FFLC BANCORP, INC.
                               2001 ANNUAL REPORT


                                   OUR MISSION


Our mission is to operate First Federal Savings Bank as a community bank, in a
manner consistent with the high expectations of our shareholders, customers and
employees. We will achieve attractive financial results for our stockholders,
provide quality financial services and products to our customers, and offer
rewarding careers to our employees, while maintaining a high level of personal
service and integrity. The Company's primary goals are to: provide an attractive
return to its shareholders, as measured by long-term capital appreciation and
the continued payment of reasonable dividends; provide a competitive,
progressive and profitable array of financial services and products in a manner
focused on excellent customer service; attract and retain highly-motivated,
top-quality employees; and make a positive impact on the communities that we
serve.


                           FORWARD-LOOKING STATEMENTS

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

                                    CONTENTS

                                                                            Page

Corporate Profile, Corporate Organization and General Information .............1
Office Locations and Common Stock Prices and Dividends ........................2
Consolidated Financial Highlights .............................................3
Letter to Stockholders ......................................................4-5
First Federal Website and Online Banking.....................................6-7
Selected Consolidated Financial Data and Financial Ratios....................8-9
Management's Discussion and Analysis of Financial
    Condition and Results of Operations ...................................10-20
Consolidated Financial Statements .........................................21-51
Independent Auditors' Report..................................................52
Directors and Officers of FFLC Bancorp, Inc. .................................53
Directors and Officers of First Federal Savings Bank of Lake County...........54
Employees ....................................................................55




                                  Inside Cover


<PAGE>



CORPORATE PROFILE

FFLC Bancorp, Inc. ("FFLC" or the "Holding Company") was incorporated in
Delaware on September 16, 1993, and acquired First Federal Savings Bank of Lake
County (the "Bank") (together, the "Company") in connection with the Bank's
conversion to stock form on January 4, 1994. The Holding Company is a savings
and loan holding company subject to regulation by the Office of Thrift
Supervision ("OTS") which transacts its business through its subsidiary, the
Bank. The Bank is a community-oriented savings institution which offers a
variety of financial services to individuals and businesses primarily located in
Lake County, Sumter County and Citrus County, Florida. The deposits of the Bank
are insured by the Federal Deposit Insurance Corporation ("FDIC") through the
Savings Association Insurance Fund ("SAIF"). During 2001, First Alliance Title,
LLC, a 90% owned subsidiary of the Holding Company, was formed to operate as a
title agency.

CORPORATE ORGANIZATION

Holding Company
    FFLC Bancorp, Inc.

Subsidiaries
    First Federal Savings Bank of Lake County
    First Alliance Title, LLC

Affiliate of Thrift Subsidiary
    Lake County Service Corporation

GENERAL INFORMATION

Corporate Headquarters

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

     Telephone:           Local         (352) 787-3311
                     Toll Free     (877) 955-2265
Annual Meeting

     The Annual Meeting of the Stockholders will be held at the Leesburg
     Community Building located at 109 East Dixie Avenue in Leesburg at 2:00
     p.m. on May 9, 2002.

Form 10-K

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

Stockholder Assistance

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

        Registrar and Transfer Company
        10 Commerce Drive
        Cranford, New Jersey 07016
        800-368-5948
        Website:  rtco.com

Corporate Counsel
    George W. Murphy, Jr.
    Muldoon, Murphy & Faucette LLP
    5101 Wisconsin Avenue
    Washington, D.C. 20016

Independent Auditors
    Hacker, Johnson & Smith PA
    Certified Public Accountants
    930 Woodcock Road, Suite 211
    Orlando, Florida 32803


                                       1
<PAGE>


                        [ GRAPHIC - FIRST FEDERAL LOGO ]
OFFICE LOCATIONS




                           [ GRAPHIC-MAP-HALF PAGE ]





COMMON STOCK PRICES AND DIVIDENDS

FFLC's common stock is listed on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") under the symbol FFLC. The following table sets
forth market price information, based on closing prices, as reported by the
NASDAQ for the common stock high and low closing sales prices and the amount of
dividends paid on the common stock for the periods indicated. See Note 20 of the
Consolidated Financial Statements for a summary of quarterly financial data.

                                      Cash
                                    Dividends
                                      Paid
                                            High         Low        Per Share
           Quarter Ended:

           March 31, 2000............     15.250        11.250        .12
           June 30, 2000.............     13.250        11.375        .12
           September 30, 2000........    14.250         12.625        .12
           December 31, 2000.........     15.250        13.500        .12
           March 31, 2001............     19.250        14.875        .13
           June 30, 2001.............     19.950        18.500        .13
           September 30, 2001........     21.300        18.500        .13
           December 31, 2001.........     23.250        18.700        .13

As of January 28, 2002, the Company had 1,594 holders of record of common stock
(includes shares held by brokers).



                                       2
<PAGE>



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

AT YEAR END:                                                                 2001           2000          1999
                                                                             ----           ----          ----

<S>                                                                  <C>                   <C>           <C>
Total assets.......................................................  $     823,151         711,493       590,432
Loans, net.........................................................  $     685,935         615,484       500,901
Securities ........................................................  $      59,503          42,717        36,909
Deposits...........................................................  $     585,128         518,885       429,274
Equity.............................................................  $      64,068          59,283        55,637
Book value per share...............................................  $       17.98           16.78         15.52
Shares outstanding ................................................      3,563,932       3,532,561     3,583,938
Equity-to-assets ratio.............................................          7.78%             8.33%         9.42%
Nonperforming assets to total assets...............................           .28%              .39%          .47%

FOR THE YEAR:

Interest income....................................................    $    57,041          49,350        38,612
Net interest income after provision for loan losses................    $    20,610          18,405        16,679
Net income (1).....................................................    $     6,289           5,309         4,850
Basic income per share (1).........................................    $      1.77            1.50          1.37
Diluted income per share (1).......................................    $      1.73            1.46          1.32
Loan originations funded...........................................    $   198,941         188,141       195,034
Return on average assets (1).......................................           .82%            .82%          .93%
Return on average equity (1).......................................         10.20%           9.24%         8.88%
Average equity to average assets ratio.............................          8.05%           8.88%        10.45%
Noninterest expense to average assets..............................          1.68%           1.76%         1.97%

YIELDS AND RATES:


</TABLE>


<TABLE>
<CAPTION>
                                                              Weighted Average
                                                              Rate or Yield                    Average Rate or Yield During
                                                               at December 31,                     Year Ended December 31,
                                                           --------------------------        ------------------------------
                                                            2001               2000          2001          2000          1999
                                                            ----               ----          ----          ----          ----

<S>                                                         <C>                <C>           <C>           <C>           <C>
Loans ..................................................... 7.61%              8.17%         8.08%         8.12%         7.99%
Securities................................................. 5.16%              6.50%         5.84%         6.47%        5.83%
All interest-earning assets ............................... 7.17%              8.02%         7.78%         7.98%        7.73%
Deposits................................................... 3.85%              5.29%         4.95%         5.07%        4.56%
All interest-bearing liabilities .......................... 4.22%              5.51%         5.15%         5.28%        4.70%
Interest-rate spread (2)................................... 2.95%              2.51%         2.63%         2.70%        3.03%
Net yield on average interest-earning assets (3)...........   N/A                N/A         2.96%         3.12%        3.48%
</TABLE>

(1) Excludes gain in 1999 on sale of real estate held for development of $886
($552 net of tax).

(2) Average yield on all interest-earning assets less average rate paid on all
interest-bearing liabilities.

(3) Net interest income divided by average interest-earning assets.



                                       3
<PAGE>



                        [ GRAPHIC - FIRST FEDERAL LOGO ]





Dear Stockholders:

I am pleased to report that the year 2001 was a solid year for your Company. We
enjoyed a successful year, both in terms of the growth of the Bank and in
operating earnings. During 2001, we again experienced record net income from
operations, and increased quarterly cash dividends on our common stock. First
Federal Savings Bank, the Company's subsidiary, set a new record for total
assets, ending the year with total assets in excess of $823 million. Our success
results from a team effort, and I want to take this opportunity to thank all of
you - our employees, our stockholders, our customers, and our communities - for
your efforts and support as we moved through 2001 and into 2002.

The Company's net income from operations increased 18%, from $5.3 million in
2000 to $6.3 million in 2001. On a per share basis, basic income increased 18%
from $1.50 per share for 2000 to $1.77 for 2001. On a diluted basis, net income
per share increased 18% from $1.46 for 2000 to $1.73 for 2001.

In January 2002, our Board of Directors approved an 8% increase in the quarterly
cash dividend, to $.14 per common share from the $.13 per common share paid for
the prior four quarters. That increase continues the practice of annual
increases in effect since 1994, when the quarterly cash dividend was $.036 per
common share (adjusted for the five-for-three stock split in November 1997).

In July 2000, we introduced our Internet banking solution, First Federal Online
Banking. I am very pleased to report that First Federal Online Banking has
continued to enjoy support from both our retail and commercial customers, and
enrollments have exceeded our expectations. We currently have over 1,800
registered users of our online banking service. If you haven't had a chance to
check out First Federal Online Banking, I encourage you to visit our website,
1stfederal.com, and click the "Test Drive" button. I believe you will be
pleasantly surprised at how easily and completely you can check account
balances, transfer funds, pay bills, and access cash management services (for
commercial customers) on a 24-hour-a-day, 7-days-a-week basis. While you are at
our website, I also encourage you to note all the other useful information,
including our loan and deposit products, links to our press releases and
financial reports, local weather, and links to some other "local-interest"
websites.

During 2001, First Federal also began offering mutual funds, annuities, discount
brokerage and financial planning services. These investment, retirement and
financial planning services are being offered through a joint venture program
with T.H.E. Financial Group, Ltd., an independent securities broker-dealer firm,
and member of the NASD and SIPC.

With regard to our plans for continued growth, I am pleased to report that the
Bank has begun construction on a new branch building at the Lake Harris Square
shopping center, at the intersection of U.S. 27 and State Road 48 in Leesburg.
That branch facility will replace a leased storefront branch opened in 1997,
which has outgrown its current space. We also have purchased an outparcel in the
new Kings Ridge Shopping Center in Clermont, for construction of a full-service
branch. And, we are exploring opportunities for other branch locations that may
become available due to recent bank mergers.


                                       4
<PAGE>


Asset growth continues to be an important focal point for the Company. The
Company's total assets grew 16%, from $711 million at December 31, 2000 to $823
million at December 31, 2001. During 2001, total loans receivable grew 12%, from
$630 million to $704 million. During 2001, the Bank's loan originations totaled
$257.9 million, compared to $220.1 million in 2000. Originations of residential
loans were $102.4 million, commercial loans were $80.2 million, and consumer
loans were $75.3 million for 2001. Those volume levels compare to $106.4
million, $47.9 million, and $65.8 million, respectively, for 2000.

The Company's asset growth was funded by a $66 million increase in the Bank's
deposits, a $31 million increase in Federal Home Loan Bank advances, and $10.1
million provided from operations. During 2001, the Bank's deposits grew from
$519 million to $585 million, an increase of 13%. Of the total increase in
deposits, checking and other non-certificate accounts grew $30 million (or 26%),
while certificates of deposit grew $35 million (or 9%).

I am also pleased to report that the FFLC Bancorp Dividend Reinvestment Plan
(the "Plan") established in January 2000, has been a success, with over 280
shareholders participating. The Plan allows registered stockholders of at least
50 shares of common stock to reinvest regular dividends on all or a portion of
their common stock into additional shares. The Plan also allows participants to
make optional cash purchases of common stock. The Company pays the
administrative costs of the Plan, including brokerage commissions for
reinvestment and optional cash purchases. If you would like more information
about the Plan, please contact us.

It is gratifying to note that our stock price rose over 39% during 2001, from
$14.81 to $20.75. Since our initial public offering in 1994, our stock has
yielded an average annual return, including dividends, of 19.23%. We remain
convinced that our best strategy for creating long-term value to our
stockholders is to focus on profitability and excellence in customer service.

We truly appreciate the loyalty and support of our stockholders, our customers,
and our employees. We remain committed to increasing the long-term value of our
Company. That commitment includes meeting the investment needs of our
stockholders, the financial needs of our customers, and the needs of the
communities in which we have the privilege to serve. We believe FFLC Bancorp,
Inc., is well positioned to meet those needs, and we look forward to the
opportunities before us.

Cordially yours,



Stephen T. Kurtz
President and Chief Executive Officer


                                       5
<PAGE>


                        [ GRAPHIC - FIRST FEDERAL LOGO ]



                       [ GRAPHIC FIRST FEDERAL WEBSITE. ]



Visit First Federal's website at http://www.1stfederal.com. This site serves as
a portal for First Federal banking services, local news, and information
regarding our communities. From this site, customers can gain access to First
Federal Online Banking, our fully interactive banking system, that allows bill
payments, account inquiries, transfer of funds and more. In addition, commercial
customers can access cash management tools, make tax payments and perform
payroll processing through First Federal Online Banking. Also available at
1stfederal.com is current information about the Bank's locations, products and
services. Investors can also get the latest information regarding FFLC Bancorp,
including stock quotes, press releases, and financial data.


                                       6
<PAGE>


                              First Federal Online


                       [ GRAPHIC ONLINE BANKING PAGE. ]



First Federal introduced First Federal Online Banking in July 2000 through the
Bank's website at http://www.1stfederal.com. First Federal customers can now
access practically their entire First Federal relationship through the website,
24 hours a day, 7 days a week. From the First Federal website, customers can
view our online banking product and may enroll online. After receiving their
user ID and password, customers may log-on to check balances, pay their bills
online, reconcile their account statements, transfer funds from one account to
another, review account histories, reorder checks and more. First Federal Online
Banking is just one more added convenience to banking with First Federal.


                                       7
<PAGE>


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


                                                                                             At December 31,
                                                                                             ---------------
                                                                 2001           2000         1999        1998        1997
                                                                 ----           ----         ----        ----        ----

<S>                                                           <C>             <C>            <C>        <C>         <C>
Total assets ............................................     $ 823,151       711,493        590,432    463,820     400,237
Loans, net   ............................................       685,935       615,484        500,901    389,059     315,353
Cash and cash equivalents................................        49,792        30,481         34,339     22,928      15,684
Securities   ............................................        59,503        42,717         36,909     40,392      58,598
Deposits     ............................................       585,128       518,885        429,274    351,030     315,390
Borrowed funds...........................................       167,327       129,376        102,914     56,789      30,000
Stockholders' equity.....................................        64,068        59,283         55,637     53,223      51,429

<CAPTION>
                                                                               For the Year Ended December 31,
                                                                               -------------------------------
                                                               2001         2000            1999        1998         1997
                                                               ----         ----            ----        ----         ----

<S>                                                       <C>                <C>           <C>          <C>          <C>
Interest income.......................................... $    57,041        49,350        38,612       32,173       28,156
Interest expense.........................................      35,316        30,065        21,214       17,271       15,416
Net interest income......................................      21,725        19,285        17,398       14,902       12,740
Provision for loan losses................................       1,115           880           719          682          649
Net interest income after provision for loan losses......      20,610        18,405        16,679       14,220       12,091
Noninterest income (1)...................................       2,217         1,682         1,446        1,264        1,219
Noninterest expense......................................      12,841        11,414        10,313        8,446        7,473
Income before provision for income taxes (1).............       9,986         8,673         7,812        7,038        5,837
Provision for income taxes (1)...........................       3,697         3,364         2,962        2,641        2,083
Net income (1)...........................................       6,289         5,309         4,850        4,397        3,754
Basic income per share (1)...............................        1.77          1.50          1.37         1.22         1.01
Weighted average number of common
      shares outstanding for basic.......................   3,547,764     3,541,400     3,548,568    3,592,253    3,700,220
Diluted income per share (1).............................      $ 1.73          1.46          1.32         1.16          .96
Weighted average number of common shares
      outstanding for diluted............................   3,629,432     3,615,740     3,677,038    3,777,085    3,911,256
</TABLE>

________________________________________

     (1) Excludes  gain on sale of real estate held for  development  in 1999 of
     $886 ($552 net of tax).


                                       8
<PAGE>


SELECTED CONSOLIDATED FINANCIAL RATIOS
AND OTHER DATA:

<TABLE>
<CAPTION>
                                                                                At or For the Year Ended December 31,
                                                                               -------------------------------------
                                                                      2001         2000         1999        1998          1997
                                                                      ----         ----         ----        ----          ----

<S>                                                              <C>          <C>          <C>          <C>           <C>
Return on average assets (5).................................        0.82%        0.82%        0.93%        1.05%         1.00%
Return on average equity (5).................................       10.20%        9.24%        8.88%        8.37%         7.18%
Dividend payout ratio .......................................       29.35%       32.32%       28.95%       29.51%        28.51%
Average equity to average assets.............................        8.05%        8.88%       10.45%       12.52%        13.93%
Total equity to total assets.................................        7.78%        8.33%        9.42%       11.47%        12.85%
Interest rate spread during year(1)..........................        2.63%        2.70%        3.03%        3.08%         2.86%
Net interest margin (2)......................................        2.96%        3.12%        3.48%        3.69%         3.53%
Nonperforming assets to total assets (3).....................        0.28%        0.39%        0.47%        0.17%         0.19%
Nonperforming loans to total loans (4).......................        0.27%        0.40%        0.46%        0.11%         0.07%
Allowance for loan losses to non-performing loans............      224.20%      141.51%      119.01%      514.19%       695.87%
Allowance for loan and REO
      losses to nonperforming assets.........................      187.62%      127.49%      101.77%      281.85%       224.83%
Allowance for loan losses to gross loans.....................        0.61%        0.56%        0.54%        0.57%         0.51%
Noninterest expenses to average assets.......................        1.68%        1.76%        1.97%        2.01%         1.99%
Operating efficiency ratio (5)...............................       53.63%       54.44%       54.73%       52.25%        53.54%
Average interest-earning assets to
      average interest-bearing liabilities...................        1.07         1.09         1.11         1.14          1.16
Net interest income to noninterest expenses..................        1.69         1.69         1.69         1.76          1.70
Total shares outstanding.....................................    3,563,932    3,532,561    3,583,938    3,655,620     3,743,988
Book value per common share outstanding......................     $ 17.98        16.78        15.52        14.56         13.74
Number of banking offices (all full-service).................           12           12           12            9             9

</TABLE>


(1) Difference between weighted average yield on all interest-earning assets and
weighted average rate on all interest-bearing liabilities.

(2) Based upon net interest income before provision for loan losses divided by
average interest-earning assets.

(3) Nonperforming assets consist of nonperforming loans and foreclosed assets.

(4) Nonperforming loans consist of loans 90 days or more delinquent.

(5) Excludes gain on sale of real estate held for development in 1999 of
$886,000 ($552,000 net of tax).


                                       9
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

GENERAL

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

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

The Company's net income from operations increased 18.5% to $6.3 million for the
year ended December 31, 2001 from $5.3 million for the year 2000. The Bank's
total assets increased 15.7% to $823.2 million at December 31, 2001 from $711.5
million at December 31, 2000. That increase resulted primarily from a 11.4%
increase in net loans to $685.9 million at December 31, 2001 from $615.5 million
at December 31, 2000, reflecting increased local loan demand. Securities
increased 39.3% or $16.8 million during 2001. Deposits increased 12.8% to $585.1
million at December 31, 2001 from $518.9 million at December 31, 2000. Advances
from the Federal Home Loan Bank increased $31.0 million, to $154.0 million at
December 31, 2001 from $123.0 million at December 31, 2000.


                                       10
<PAGE>


REGULATION AND LEGISLATION

General

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

Capital Requirements

The OTS capital regulations require savings institutions to meet three capital
standards: a 1.5% tangible capital standard; a 3% leverage (core capital) ratio;
and an 8% risk-based capital standard. Under the OTS final rule implementing
FDICIA, generally, a well-capitalized institution is defined as one that meets
the following capital standards: a 5% tangible capital standard; a 6% leverage
(core capital) ratio; and a 10% risk-based capital standard, and has not been
notified by its Federal banking agency that it is in a "troubled condition." At
December 31, 2001, the Bank met each of its capital requirements and met the
criteria of a "well-capitalized" institution as defined above.

Insurance of Deposit Accounts

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


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

CREDIT RISK

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


                                       11
<PAGE>


RESULTS OF OPERATIONS

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

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


                                       12
<PAGE>


The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest-rate spread;
(v) net interest margin; and (vi) weighted average yields and rates at December
31, 2001. Yields and costs were derived by dividing income or expense by the
average balance of assets or liabilities, respectively, for the periods shown.
The average balance of loans includes loans on which the Company has
discontinued accruing interest. The yields and costs include fees which are
considered to constitute adjustments to yields.




<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                       -----------------------
                                                                     2001                               2000
                                                          ----------------------------     -----------------------------
                                            Yield At               Interest    Average              Intererst   Average
                                           December 31,    Average   and        Yield/      Average    and       Yield/
                                              2001         Balance  Dividends     Cost      Balance  Dividends     Cost
                                              ----         -------  ---------     ----      -------  ---------     ----
                                                                                (Dollars in thousands)
<S>                                             <C>       <C>           <C>       <C>       <C>          <C>      <C>
Interest-earning assets:
    Loans  ...................................  7.61%     $ 655,306     52,940    8.08%     $ 562,392    45,656   8.12%
    Securities................................  5.16         49,709      2,901    5.84         37,382     2,417   6.47
    Other interest-earning assets (1).........  2.48         27,837      1,200    4.31         19,026     1,277   6.71
                                                            -------     -------  ------       -------    ------

           Total interest-earning assets......  7.17        732,852     57,041    7.78        618,800    49,350   7.98

Noninterest-earning assets....................               32,885                            28,090
                                                             ------                            ------

           Total assets.......................            $ 765,737                         $ 646,890
                                                          =========                         =========

Interest-bearing liabilities:
    NOW and money market
        accounts..............................  1.41         97,574      2,278    2.33         82,710     2,182   2.64
    Passbook and statement savings
        accounts..............................  1.09         20,121        359    1.78         20,179       421   2.09
    Certificates..............................  4.64        419,923     23,959    5.71        356,219    20,672   5.80
    FHLB advances.............................  5.73        136,041      8,257    6.07        104,647     6,497   6.21
    Other borrowings..........................  2.15         11,842        463    3.91          5,729       293   5.11
                                                            -------     -------  ------       -------    ------

           Total interest-bearing
             liabilities......................  4.22        685,501     35,316    5.15        569,484    30,065   5.28
                                                                        ------                          --------

Noninterest-bearing deposits..................               13,683                            13,221
Noninterest-bearing liabilities...............                4,911                             6,756
Stockholders' equity..........................               61,642                            57,429
                                                            --------                          --------

           Total liabilities and equity.......            $ 765,737                         $ 646,890
                                                          =========                         =========

Net interest-earning assets and
    interest-rate spread (2)..................  2.95%     $  47,351               2.63%     $  49,316             2.70%
                         ==                     ====      =========               ====      =========             ====

Net interest income and net
    margin (3)................................                        $ 21,725    2.96%                $ 19,285   3.12%
           ==                                                         ========    ====                 ========   ====
Ratio of interest-earning assets
    to interest-bearing liabilities...........                 1.07                              1.09
                                                               ====                              ====

<CAPTION>



                                                                1999
                                                 -------------------------------
                                                             Interest  Average
                                                   Average    and       Yield/
                                                   Balance  Dividends     Cost
                                                   -------  ---------     ----


<S>                                             <C>          <C>         <C>
 Interest-earning assets:
     Loans  ................................... $ 442,213    35,315      7.99%
     Securities................................    37,951     2,213      5.83
     Other interest-earning assets (1).........    19,404     1,084      5.59

            Total interest-earning assets......   499,568    38,612      7.73

 Noninterest-earning assets....................    23,062
                                                   ------

            Total assets....................... $ 522,630
                                                =========

 Interest-bearing liabilities:
     NOW and money market
         accounts..............................    66,892     1,631      2.44
     Passbook and statement savings
         accounts..............................    22,170       485      2.19
     Certificates..............................   285,898    14,967      5.24
     FHLB advances.............................    74,515     4,038      5.42
     Other borrowings..........................     1,916        93      4.85
                                                  --------   -------    ------

            Total interest-bearing
              liabilities......................   451,391    21,214      4.70\
                                                            --------

 Noninterest-bearing deposits..................    10,411
 Noninterest-bearing liabilities...............     6,202
 Stockholders' equity..........................    54,626
                                                  ---------

            Total liabilities and equity....... $ 522,630
                                                =========

 Net interest-earning assets and
     interest-rate spread (2).................. $  48,177                3.03%
                          ==                    =========                ====

 Net interest income and net
     margin (3)................................            $ 17,398      3.48%
            ==                                             ========      ====
 Ratio of interest-earning assets
     to interest-bearing liabilities...........      1.11
                                                     ====


</TABLE>


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

(2) Interest-rate spread represents the difference between the average yield on
   interest-earning assets and the average cost of interest bearing liabilities.

(3) Net interest margin is net interest income divided by average
    interest-earning assets.


                                       13
<PAGE>


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


<TABLE>
<CAPTION>
                                                     Year Ended December 31,                      Year Ended December 31,
                                                       2001 vs. 2000                                 2000 vs. 1999
                                                      Increase (Decrease)                         Increase (Decrease)
                                                      -------------------                         -------------------
                                                            Due to                                         Due to
                                                            ------                                         ------
                                                                   Rate/                                         Rate/
                                             Rate     Volume       Volume       Net        Rate     Volume       Volume       Net
                                             ----     ------       ------       ---        ----     ------       ------       ---
                                                                                 (Dollars in thousands)
<S>                                          <C>        <C>         <C>        <C>          <C>      <C>          <C>      <C>
Interest-earning assets:
     Loans, net...........................   $(222)     7,543       (37)       7,284        585      9,597        159      10,341
     Securities...........................    (235)       797       (78)         484        241        (33)        (4)        204
     Other interest-earning (1)...........    (457)       591      (211)         (77)       218        (21)        (4)        193
                                            --------    --------  --------     --------    --------  --------  --------    --------
             Total........................    (914)     8,931      (326)       7,691      1,044      9,543        151      10,738

Interest-bearing liabilities:
     NOW and money market accounts........    (251)       392       (45)          96        134        385         32         551
     Passbook and statement savings
         accounts.........................     (61)        (1)       --          (62)       (22)       (44)         2         (64)
     Certificates.........................    (348)     3,697       (62)       3,287      1,624      3,682        399       5,705
     FHLB advances........................    (145)     1,949       (44)       1,760        588      1,633        238       2,459
     Other borrowings.....................     (69)       313       (74)         170          5        185         10         200
                                            --------    --------  --------     --------    --------  --------  --------    --------
             Total........................    (874)     6,350      (225)       5,251      2,329      5,841        681       8,851
                                            --------    --------  --------     --------    --------  --------  --------    --------
Net change in net interest
     income  ............................   .$ (40)     2,581      (101)       2,440     (1,285)     3,702       (530)      1,887
                                            ========    ========  ========     ========  ========  ========    ========    =========


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


                                       14
<PAGE>


CAPITAL  RESOURCES

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

At December 31, 2001, the Bank had outstanding commitments to originate $21.1
million of loans, to fund unused lines of credit of $45.8 million, to fund the
undisbursed portion of loans in process of $14.3 million and $1.7 million in
outstanding standby letters of credit. The Bank believes that it will have
sufficient funds available to meet its commitments. At December 31, 2001,
certificates of deposit which were scheduled to mature in one year or less
totaled $314.7 million. Management believes, based on past experience, that a
significant portion of these funds will remain with the Bank.

REGULATORY  CAPITAL  REQUIREMENTS

As a federally-chartered financial institution, the Bank is required to maintain
certain minimum amounts of regulatory capital. Regulatory capital is not a
valuation allowance and has not been created by charges against earnings. The
following table provides a summary of the capital requirements, the Bank's
regulatory capital and the amounts in excess at December 31, 2001:
<TABLE>
<CAPTION>

                                                        Tangible                 Core                   Risk-Based
                                                 --------------------------------------------------------------------------
                                                               % of                          % of                  % of Risk-
                                                             Adjusted                     Adjusted                   Weighted
                                                   Amount      Assets          Amount       Assets          Amount     Assets
                                                   ------      ------          ------       ------          ------     ------
                                                                       (Dollars in thousands)

<S>                                                 <C>        <C>              <C>          <C>             <C>         <C>
      Regulatory capital..........................$ 59,141     7.19%          $ 59,141       7.19%         $ 62,520     11.40%
      Requirement.................................  12,344     1.50             24,688       3.00            43,867      8.00
                                                  --------    ------          ---------     ------       ------------  --------
      Excess .....................................$ 46,797      5.69%         $ 34,453       4.19%         $  18,653      3.40%
                                                  ========      ====          ========       ====          =========      ====
</TABLE>

MARKET RISK

Market risk is the risk of loss from changes in market prices and rates. The
Company's market risk arises primarily from interest-rate risk inherent in its
lending and deposit taking activities. To that end, management actively monitors
and manages its interest-rate risk exposure. The measurement of market risk
associated with financial instruments is meaningful only when all related and
offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about the fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in Note 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, while adjusting the Company's asset-liability structure to
obtain the maximum yield-cost spread on that structure. The Company relies
primarily on its asset-liability management to control interest-rate risk.
However, a sudden and substantial increase in interest rates may adversely
impact the Company's earnings, to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same extent, or
on the same basis. The Company does not engage in trading activities.


                                       15
<PAGE>


ASSET /LIABILITY MANAGEMENT

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

The Bank's profitability, like that of most financial institutions, is dependent
to a large extent upon its net interest income, which is the difference between
its interest income on interest-earning assets, such as loans, mortgage-backed
securities and investment securities, and its interest expense on
interest-bearing liabilities, such as deposits and other borrowings. Financial
institutions continue to be affected by general changes in levels of interest
rates and other economic factors beyond their control. At December 31, 2001, the
Bank's one-year interest sensitivity gap (the difference between the amount of
interest-earning assets anticipated by the Bank to mature or reprice within one
year and the amount of interest-bearing liabilities anticipated by the Bank to
mature or reprice within one year) as a percentage of total assets was a
positive 13.86%. Generally, an institution with a positive gap would experience
an increase in net interest income in a period of rising interest rates or a
decrease in net interest income in a period of declining interest rates.
However, certain shortcomings are inherent in the sensitivity analysis presented
above. For example, although certain assets and liabilities may have similar
maturities or periods to repricing, they may react in different manners to
changes in market interest rates. Therefore, no assurance can be given that the
Bank will be able to maintain its net interest-rate spread as market interest
rates fluctuate.

The Bank monitors its interest-rate risk through the Asset/Liability Committee
which meets monthly and reports the results of such monitoring quarterly to the
Board of Directors. The Bank's policy is to seek to maintain a balance between
interest-earning assets and interest-bearing liabilities so that the Bank's
cumulative one-year gap ratio is within a range which management believes is
conducive to maintaining profitability without incurring undue risk. The Bank
has increased its investment in adjustable-rate and shorter average life,
fixed-rate mortgage-related securities in order to position itself against the
consequences of rising interest rates. The Bank also maintains liquid assets in
an amount which allows for the possibility of disintermediation when interest
rates fluctuate. The Bank's liquidity ratio was 14.2% at December 31, 2001. In
addition, the Bank's large stable core deposit base resulting from its
continuing commitment to quality customer service has historically provided it
with a steady source of funds.


                                       16
<PAGE>


The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2001 that are expected
to reprice, based upon certain assumptions, in each of the future periods shown.

<TABLE>
<CAPTION>


                                                More       More         More         More       More
                                                than       than         than         than       than
                                                Three      Six          One          Three      Five          More
                                     Three      Months     Months       Year         Years      Years         than
                                     Months     to Six     to 12        to 3          to 5      to 10         Ten
                                     or Less    Months     Months       Years         Years     Years         Years          Total
                                     -------    ------     ------       -----         -----     -----         -----          -----
<S>                                 <C>         <C>        <C>         <C>           <C>         <C>          <C>          <C>
Rate-sensitive assets:
   Mortgage loans, net of LIP       $144,312    101,947    139,082     101,578       26,907      26,380       11,285       551,491
   Commercial and consumer
    loans, net of LIP                 39,612     10,895     18,799      44,838       15,159       7,276        1,562       138,141
   Mortgage-backed
    securities                         3,166      2,261      1,769       1,582        1,100       1,065           --        10,943
   Interest-earning deposits          30,183         --         --          --           --          --           --        30,183
   Investment securities               1,277      1,013      8,228      21,991        2,008          --        5,000        39,517
   Mutual funds                        9,043         --         --          --           --          --           --         9,043
   FHLB stock                          7,700         --         --          --           --          --           --         7,700
                                    --------    -------    -------     -------       ------      ------       ------       -------
        Total interest-earning
           assets                    235,293    116,116    167,878     169,989       45,174      34,721       17,847       787,018

Rate-sensitive liabilities:
   Deposits:
    Savings accounts                   1,502      1,398      2,511       9,552        3,994       3,917        1,219        24,093
    NOW and money
        market accounts                7,969      7,416     13,325      34,804       21,196      20,784        6,467       111,961
    Certificates                     134,286     51,910    146,543      97,585        4,416          --           --       434,740
   Borrowed funds                     13,327         --     25,000      36,000       74,000      19,000           --       167,327
                                    --------    -------    -------     -------       ------      ------       ------       -------
        Total interest-bearing
           liabilities               157,084     60,724    187,379     177,941      103,606      43,701        7,686       738,121
                                    --------    -------    -------     -------       ------      ------       ------       -------
Interest-sensitivity gap            $ 78,209     55,392    (19,501)     (7,952)     (58,432)     (8,980)      10,161        48,897
                                    ========     ======    =======      ======      =======      ======       ======        ======

Cumulative interest-
    sensitivity gap                 $ 78,209    133,601    114,100     106,148       47,716      38,736       48,897
                                    ========    =======    =======     =======       ======      ======       ======

Cumulative interest-earning
    assets                          $235,293    351,409    519,287     689,276      734,450     769,171      787,018
                                    ========    =======    =======     =======      =======     =======      =======

Cumulative interest-bearing
    liabilities                     $157,084    217,808    405,187     583,128      686,734     730,435      738,121
                                    ========    =======    =======     =======      =======     =======      =======

Cumulative interest-sensitivity
    gap as a percentage of
    total assets                       9.50%     16.23%      13.86%       12.90%       5.80%        4.71%         5.94%
                                       ====      =====       =====        =====        ====         ====          ====

Cumulative interest-earning
    assets as a percentage of
    cumulative interest-bearing
    liabilities                      149.79%    161.34%     128.16%      118.20%      106.95%      105.30%       106.62%
                                     ======     ======      ======       ======       ======       ======        ======
</TABLE>



                                       17
<PAGE>





                 COMPARISON OF THE YEAR ENDED DECEMBER 31, 2001
                      TO THE YEAR ENDED DECEMBER 31, 2000


     General Operating Results. Net income for the year ended December 31, 2001
          was $6.3 million, or $1.77 and $1.73 per basic and diluted share,
          respectively, compared to $5.3 million, or $1.50 and $1.46 per basic
          and diluted share, respectively, for the year 2000. The increase was
          primarily due to an increase in interest income of $7.7 million,
          partially offset by increases in interest expense of $5.3 million and
          noninterest expense of $1.4 million.

     Interest Income. Interest income increased $7.7 million or 15.6%, from
          $49.4 million for the year ended December 31, 2000 to $57.0 million
          for 2001. The increase was due to a $114.1 million or 18.4% increase
          in average interest-earning assets outstanding for the year ended
          December 31, 2001 compared to the 2000 period, partially offset by a
          decrease in the average yield earned on interest-earning assets from
          7.98% for the year ended December 31, 2000 to 7.78% for the year ended
          December 31, 2001.

     Interest Expense. Interest expense increased $5.3 million or 17.5%, from
          $30.1 million for the year ended December 31, 2000 to $35.3 million
          for the year ended December 31, 2001. The increase was due to an
          increase of $116.0 million in average interest-bearing liabilities.
          Average interest-bearing liabilities increased from $569.5 million
          outstanding during the year ended December 31, 2000 to $685.5 million
          outstanding during the comparable period for 2001. The average rate
          paid on interest-bearing liabilities decreased from 5.28% for the year
          ended December 31, 2000 to 5.15% for the comparable 2001 period.

     Noninterest Income. Noninterest income increased $535,000, or 31.8% for the
          year ended December 31, 2001 compared to the year ended December 31,
          2000 primarily due to an increase of $387,000 in other service charges
          and fees during the 2001 period.

     Noninterest Expense. Noninterest expense increased by $1.4 million or
          12.5%, from $11.4 million for the year ended December 31, 2000 to
          $12.8 million for the year ended December 31, 2001. The increase was
          primarily due to increases in salaries and employee benefits of
          $873,000, occupancy expense of $127,000 and data processing expense of
          $90,000, all of which related to the overall growth of the Company.

     Provision for Income Taxes. The provision for federal and state income
          taxes increased from $3.4 million for the year ended December 31, 2000
          (an effective tax rate of 38.8%) to $3.7 million (an effective tax
          rate of 37.0%) for the corresponding period for 2001.


                                       18
<PAGE>


                 COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000
                       TO THE YEAR ENDED DECEMBER 31, 1999


     General Operating Results. Net income for the year ended December 31, 2000
          was $5.3 million, or $1.50 and $1.46 per basic and diluted share,
          respectively, compared to $5.4 million, or $1.52 and $1.47 per basic
          and diluted share, respectively, for the comparable period in 1999.
          Net income for the 1999 period included a gain on sale of real estate
          held for development of $886,000 ($552,000, net of tax). Without the
          1999 gain on sale, net income for 2000 exceeded net income for the
          1999 period by $459,000 or 9.5%. An increase in interest income of
          $10.7 million, partially offset by increases in interest expense of
          $8.9 million and noninterest expense of $1.1 million contributed to
          the increase in net income during the current year.

     Interest Income. Interest income increased $10.7 million or 27.8%, from
          $38.6 million for the year ended December 31, 1999 to $49.4 million
          for the comparable period in 2000. The increase was due to a $119.2
          million or 23.9% increase in average interest-earning assets
          outstanding for the year ended December 31, 2000 compared to the 1999
          period and an increase in the average yield earned on interest-earning
          assets from 7.73% for the year ended December 31, 1999 to 7.98% for
          the year ended December 31, 2000.

     Interest Expense. Interest expense increased $8.9 million or 41.7%, from
          $21.2 million for the year ended December 31, 1999 to $30.1 million
          for the year ended December 31, 2000. The increase was due to an
          increase of $118.1 million in average interest-bearing liabilities.
          Average interest-bearing liabilities increased from $451.4 million
          outstanding during the year ended December 31, 1999 to $569.5 million
          outstanding during the comparable period for 2000. The average yield
          paid on interest-bearing liabilities increased from 4.70% for the year
          ended December 31, 1999 to 5.28% for the comparable 2000 period.

     Noninterest Income. Noninterest income for the year ended December 31, 1999
          exceeded noninterest income for the year ended December 31, 2000
          primarily as a result of the previously discussed pretax gain on sale
          of real estate held for development recognized during 1999, partially
          offset by an increase of $201,000 in deposit account fees during the
          2000 period.

     Noninterest Expense. Noninterest expense increased by $1.1 million or
          10.7%, from $10.3 million for the year ended December 31, 1999 to
          $11.4 million for the year ended December 31, 2000. The increase was
          primarily due to increases in salaries and employee benefits of
          $500,000, occupancy expense of $370,000 and data processing expense of
          $288,000, all of which related to the overall growth of the Company.

     Provision for Income Taxes. The provision for federal and state income
          taxes increased from $3.3 million for the year ended December 31, 1999
          (an effective tax rate of 37.9%) to $3.4 million (an effective tax
          rate of 38.8%) for the corresponding period for 2000.


                                       19
<PAGE>


IMPACT OF INFLATION AND CHANGING PRICES

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


                                       20

<PAGE>





                               FFLC BANCORP, INC.

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

<TABLE>
<CAPTION>


                                                                          At December 31,
                                                                          ---------------
                                                                        2001           2000
              Assets

<S>                                                                  <C>            <C>
Cash and due from banks ..........................................   $  19,609       16,036
Interest-bearing deposits ........................................      30,183       14,445
                                                                     ---------      -------

              Cash and cash equivalents ..........................      49,792       30,481

Securities available for sale ....................................      59,503       42,717
Loans, net of allowance for loan losses of $4,289 in 2001
     and $3,552 in 2000 ..........................................     685,935      615,484
Accrued interest receivable:
     Securities ..................................................         718          506
     Loans .......................................................       3,475        3,244
Premises and equipment, net ......................................      14,338       11,490
Foreclosed assets ................................................         373          276
Federal Home Loan Bank stock, at cost ............................       7,700        6,150
Deferred income taxes ............................................         274          240
Other assets .....................................................       1,043          905
                                                                     ---------      -------

              Total ..............................................   $ 823,151      711,493
                                                                     =========      =======

              Liabilities and Stockholders' Equity

Liabilities:
     Noninterest-bearing demand deposits .........................      14,334       13,335
     NOW and money market accounts ...............................     111,961       86,509
     Savings accounts ............................................      24,093       19,143
     Certificates ................................................     434,740      399,898
                                                                     ---------      -------

              Total deposits .....................................     585,128      518,885
                                                                     ---------      -------

Advances from Federal Home Loan Bank .............................     154,000      123,000
Other borrowed funds .............................................      13,327        6,376
Accrued expenses and other liabilities ...........................       6,628        3,949
                                                                     ---------      -------

              Total liabilities ..................................     759,083      652,210
                                                                     ---------      -------

Commitments and contingencies (Notes 4, 8 and 11)

Stockholders' equity:
     Preferred stock, $.01 par value, 1,000,000 shares authorized,
          none outstanding .......................................        --           --
     Common stock, $.01 par value, 9,000,000 shares authorized,
          4,542,953 in 2001 and 4,491,646 in 2000 shares issued ..          45           45
     Additional paid-in-capital ..................................      31,355       31,010
     Retained income .............................................      51,575       47,132
     Accumulated other comprehensive income ......................         440           81
     Treasury stock, at cost (979,021 shares in 2001 and
          959,085 shares in 2000) ................................     (19,347)     (18,985)
                                                                     ---------      -------

              Total stockholders' equity .........................      64,068       59,283
                                                                     ---------      -------

              Total ..............................................   $ 823,151      711,493
                                                                     =========      =======
</TABLE>


See accompanying Notes to Consolidated Financial Statements.


                                       21
<PAGE>


                               FFLC BANCORP, INC.

                        Consolidated Statements of Income
                   ($ in thousands, except per share amounts)
<TABLE>
<CAPTION>


                                                                          Year Ended December 31,
                                                                          -----------------------
                                                                      2001         2000         1999
                                                                      ----         ----         ----
<S>                                                             <C>              <C>          <C>
Interest income:
     Loans ..................................................   $   52,940       45,656       35,315
     Securities available for sale ..........................        2,901        2,417        1,798
     Securities held to maturity ............................         --           --            415
     Other interest-earning assets ..........................        1,200        1,277        1,084
                                                                ----------       ------       ------

          Total interest income .............................       57,041       49,350       38,612

Interest expense:
     Deposits ...............................................       26,596       23,275       17,083
     Borrowed funds .........................................        8,720        6,790        4,131
                                                                ----------       ------       ------

          Total interest expense ............................       35,316       30,065       21,214
                                                                ----------       ------       ------

          Net interest income ...............................       21,725       19,285       17,398

Provision for loan losses ...................................        1,115          880          719
                                                                ----------       ------       ------

          Net interest income after provision for loan losses       20,610       18,405       16,679
                                                                ----------       ------       ------

Noninterest income:
     Deposit account fees ...................................          835          825          624
     Other service charges and fees .........................        1,066          679          735
     Gain on sale of real estate held for development .......         --           --            886
     Other ..................................................          316          178           87
                                                                ----------       ------       ------

          Total noninterest income ..........................        2,217        1,682        2,332
                                                                ----------       ------       ------

Noninterest expense:
     Salaries and employee benefits .........................        7,554        6,681        6,181
     Occupancy expense ......................................        2,016        1,889        1,519
     Deposit insurance premium ..............................           99           90          214
     Advertising and promotion ..............................          410          328          333
     Data processing expense ................................          990          900          612
     Professional services ..................................          386          297          282
     Other ..................................................        1,386        1,229        1,172
                                                                ----------       ------       ------

          Total noninterest expense .........................       12,841       11,414       10,313

Income before income taxes ..................................        9,986        8,673        8,698

          Income taxes ......................................        3,697        3,364        3,296
                                                                ----------       ------       ------

Net income ..................................................   $    6,289        5,309        5,402
                                                                 =========    =========    =========

Basic income per share of common stock ......................   $     1.77         1.50         1.52
                                                                 =========    =========    =========

Weighted-average number of shares outstanding for basic .....    3,547,764    3,541,400    3,548,568
                                                                 =========    =========    =========

Diluted income per share of common stock ....................   $     1.73         1.46         1.47
                                                                 =========    =========    =========

Weighted-average number of shares outstanding for diluted ...    3,629,432    3,615,740    3,677,038
                                                                 =========    =========    =========


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


                                       22
<PAGE>


                               FFLC BANCORP, INC.

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

<TABLE>
<CAPTION>

                                                                                 Stock
                                                                                 Held
                                                                                  By                     Accumulated
                                                            Additional           Incentive                    Other            Total
                                                  Common    Paid-In   Treasury   Plan     Retained   Comprehensive     Stockholders'
                                                   Stock    Capital   Stock      Trusts     Income   Income  (Loss)         Equity
                                                   -----    -------   -----      ------     ------   --------------    -------------

<S>                                              <C>        <C>      <C>        <C>      <C>               <C>             <C>
Balance at December 31, 1998 .................   $    44    29,286   (15,125)   (631)    39,714            (65)            53,223
                                                                                                                          ---------
Comprehensive income:

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

     Change in unrealized losses
        on securities available for
        sale, net of income taxes
        of $70 ...............................      --        --        --      --         --             (117)              (117)
                                                                                                                          ---------
Comprehensive income .........................                                                                              5,285
                                                                                                                          ---------
Net proceeds from the issuance of
     75,420 shares of common
     stock, stock options exercised ..........      --         453      --      --         --             --                  453

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

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

Purchase of treasury stock,
     147,102 shares ..........................      --        --      (2,596)   --         --             --               (2,596)
                                                 -------   -------   --------   -----    ------           -----            ------
Balance at December 31, 1999 .................   $    44    30,273   (17,721)   (316)    43,539           (182)            55,637
                                                 =======    ======   =======    ====     ======           ====             ======

                                                                     (continued)
</TABLE>


                                       23
<PAGE>


                               FFLC BANCORP, INC.

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


                                                                                    Stock
                                                                                    Held
                                                                                     By        Accumulated
                                                   Additional                     Incentive        Other              Total
                                         Common    Paid-In  Treasury      Plan    Retained     Comprehensive      Stockholders'
                                          Stock    Capital   Stock        Trusts  Income       Income  (Loss)         Equity
                                         -----    -------   -----      ------     ------        --------------    -------------
<S>                 <C> <C>             <C>        <C>      <C>           <C>      <C>             <C>               <C>
Balance at December 31, 1999 ........   $    44    30,273   (17,721)      (316)    43,539          (182)             55,637
                                                                                                                   -----------
Comprehensive income:

     Net income .....................      --        --        --         --        5,309          --                 5,309

     Change in unrealized losses
        on securities available for
        sale, net of income taxes
        of $158 .....................      --        --        --         --         --             263                 263
                                                                                                                   -----------

Comprehensive income ................                                                                                 5,572

Net proceeds from the issuance of
     34,217 shares of common
     stock, stock options exercised .         1       210      --         --         --            --                   211

Net proceeds from the issuance of
     9,968 shares of common stock
     under the Dividend Reinvestment
     Plan ...........................      --         132      --         --         --            --                   132

Shares committed to participants
     in incentive plans (2,735 shares
     remain uncommitted at
     December 31, 2000) .............      --         395      --          316       --            --                   711

Dividends paid ......................      --        --        --         --       (1,716)         --                (1,716)

Purchase of treasury stock,
     95,562 shares ..................      --        --      (1,264)      --         --            --                (1,264)
 )
                                        -------   -------   --------   -------    -------       ------            ------------

Balance at December 31, 2000 ........   $    45    31,010   (18,985)      --       47,132            81              59,283
                                        =======    ======   =======    =======     ======       =======           ============

</TABLE>

                                                                     (continued)


                                       24
<PAGE>



                               FFLC BANCORP, INC.

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

<TABLE>
<CAPTION>



                                                                                             Accumulated
                                                Additional                                      Other             Total
                                     Common       Paid-In      Treasury       Retained      Comprehensive     Stockholders'
                                      Stock       Capital        Stock         Income          Income            Equity
                                      -----       -------        -----         ------          ------            ------

<S>                                   <C>        <C>            <C>             <C>                <C>           <C>
Balance at December 31, 2000 ......   $    45    31,010         (18,985)        47,132             81            59,283
                                                                                                              ------------
Comprehensive income:

     Net income ...................      --        --              --            6,289           --               6,289

     Change in unrealized gains
        on securities available for
        sale, net of income taxes
        of $217 ...................      --        --              --             --              359               359

Comprehensive income ..............                                                                                6,648
                                                                                                              ------------

Net proceeds from the issuance of
     51,307 shares of common
     stock, stock options exercised      --         345            --             --             --                 345

Dividends paid ....................      --        --              --           (1,846)          --              (1,846)

Purchase of treasury stock,
     19,936 shares ................      --        --              (362)          --             --                (362)
                                      -------   -------         --------       -------         -------         ------------
Balance at December 31, 2001 ......   $    45    31,355         (19,347)        51,575            440            64,068
                                      =======   =======         ========        ======         =======         ============

</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                       25
<PAGE>


                               FFLC BANCORP, INC.

                      Consolidated Statements of Cash Flows
                                ($ in thousands)

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                                  -----------------------
                                                                               2001         2000         1999
                                                                               ----         ----         ----
<S>                                                                        <C>          <C>          <C>
Cash flows from operating activities:
     Net income .......................................................   $   6,289        5,309        5,402
     Adjustments to reconcile net income
          to net cash provided by operations:
              Provision for loan losses ...............................       1,115          880          719
              Depreciation ............................................         852          760          575
              (Gain) loss on sale of foreclosed assets ................         (28)           4          (34)
              Gain on sale of real estate held for development ........        --           --           (886)
              Credit for deferred income taxes ........................        (251)        (500)        (112)
              Shares committed and dividends to incentive
                   plan participants ..................................        --            711          872
              Net amortization of premiums and discounts on securities          (52)           5           69
              Net deferral of loan fees and costs .....................         134          (58)        (372)
              Increase in accrued interest receivable .................        (443)        (935)        (573)
              Increase in other assets ................................        (138)        (173)        (188)
              Increase in accrued expenses and other liabilities ......       2,679        1,444           11
                                                                              -----        -----           --

                       Net cash provided by operating activities ......      10,157        7,447        5,483
                                                                             ------        -----        -----

Cash flows from investing activities:
     Proceeds from principal repayments and maturities of securities
          held to maturity ............................................        --           --          3,428
     Purchase of securities available for sale ........................     (30,751)     (13,411)     (10,483)
     Proceeds from principal repayments and maturities of securities
          available for sale ..........................................      14,593        8,019       10,282
     Loan disbursements ...............................................    (198,941)    (188,141)    (195,034)
     Principal repayments on loans ....................................     126,674       72,274       82,465
     Purchase of premises and equipment, net ..........................      (3,700)      (2,864)      (4,364)
     Purchase of Federal Home Loan Bank stock .........................      (1,550)      (1,200)      (2,150)
     Proceeds from sales of foreclosed assets .........................         498          582          150
     Proceeds from sale of real estate held for development ...........        --           --          1,008
                                                                             ------        -----        -----

                       Net cash used in investing activities ..........     (93,177)    (124,741)    (114,698)
                                                                             ------        -----        -----

</TABLE>

                                                                     (continued)


                                       26
<PAGE>


                               FFLC BANCORP, INC.

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

<TABLE>
<CAPTION>

                                                                                           Year Ended December 31,
                                                                                           -----------------------
                                                                                         2001         2000         1999
                                                                                         ----         ----         ----
<S>                                                                                    <C>          <C>          <C>
Cash flows from financing activities:
     Net increase in deposits ...................................................   $  66,243       89,611       78,244
     Net increase in Federal Home Loan Bank advances ............................      31,000       24,000       43,000
     Net increase in other borrowed funds .......................................       6,951        2,462        3,125
     Issuance of common stock ...................................................         345          343          453
     Purchase of treasury stock .................................................        (362)      (1,264)      (2,596)
     Cash dividends paid ........................................................      (1,846)      (1,716)      (1,600)
                                                                                      -------      -------      -------

                   Net cash provided by financing activities ....................     102,331      113,436      120,626
                                                                                      -------      -------      -------

Net increase (decrease) in cash and cash equivalents ............................      19,311       (3,858)      11,411

Cash and cash equivalents at beginning of year ..................................      30,481       34,339       22,928
                                                                                      -------      -------      -------

Cash and cash equivalents at end of year ........................................   $  49,792       30,481       34,339
                                                                                    =========       ======       ======

Supplemental disclosures of cash flow information
     Cash paid during the year for:
          Interest ..............................................................   $  35,217       29,829       20,795
                                                                                    =========       ======       ======

          Income taxes ..........................................................   $   3,821        3,700        3,456
                                                                                    =========        =====        =====

     Noncash investing and financing activities:

          Accumulated other comprehensive income, net change in
              unrealized gain (loss) on securities available for sale, net of tax   $     359          263         (117)
                                                                                    =========        =====        =====

          Transfers from loans to foreclosed assets .............................   $     656          826          425
                                                                                    =========        =====        =====

          Loans originated on sales of foreclosed assets ........................   $      89          364          275
                                                                                    =========        =====        =====

          Loans funded by and sold to correspondent .............................   $  14,926        1,121        6,988
                                                                                    =========        =====        =====

          Transfer securities from held to maturity to available for
              sale upon adoption of FAS 133 .....................................   $      --           --       14,784
                                                                                    =========        =====        =====


</TABLE>


See accompanying Notes to Consolidated Financial Statements.


                                       27
<PAGE>


                               FFLC BANCORP, INC.

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(1)  Summary of Significant Accounting Policies

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

     During 2001,  First  Alliance  Title,  LLC, a 90% owned  subsidiary  of the
     Holding  Company was formed to operate as a title agency.  This  subsidiary
     had minimal activity through December 31, 2001.

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

General. The  accounting  and reporting  policies of FFLC Bancorp,  Inc. and its
     subsidiaries  (together,  the "Company")  conform to accounting  principles
     generally accepted in the United States of America and to general practices
     within the banking  industry.  The  following  summarizes  the  significant
     accounting policies of the Company:

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

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

The  Bank is required to maintain certain average reserve  balances  pursuant to
     regulations of the Federal Reserve Board. These balances must be maintained
     in the form of vault  cash or  noninterest  bearing  deposits  at a Federal
     Reserve Bank. The Bank met this requirement at December 31, 2001 and 2000.

Securities.  The Company may classify its securities as either trading,  held to
     maturity or available for sale. Trading securities are held principally for
     resale and  recorded at their fair values.  Unrealized  gains and losses on
     trading securities are included  immediately in earnings.  Held-to-maturity
     securities are those which the Company has the positive  intent and ability
     to hold to maturity and are reported at amortized cost.  Available-for-sale
     securities  consist of securities not classified as trading  securities nor
     as held-to-maturity securities. Unrealized holding gains and losses, net of
     tax, on available-for-sale securities are excluded from income and reported
     in  other   comprehensive   income.   Gains  and  losses  on  the  sale  of
     available-for-sale securities are recorded on the trade date and determined
     using  the  specific-identification   method.  Premiums  and  discounts  on
     securities  available for sale are recognized in interest  income using the
     interest method over the period to maturity.


                                       28
<PAGE>


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

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

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

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

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

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

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

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

Foreclosed Assets.  Assets acquired  through,  or in lieu of,  foreclosure,  are
     initially  recorded  at  fair  value  at the  date  of  foreclosure.  After
     foreclosure,  valuations are  periodically  performed by management and the
     assets are carried at the lower of carrying  amount or fair value less cost
     to sell.  Revenue and expenses from operations and changes in the valuation
     allowance are included in income.


                                       29
<PAGE>


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

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

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

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

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

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

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

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


                                       30
<PAGE>


          Loans.  For  variable-rate  loans that reprice  frequently and have no
          significant  change in credit risk,  fair values are based on carrying
          values.   Fair  values  for  fixed-rate   loans  are  estimated  using
          discounted  cash flow analyses,  using interest rates  currently being
          offered for loans with similar  terms to  borrowers of similar  credit
          quality.

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

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

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

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


                                       31
<PAGE>


Income Per  Share of  Common  Stock.  The  Company  follows  the  provisions  of
     Financial  Accounting  Standards  No. 128,  "Earnings  Per Share" (SFAS No.
     128).  SFAS  No.  128  provides  accounting  and  reporting  standards  for
     calculating  income per share.  Basic  income per share of common stock has
     been   computed   by   dividing   the  net  income  for  the  year  by  the
     weighted-average  number of  shares  outstanding.  Shares  of common  stock
     purchased by the Employee  Stock Option Plan ("ESOP") and the Retention and
     Recognition Plan ("RRP")  incentive plans (see Note 16) are only considered
     outstanding  when the shares are  released or  committed to be released for
     allocation to participants. The ESOP initially purchased 368,242 shares, of
     which 4,383 shares were released for allocation to participants  each month
     beginning in January,  1994.  As of December 31, 2000,  all ESOP shares had
     been  allocated.  The RRP  initially  purchased  184,122  shares,  of which
     179,373,  181,387  and  181,387  were  allocated  to  participants  and are
     considered  outstanding  for the years ended  December 31,  1999,  2000 and
     2001,  respectively.  At December 31, 2001, 2,735 shares remain uncommitted
     under the RRP plan and are not considered  outstanding  for purposes of the
     computation  of net income per share of common  stock.  Diluted  income per
     share is computed by dividing net income by the weighted-average  number of
     shares outstanding including the dilutive effect of stock options (see Note
     16) computed using the treasury stock method.  The following table presents
     the calculation of net income per share of common stock:

<TABLE>
<CAPTION>

                                                                                            Year Ended December 31,
                                                                                            -----------------------
                                                                                  2001             2000               1999
                                                                                  ----             ----               ----
<S>                                                                             <C>               <C>              <C>
 Weighted-average shares of common stock issued
      and outstanding before adjustments for ESOP,
      RRP and common stock options......................................        3,550,499         3,571,858        3,632,058

 Adjustment to reflect the effect of unallocated
      ESOP and RRP average shares.......................................           (2,735)          (30,458)         (83,490)
                                                                                ---------         ---------        ---------

 Weighted-average shares for basic income per share.....................        3,547,764         3,541,400        3,548,568
                                                                                =========         =========        =========

 Basic income per share.................................................   $         1.77              1.50             1.52

 Total weighted-average common shares and equivalents
      outstanding for basic income per share
      computation.......................................................        3,547,764         3,541,400        3,548,568

 Additional dilutive shares using the average market value
      for the period utilizing the treasury stock method
      regarding stock options...........................................           81,668            74,340          128,470
                                                                                ---------         ---------        ---------

 Weighted-average common shares and equivalents
      outstanding for diluted income per share..........................        3,629,432         3,615,740        3,677,038
                                                                                =========         =========        =========

 Diluted income per share...............................................  $          1.73              1.46             1.47
                                                                                =========         =========        =========
</TABLE>


Comprehensive Income.  Accounting  principles  generally require that recognized
     revenue,  expenses, gains and losses be included in net earnings.  Although
     certain  changes in assets and  liabilities,  such as unrealized  gains and
     losses  on  available-for-sale  securities,  are  reported  as  a  separate
     component of the equity  section of the balance  sheet,  such items,  along
     with net earnings,  are components of comprehensive  income. The components
     of other  comprehensive  income were unrealized holding gains and losses on
     securities available for sale.

Reclassifications.  Certain amounts in the 1999 and 2000 consolidated  financial
     statements have been reclassified to conform to the presentation for 2001.


                                       32
<PAGE>


(2)  Securities

     All  securities  have been  classified as available for sale by management.
          The  carrying  amounts  of  securities  available  for sale and  their
          approximate fair values were as follows:



                                        Gross      Gross
                                        Amortized  Unrealized Unrealized  Fair
                                          Cost        Gains     Losses    Value
                                          ----        -----     ------    -----
                                                     (In thousands)
Securities available for sale:
At December 31, 2001:
    Mutual funds ........................$ 9,125        --       (82)     9,043
    U.S. Government and agency securities 32,670       625       (54)    33,241
    Mortgage-backed securities .......... 10,735       279       (71)    10,943
    Other investment securities .........  6,268         8        --      6,276
                                         -------   -------   -------    -------

         Total ..........................$58,798       912      (207)    59,503
                                         -------   -------   -------    -------
At December 31, 2000:
    Mutual funds ........................  9,130        --      (151)     8,979
    U.S. Government and agency securities 17,849       119        --     17,968
    Mortgage-backed securities .......... 14,244       150        --     14,394
    Other investment securities .........  1,365        11        --      1,376
                                         -------   -------   -------    -------

         Total ..........................$42,588       280      (151)    42,717
                                         =======       ===      ====     ======

The scheduled  maturities of securities  available for sale at December 31, 2001
were as follows:

                                 Amortized           Fair
                                   Cost             Value
                                   ----             -----
                                      (In thousands)

Due in less than one year .....   $ 8,961           9,242
Due from one year to five years    23,709          23,999
Due after ten years ...........     6,268           6,276
Mortgage-backed securities ....    10,735          10,943
Mutual funds ..................     9,125           9,043
                                    -----           -----

    Total .....................   $58,798          59,503
                                  =======          ======

     Securities with a carrying  value of  approximately  $8.8  million and $6.5
          million at December 31, 2001 and 2000,  respectively,  were pledged to
          secure  public  funds and tax  deposits.  The Company has also pledged
          securities with a carrying value of $18.7 million and $9.9 million for
          borrowings  under  retail  repurchase  agreements  with  customers  at
          December 31, 2001 and 2000, respectively (See Note 6).

     There were no sales of securities during the years ended December 31, 2001,
     2000 or 1999.


                                       33
<PAGE>


(3)  Loans
     The components of loans were as follows:
                                                        At December 31,
                                                  2001              2000
                                                      (In thousands)
First mortgage loans secured by:
     One-to-four-family residential ...........   $ 413,712      409,600
     Construction and land ....................      22,951       13,006
     Multi-family units .......................      20,304       17,602
     Commercial real estate, churches and other     108,804       79,729
Consumer loans ................................     119,357       95,824
Commercial loans ..............................      18,814       14,677
                                                     ------       ------

         Subtotal .............................     703,942      630,438

Undisbursed portion of loans in process .......     (14,310)     (12,128)
Net deferred loan costs .......................         592          726
Allowance for loan losses .....................      (4,289)      (3,552)
                                                     ------       ------

Loans, net.....................................   $ 685,935      615,484
                                                  =========      =======

     An analysis of the change in the allowance for loan losses follows:

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

Balance at January 1 ....   $ 3,552      2,811      2,283
Net loans charged-off ...      (378)      (139)      (191)
Provision for loan losses     1,115        880        719
                              -----        ---        ---

Balance at December 31 ..   $ 4,289      3,552      2,811
                    ==      =======      =====      =====

     The  following summarizes the amount of impaired loans at December 31, 2001
          and 2000, all of which are  collateral  dependent (in  thousands):

                                                              At December 31,
                                                               2001     2000
Loans identified as impaired:
Gross loans with no related allowance for losses            $   --        --
Gross loans with related allowance for losses recorded ..      306     1,280
         Less:  Allowances on these loans ...............     (150)     (192)
                                                              ----      ----

    Net investment in impaired loans ....................   $  156     1,088
                                                            ======     =====


                                       34
<PAGE>


     The  average  net  investment  in  impaired   loans  and  interest   income
          recognized  and  received  on  impaired  loans  during the years ended
          December 31, 2001, 2000 and 1999 was as follows (in thousands):

                                                      Year Ended December 31,
                                                      -----------------------
                                                      2001    2000    1999
                                                      ----    ----    ----

Average net investment in impaired loans .........   $ 581   1,117   1,152
                                                     =====   =====   =====

Interest income recognized on impaired loans .....   $  81      46      84
                                                     =====   =====   =====

Interest income received on impaired loans .......   $  81      46      84
                                                     =====   =====   =====

     During the second  quarter of 2001,  an impaired loan in the amount of $1.3
     million was repaid.

     The  Company  originates or purchases  nonresidential  real property loans.
          These loans are  considered by  management  to be of somewhat  greater
          risk of uncollectibility due to the dependency on income production or
          future  development  of the real estate.  Nearly all of the  Company's
          real  property  loans were  collateralized  by real  property in Lake,
          Sumter and Citrus Counties, Florida.

     Nonaccrual loans at December  31, 2001 and 2000  totaled  $1.9  million and
          $2.5  million,  respectively.  For the years ended  December 31, 2001,
          2000 and 1999,  interest  income on loans  would  have been  increased
          approximately  $116,000,  $230,000 and $99,000,  respectively,  if the
          interest on  nonaccrual  loans had been  recorded  under the  original
          terms of such loans.

    Loans serviced for others, consisting solely of participations sold, are not
          included in the accompanying  consolidated  balance sheets. The unpaid
          principal  balances of these loans were approximately $1.5 million and
          $.9 million at December 31, 2001 and 2000, respectively.


(4)  Premises and Equipment
     Components of premises and equipment were as follows:

                                    At December 31,
                                    ---------------
                                  2001          2000
                                  ----          ----
                                    (In thousands)
Cost:
    Land ....................   $  4,115       3,134
    Building and improvements     11,672       8,799
    Furniture and equipment .      2,882       2,901
    Construction in progress         158         955
                                  ------       -----

         Total cost .........     18,827      15,789

Less accumulated depreciation     (4,489)     (4,299)
                                  ------       -----

    Net book value ..........   $ 14,338      11,490
                                ========      ======


                                       35
<PAGE>


     Certain Company  facilities  are leased  under  various  operating  leases.
          Rental expense was $118,000,  $180,000 and $195,000 in 2001,  2000 and
          1999,  respectively.  At December  31,  2001,  future  minimum  rental
          commitments   under   noncancellable   leases   were  as  follows  (in
          thousands):

              Year Ending
              December 31,                               Amount

                   2002............................     $  68
                   2003............................        60
                   2004............................        62
                   2005............................        65
                   2006............................        68
                   Thereafter......................        71
                                                           --

                                                       $ 394
                                                       =====

     (5)  Deposits

          The aggregate amount of short-term jumbo certificates of deposit, each
          with a minimum  denomination  of $100,000,  was  approximately  $107.2
          million and $61.9 million at December 31, 2001 and 2000, respectively.

     At December 31, 2001, the scheduled  maturities of  certificates of deposit
     were as follows (in thousands):

              Year Ending

                   2002............................   $ 314,743
                   2003............................      99,363
                   2004............................      16,133
                   2005............................       2,109
                   2006............................       2,392
                                                          -----

                                                      $ 434,740
                                                      =========


                                       36
<PAGE>


(6)  Advances from Federal Home Loan Bank and Other Borrowings

     As   of December 31, 2001, the Bank had $154.0 million in Federal Home Loan
          Bank of Atlanta ("FHLB")  advances  outstanding.  These advances had a
          weighted-average  interest  rate  of  5.73%  and  interest  rates  and
          maturities as follows (dollars in thousands):

                                           Interest         At December 31,
                                           --------         ---------------
              Year Ending December 31,       Rate         2001          2000
                                            -------       ----          ----

                   2002..................   6.10%   $    5,000        5,000
                   2002..................   5.96%       15,000       15,000
                   2002..................   4.03%        5,000        -
                   2003..................   4.90%       10,000       10,000
                   2003..................   4.91%        6,000        -
                   2003..................   4.53%        5,000        -
                   2003..................   3.77%        5,000        -
                   2004..................   6.05%       10,000       10,000
                   2005..................   6.39%(B)    20,000       20,000
                   2005..................   6.60%(B)    13,500       13,500
                   2005..................   6.68%(B)    12,500       12,500
                   2005..................   6.31%(B)     7,000        7,000
                   2005..................   6.04%(B)    10,000       10,000
                   2005..................   6.00%(B)     6,000        6,000
                   2006..................   1.95%(A)     5,000        -
                   2009..................   6.39%(B)    14,000        14,000
                   2011..................   4.44%(B)     5,000        -
                                                      -----------   ---------
                         Total...................... $ 154,000       123,000
                                                     ============   ========

     (A)  Adjustable Rate

     (B) The FHLB has the  option to  convert  to an  adjustable  rate in future
     years.

     The  security   agreement  with  FHLB  includes  a  blanket  floating  lien
          requiring  the  Bank to  maintain  first  mortgage  loans  as  pledged
          collateral in an amount equal to at least,  when  discounted at 75% of
          the unpaid principal balances,  100% of these advances. The FHLB stock
          is also  pledged as  collateral  for these  advances.  At December 31,
          2001,  the Bank  could  borrow  up to  $216.4  million  under the FHLB
          security agreement.

     The  Bank  has an $8  million  line  of  credit  facility  with  one of its
          correspondent  banks,  under  which the Bank may draw  funds for daily
          liquidity.  Borrowings under this line of credit must be repaid within
          seven days. The line of credit bears a floating interest rate equal to
          the average  federal  funds rate and expires on June 30,  2002.  As of
          December 31, 2001, the Bank has not used this line of credit.

     Other borrowed funds were  composed of retail  repurchase  agreements  with
          customers.  The Company enters into retail repurchase  agreements with
          customers in which the funds  received are accounted for as borrowings
          to the Company. The total amount outstanding under these agreements at
          December  31,  2001 and 2000  were  $13.3  million  and $6.4  million,
          respectively.  The Company pledged securities with a carrying value of
          $18.7 million and $9.9 million as collateral  for these  agreements at
          December 31, 2001 and 2000, respectively.

(7)  Income Taxes

     The  Holding Company and its  subsidiaries  file  consolidated  federal and
          state income tax returns. Income taxes are allocated proportionally to
          the Holding  Company and each of the  subsidiaries  as though separate
          income tax returns were filed.


                                       37
<PAGE>



     The income tax provision is summarized as follows:

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

              Current  .............   $ 3,948         3,864        3,408
              Deferred .............      (251)         (500)         (112)
                                          ----          ----          ----

                                       $ 3,697         3,364        3,296
                                       =======         =====        =====

     The  effective tax rate on income before income taxes differs from the U.S.
          statutory rate of 34%. The following  summary  reconciles taxes at the
          U.S. statutory rate with the effective rates:

                                              Year Ended December 31,
                                              -----------------------
                                     2001             2000           1999
                              ---------------    -------------  ---------------
                               Amount       %      Amount   %     Amount     %
                               ------       -      ------   -     ------     -
                                          (Dollars in thousands)
Taxes on income at U.S. ..
     statutory rate ......   $ 3,395      34.0%  $ 2,949   34.0% $ 2,957   34.0%
State income taxes, net of
     federal tax benefit .       341       3.4       324    3.7      297    3.4
Other, net ...............       (39)      (.4)       91    1.1       42     .5
                                 ---       ---        --    ---       --     --

Taxes on income at
     effective rates .....   $ 3,697      37.0%  $ 3,364   38.8% $ 3,296   37.9%
                             =======      ====   =======   ====  =======   ====

     Temporary differences  between the financial statement carrying amounts and
          tax  bases of assets  and  liabilities  that gave rise to  significant
          portions of the deferred tax asset relate to the following:

                                                       At December 31,
                                                       ---------------
                                                      2001          2000
                                                      ----          ----
                                                       (In thousands)
Deferred tax assets:
     Allowance for loan losses ......................   $1,263      902
     Accrued interest ...............................        9       64
     RRP incentive plan .............................       74       79
     Deferred loan fees .............................       24       48
     Other ..........................................       24       81
                                                            --       --

Gross deferred tax assets ...........................    1,394    1,174
                                                         -----    -----

Deferred tax liabilities:
     FHLB stock dividends ...........................      349      347
     Building and land ..............................      334      334
     Accumulated depreciation .......................      155      183
     Unrealized gain on securities available for sale      265       48
     Deferred loan costs ............................       17       22
                                                            --       --

Gross deferred tax liabilities ......................    1,120      934
                                                         -----      ---

Net deferred tax asset ..............................   $  274      240


                                       38
<PAGE>


     Retained earnings at December 31, 2001 and 2000 includes approximately $5.8
          million for which no deferred  federal  income tax  liability has been
          recognized. This amount represents an allocation of income to bad debt
          deductions  for tax purposes  only.  Reduction of amounts so allocated
          for  purposes  other than tax bad debt losses or  adjustments  arising
          from  carryback of net  operating  losses would create  income for tax
          purposes  only,  which would be subject to the then current  corporate
          income tax rate. The unrecorded  deferred  income tax liability on the
          above amount was  approximately  $2.2 million at December 31, 2001 and
          2000.

     The  Small  Business Job Protection Act of 1996 (the "1996 Act") enacted on
          August 2, 1996  requires  savings  institutions,  such as the Bank, to
          recapture certain portions of their accumulated bad debt reserves, and
          eliminated  the  Percentage of Taxable Income Method of accounting for
          bad debts for tax purposes. The Bank was required to change its method
          of  accounting  for bad debts for tax  purposes  effective  January 1,
          1996.  In addition,  the Bank was required to recapture  the excess of
          its bad debt reserves at December 31, 1995 over its base year reserves
          at December 31,  1987,  ratably  over a six-year  period  beginning in
          1998.  At December 31, 2001,  the Bank had  approximately  $262,000 of
          deferred tax liabilities  recorded for the recapture of its excess bad
          debt reserves.


                                       39
<PAGE>


     (8)  Financial  Instruments

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

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

     Commitments to extend  credit are  agreements to lend to a customer as long
          as there is no violation of any condition established in the contract.
          Commitments generally have fixed expiration dates or other termination
          clauses  and  may  require  payment  of  a  fee.  Since  some  of  the
          commitments are expected to expire without being drawn upon, the total
          commitment   amounts  do  not   necessarily   represent   future  cash
          requirements.  The Company evaluates each customer's credit worthiness
          on a case-by-case  basis. The amount of collateral  obtained if deemed
          necessary  by the  Company  upon  extension  of  credit  is  based  on
          management's credit evaluation of the counterparty.

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


                                       40
<PAGE>


     The estimated fair values of the Company's  financial  instruments  were as
     follows:
<TABLE>
<CAPTION>

                                      At December 31, 2001           At December 31, 2000
                                     Carrying           Fair         Carrying          Fair
                                      Amount            Value         Amount          Value
                                      ------            -----         ------          -----
                                                   (In thousands)
<S>                                  <C>               <C>            <C>          <C>
Financial assets:
     Cash and cash equivalents ...   $ 49,792           49,792         30,481       30,481
     Securities available for sale     59,503           59,503         42,717       42,717
     Loans .......................    685,935          689,362        615,484      616,345
     Accrued interest receivable .      4,193            4,193          3,750        3,750
     Federal Home Loan Bank stock       7,700            7,700          6,150        6,150

Financial liabilities:
     Deposit liabilities .........    585,128          587,642        518,885      517,672
     Advances from FHLB ..........    154,000          161,205        123,000      123,201
     Other borrowed funds ........     13,327           13,327          6,376        6,376

A summary of the  notional  amounts of the  Company's  financial  instruments
     which approximates fair value, with  off-balance-sheet risk at December 31,
     2001, follows:

</TABLE>

                                                         Notional
                                                          Amount
                                                       (In thousands)

                Commitments to extend credit ..........    $21,059
                                                           =======

                Unused lines of credit ................    $45,763
                                                           =======

                Undisbursed portion of loans in process    $14,310
                                                           =======

                Standby letters of credit .............    $ 1,725
                                                           =======

(9) Significant Group Concentration of Credit Risk

The  Company  grants real estate,  commercial  and  consumer  loans to customers
     primarily  in the State of Florida  with the  majority of such loans in the
     Lake, Sumter and Citrus County area.  Therefore,  the Company's exposure to
     credit  risk is  significantly  affected  by changes in the  economy of the
     Lake,  Sumter and Citrus  County  areas.  In  addition,  the  Company has a
     concentration  of  single-family  residential  mortgage loans in a specific
     residential   retirement  community  of  approximately  $110.0  million  at
     December 31, 2001.

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


                                       41
<PAGE>


(10)  Related Parties

Loans to directors  and  executive  officers  of the  Company  were  made in the
     ordinary  course of business  and did not involve  more than normal risk of
     collectibility or present other unfavorable features.  Activity in loans to
     directors and executive officers were as follows:

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

Beginning balance ..   $ 5,413      4,983
Loans originated ...     4,086      1,436
Principal repayments    (2,714)    (1,006)
                        ------     ------

     Ending balance    $ 6,785      5,413
                       =======      =====

(11)  Commitments and Contingencies

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

(12)  Restrictions on Retained Earnings

     The  Bank is  subject to certain  restrictions  on the amount of  dividends
          that it may declare without prior regulatory approval. At December 31,
          2001,  approximately $20.7 million of retained earnings were available
          for dividend declaration without prior regulatory approval.

(13)  Regulatory Matters

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

     Quantitative measures  established by regulation to ensure capital adequacy
          require the Bank to maintain  minimum  amounts (set forth in the table
          below) of total and Tier I capital (as defined in the  regulations) to
          risk-weighted assets (as defined). Management believes, as of December
          31, 2001,  that the Bank meets all capital  adequacy  requirements  to
          which it is subject.

     As   of  December  31,  2001,  the most  recent  notification  from the OTS
          categorized  the  Bank  as  well  capitalized   under  the  regulatory
          framework for prompt  corrective  action.  To be  categorized  as well
          capitalized,  the Bank must maintain minimum tangible,  tier I (core),
          tier I (risk-based) and total  risk-based  capital ratios as set forth
          in  the  table.   There  are  no   conditions  or  events  since  that
          notification  that management  believes have changed the institution's
          category.


                                       42
<PAGE>


     The Bank's actual capital  amounts and percentages at December 31, 2001 and
     2000 are also presented in the tables.

         <TABLE>
<CAPTION>
                                                                                                               To Be Well
                                                                                    Minimum                    Capitalized
                                                                                  For Capital                  For Prompt
                                                                                   Adequacy                Corrective Action
                                                         Actual                    Purposes                    Provisions
                                                     -------------------        ---------------            --------------------
                                                      %           Amount        %         Amount            %           Amount
                                                      -           ------        -         ------            -           ------
           As of December 31, 2001:                                    (Dollars in thousands)
<S>                                                 <C>        <C>             <C>         <C>              <C>        <C>
           Stockholders' equity, and
               ratio to total assets.........       7.3%       $  60,108
           Less: investment in
               nonincludable
               subsidiary....................                       (477)
           Unrealized gain on
               available-for-sale
               securities....................                       (490)
                                                                    ----

           Tangible capital,
               and ratio to adjusted
               total assets..................       7.2%       $  59,141       1.5%        $ 12,344
                                                               =========                   ========

           Tier 1 (core) capital, and
               ratio to adjusted total
               assets....................           7.2%       $  59,141       3.0%        $ 24,688         5.0%       $ 41,147
                                                               =========                  ========                    ========

           Tier 1 capital, and ratio
               to risk-weighted assets.......      10.8%          59,141       4.0%        $ 21,933         6.0%       $ 32,900

           Less: nonincludable
               investment in 80%
               land loans....................                       (656)

           Tier 2 capital (allowance for
               loan losses)..................                      4,035
                                                                   -----

           Total risk-based capital,
               and ratio to risk-
               weighted assets...............      11.4%      $   62,520       8.0%        $ 43,867        10.0%       $ 54,833
                                                              ==========

           Total assets......................                  $ 823,916
                                                               =========

           Adjusted total assets.............                  $ 822,946
                                                               =========

           Risk-weighted assets..............                  $ 548,332
                                                               =========

</TABLE>


                                       43
<PAGE>



<TABLE>
<CAPTION>

                                                                                To Be Well
                                                             Minimum            Capitalized
                                                           For Capital           For Prompt
                                                            Adequacy          Corrective Action
                                        Actual              Purposes             Provisions
                                      --------------     ------------------   ----------------
                                       %       Amount      %        Amount     %       Amount
                                       -       ------      -        ------     -       ------
   As of December 31, 2000:                           (Dollars in thousands)
   Stockholders' equity,
       and ratio to total
<S>                                  <C>      <C>           <C>  <C>         <C>   <C>
    assets ..................        7.88%   $  56,130
Less: investment in
    nonincludable
    subsidiary ..............                     (485)
Unrealized gain on
    available-for-sale
    securities ..............                     (175)

Tangible capital,
    and ratio to adjusted
    total assets ............        7.80%   $   55,470    1.5% $   10,670
                                              =========          =========

Tier 1 (core) capital, and
    ratio to adjusted total
    assets ..................        7.80%    $  55,470     3.0% $  21,340   5.0%  $  35,567
                                              =========          =========          ========

Tier 1 capital, and ratio
    to risk-weighted assets .       12.45%       55,470     4.0% $  17,824   6.0%  $  26,736

Less: nonincludable
    investment in 80%
    land loans ..............                     (245)
                                                  ----

Tier 2 capital (allowance for
    loan losses) ............                    3,477
                                                 -----

Total risk-based capital,
    and ratio to risk-
    weighted assets .........       13.17%    $  58,702     8.0% $  35,648   10.0%  $ 44,560
                                              =========          =========          ========

Total assets ................                 $ 712,001
                                              =========

Adjusted total assets .......                 $ 711,341
                                              =========

Risk-weighted assets ........                 $ 445,597
                                              =========

</TABLE>


                                       44
<PAGE>


(14)  Conversion to Stock Savings Bank

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

     Current regulations  allow the Bank to pay dividends on its stock after the
          conversion  if its  regulatory  capital  would not  thereby be reduced
          below the amount  then  required  for the  aforementioned  Liquidation
          Account.  Also,  capital  distribution  regulations  limit the  Bank's
          ability to make capital  distributions which include dividends,  stock
          redemptions and repurchases,  cash-out  mergers,  interest payments on
          certain convertible debt and other transactions charged to the capital
          account based on their capital level and supervisory condition.

(15)  401(k) Plan

     Effective  January 1, 2001,  the Board of  Directors  approved the transfer
          from the  multi-employer  401(k) plan the Company had participated in,
          to a  single  employer  401(k)  plan  ("KSOP"),  and the  simultaneous
          combination  of that  plan  with the  Employee  Stock  Ownership  Plan
          discussed in Note 16. Under the new KSOP, participation is open to all
          employees  the  month  after  hire  date  (for  purposes  of  employer
          contributions, one year of service is required), and participants have
          the twelve  investment  options  offered by the previous plan,  plus a
          Company stock fund. The Company makes a contribution of at least 3% of
          compensation  (for  all  participants  who have  met the  one-year  of
          service  requirement),  which  vests  immediately.  In  addition,  the
          Company  will  make a  discretionary  matching  contribution  (for all
          participants who have met the one-year of service requirement),  which
          will vest after five years of service.  For 2001, the Board approved a
          matching  contribution equal to 100% of employees'  deferrals up to 3%
          of compensation,  which totaled $282,000.  The amounts of employee and
          employer contributions under the KSOP, 401(k) and the ESOP are subject
          to IRS limitations.

     Prior to January 1, 2001, the  Company  had a defined  contribution  profit
          sharing  401(k) plan (the  "401(k)  Plan").  All  employees  who met a
          minimum service  requirement (1,000 hours of service in a twelve-month
          period) participated in the Plan. Under the 401(k) Plan, a participant
          could  elect to  contribute  up to 15% of their  annual  compensation,
          subject to IRS limitations on total annual contributions.  The Company
          made  contributions  to the  401(k)  Plan on a  monthly  basis  at two
          percent of  participants'  compensation.  Contributions  to the 401(k)
          Plan for the years ended  December  31, 2000 and 1999 were $65,700 and
          $54,000, respectively.


                                       45
<PAGE>


(16)  Stock Benefit Plans

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

     StockOption Plan.  The Company has a Stock Option Plan under which  460,303
          common shares are authorized to be granted to directors,  officers and
          employees  of the  Bank.  Shares  granted  under the  Option  Plan are
          exercisable  at the market price at the date of grant.  Such incentive
          stock options  granted to officers and employees  are  exercisable  in
          three equal annual  installments,  with the first installment becoming
          exercisable  one year  from  the date of  grant.  Options  granted  to
          outside directors are exercisable  immediately,  but any common shares
          obtained  from  exercise  of the  options may not be sold prior to one
          year from the date of grant.  All options expire at the earlier of ten
          years for officers and  employees or twenty years for  directors  from
          the date of grant or one year  following  the date  which the  outside
          director,  officer or employee  ceases to serve in such  capacity.  At
          December 31, 2001,  33,714 shares remain available for grant to future
          directors, officers and employees.

     The following is a summary of option transactions:
                                                                  Weighted-
                                               Range of           Average
                                 Number        Per Share         Per Share
                                of Shares    Option Price         Price
                                ---------    ------------         -----

Outstanding, December 31, 1998    273,200    $6.00-21.2       $  6.83
Granted ......................     16,250    16.75-17.63         17.56
Exercised ....................    (75,420)          6.00          6.00
                                  -------

Outstanding, December 31, 1999    214,030    6.00-21.25           7.93
Granted ......................      5,035         12.56          12.56
Exercised ....................    (34,217)   6.00-12.00           6.16
                                  -------

Outstanding, December 31, 2000    184,848    6.00-21.25           8.49
Exercised ....................    (51,307)   6.00-12.56           6.76
                                  -------

Outstanding, December 31, 2001    133,541    $ 6.00-21.25     $   9.02
                                  =======    ====== =====     ========


                                       46
<PAGE>



     The  weighted-average  remaining  contractual life of the outstanding stock
     options at December  31,  2001,  2000 and 1999 was 7.7,  7.9 and 8.6 years,
     respectively.

     The outstanding options at December 31, 2001 were exercisable as follows:

                         Number                    Weighted-Average
                           of     Weighted-Average     Remaining
Year Ending December 31, Shares    Exercise Price   Contractual Life
                        ------    --------------   -----------------
                                                        (In years)

Currently exercisable   128,125   $    8.66                7.7
2002 ................     5,416       17.56                8.0
                          -----       -----                ---

                        133,541   $    9.02                7.7
                        =======   =========                ===

     During the years ended December 31, 2000 and 1999, 5,035 and 16,250 options
          were  granted  under the Option Plan.  No options  were granted  under
          either plan during  2001.  SFAS No. 123  requires pro forma fair value
          disclosures if the intrinsic value method is being utilized.  In order
          to  calculate  the fair value of the options  granted,  it was assumed
          that  the  risk-free  interest  rate was  7.0%  for  each  period,  an
          annualized  dividend yield of approximately  2.0% would apply over the
          exercise period,  the expected life of the options would be the entire
          exercise  period and the expected  stock  volatility  was 37% and 36%,
          respectively,   for  2000  and  1999.   For   purposes  of  pro  forma
          disclosures,  the estimated  fair value was included in expense in the
          period vesting occurs. The proforma information has been determined as
          if the Company had  accounted  for its stock  options and share awards
          under the fair  value  method of SFAS No.  123 and is as  follows  (in
          thousands, except per share amounts):

                                                   Year Ended December 31,
                                                 -----------------------
                                               2001       2000        1999
                                                ----       ----        ----
Weighted-average grant-date fair value
    of options  issued during the year ....   $    --         28        133

Proforma net income .......................   $ 6,250      5,182      5,288
                                              =======      =====      =====

Proforma basic income per share ...........   $  1.76       1.46       1.49
                                              =======       ====       ====

Proforma diluted income per share..........   $  1.72       1.43       1.44
                                              =======       ====       ====


                                       47
<PAGE>


     Employee Stock  Ownership  Plan.  Through  December 31,  2000,  the Company
          sponsored  a  leveraged  ESOP  that  covered  eligible  employees  who
          completed a year of service. The Bank made quarterly  contributions to
          the ESOP equal to the ESOP's debt  service.  The ESOP Trust  purchased
          368,242  shares  of  common  stock  in the  Company's  initial  public
          offering  with the proceeds  from a loan from the  Company.  That loan
          bore  interest at a  fixed-rate  of six  percent  with  principal  and
          interest payable in equal quarterly  installments over seven years and
          the loan was paid-off in December 2000. The ESOP shares initially were
          pledged as  collateral  for its debt.  As the debt was repaid,  shares
          were released from collateral and allocated to active  employees based
          on the  proportion  of debt service paid during the year.  The Company
          accounted for its ESOP in accordance  with Statement of Position 93-6.
          Accordingly, the debt of the ESOP was recorded as debt and the cost of
          the shares  pledged as  collateral  were  reported as a contra  equity
          account. As shares were released from collateral, the Company recorded
          compensation  expense,  and an offsetting credit to capital,  equal to
          the  current  market  price  of the  shares,  and  the  shares  became
          outstanding for income per share  computations.  Dividends on all ESOP
          shares were recorded as  compensation  expense as it was  management's
          intention  to  allocate  the  dividends  along  with the  shares  when
          allocated.  Compensation expense for the years ended December 31, 2000
          and 1999 included the following ESOP related costs:

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

Amortization of the original cost, $6 per share   $316    315
Market appreciation of the FFLC shares ........    395    534
Dividends on ESOP shares ......................     --     23
                                                   ---    ---

     Total ....................................   $711    872
                                                  ====    ===

     Effective January 1, 2001, the Board of Directors approved the combining of
          the ESOP with the Company's  401(k) Plan to form a new Plan, the KSOP.
          (See Note 15). In connection  therewith,  the Company makes  quarterly
          profit-sharing  contributions  in amounts  approved by the Board,  and
          those  contributions  are  allocated to the accounts of  participating
          employees on a quarterly basis.  Company  contributions under the KSOP
          vest  after  five  years of  service.  For 2001,  the  Board  approved
          profit-sharing  contributions equal to four percent (4%) of the Bank's
          operating net income,  which were made after each quarter based on the
          actual  results  of the  preceding  quarter.  During  the  year  ended
          December  31,  2001,  the Company  made profit  sharing  contributions
          totaling  $231,000  to the KSOP.  The Plan  allows the Company to fund
          such KSOP  contributions  by either issuing shares,  or purchasing the
          required  number of shares on the open  market.  As these  shares  are
          allocated  on a  quarterly  basis,  the Company  records  compensation
          expense, and either an offsetting credit to capital (in the event that
          new  shares  are  issued)  or to cash (in the event  that  shares  are
          purchased on the open  market),  equal to the current  market price of
          the  shares.  The  shares  become  outstanding  for  income  per share
          computations when allocated.

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


                                       48
<PAGE>


     If   a holder of restricted  stock under the RRP terminated  employment for
          reasons other than death, disability,  retirement or change of control
          in the Company,  such  employee  forfeited all rights to any allocated
          shares which are still restricted.  If termination is caused by death,
          disability,  retirement  or  change in  control  of the  Company,  all
          allocated shares become  unrestricted.  Forfeitures are reallocated to
          eligible  participants  annually.  At December 31, 2001,  2,735 shares
          remain reserved for future directors, officers and employees.

(17)  Stock Repurchase Program

     In   September  1998, the Company's  Board of Directors  approved a program
          which allowed the Company to acquire 369,285 shares of common stock in
          the open  market.  During  2001,  2000,  1999 and  1998,  the  Company
          repurchased 19,936, 95,562, 147,102 and 32,025 shares, respectively or
          5.4%,  25.9%,  39.8% and 8.7%,  respectively  under this  program.  At
          December  31, 2001,  the Company can still  repurchase  an  additional
          74,660 shares under this program.

(18)  Dividend Reinvestment Plan

     On   January 7, 2000, the Company established a Dividend  Reinvestment Plan
          (the  "DRP").  The DRP was  approved  by the  Board  of  Directors  on
          December 30, 1999 and is intended to provide stockholders of record of
          at  least  50  shares  with  a  convenient   and   economical  way  to
          automatically reinvest all or a portion of their cash dividends and to
          invest optional cash payments, subject to minimum and maximum purchase
          limitations, in additional shares of common stock. Stockholders pay no
          service  charges or brokerage  commissions  for common stock purchased
          under the DRP.  During the years  ended  December  31,  2001 and 2000,
          19,341 and 19,969 shares of common stock, respectively, were purchased
          under  the DRP of which 0 and  9,968  were new  shares  issued  by the
          Company  and 19,341  and  10,001  shares  were  purchased  in the open
          market, respectively in these periods.

(19)  Parent Company Only Financial Statements

     Condensed  financial  statements of the Holding  Company as of December 31,
          2001 and 2000 and for each of the years in the three-year period ended
          December  31,  2001  are  presented  below.  Amounts  shown  as  cash,
          investment  in  subsidiaries,  loans to  subsidiaries  and  equity  in
          earnings of subsidiaries are eliminated in consolidation.

                            Condensed Balance Sheets

                                                        At December 31,
                                                        ---------------
                                                       2001       2000
                                                       ----       ----
                                                        (In thousands)
    Assets

Cash, deposited with subsidiary ...................   $ 1,474       668
Investment in subsidiaries ........................    60,113    56,130
Loans to subsidiaries .............................     2,500     2,500
                                                        -----     -----

         Total assets .............................   $64,087    59,298
                                                      =======    ======

    Liabilities and Stockholders' Equity

Accrued expense and other liabilities .............        19        15
Stockholders' equity ..............................    64,068    59,283
                                                       ------    ------

         Total liabilities and stockholders' equity   $64,087    59,298
                                                      =======    ======


                                       49
<PAGE>


                         Condensed Statements of Income

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

Revenues .......................................   $   130        179        261
Expenses .......................................     (160)      (170)      (190)

   (Loss) income before earnings of subsidiaries       (30)         9         71
   Earnings of subsidiaries ....................     6,319      5,300      5,331
                                                     -----      -----      -----

   Net income ..................................   $ 6,289      5,309      5,402
                                                   =======      =====      =====

                       Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                            2001      2000        1999
                                                                            ----      ----        ----
                                                                                 (In thousands)
<S>                                                                      <C>          <C>        <C>
     Cash flows from operating activities:
     Net income ......................................................   $ 6,289      5,309      5,402
     Adjustments to reconcile net income to net cash (used in)
       provided by operations:
         Equity in earnings of subsidiaries ..........................    (6,319)    (5,300)    (5,331)
         Increase (decrease) in accrued expenses and other liabilities         4         (1)        13
                                                                          ------     ------     ------

              Net cash (used in) provided by operating activities ....       (26)         8         84
                                                                          ------     ------     ------

Cash flows from investing activities:
         Investment in subsidiaries ..................................        (5)        --         --
         Cash dividends received from subsidiaries ...................     2,700      2,500         --
         Repayment of loans to subsidiaries ..........................        --        316      3,315
                                                                          ------     ------     ------

              Net cash provided by investing activities ..............     2,695      2,816      3,315
                                                                          ------     ------     ------

Cash flows from financing activities:
         Purchase of treasury stock ..................................      (362)    (1,264)    (2,596)
         Proceeds from issuance of stock .............................       345        343        453
         Cash dividends paid .........................................    (1,846)    (1,716)    (1,600)
                                                                          ------     ------     ------

              Net cash used in financing activities ..................    (1,863)    (2,637)    (3,743)
                                                                          ------     ------     ------

Net increase (decrease) in cash ......................................       806        187       (344)

Cash at beginning of year ............................................       668        481        825
                                                                          ------     ------     ------

Cash at end of year ..................................................   $ 1,474        668        481
                                                                         =======        ===        ===

</TABLE>


                                       50
<PAGE>


     (20) Quarterly  Financial  Data  (Unaudited)  The following  tables present
          summarized quarterly data (in thousands, except per share amounts):


<TABLE>
<CAPTION>
                                                Year Ended December 31, 2001
                                                ----------------------------
                                        First    Second    Third    Fourth
                                       Quarter   Quarter  Quarter   Quarter     Total
                                       -------   -------  -------   -------     -----

<S>                                   <C>        <C>       <C>       <C>       <C>
Interest income ...................   $13,979    14,344    14,429    14,289    57,041
Interest expense ..................     8,921     9,149     9,062     8,184    35,316
                                        -----     -----     -----     -----    ------

Net interest income ...............     5,058     5,195     5,367     6,105    21,725

Provision for loan losses .........       275       325       225       290     1,115
                                          ---       ---       ---       ---     -----
Net interest income after provision
     for loan losses ..............     4,783     4,870     5,142     5,815    20,610

Noninterest income ................       471       537       560       649     2,217
Noninterest expense ...............     2,963     3,052     3,201     3,625    12,841
                                        -----     -----     -----     -----    ------

Income before income taxes ........     2,291     2,355     2,501     2,839     9,986

Income taxes ......................       859       882       936     1,020     3,697
                                          ---       ---       ---     -----     -----

Net income ........................   $ 1,432     1,473     1,565     1,819     6,289
                                      =======     =====     =====     =====     =====

Basic income per common share .....   $   .41       .41       .44       .51      1.77
                                      =======     =====     =====     =====     =====

Diluted income per common share ...   $   .40       .40       .43       .50      1.73
                                      =======     =====     =====     =====     =====

<CAPTION>

                                                 Year Ended December 31, 2000
                                                 ----------------------------
                                         First    Second    Third    Fourth
                                        Quarter   Quarter  Quarter   Quarter     Total
                                        -------   -------  -------   -------     -----
<S>                                   <C>        <C>       <C>       <C>       <C>
Interest income ...................   $11,120    11,862    12,833    13,535    49,350
Interest expense ..................     6,395     7,016     8,013     8,641    30,065
                                        -----     -----     -----     -----    ------

Net interest income ...............     4,725     4,846     4,820     4,894    19,285

Provision for loan losses .........       200       260       210       210       880
                                          ---       ---       ---       ---       ---
Net interest income after provision
     for loan losses ..............     4,525     4,586     4,610     4,684    18,405

Noninterest income ................       403       443       413       423     1,682
Noninterest expense ...............     2,756     2,791     2,888     2,979    11,414
                                        -----     -----     -----     -----    ------

Income before income taxes ........     2,172     2,238     2,135     2,128     8,673

Income taxes ......................       855       861       828       820     3,364
                                          ---       ---       ---       ---     -----

Net income ........................   $ 1,317     1,377     1,307     1,308     5,309
                                      =======     =====     =====     =====     =====

Basic income per common share .....   $   .37       .39       .37       .37      1.50
                                      =======     =====     =====     =====     =====

Diluted income per common share ...   $   .36       .38       .36       .36      1.46
                                      =======     =====     =====     =====     =====
</TABLE>

                                       51
<PAGE>


                               FFLC BANCORP, INC.
 (Parent Company of First Federal Savings Bank of Lake County and Subsidiary and
                           First Alliance Title, LLC)
                                Leesburg, Florida


                    Audited Consolidated Financial Statements

                          At December 31, 2001 and 2000
                        and for each of the Years in the
                    Three-Year Period Ended December 31, 2001


                  (Together with Independent Auditors' Report)

                          Independent Auditors' Report



<PAGE>



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

     We have  audited  the  accompanying  consolidated  balance  sheets  of FFLC
Bancorp,  Inc. and Subsidiaries (the "Company") as of December 31, 2001 and 2000
and the related  consolidated  statements  of income,  changes in  stockholders'
equity  and cash  flows for each of the  years in the  three-year  period  ended
December 31, 2001.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects,  the financial position of the Company
as of December 31, 2001 and 2000 and the results of its  operations and its cash
flows for each of the years in the three-year  period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America.


HACKER, JOHNSON & SMITH PA
Orlando, Florida
January 11, 2002



                                       52
<PAGE>


                          AUDITED FINANCIAL STATEMENTS

                               FFLC BANCORP, INC.

                             DIRECTORS AND OFFICERS

Directors:                     Occupation
----------                     ----------

Claron D. Wagner
Chairman of the Board          President, Woody Wagner, Inc.

James P. Logan
Vice Chairman                  President/Owner, Logan Sitework Contractors, Inc.

Joseph J. Junod
Ted R. Ostrander, Jr.          Retired, General Manager, Avesta Sheffield Pipe
H.D. Robuck, Jr.               President, Lassiter-Ware, Inc.
Howart H. Hewitt               Attorney; CEO, Ro-Mac Lumber & Supply, Inc.
Stephen T. Kurtz               President/Owner, Hewitt Construction Company
Paul K. Mueller                President, FFLC Bancorp, Inc. & Subsidiaries
                               Executive Vice President, FFLC Bancorp, Inc. &
                               Subsidiaries

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

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

Officers:
---------

Stephen T. Kurtz
President and Chief Executive Officer

Paul K. Mueller
Executive Vice President and Treasurer

Sandra L. Rutschow
Vice President and Secretary


                                       53
<PAGE>


                           FIRST FEDERAL SAVINGS BANK
                                 OF LAKE COUNTY

                        DIRECTORS, OFFICERS AND MANAGERS

<TABLE>
<CAPTION>

DIRECTORS
---------


<S>                                                            <C>
Claron D. Wagner                                                Donna Boyett
Chairman of the Board                                           Assistant Vice President and Branch
                                                                Operations Coordinator
James P. Logan
Vice Chairman                                                   Norma Caron
                                                                Assistant Vice President and Checking Department Manager
Joseph J. Junod
Ted R. Ostrander, Jr.                                           James M. Combs
H.D. Robuck, Jr.                                                Assistant Vice President and Indirect Loan Manager
Howard H. Hewitt
Stephen T. Kurtz                                                Lori Farfaglia
Paul K. Mueller                                                 Assistant Vice President and Fruitland Park Branch Manager

Advisory Directors                                              Janet B. Farrar
                                                                Assistant Vice President and Branch
James R. Gregg                                                  Operations Coordinator
James H. Herlong
Horace D. Robuck                                                Penny Hollis
                                                                Assistant Vice President and Compliance Officer
OFFICERS
                                                                Cindy Lay
Stephen T. Kurtz                                                Assistant Vice President and Data Manager &
President                                                       MIS Coordinator
Chief Executive Officer
                                                                Charles L. Lee
Paul K. Mueller                                                 Assistant Vice President and Security Officer
Executive Vice President
and Treasurer                                                   Marilyn Leugers
                                                                Assistant Vice President and Main Office Branch Manager
Dwight L. Hart
Senior Vice President and Mortgage Loan Manager                 Sandra A. Rowe
                                                                Assistant Vice President and Loan Servicing Manager
Joseph D. Cioppa
Senior Vice President and Commercial Loan Manager               Leigh S. Skehan
                                                                Assistant Vice President and Marketing Officer
Paul S. Allen
Senior Vice President, Audit, Planning and Budget               John Beaulieu
                                                                Investment Officer
Jay Bartholomew
Senior Vice President and Retail Banking Manager                Craig S. Cannon
                                                                Bushnell Branch Manager
Brenda M. Grubb
Senior Vice President and Human Resources Manager               James R. Cummings
                                                                Collections Manager
Susan L. Berkebile
Vice President and Area Loan Manager                            Cindy Deeb
                                                                Citrus Ridge Office Manager
Michael J. Cox
Vice President and Area Loan Manager                            Karen A. Dixon
                                                                Inverness Loan Officer
Jankie Dhanpat
Vice President, SEC Reporting & Controller                      Dee Dee Dye
                                                                Lady Lake Office Manager
James D. Haug
Vice President and Lady Lake Branch Manager                     Craig Dykstra
                                                                Investment Officer
Lawrence E. Hoag
Vice President and Operations Manager                           Amy L. Eckert
                                                                Business Development Officer
Stephanie Hodges
Vice President and Secondary Market Manager                     Cinda Franklin
                                                                Citrus Ridge Branch Manager
Brian R. Hofer
Vice President and Commercial Loan Officer                      Gregory F. Heckler
                                                                Main Street Office Manager
Karen Hollister
Vice President and Loan Operations Manager                      Doris E. Hyatt
                                                                Loan Closing Manager & Assistant Secretary
Tara Keane
Vice President and Eustis Branch Manager                        Mark Lachowicz
                                                                Inverness Office Manager
B. Stan McCullars, Jr.
Vice President Finance                                          Hilda Lozano
                                                                Eustis Office Manager
Dennis R. Rogers
Vice President, Wildwood Branch Manager and                     Michael J. Price
Area Loan Manager                                               Eustis Loan Officer

Sandra L. Rutschow                                              Leslie Rocha
Vice President and Corporate Secretary                          Clermont Office Manager

Sandra L. Seaton                                                Pamela Self
Vice President and South Leesburg Branch Manager                Fruitland Park Office Manager

Raynard S. (Ray) Taylor                                         Carol A. Sieder
Vice President and Commercial Loan Officer                      South Leesburg Office Manager

Phil Tompetrini                                                 Catherine M. Wallin
Vice President and Inverness Branch Manager                     Lake Square Office Manager

Tara Wainwright                                                 Bob Wedlock
Vice President and Clermont Branch Manager                      Information Technology Manager

Lynda F. Wemple                                                 Betty Wolcott
Vice President and Accounting Manager                           Facilities & Purchasing Manager

Vickie S. Baxter                                                Sylvie Zimmerman
Assistant Vice President and Loan Officer                       Wildwood Office Manager

Victoria M. Boren
Assistant Vice President and Deposit Administrator

</TABLE>


                                       54
<PAGE>


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

<TABLE>


MAIN OFFICE & ADMINISTRATION:

<S>                        <C>                           <C>
Paul S. Allen               Jennette L. Roode             Misty A. Greene
Emily C. Ashline            Landa A. Rossman              Brian R. Hofer
Talera Baker                Sandra A. Rowe                Janna R. Mitchell
Patricia A. Baldwin         Sandra L. Rutschow            Fay E. Phillips
Jay R. Bartholomew          James Schaeffer               Leslie A. Rocha
Vickie S. Baxter            Dorene K. Shahan              Sharon M. Slack
Victoria M. Boren           Brandi L. Shaw                Tara H. Wainwright
Barbara Boscana             Margaret M. Siegel            Darla Jean Williams
Donna L. Boyett             Claire M. Smith
Deena M. Bryant             Jill S. Spires                EUSTIS OFFICE:
Norma J. Caron              Lynn P. Stoffel
Maryann D. Chantos          Raynard S. Taylor             Amanda L. Collier
Shu Een Chen-Noble          Michelle M. Thompson          Michael  Cox
Constance P. Christian      Virginia D. Vann              Vivian R. Curry
Joseph D. Cioppa            Mary T. Walsh                 Tara A. Keane
Tina R. Clancy              Robert R. Wedlock             Hilda Lozano
Sheila C. Coffey            Lynda F. Wemple               Natasha L. Pender
Carlos E. Colon             Margaret R. White             Michael J. Price
James M. Combs              Rhonda L. Wilkerson           Natalie L. Rice
Diane S. Cook               Joyce L. Williams             Carolyn A. Rodgers
Judith A. Cook              Betty L. Wolcott              Tamika J. Rolle
Barbara A. Cordes           Lisa K. Woolwine              Juanita L. Taylor
Jewel M. Correll            Jeffrey W. Wright             Sharlene M. Willis
Robert Cumm                 Catherine J. Wrobleski        Karen E. Wright
Jason A. Davis
Cheryl A. Davis             FRUITLAND PARK OFFICE:        WILDWOOD OFFICE:
Dawn Rene Davison
Ginger L. Devine            Lori M. Farfaglia             Dana L. Fields
Jankie Dhanpat              Charlana M. Fenwick           Linda Gallop
Alma H. Dunbar              Kimberly L. Jones             Latahna J. Green
Mary A. Durre               Cynthia M. Page               Sophia A. Hamilton
Martha M. Duty              Pamela Self                   Crystal L. House
Craig A. Dykstra            Jennifer A. Strow             Jennifer L. McDowell
Amy L. Eckert               Delphine C. Williams          Dennis R. Rogers
Janet B. Farrar                                           Crystal L. Thompson
Linda S. Finn               LADY LAKE OFFICE:             Cathy H. Watson
Ruth E. Franzoni                                          Sylvie M. Zimmerman
Terry J. French             Jamie L. Abbott
Joan  P. Gibson             John A. Beaulieu              SOUTH LEESBURG OFFICE:
Linda J. Giggey             Karen L. Bednarik
Zoann Goodman               Sonja K. Craig                Janis L. Brown
Jennifer Grovesteen         Estelle E. Crawley            Sandra L. Seaton
Brenda M. Grubb             Deedee A. Dye                 Carol A. Sieder
Dwight L. Hart              James D. Haug                 Brandi M. Simko
Lawrence E. Hoag            Constance L. Merrell-Kasch    Eva J. Snead
Stephanie Hodges            Brenda A. Simmons             Catherine N. Williams
Carol B. Holley             Patricia L. Sizemore          Paula D. Williams
Penny M. Hollis             Heather L. Varner
Karen L. Hollister          Vanessa D. Wall               INVERNESS:
Rebecca B. Huffman          Betty T. Woods
Mary C. Hurst                                             Karen A. Dixon
Doris E. Hyatt              MAIN STREET OFFICE:           Jamie R. Hemmendinger
Patricia B Inman                                          Teresa A. Kuechle
Bobby H. Inscoe             Kari K. Caulk                 Mark Lachowicz
Juanita F. Jackson          Brandy A. Dawkins             Judith Lamontagne
Jennifer D. Jennings        Debra L. Eastwood             Jean Reese
Sondra Jones                Gregory F. Heckler            Lillian G. Russo
Kenneth G. Kramer           Cynthia A. Lord               Phil P. Tompetrini
Stephen T. Kurtz            Angela N. Phillips
Linda N. Landers            Kristin E. Young              CITRUS RIDGE:
Nancy J. Lane
Linda B. Law                LAKE SQUARE                   Stephany M. Barr
Cynthia M. Lay              MALL OFFICE:                  Cynthia M. Deeb
Leslie A. Leach                                           Cinda K. Franklin
Charles L. Lee              Melissa R. Adams              Christine M. Martinez
Betty J. Leech              Christin M. King              Erma R. Moore
Marilyn A. Leugers          Shannon J. Peters             Sarah L. Williams
Angie R. Liston             Regina D. Shiver
Margaret H. Locke           Catherine M. Wallin
B. Stan McCullars Jr.                                     BUSHNELL:
Annette McCullough          CLERMONT OFFICE:
Tammy Mizell                                              Elaine Buzzerd
Erika R. Morgan             Susan Lynn Berkebile          Craig S. Cannon
Keri L. Morris              Dena M. Castro                Betty J. Hewett
Paul K. Mueller             Paula N. Coffman              Natalie D. Langford
John R. Nelson              Lynda S. Cole                 Megan L. Marsh
Marquisa L. Parham          Zaida I. Colon                Inge Pelfrey
Tricka M. Parker            Birgit M. Fox
Connie J. Rhodes            Donna L. Franklin
Natalie J. Rojas            Judy L. Garafola





</TABLE>

                                       55