During 2001, First Alliance Title, L.L.C., a 90% owned subsidiary of the
Company, was formed to facilitate the sale of title insurance. This subsidiary
had only a minimal amount of activity during 2001.

Market Area and Competition

The Bank is a community-oriented savings institution offering a variety of
financial services to meet the needs of the communities it serves. The Bank's
deposit gathering and lending markets are primarily concentrated in the
communities surrounding its full service offices located in Lake, Sumter and
Citrus counties in central Florida. The Bank's competition for loans comes
principally from commercial banks, savings institutions, and mortgage banking
companies. The Bank's most direct competition for savings has historically come
from commercial banks, savings institutions and credit unions. The Bank faces
additional competition for savings from money-market mutual funds and other
corporate and government securities funds. The 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 8 of Notes to Consolidated Financial Statements.

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

Lending Activities

Loan Portfolio. The Bank's loan portfolio consists primarily of conventional
first mortgage loans secured by one-to-four-family residences. At December 31,
2001, the Bank's total gross loans outstanding were $703.9 million, of which
$413.7 million or 58.77% of the 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, approximately 36% were
fixed rate loans and 64% were adjustable-rate ("ARM") loans. At the same date,
commercial real estate loans and other loans on improved real estate totaled
$108.8 million, or 15.46% of the Bank's total loan portfolio; construction
(excluding construction/permanent loans) and land loans totaled $23.0 million or
3.26% of the Bank's total loan portfolio; and multi-family mortgage loans
totaled $20.3 million or 2.88% of the Bank's total loan portfolio. Consumer,
commercial and other loans held by the Bank, which principally consist of home
equity loans, deposit, consumer, commercial and other loans, totaled $138.1
million or 19.63% of the Bank's total loan portfolio at December 31, 2001.


                                       4

<PAGE>


The following table sets forth the composition of the Bank's loan portfolio in
dollar amounts and percentages at the dates indicated:

<TABLE>
<CAPTION>


                                                                             At December 31,
                                      -----------------------------------------------------------------------------------
                                           1997                   1998                 1999                2000
                                      -----------------     -----------------     -----------------    -----------------
                                                  % of                  % of                  % of                % of
                                       Amount     Total      Amount     Total      Amount     Total     Amount    Total
                                       ------     -----      ------     -----      ------     -----     ------    -----
                                                                            (Dollars in thousands)
Mortgage loans:
<S>                                   <C>         <C>     <C>           <C>      <C>          <C>     <C>         <C>
      One-to-four-family              $ 245,524   74.64%  $ 283,372     70.59%   $ 354,317    68.28%  $ 409,600   64.97%
      Construction and land               3,528    1.07%     11,683      2.91%      11,861     2.29%     13,006    2.06%
      Multi-family                        4,464    1.36%      8,165      2.04%      13,394     2.58%     17,602    2.79%
      Commercial real estate
           and other                     37,975   11.54%     44,211     11.01%      61,052    11.76%     79,729   12.65%
                                      ---------   ------  ---------    ------    ---------   ------   ---------  ------

                     Total mortgage
                           loans        291,491   88.61%    347,431     86.55%     440,624    84.91%    519,937   82.47%

Consumer loans                           32,834    9.98%     43,490     10.83%      64,042    12.34%     95,824   15.20%
Commercial loans                          4,632    1.41%     10,532      2.62%      14,285     2.75%     14,677    2.33%
                                      ---------   ------  ---------    ------    ---------   ------   ---------  ------

                     Total loans
                        receivable (1)  328,957  100.00%    401,453    100.00%     518,951   100.00%    630,438  100.00%
                                                ========              ========              ========            ========

Less:
      Loans in process                  (12,253)            (10,637)               (15,907)             (12,128)
      Net deferred loan costs               333                 526                    668                  726
      Allowance for loan losses          (1,684)             (2,283)                (2,811)              (3,552)
                                      ---------           ---------              ---------            ---------

                     Loans receivable,
                          net         $ 315,353           $ 389,059            $   500,901            $ 615,484
                                      =========           =========            ===========            =========
----------------------------
(1) Total loans receivable
      outstanding by department
      consists of the following:
           Residential                $ 253,159   76.96%  $ 287,874     71.71%   $ 353,422    68.10%  $ 404,494   64.16%
           Commercial                    42,964   13.06%     70,089     17.46%     101,487    19.56%    130,120   20.64%
           Consumer                      32,834    9.98%     43,490     10.83%      64,042    12.34%     95,824   15.20%
                                      ---------   -----   ---------    ------    ---------   ------   ---------  ------

                                      $ 328,957  100.00%  $ 401,453    100.00%   $ 518,951   100.00%  $ 630,438  100.00%
                                      =========  ======   =========    ======    =========   ======   =========  ======
</TABLE>


<TABLE>
<CAPTION>


                                            At December 31,
                                         ---------------------
                                                   2001
                                               ---------
                                               % of
                                         Amount           Total
                                         ------           -----
                                                   (Dollars in thousands)
Mortgage loans:
<S>                                     <C>                <C>
      One-to-four-family                $ 413,712          58.77%
      Construction and land                22,951           3.26%
      Multi-family                         20,304           2.88%
      Commercial real estate
           and other                      108,804          15.46%
                                        ---------         ------

                     Total mortgage
                           loans          565,771          80.37%

Consumer loans                            119,357          16.96%
Commercial loans                           18,814           2.67%
                                        ---------         ------

                     Total loans
                        receivable (1)    703,942         100.00%
                                        =========

Less:
      Loans in process                    (14,310)
      Net deferred loan costs                 592
      Allowance for loan losses            (4,289)
                                         --------

                     Loans receivable,
                          net           $ 685,935
                                        =========
----------------------------
(1) Total loans receivable
      outstanding by department
      consists of the following:
           Residential                  $ 403,897          57.37%
           Commercial                     180,688          25.67%
           Consumer                       119,357          16.96%
                                        ---------          ------

                                        $ 703,942         100.00%
                                        =========         ======
</TABLE>

                                        5

<PAGE>


Purchase of Mortgage Loans. From time to time, the Bank purchases mortgage loans
originated by other lenders. At December 31, 2001, $4.6 million, or .65% of the
Bank's total loan portfolio consisted of purchased mortgage loans or loan
participations. Purchased or participated mortgage loans consist of
one-to-four-family residential mortgage loans and commercial real estate loans.

Secondary Market Activities. The 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 Bank's interest-rate risk on such loans. Such loans
are closed on the 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
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, 2001, such loans amounted to $14.9 million or 11.28% of total
mortgage loans originated.

Loan Originations, Sales and Principal Repayments. The following table sets
forth the Bank's loan originations, sales and principal repayments for the
periods indicated.

<TABLE>
<CAPTION>

                                                               Year Ended December 31,
                                                       ----------------------------------------
                                                         1999            2000           2001
                                                         ----            ----           ----
                                                                   (In thousands)
<S>                                                    <C>              <C>            <C>
Mortgage loans (gross):
     At beginning of year                              $ 347,431        440,624        519,937
                                                       ---------      ---------      ---------
     Mortgage loans originated:
           One-to-four-family                            136,456        106,209        101,977
           Construction and land                           2,387          3,457          9,314
           Multi-family                                    1,037          3,800          4,475
           Commercial real estate                         14,345          9,950         12,408
                                                       ---------      ---------      ---------

               Total mortgage loans originated           154,225        123,416        128,174

     Mortgage loans purchased or participated                 --             --          4,134
                                                       ---------      ---------      ---------

               Total mortgage loans originated and
                     purchased or participated           154,225        123,416        132,308

     Transfer of loans to real estate owned                 (425)          (826)          (656)
     Principal repayments                                (53,619)       (42,156)       (70,892)
     Sales of loans (1)                                   (6,988)        (1,121)       (14,926)
                                                       ---------      ---------      ---------

               At end of year                          $ 440,624        519,937        565,771
                                                       =========      =========      =========

Consumer loans (gross):
     At beginning of year                                 43,490         64,042         95,824
     Loans originated                                     40,873         60,214         68,777
     Principal repayments                                (20,321)       (28,432)       (45,244)
                                                       ---------      ---------      ---------

               At end of year                          $  64,042         95,824        119,357
                                                       =========      =========      =========

Commercial loans (gross):
     At beginning of year                                 10,532         14,285         14,677
     Loans originated                                      6,924          5,632         12,782
     Principal repayments                                 (3,171)        (5,240)        (8,645)
                                                       ---------      ---------      ---------

               At end of year                          $  14,285         14,677         18,814
                                                       =========      =========      =========
</TABLE>


(1) Represents loans originated for and funded by correspondents.


                                       6
<PAGE>


Maturities of Loans. The following table shows the contractual maturities of the
Bank's loan portfolio at December 31, 2001. 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
Bank's loans totaled $77.1 million, $74.7 million and $124.8 million for the
years ended December 31, 1999, 2000 and 2001, respectively.

<TABLE>
<CAPTION>


                                             Mortgage Loans
                                        ------------------------
                                           One-to-                                                    Total
                                            Four-                        Commercial    Consumer       Loans
                                           Family         Other            Loans        Loans       Receivable
                                           ------         -----            -----        -----       ----------
                                                                      (In thousands)
 Amounts due:
    <S>                                  <C>               <C>             <C>            <C>           <C>
    Within 1 year                        $   5,581         11,768          2,872          6,048         26,269
                                         ---------      ---------      ---------      ---------      ---------

    1 to 3 years                             1,743         32,425          4,864         21,701         60,733
    3 to 5 years                             3,458         20,171          8,619         44,502         76,750
    5 to 10 years                            9,250         27,004          2,459         19,275         57,988
    10 to 20 years                          71,659         33,864             --         27,831        133,354
    Over 20 years                          322,021         26,827             --             --        348,848
                                         ---------      ---------      ---------      ---------      ---------

    Total due after 1 year                 408,131        140,291         15,942        113,309        677,673
                                         ---------      ---------      ---------      ---------      ---------

    Total amounts due                      413,712        152,059         18,814        119,357        703,942

    Loans in process                       (14,280)            --             --            (30)       (14,310)
    Net deferred loan fees and costs           592             --             --             --            592
    Allowance for loan losses                 (752)        (2,305)          (337)          (895)        (4,289)
                                         ---------      ---------      ---------      ---------      ---------

Loans receivable, net                    $ 399,272        149,754         18,477        118,432        685,935
                                         =========      =========      =========      =========      =========
</TABLE>


Loans Due After December 31, 2002. The following table sets forth at December
31, 2001, the dollar amount of all loans due or scheduled to reprice after
December 31, 2002, classified according to whether such loans have fixed or
adjustable interest rates.

<TABLE>
<CAPTION>

                                         Due after December 31, 2002
                                         ---------------------------
                                      Fixed      Adjustable      Total
                                      -----      ----------      -----
                                               (In thousands)
<S>                                  <C>           <C>          <C>
Mortgage loans:
          One-to-four-family         $147,220      260,911      408,131
          Construction and land         1,775       14,645       16,420
          Multi-family                  1,428       17,129       18,557
          Commercial real estate       34,058       71,256      105,314

Consumer loans                        101,434       11,875      113,309
Commercial loans                        4,573       11,369       15,942
                                     --------     --------     --------

                    Total            $290,488      387,185      677,673
                                     ========     ========     ========
</TABLE>

One-to-Four-Family Mortgage Lending. The Bank's primary residential 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 Bank makes
loans on residences used as second homes or as investments. The Bank also offers
second mortgage loans which are underwritten applying the same standards as for
first mortgage loans.

                                       7
<PAGE>


In the years ended December 31, 1999, 2000 and 2001, the Bank's total mortgage
loan originations, including loans purchased or participated, amounted to $154.2
million, $123.4 million and $132.3 million, respectively, of which $136.5
million, $106.2 million and $102.0 million, respectively, were secured by
one-to-four-family properties.

At December 31, 2001, 58.77% of total loans consisted of one-to-four-family
residential loans, of which approximately 64% were ARM loans. The 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 Bank in
accordance with market and competitive factors. The 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 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, 2001, $108.8
million, or 15.46% of the Bank's total loan portfolio consisted of commercial
real estate loans and $20.3 million, or 2.88% of the Bank's total loan
portfolio, consisted of multi-family mortgage loans.

The commercial real estate loans in the Bank's portfolio consist of fixed-rate
and ARM loans which were originated at prevailing market rates. The Bank's
policy has been to originate commercial or multi-family loans only in its
primary market area. Commercial and multi-family mortgage loans are generally
made in amounts up to 80% of the appraised value of the property. In making such
loans, the 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 Bank's lending experience with the borrower.

Commercial Loans. As of December 31, 2001, $18.8 million or 2.67% of the Bank's
total loan portfolio, consisted of commercial loans.

Construction and Land Loans. The 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,
2001, construction (excluding construction/permanent loans) and land loans
totaled $23.0 million or 3.26% of the Bank's total loan portfolio.

At December 31, 2001, the Bank had loans in process (undisbursed loan proceeds
of construction loans) of $14.3 million which were mainly secured by residential
mortgages. The 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.


                                       8
<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 1.0% during the construction period. The Bank
obtains a commitment for the permanent financing from the other lender prior to
originating the construction loan.

Consumer Lending. At December 31, 2001, $119.4 million or 16.96% of the Bank's
total loan portfolio consisted of consumer loans, including home equity loans of
$34.0 million, lines of credit of $11.9 million, direct auto and truck loans of
$15.3 million, indirect auto and truck loans of $24.7 million, home improvement
loans and other secured consumer loans of $18.5 million, lot loans of $14.1
million and unsecured personal loans of $.9 million.


The Bank's home equity loans are originated on one-to-four-family residences,
either on a fixed-rate basis with terms of up to 15 years or as balloon loans
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 90% of the loan to value ratio. The 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 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. Loan approval authority for loans exceeding
$1,600,000 is vested in the Executive Committee of the Board which meets weekly
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 Bank and has been delegated authority to approve mortgage loans,
commercial loans, home equity loans, home equity lines of credit and secured
consumer loans up to $1,600,000.

The 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 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 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.


                                       9
<PAGE>



At December 31, 1999, 2000 and 2001, delinquencies in the Bank's loan portfolio
were as follows:

<TABLE>
<CAPTION>

                                                  At December 31, 1999                         At December 31, 2000
                                   -----------------------------------------------  -------------------------------------------
                                         60-89 Days            90 Days or More            60-89 Days            90 Days or More
                                   ---------------------     --------------------   ---------------------     ------------------
                                   Number      Principal     Number     Principal    Number     Principal     Number   Principal
                                     of         Balance       of        Balance       of         Balance       of       Balance
                                    Loans      of Loans      Loans      of Loans     Loans      of Loans      Loans    of Loans
                                    -----      --------      -----      --------     -----      --------      -----    --------
                                                                      (Dollars in thousands)
<S>                                     <C>     <C>             <C>     <C>             <C>     <C>             <C>    <C>

One-to-four-family                       3      $  107           5      $  561           5      $  427          10     $  980
Construction and land                    1          36           1         172          --          --           2        213
Multi-family                            --          --           1         119          --          --          --         --
Commercial real estate                  --          --           1       1,348          --          --           1      1,279
                                    ------      ------      ------      ------      ------      ------      ------     ------

       Total mortgage loans              4         143           8       2,200           5         427          13      2,472

Consumer loans                           7          75          13         162           3          32           2          8
Other loans                             --          --          --          --           3         260           1         30
                                    ------      ------      ------      ------      ------      ------      ------     ------

       Total loans                      11      $  218          21      $2,362          11      $  719          16     $2,510
                                    ======      ======      ======      ======      ======      ======      ======     ======

Delinquent loans to total loans                    .04%                    .46%                    .11%                   .40%
                                                  ====                  ======                  ======                 ======
</TABLE>

<TABLE>
<CAPTION>

          At December 31, 2001
 --------------------------------------
     60-89 Days        90 Days or More
 ------------------   -----------------
  Number  Principal   Number   Principal
   of      Balance     of       Balance
  Loans   of Loans    Loans    of Loans
  -----   --------    -----    --------
       (Dollars in thousands)
    <C>    <C>            <C>    <C>

     4     $  126         12     $1,004
    --         --          1         47
    --         --         --         --
    --         --          2        390
------     ------     ------     ------

     4        126         15      1,441

    27        391         20        472
     2        194         --         --
------     ------     ------     ------

    33     $  711         35     $1,913
======     ======     ======     ======

             .10%                  .27%
          ======                 ======
</TABLE>



                                       10
<PAGE>




Nonperforming Assets. The following table sets forth information with respect to
the Bank's nonperforming assets at the dates indicated.

<TABLE>
<CAPTION>

                                                                     At December 31,
                                                               ---------------------------------------
                                                   1997        1998       1999      2000        2001
                                                   ----        ----       ----      ----        ----
                                                                 (Dollars in thousands)

<S>                                                <C>          <C>        <C>      <C>        <C>
Nonaccrual mortgage loans                          $ 242        434        853      1,193      1,051

Nonaccrual commercial and consumer loans              --         10      1,509      1,317        862
                                                   -----      -----      -----      -----      -----

Total nonperforming loans                            242        444      2,362      2,510      1,913

Foreclosed assets                                    507        366        400        276        373
                                                   -----      -----      -----      -----      -----

                    Total nonperforming assets     $ 749        810      2,762      2,786      2,286
                                                   =====      =====      =====      =====      =====

Nonperforming loans to total loans                   .07%       .11%       .46%       .40%       .27%
                                                   =====      =====      =====      =====      =====

Total nonperforming assets to total assets           .19%       .17%       .47%       .39%       .28%
                                                   =====      =====      =====      =====      =====
</TABLE>

At December 31, 2001, the 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 $1.9
million, $2.5 million and $2.4 million at December 31, 2001, 2000 and 1999,
respectively. For the year ended December 31, 2001, interest income that would
have been recorded under the original terms of nonaccrual loans at December 31,
2001 and interest income actually recognized is summarized below (in thousands):


          Interest income that would have been recorded          $ 163
          Interest income recognized                               (47)
                                                                 -----

          Interest income foregone                               $ 116
                                                                 =====

Classified Assets. Federal regulations and the 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
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 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.



                                       11
<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, 2001:
Loans                                            7     $2,182         48     $2,722

Foreclosed assets:
          One-to-four-family properties         --         --          2        139

          Other                                 --         --          5        234
                                            ------     ------     ------     ------

                    Total                        7     $2,182         55     $3,095
                                            ======     ======     ======     ======

At December 31, 2000:
Loans                                           10     $1,829         20     $2,923

Foreclosed assets:
          One-to-four-family properties         --         --          3        208

          Other                                 --         --          6         68
                                            ------     ------     ------     ------

                    Total                       10     $1,829         29     $3,199
                                            ======     ======     ======     ======
</TABLE>


Allowance for Loan Losses. The 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 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 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.



                                       12
<PAGE>



The following table sets forth the 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,
                                             -----------------------------------------------------------
                                              1997         1998         1999         2000         2001
                                              ----         ----         ----         ----         ----
                                                               (Dollars in thousands)

<S>                                         <C>            <C>          <C>          <C>          <C>
Balance at beginning of year                $ 1,063        1,684        2,283        2,811        3,552
Provision for loan losses                       649          682          719          880        1,115
Charge-offs:
          One-to-four-family                    (12)         (80)          --          (58)         (48)
          Construction and land -                --           --          (44)          --           --
          Multi-family                           --           --           --           --           --
          Commercial real estate                 --           --           --           --          (90)
          Commercial and consumer loans         (16)          (6)        (166)         (99)        (258)
                                            -------      -------      -------      -------      -------

          Total charge-offs by category         (28)         (86)        (210)        (157)        (396)

Recoveries                                       --            3           19           18           18
                                            -------      -------      -------      -------      -------

Balance at end of year                      $ 1,684        2,283        2,811        3,552        4,289
                                            =======      =======      =======      =======      =======
</TABLE>

The following table sets forth the ratios of the Bank's charge-offs and
allowances for losses for the years indicated.

<TABLE>
<CAPTION>

                                                        1997        1998        1999        2000        2001
                                                        ----        ----        ----        ----        ----
<S>                                                   <C>         <C>         <C>         <C>         <C>
Net charge-offs during the year
          as a percentage of average loans
          outstanding during the year                    .01%        .03%        .04%        .03%        .06%

Allowance for loan losses as a
          percentage of gross loans receivable
          at end of year                                 .51%        .57%        .54%        .56%        .61%

Allowance for loan losses as a
          percentage of total nonperforming
          assets at end of year                       224.83%     281.85%     101.77%     127.49%     187.62%

Allowance for loan losses as a
          percentage of nonperforming loans
          at end of year                              695.87%     514.19%     119.01%     141.51%     224.20%

</TABLE>




                                       13
<PAGE>



The following table sets forth the Bank's specific and general allowance for
possible loan losses by type of loan for the years indicated.

<TABLE>
<CAPTION>

                                                                         At December 31,
                                                        ------------------------------------------------------
                                         1997               1998              1999                2000            2001
                                       --------           --------          --------            --------        --------
                                                 % 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)
At end of year allocated to:
<S>                                  <C>        <C>     <C>        <C>     <C>        <C>     <C>        <C>     <C>      <C>
          One-to-four-family         $  507     74.64%  $  575     70.59%  $  528     68.28%  $  609     64.97%  $  752   58.77%
          Construction and land         240      1.07      338      2.91      408      2.29      423      2.06      595    3.26
          Multi-family                  268      1.36      295      2.04      301      2.58      488      2.79      353    2.88
          Commercial real estate        383     11.54      565     11.01      750     11.76      998     12.65    1,357   15.46
          Consumer loans                229      9.98      304     10.83      447     12.34      708     15.20      895   16.96
          Commercial loans               57      1.41      206      2.62      377      2.75      326      2.33      337    2.67
                                     ------    ------   ------    ------   ------    ------   ------    ------   ------   ------

                    Total            $1,684    100.00%  $2,283    100.00%  $2,811    100.00%  $3,552    100.00%  $4,289  100.00%
                                     ======    ======   ======    ======   ======    ======   ======    ======   ======  ======
</TABLE>




                                       14
<PAGE>



Investment Activities

The investment policy of the 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 Bank's lending activities. In
establishing its investment strategies, the 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.

The Company follows 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.

The Company adopted FAS 133 effective July 1, 1999. As allowed by this standard,
the Company reclassified all securities held to maturity with a book value of
$14,784,000 and a market value of $14,969,000 to available for sale on July 1,
1999.

Mortgage-Backed Securities

The Company's mortgage-backed securities consist of securities issued by the
Government National Mortgage Association ("GNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association
("FNMA"). These mortgage-backed securities totaled $10.9 million or 18.3% of
total securities.

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

                                                  Year Ended December 31,
                                                  -----------------------
                                           1999            2000         2001
                                           ----            ----         ----
                                                      (In thousands)

At beginning of year                      $ 24,784        17,490        14,394
Purchases                                       --         1,005           500
Amortization and principal repayments       (7,334)       (4,096)       (4,009)
Change in unrealized gain                       40            (5)           58
                                          --------      --------      --------

                    At end of year        $ 17,490        14,394        10,943
                                          ========      ========      ========

Investment Securities

At December 31, 2001, the Bank held $48.6 million in investment securities, all
of which were classified available for sale, consisting of $33.3 million in U.S.
Government and agency securities, $9.0 million in mutual funds and $6.3 million
in other investment securities. In addition, the Bank holds $30.2 million in
interest-earning deposits and $7.7 million of FHLB of Atlanta stock.



                                       15
<PAGE>



The following table sets forth certain information regarding the amortized cost
and market values of the Bank's interest-earning deposits, FHLB stock and
investment securities at the dates indicated:

<TABLE>
<CAPTION>

                                                                  At December 31,
                                                  -------------------------------------------------
                                                  1999                 2000                    2001
                                         --------------------    --------------------    --------------------
                                          Amortized    Market    Amortized    Market      Amortized   Market
                                            Cost       Value       Cost        Value        Cost      Value
                                            ----       -----       ----        -----        ----      ------
                                                                          (In thousands)
<S>                                       <C>          <C>         <C>         <C>         <C>         <C>
Interest-earning deposits                 $17,026      17,026      14,445      14,445      30,183      30,183
                                          =======     =======     =======     =======     =======     =======

FHLB stock                                $ 4,950       4,950       6,150       6,150       7,700       7,700
                                          =======     =======     =======     =======     =======     =======

Investment securities-

     Available-for-sale:
          U.S. Government and
                    agency securities       8,998       8,919      17,849      17,968      32,670      33,241
          Other investment securities       1,666       1,671       1,365       1,376       6,268       6,276
          Investment in mutual funds        9,065       8,829       9,130       8,979       9,125       9,043
                                          -------     -------     -------     -------     -------     -------

          Total available-for-sale        $19,729      19,419      28,344      28,323      48,063      48,560
                                          =======     =======     =======     =======     =======     =======
</TABLE>


                                       16
<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, 2001.

<TABLE>
<CAPTION>
                                                    Due After             Due After
                                                  One Through             Five Through             Due After
                         Due Within One Year       Five Years             10 Years                 10 Years
                        ---------------------  -------------------   ---------------------   --------------------
                                   Annualized           Annualized              Annualized             Annualized
                                     Weighted             Weighted                Weighted               Weighted
                        Amortized     Average  Amortized   Average   Amortized     Average   Amortized    Average
                          Cost         Yield      Cost       Yield        Cost       Yield        Cost      Yield
                       ----------  ----------   -------    -------   ---------  ----------     -------  ---------
                                                          (Dollars in thousands)
<S>                       <C>         <C>       <C>         <C>        <C>            <C>      <C>         <C>
FHLB stock (no
  defined maturity)       $ 7,700     6.25%     $    --         --%    $    --          --%    $    --        --%
                          =======     =====
Investment securities:
    U.S. Government
          and agency
          obligations       8,961      5.98      23,709       4.93          --          --          --        --
    Other investment
          securities           --                    --         --          --          --        6,268     3.65

    Mutual funds (no
       defined maturity)    9,125      3.80          --         --          --          --          --        --
                          -------               -------                -------                           -------

       Total investment
           securities     $18,086      4.88%    $23,709       4.93%    $    --          --%    $ 6,268      3.65%
                          =======     =====     =======    =======     =======     =======     =======   =======
</TABLE>

 <TABLE>
<CAPTION>


                                        Total
                                    -------------

                                               Approximate
                           Amortized                Market
                                Cost                 Value
                             -------         -------------
                                         (Dollars in thousands)
<S>                          <C>            <C>
FHLB stock (no
  defined maturity)          $ 7,700          $ 7,700
                             =======          =======
Investment securities:
    U.S. Government
          and agency
          obligations         32,670           33,241
    Other investment
          securities           6,268            6,276

    Mutual funds (no    )
       defined maturity)       9,125            9,043
                             -------          -------

       Total investment
           securities        $48,063          $48,560
                             =======          =======
</TABLE>

                                                     17
<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 Bank's funds for use in lending, investing and for other
general purposes.

Deposits. The Bank offers a variety of deposit accounts having a range of
interest rates and terms. The 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, 2001, $44.3 million or 7.6%
consist of individual retirement accounts ("IRAs").

The Bank seeks to retain core deposits consisting of passbook and statement
savings, money market, noninterest-bearing checking, and NOW accounts, which
contribute to a low cost of funds. Such core deposits represented 25.5%, 22.9%
and 25.7% of total deposits at December 31, 1999, 2000 and 2001, respectively.

The following table shows the distribution of the 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, 2001 (dollars in thousands).

<TABLE>
<CAPTION>
                                                            At December 31,
                                  ------------------------------------------------------------------------------
                                        1999                   2000                            2001
                                --------------------     --------------------   ---------------------------------
                                       Percent                Percent                   Percent    Weighted-
                                            of Total               of Total                  of Total    Average
                                 Amount     Deposits      Amount   Deposits       Amount     Deposits      Rate
                                 ------     --------      ------   --------       ------     --------      ----
<S>                            <C>           <C>        <C>          <C>         <C>          <C>           <C>
Demand accounts:
    Noninterest-bearing
          checking             $ 11,100        2.58%    $  13,335      2.57%     $ 14,334       2.45%         --%
    NOW and money-
          market accounts        77,293       18.01        86,509     16.67       111,961      19.13        1.41
    Passbook and
          statement savings      21,110        4.92        19,143      3.69        24,093       4.12        1.09
                                -------     -------     ---------    ------      --------     ------      ------

          Total                 109,503       25.51       118,987     22.93       150,388      25.70        1.22
                                -------     -------     ---------    ------      --------     ------      ------

Certificate accounts:
    1-3 months                    8,552        1.99        19,141      3.69        38,854       6.64        2.67
    91 day                          358         .08           220       .04           279        .05        2.58
    182 day                       9,741        2.27         6,630      1.28        10,085       1.72        3.41
    7 months                      5,748        1.34            50       .01           325        .06        3.77
    9 months                      5,975        1.39         8,631      1.66        17,974       3.07        3.97
    10 months                    20,729        4.83         4,772       .92            --      --             --
    12 months                    41,509        9.67        32,190      6.21        55,356       9.46        4.00
    13 months                    10,486        2.44            61       .01        88,670      15.15        4.30
    14 months                        --          --       137,618     26.52        18,835       3.22        6.24
    18 months                     6,637        1.55        12,647      2.44        27,374       4.68        4.92
    20 months                    63,454       14.79            24       .00            26        .00        6.86
    21 months                        --                    24,432      4.71        94,807      16.20        5.26
    22 months                   108,261       25.22       101,945     19.65         4,721        .81        6.40
    24 months                    16,031        3.73        15,784      3.04        25,414       4.34        4.91
    25 months                        --          --        17,609      3.39        18,193       3.11        6.53
    30 months                     4,970        1.16         8,869      1.71        21,471       3.67        5.33
    36 months                        --          --           100       .02         2,615        .45        4.13
    60 months                    17,320        4.03         9,175      1.77         9,741       1.67        5.47
                                -------     -------     ---------    ------      --------     ------      ------

          Total                 319,771       74.49       399,898     77.07       434,740      74.30        4.64
                                -------     -------     ---------    ------      --------     ------      ------

          Total deposits       $429,274      100.00%    $ 518,885    100.00%     $585,128     100.00%       3.85%
                               ========    ========     =========    ======      ========     ======      ======
</TABLE>



                                       18
<PAGE>


The following table presents the deposit activity of the Bank for the years
indicated.

<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                                                   -----------------------
                                         1999              2000             2001
                                         ----              ----             ----
                                                      (In thousands)
<S>                                   <C>                <C>              <C>
Deposits                              $ 1,414,959        1,898,638        2,394,602
Withdrawals                            (1,349,451)      (1,826,173)      (2,353,541)
                                      -----------      -----------      -----------

Deposits in excess of withdrawals          65,508           72,465           41,061

Interest credited on deposits              12,736           17,146           25,182
                                      -----------      -----------      -----------

Total increase in deposits            $    78,244           89,611           66,243
                                      ===========      ===========      ===========
</TABLE>


The following table presents the amount of time deposit accounts in amounts of
$100,000 or more at December 31, 2001 maturing as follows (in thousands):

        Maturity Period

One month through three months     $ 19,382
Over three through six months        11,293
Over six through 12 months           34,216
Over 12 months                       42,336
                                   --------

                       Total       $107,227
                                   ========



                                       19
<PAGE>


The following table presents, by various rate categories, the amount of
certificate accounts outstanding at December 31, 1999, 2000 and 2001 and the
periods to maturity of the certificate accounts outstanding at December 31,
2001.

<TABLE>
<CAPTION>

                                                                      Period to Maturity from December 31, 2001
                                                            ----------------------------------------------------------
                              At December 31,
                   --------------------------------------  Within       1 to        2 to         3 to          4 to
                     1999          2000        2001        1 Year       2 Years     3 Years      4 Years       5 Years       Total
                     ----          ----        ----        ------       -------     -------      -------       -------       -----
                                                                      (In thousands)

<S>                <C>           <C>          <C>          <C>           <C>          <C>           <C>         <C>         <C>
2.01% to 3.00%     $     --           --       48,916       47,823        1,093           --           --           --       48,916
3.01% to 4.00%          358           --       92,048       52,991       35,268        3,406           --          383       92,048
4.01% to 5.00%      106,202       24,433      141,637       85,487       44,702       10,240           51        1,156      141,637
5.01% to 6.00%      181,001      128,393       68,394       46,098       18,154        2,487          880          776       68,394
6.01% to 8.00%       32,210      247,072       83,745       82,344          146           --        1,178           77       83,745
                   --------     --------     --------     --------     --------     --------     --------     --------     --------

                   $319,771      399,898      434,740      314,743       99,363       16,133        2,109        2,392      434,740
                   ========     ========     ========     ========     ========     ========     ========     ========     ========
</TABLE>



                                       20
<PAGE>



Borrowings

The 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 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 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, 2001, the Bank
had $154.0 million in FHLB advances outstanding.

The Bank also borrows under retail repurchase agreements with customers of the
Bank. These agreements are accounted for as borrowings and are secured by
securities owned by the Bank.

The following table sets forth certain information relating to the Bank's
borrowings at the dates indicated:

<TABLE>
<CAPTION>

                                                                                             At or For the Year
                                                                                             Ended December 31,
                                                                          -------------------------------------
                                                                             1999          2000            2001
                                                                             ----          ----            ----
                                                                                   (Dollars in thousands)
<S>                                                                       <C>            <C>              <C>
FHLB advances:
          Average balance outstanding                                     $  74,515      $   104,647      $136,041
                                                                          =========      ===========      ========
          Maximum amount outstanding at any month end during the year     $  99,000      $   123,000      $154,000
                                                                          =========      ===========      ========
          Balance outstanding at end of year                              $  99,000      $   123,000      $154,000
                                                                          =========      ===========      ========
          Weighted average interest rate during the year                       5.42%            6.21%         6.07%
                                                                          =========      ===========      ========
          Weighted average interest rate at end of year                        5.64%            6.18%         5.73%
                                                                          =========      ===========      ========

Other borrowed funds:
          Average balance outstanding                                     $   1,916      $     5,729      $ 11,842
                                                                          =========      ===========      ========
          Maximum amount outstanding at any month end during the year     $   3,914      $     8,013      $ 18,427
                                                                          =========      ===========      ========
          Balance outstanding at end of year                              $   3,914      $     6,376      $ 13,327
                                                                          =========      ===========      ========
          Weighted average interest rate during the year                       4.85%            5.11%         3.91%
                                                                          =========      ===========      ========
          Weighted average interest rate at end of year                   4,75%                 5.25%         2.15%
                                                                          =========      ===========      ========

Total borrowings:
          Average balance outstanding                                     $  76,431      $   110,376      $147,883
                                                                          =========      ===========      ========
          Maximum amount outstanding at any month end during the year     $ 102,914      $   131,013      $172,427
                                                                          =========      ===========      ========
          Balance outstanding at end of year                              $ 102,914      $   129,376      $167,327
                                                                          =========      ===========      ========
          Weighted average interest rate during the year                       5.40%            6.15%         5.90%
                                                                          =========      ===========      ========
          Weighted average interest rate at end of year                        5.61%            6.13%         5.44%
                                                                          =========      ===========      ========
</TABLE>


Subsidiary Activities

The Bank has a wholly-owned subsidiary, Lake County Service Corporation
("LCSC"), formed to develop a 100-lot subdivision. LCSC sold the last remaining
lots during 2001. During 1999, LCSC sold an 8.4 acre commercial parcel and a
one-acre lot that adjoins the Bank's main office. The gain on the sale of the
commercial property was $552,000 after tax and $886,000 before tax. During 1999,
LCSC purchased two commercial building sites for possible future bank branches
and purchased an existing branch building in Inverness, which was rented to the
Bank as a branch site. The Inverness branch property was transferred to the Bank
in 2000.

During the second quarter of 2001, the Bank introduced an Investment Services
Program through a joint venture with T.H.E. Financial Group, Ltd., an
independent securities broker-dealer firm and a member of the National
Association of Securities Dealers and the Securities Investor Protection
Corporation. Through this program, the Bank offers mutual funds, annuities,
discount brokerage and financial planing services to bank customers. The
services are offered through LCSC, which receives monthly fees on sales made
through this program. During 2001, LCSC recognized fees of $114,000 and expenses
of $123,000 (including $37,000 of initial start-up costs) from this program.

                                       21
<PAGE>


During  2001,  First  Alliance  Title,  L.L.C.,  a 90% owned  subsidiary  of the
Company,  was formed to facilitate the sale of title insurance.  This subsidiary
did not have a material amount of activity during 2001.

Personnel

As of February 13, 2002, the Bank had 194 full-time employees and 19 part-time
employees. The employees are not represented by a collective bargaining unit and
the Bank considers its relationship with its employees to be good.

REGULATION AND SUPERVISION

General

As a savings and loan holding company, the Company is required by federal law to
file reports with, and otherwise comply with, the rules and regulations of the
OTS. The 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 Bank is a member of the Federal Home Loan Bank System and, with respect to
deposit insurance, of the Savings Association Insurance Fund ("SAIF") managed by
the FDIC. The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with, or
acquisitions of, other savings institutions. The OTS and/or the FDIC conduct
periodic examinations to test the 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 Bank and their operations. Certain of the
regulatory requirements applicable to the 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 Bank and the Company.

Holding Company Regulation

The Company is a nondiversified unitary savings and loan holding company within
the meaning of federal law. Under prior law, a unitary savings and loan holding
company, such as the Company was not generally restricted as to the types of
business activities in which it may engage, provided that the Bank continued to
be a qualified thrift lender. See "Federal Savings Institution Regulation - QTL
Test." The Gramm-Leach-Bliley Act of 1999 provides that no company may acquire
control of a savings association after May 4, 1999 unless it engages only in the
financial activities permitted for financial holding companies under the law or
for multiple savings and loan holding companies as described below. Further, the
Gramm-Leach-Bliley Act specifies that existing savings and loan holding
companies may only engage in such activities. The Gramm-Leach-Bliley Act,
however, grandfathered the unrestricted authority for activities with respect to
unitary savings and loan holding companies existing prior to May 4, 1999, such
as the Company, so long as the Bank continues to comply with the QTL Test. Upon
any non-supervisory acquisition by the Company of another savings institution or
Bank that meets



                                       22
<PAGE>

the qualified thrift lender test 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
generally be limited to activities permissible for bank holding companies under
Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval
of the OTS, and certain activities authorized by OTS regulation.

A savings and loan holding company is prohibited from, directly or indirectly,
acquiring more than 5% of the voting stock of another savings institution or
savings and loan holding company, without prior written approval of the OTS and
from 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 considers the financial and managerial resources
and future prospects of the company and institution involved, the effect of the
acquisition on the risk to the deposit insurance funds, the convenience and
needs of the community and competitive factors.

The OTS may not approve 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, federal regulations do prescribe such restrictions on
subsidiary savings institutions as described below. The Bank must notify the OTS
30 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, non-residential 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 4%
leverage ratio (3% for institutions receiving the highest rating on the CAMELS
rating system) 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 ratio (3% for institutions receiving
the highest rating on the CAMEL financial institution rating system), and,
together with the risk-based capital standard itself, a 4% Tier 1 risk-based
capital standard. The OTS regulations also require that, in meeting the
tangible, leverage and risk-based capital standards, institutions must generally
deduct investments in and loans to subsidiaries engaged in activities as
principal that are not permissible for a national bank.

The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (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

                                       23
<PAGE>

factor of 0% to 100%, assigned by the OTS capital regulation based on the risks
believed inherent in the type of asset. Core (Tier 1) 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 components of supplementary capital currently include cumulative preferred
stock, long-term perpetual preferred stock, mandatory convertible securities,
subordinated debt and intermediate preferred stock, the allowance for loan and
lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45%
of unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.

The capital regulations 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. For the present time, the OTS has deferred implementation
of the interest rate risk capital charge. At December 31, 2001, the Bank met
each of its capital requirements.

The following table presents the Bank's capital position at December 31, 2001.

<TABLE>
<CAPTION>

                                                                  Capital Ratios
                                                                  --------------
                          Actual      Required     Excess       Actual    Required
                          Capital      Capital     Amount       Percent   Percent
                          -------      -------     ------       -------   -------
                                           (Dollars in thousands)

<S>                       <C>          <C>         <C>            <C>       <C>
Tangible ..............   $59,141      12,344      46,797         7.19%     1.50%
Core (Leverage) .......   $59,141      24,688      34,453         7.19      3.00
Risk-based ............   $62,520      43,867      18,653        11.40      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 or less
than 2% is deemed to be "critically undercapitalized." Subject to a narrow
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. The Bank is a member of 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 supervisory information. An

                                       24
<PAGE>

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. By law, there has been
equal sharing of FICO payments between SAIF and BIF members since January 1,
2000.

The Bank did not pay an assessment for deposit insurance in 2001, however, its
payments toward the FICO bonds amounted to $99,000. 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.

Loans to One Borrower. Federal law provides that savings institutions are
generally subject to the limits on loans to one borrower applicable to national
banks. A savings institution 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 secured by specified readily-marketable collateral. At December
31, 2001, the Bank's limit on loans to one borrower was $9.4 million and the
Bank's largest aggregate outstanding loans and extensions of credit to one
borrower was $8.4 million.

QTL Test. The HOLA requires savings institutions to meet a qualified thrift
lender test. Under the test, a savings association is required to either qualify
as a "domestic building and loan association" under 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 qualified thrift lender test is subject to
certain operating restrictions and may be required to convert to a bank charter.
As of December 31, 2001, the Bank maintained 84% of its portfolio assets in
qualified thrift investments and, therefore, met the qualified thrift lender
test. Recent legislation has expanded the extent to which education loans,
credit card loans and small business loans may be considered "qualified thrift
investments."

Limitation on Capital Distributions. OTS regulations impose limitations upon all
capital distributions by a savings institution, including cash dividends,
payments to repurchase its shares and payments to shareholders of another
institution in a cash-out merger. Under a new regulation effective April 1,
1999, an application to and the prior approval of the OTS is 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

                                       25
<PAGE>

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 if, like the Bank, it is a subsidiary of a holding company.
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 any institution, which would
otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice.

Assessments. Savings institutions are required to pay assessments to the OTS to
fund the agency's operations. The general assessments, paid on a semi-annual
basis, are computed upon the savings institution's total assets, including
consolidated subsidiaries, as reported in the Bank's latest quarterly thrift
financial report. The Bank was assessed $140,602 for the fiscal year ended
December 31, 2001.

Transactions with Related Parties. The Bank's authority to engage in
transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including the Company and its non-savings
institution subsidiaries) is limited by federal law. The aggregate amount of
covered transactions with any individual affiliate is limited to 10% of the
capital and surplus of the savings institution. The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law. The
purchase of low quality assets from affiliates is generally prohibited. The
transactions with affiliates must be on terms and under circumstances, that are
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.




                                       26
<PAGE>


The Bank's authority to extend credit to executive officers, directors and 10%
shareholders ("insiders"), as well as entities such persons control, is also
governed by federal law. Such loans are required to be made on terms
substantially the same as those offered to unaffiliated individuals and not
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. The law limits both the individual
and aggregate amount of loans the Bank may make to insiders based, in part, on
the Bank's capital position and requires certain board approval procedures to be
followed.

Enforcement. 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. The FDIC has the
authority to recommend to the Director of the OTS that 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 OTS determines that a savings
institution fails to meet any standard prescribed by the guidelines, the OTS may
require the institution to submit an acceptable plan to achieve compliance with
the standard.

Federal Home Loan Bank System

The Bank is a member of the Federal Home Loan Bank ("FHLB") System, which
consists of 12 regional FHLBs. The FHLB provides a central credit facility
primarily for member institutions. In order to borrow from the FHLB, the Bank is
required to purchase shares of the FHLB's nonmarketable equity securities at
par. The Bank, as a member of the FHLB, is required to acquire and hold shares
of capital stock in that FHLB in an amount at least equal to 1.0% of the
aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the FHLB, whichever is greater. The Bank was in compliance with this
requirement with an investment in FHLB stock at December 31, 2001 of $7.7
million. For the year ended December 31, 2001, the dividend yield on FHLB stock
was 6.75%.

The FHLBs are required to provide funds for the resolution of insolvent thrifts
in the late 1980s and to contribute funds for affordable housing programs. These
requirements could reduce the amount of dividends that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their members. If dividends were reduced, or interest on future FHLB
advances increased, the Bank's net interest income would likely also be reduced.
Recent legislation has changed the structure of the FHLBs funding obligations
for insolvent thrifts, revised the capital structure of the FHLBs and
implemented entirely voluntary membership for FHLBs. Management cannot predict
the effect that these changes may have with respect to its FHLB membership.


                                       27
<PAGE>


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 regulations generally provide that reserves
be maintained against aggregate transaction accounts as follows: for accounts
aggregating $41.3 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3%; and for accounts aggregating greater than
$41.3 million, the reserve requirement is $1.239 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 $41.3 million. The first $5.7 million
of otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements. At December 31, 2001, the
Bank complied with the foregoing requirements.

Community Reinvestment Act

Under the Community Reinvestment Act ("CRA"), as implemented by Office of Thrift
Supervision regulations, a savings association has a continuing and affirmative
obligation consistent with its safe and sound operation to help meet the credit
needs of its entire community, including low and moderate income neighborhoods.
The CRA does not establish specific lending requirements or programs for
financial institutions nor does it limit an institution's discretion to develop
the types of products and services that it believes are best suited to its
particular community, consistent with the CRA. The CRA requires the Office of
Thrift Supervision, in connection with its examination of an institution, to
assess the institution's record of meeting the credit needs of its community and
to take such record into account in its evaluation of applications by such
institution. The CRA requires public disclosure of an institution's CRA rating.
The latest CRA rating of the Bank received from the Office of Thrift Supervision
was "Satisfactory."


                                       28
<PAGE>


Federal and State Taxation

General. The Company and the 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 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
Bank or the Company. The Bank was last audited by the IRS for the year ended
December 31, 1996. For its 2001 taxable year, the 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 Bank originates a minimum of certain residential loans based
upon the average of the principal amounts of such loans made by the Bank during
its six taxable years preceding its current taxable year. Under the 1996 Act,
for its current and future taxable years, the Bank is permitted to make
additions to its tax bad debt reserves. In addition, the 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, 2001, the Bank had
approximately $262,000 of deferred tax liabilities recorded for the recapture of
its bad debt reserves.



                                       29
<PAGE>


Distributions. Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the 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 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 Bank's income. Non-dividend
distributions include distributions in excess of the 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 Bank's current or accumulated earnings
and profits will not be so included in the 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 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 Bank does not intend to pay dividends that would result in a recapture
of any portion of its bad debt reserves.

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 Bank, whether or not
an Alternative Minimum Tax ("AMT") is paid. The 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 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 Bank will not file a consolidated tax return,
except that if the Company and the 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 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 Bank is not
currently under audit with respect to its Florida franchise tax returns.


                                       30
<PAGE>


ITEM 2.   PROPERTIES

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

<TABLE>
<CAPTION>

                                                                   Net Book Value of Land
                                                 Date                 and Buildings at
Location                                       Acquired              December 31, 2001
--------                                       --------              -----------------
                                                                   (Dollars in thousands)
<S>                                              <C>                      <C>
Main Office
800 North Boulevard, West
Leesburg, Florida  34748-5053                    1961                     $ 2,319

Wildwood
837 South Main Street
Wildwood, Florida  34785-5302                    1967                         269

Main Street
1409 West Main Street
Leesburg, Florida  34748-4854                    1972                         365

Clermont
481 East Highway 50
Clermont, Florida  34711-4032                    1982                         645

Eustis
2901 South Bay Street
Eustis, Florida  32726-6551                      1979                         512

Fruitland Park
410 Palm Street
Fruitland Park, Florida  34731-4013              1983                         430

Lady Lake
431 US Highway 441/27
Lady Lake, Florida  32159-3046                   1995                       1,184

Lake Square
10105 US Highway 441
Leesburg, Florida  34788-3952                    1995                         446

South Leesburg (1)
27405 US Highway 27, Suite 123
Leesburg, Florida  34748-7914                    1996                          83

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

Inverness
2709 East Gulf to Lake Highway
Inverness, Florida 34453-3245                    1998                         817

Citrus Ridge
16550 Woodcrest Way
Clermont, Florida 34711-7004                     1998                       1,014
</TABLE>


                                                                     (continued)

                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                                   Net Book Value of Land
                                                 Date                 and Buildings at
Location                                       Acquired              December 31, 2001
--------                                       --------              -----------------
                                                                   (Dollars in thousands)
<S>                                             <C>                            <C>
Bushnell (3)
1128 North Main Street
Bushnell, Florida 33513                          1998                            243

Administration (4)
715 West Oak Terrace Drive
Leesburg, Florida  34748                         1961                          1,859

Sumter County (5)                                1999                            418

Boulevard (6)                                    2000                            276
900 North Boulevard West
Leesburg, Florida  34748

Accounting and Human Resource Offices
800 North Lee Street
Leesburg, Florida  34748                         2001                            224

Kings Ridge
Clermont, Florida    (7)                         2001                            500

Spruce Creek
13945 U.S. Highway 441
Lady Lake, Florida  32159  (8)                   2001                            893
</TABLE>


(1)  Leased branch office opened February, 1997.
(2)  Parcel of land purchased by the Bank for a future branch office location.
     Construction began in 2001.
(3)  Leased branch office opened May, 1999.
(4)  Administration offices for the Bank (opened June 2000).
(5)  Two parcels of land purchased by Lake County Service Corp. for future
     branch office locations.
(6)  Storage facility owned by the Bank.
(7)  Parcel of land purchased by the Bank for a future branch office location.
(8)  Existing facility purchased by the Bank for a future branch office
     location.


The Bank owns and operates personal computers, teller terminals and associated
equipment. At December 31, 2001, such equipment had a net book value of $1,308.
The Bank also had $158 in construction in process at December 31, 2001.



                                       32
<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, 2001, 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 2001 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 8 and 9 of the Registrant's 2001 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
2001 Annual Report to Stockholders on pages 10 through 20 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 & Smith PA appear in the
Registrant's 2001 Annual Report to Stockholders on pages 21 through 52 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.

                                       33
<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 9, 2002 at pages 6 through 9.

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 9, 2002 at pages 12 through 14.

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 9, 2002 at
pages 4 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 14 and 15 of the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 9, 2002.



                                       34
<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 2001 Annual Report to
     Stockholders.

                                                                          Page

     Independent Auditor's Report                                          52

     Consolidated Balance Sheets as of December 31, 2001 and 2000          21

     Consolidated Statements of Income for the Years Ended
               December 31, 2001, 2000 and 1999                            22

     Consolidated Statements of Stockholders' Equity for the
               Years Ended December 31, 2001, 2000 and 1999               23-25

     Consolidated Statements of Cash Flows for the Years
               Ended December 31, 2001, 2000 and 1999                     26-27

     Notes to Consolidated Financial Statements for the Years
               Ended December 31, 2001, 2000 and 1999                     28-51

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

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

     (3) Exhibits

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

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

     *    Incorporated herein by reference into this document from the Exhibits
          to Form S-1, Registration Statement, initially filed on September 27,
          1993, Registration No. 33-69466.

     **   Incorporated herein by reference into this document from the Proxy
          Statement for the Annual Meeting of Stockholders held on May 12, 1994.

     ***  Incorporated herein by reference into this document from the September
          30, 1999 Form 10-Q, filed November 3, 1999.

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


                                       35
<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 14, 2002



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/ Claron D. Wagner         Chairman of the Board              March 14, 2002
--------------------
Claron D. Wagner

/s/ James P. Logan           Vice Chairman of the Board         March 14, 2002
------------------
James P. Logan

/s/ Joseph J. Junod          Director                           March 14, 2002
-------------------
Joseph J. Junod

/s/ Ted R. Ostrander, Jr.    Director                           March 14, 2002
-------------------------
Ted R. Ostrander

/s/ H.D. Robuck, Jr.         Director                           March 14, 2002
--------------------
H.D. Robuck, Jr.

/s/ Howard H. Hewitt         Director                           March 14, 2002
--------------------
Howard H. Hewitt

/s/ Stephen T. Kurtz         Chief Executive Officer,
--------------------         President and Director             March 14, 2002
Stephen T. Kurtz

/s/ Paul K. Mueller          Executive Vice President, Chief
-------------------          Operating Officer and Treasurer
Paul K. Mueller               and Director                      March 14, 2002


                                       36