SECURITY FIRST CORP, 10-K405, 1997-06-27

SECURITY FIRST CORP
10-K405, 1997-06-27
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-K

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

For the fiscal year ended March 31, 1997

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

For the transition period from to to
----------------- ----------------
Commission File Number 0-21212.

SECURITY FIRST CORP.

- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)

Delaware 34-1724675
- --------------------------------------------------------------------------------
State or Other Jurisdiction of (I.R.S. Employee
Incorporation or Organization) Identification Number)

1413 Golden Gate Boulevard
Mayfield Heights, Ohio 44124
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) Zip Code

Registrant's telephone number, including area code: (216) 449-3700

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

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

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

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

As of June 13, 1997, there were issued and outstanding 5,048,793 shares
of the Registrant's Common Stock.

The aggregate market value of the voting stock held by non-affiliates
of the Registrant, computed by reference to the average of the bid and asked
price of such stock as of June 13, 1997, was $85.0 million. (The exclusion from
such amounts of the market value of the shares owned by any person shall not be
deemed an admission by the Registrant that such person is an affiliate of the
Registrant.)

DOCUMENTS INCORPORATED BY REFERENCE

PART II and III of Form 10-K - Proxy Statement for the 1997 Annual
Meeting of Shareholders.

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<PAGE> 2

PART I
------
ITEM 1. BUSINESS
- ------------------

GENERAL
- -------

Security First Corp. ("Security First") is a Delaware corporation
(organized in 1992), the principal assets of which are Security Federal Savings
and Loan Association of Cleveland ("Security Federal") and First Federal Savings
Bank of Kent ("First Federal" and together with Security Federal, the
"Associations"). On April 10, 1996, Security First acquired First Kent Financial
Corporation ("First Kent"), the holding company for First Federal. The
acquisition was accounted for as a pooling of interests and, accordingly, the
financial statements for the Company for all periods presented prior to the
acquisition have been restated to include the results of First Kent. See "-
Lending Activities." Security First is also the parent company of SF Development
Co. See "Subsidiary Activities." Unless the context otherwise requires, Security
First, the Associations, SF Development Co. and their subsidiaries are
hereinafter collectively referred to as the "Company". See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
General" set forth in the Proxy Statement attached to this Form 10-K as Exhibit
99 ("Proxy Statement").

The Company's primary business, through the Associations, consists of
attracting deposits from the general public and originating real estate loans
and other types of investments. Security Federal conducts its operations through
its main office located in Mayfield Heights, Ohio and 11 other full-service
branch offices located in Medina, Chardon, Cleveland, Painesville, Geneva,
Madison, Parma Heights, Broadview Heights, Strongsville and Willoughby, Ohio.
First Federal conducts its operations through its main office located in Kent,
Ohio and its full service branch office located in Ravenna, Ohio. At March 31,
1997, the Company had $634.8 million of assets, deposits of $445.2 million and
shareholders' equity of $59.4 million.

Like all thrift institutions, the Associations' (and therefore the
Company's) operations are materially affected by general economic conditions,
the monetary and fiscal policies of the federal government and the policies of
the various regulatory authorities, including the Office of Thrift Supervision
(the"OTS") and the Board of Governors of the Federal Reserve System ("Federal
Reserve Board"). Its results of operations are largely dependent upon its net
interest income, which is the difference between (i) the interest it receives on
its loan portfolio and its investment securities portfolio and (ii) the interest
it pays on its deposit accounts and borrowings. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" set forth in the
Proxy Statement.

The Company's main office is located at 1413 Golden Gate Boulevard,
Mayfield Heights, Ohio 44124. The Company's telephone number at this address is
(216) 449-3700.

<PAGE> 3

FORWARD-LOOKING STATEMENTS
- --------------------------

When used in this Form 10-K or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project," "believe" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made, and to advise readers that various factors including regional
and national economic conditions, changes in levels of market interest rates,
credit risks of lending activities, and competitive and regulatory factors could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ materially from those anticipated or
projected.

The Company does not undertake and specifically disclaims any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.

LENDING ACTIVITIES
- ------------------

GENERAL. In order to diversify its loan portfolio, to manage the
interest rate sensitivity of the loan portfolio to changes in the Company's cost
of funds and to increase interest income, the Company emphasizes permanent and
construction loans secured by one- to four-family residential property,
multi-family and commercial real estate, permanent loans secured by consumer
products and commercial business loans. Substantially all of the Company's loans
are originated within their Northeastern Ohio market area.

Residential loan originations come primarily from referrals from real
estate brokers, builders and walk-in customers. Commercial real estate loan
originations are obtained through direct solicitation of developers and
continued business from customers. All completed loan applications are reviewed
by salaried loan officers. The quality of loans is analyzed based on historical
experience and on the Company's guidelines with respect to credit underwriting
as well as the guidelines issued by the Federal Home Loan Mortgage Corporation
(the "FHLMC"), the Federal National Mortgage Association (the "FNMA") and other
purchasers of loans, depending on the type of loan involved. Most one- to
four-family residential properties, multi-family and commercial real estate are
appraised by independent fee appraisers.

The Company generally charges origination fees from 1% to 2% of the
loan amount, depending on the type of loan. The interest rate charged is
normally the prevailing market rate at the time the loan commitment is made.

Loan commitments are approved at different levels, depending on the
size and type of the loan being sought. Loans exceeding the Committee's approval
authority are referred to the Board of Directors. Regardless of the individual
loan approval authority, the Board of Directors generally reviews all mortgage
loans.

<PAGE> 4

LOAN PORTFOLIO COMPOSITION. The following table sets forth the
composition of the Company's total loan portfolio in dollars and percentages as
of the dates indicated. As of March 31, 1997, there were no concentrations of
loans in any types of industry which exceeded 10% of the Company's total loans
that are not included as a loan category in the table below.
<TABLE>
<CAPTION>

March 31,
---------------------------------------------------------------
1997 1996 1995
---------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
-------- -------- -------- -------- -------- --------
(Dollars in Thousands)
Real estate loans:
- -----------------
Permanent:
<S> <C> <C> <C> <C> <C> <C>
One- to four-family .............. $235,959 37.60% $225,573 43.34% $213,894 46.20%
Multi-family ..................... 53,628 8.55 38,057 7.31 33,992 7.34
Commercial ....................... 115,882 18.47 94,880 18.23 79,304 17.13

Construction:
One- to four-family .............. 80,498 12.83 56,754 10.91 53,571 11.57
Multi-family ..................... 1,051 .17 5,002 0.96 3,838 0.83
Commercial ....................... 23,881 3.80 3,101 0.60 2,354 0.51
Residential development land ....... 50,432 8.03 43,387 8.34 33,708 7.28
Lines of credit - secured by one- to
four-family residences ........... 17,756 2.82 15,667 3.01 14,701 3.17
-------- -------- -------- -------- -------- --------
Total real estate loans ........ 579,087 92.27 482,421 92.70 435,362 94.03
-------- -------- -------- -------- -------- --------

Other loans:
- ------------
Commercial business ................ 6,165 .98 2,571 0.49 2,002 0.43
Consumer:
Loans on deposits ................ 2,191 .35 1,529 0.29 1,463 0.31
Home improvement and other secured 38,338 6.11 31,524 6.06 21,803 4.71
Other ............................ 1,792 .29 2,369 0.46 2,377 0.52
-------- -------- -------- -------- -------- --------
Total other loans .............. 48,486 7.73 37,993 7.30 27,645 5.97
-------- -------- -------- -------- -------- --------
Total loans .................... 627,573 100.00% 520,414 100.00% 463,007 100.00%
====== ====== ======

Less:
- ----
Undisbursed portion of loans in
process........................... (50,332) (36,251) (23,905)
Allowance for loan losses........... (4,968) (4,572) (4,283)
Deferred loan fees and discounts.... (4,298) (3,960) (3,913)
------- ------- -------
Loans - net......................... $567,975 $475,631 $430,906
========= ======== ========

March 31,
----------------------------------------
1994 1993
----------------------------------------
Amount Percent Amount Percent
-------- -------- -------- --------
(Dollars in Thousands)
Real estate loans:
- -----------------
Permanent:
<S> <C> <C> <C> <C>
One- to four-family .............. $203,046 46.98% $197,469 46.85%
Multi-family ..................... 32,198 7.45 29,028 6.89
Commercial ....................... 73,095 16.91 70,718 16.78

Construction:
One- to four-family .............. 48,834 11.30 49,533 11.75
Multi-family ..................... 2,939 0.68 6,388 1.51
Commercial ....................... 3,233 0.75 4,729 1.12
Residential development land ....... 32,869 7.61 30,040 7.13
Lines of credit - secured by one- to
four-family residences ........... 16,345 3.78 15,553 3.69
-------- -------- -------- --------
Total real estate loans ........ 412,559 95.46 403,458 95.72
-------- -------- -------- --------

Other loans:
- ------------
Commercial business ................ 2,318 0.54 2,005 0.48
Consumer:
Loans on deposits ................ 1,638 0.38 1,871 0.44
Home improvement and other secured 13,657 3.16 12,362 2.93
Other ............................ 2,001 0.46 1,805 0.43
-------- -------- -------- --------
Total other loans .............. 19,614 4.54 18,043 4.28
-------- -------- -------- --------
Total loans .................... 432,173 100.00% 421,501 100.00%
====== ======

Less:
- ----
Undisbursed portion of loans in
process........................... (27,005) (27,937)
Allowance for loan losses........... (3,973) (3,649)
Deferred loan fees and discounts.... (3,772) (3,424)
------- -------
Loans - net......................... $397,423 $386,491
======== ========
</TABLE>

<PAGE> 5
The following table shows the composition of the Company's fixed and
adjustable rate loan portfolio at the dates indicated. Included in adjustable
rate one- to four-family construction loans are fixed rate, prime-based,
construction loans with original maturities of one year or less. The gross
balances (before loans in process) on such loans at March 31, 1997, 1996, 1995,
1994 and 1993 were $20.4 million, $24.4 million, $23.3 million, $27.7 million
and $30.9 million, respectively.
<TABLE>
<CAPTION>
March 31,
------------------------------------------------------------------------
1997 1996 1995
------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ----- -------- -------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Adjustable rate loans:
- ---------------------
Real estate mortgage loans:
Permanent:
One- to four-family .......... $181,245 28.88% $154,755 29.74% $132,636 28.65%
Multi-family ................. 43,096 6.87 29,728 5.71 30191 6.52
Commercial ................... 104,110 16.59 85,173 16.37 73,175 15.8
Construction:
One- to four-family .......... 72,352 11.53 56,084 10.78 53,114 11.47
Multi-family ................. 1,051 .17 5,002 0.96 3,838 0.83
Commercial ................... 23,881 3.81 3,101 0.59 2,354 0.51
Residential development land ... 49,264 7.84 43,346 8.33 33,662 7.27
Line of credit - secured by one-
to-four family residence ...... 17,441 2.78 15,667 3.01 14,701 3.18
Commercial business loans ...... 1,909 .30 1,408 0.27 720 0.15
Consumer loans ................. 9,056 1.44 7,587 1.46 6,538 1.41
-------- -------- -------- -------- -------- --------
Total adjustable rate loans .. 503,405 80.21 401,851 77.22 350,929 75.79
Fixed rate loans:
- ----------------
Real estate mortgage loans:
Permanent:
One- to four-family .......... 54,714 8.72 70,818 13.61 81,258 17.55
Multi-family ................. 10,532 1.68 8,329 1.60 3,801 0.82
Commercial ................... 11,772 1.87 9,707 1.86 6,129 1.32
Construction:
One- to four-family .......... 8,146 1.30 670 0.13 457 0.10
Land ......................... 1,168 .19 41 0.01 46 0.01
Line of Credit - secured by one-
to-four family residence .......... 315 .05 -- -- -- --
Commercial business loans ......... 4,256 .68 1,163 0.22 1,282 0.28
Consumer loans .................... 33,265 5.30 27,835 5.35 19,105 4.13
-------- -------- -------- -------- -------- --------
Total fixed rate loans ........ 124,168 19.79 118,563 22.78 112,078 24.21
-------- -------- -------- -------- -------- --------
Total loans ................... 627,573 100.00% 520,414 100.00% 463,007 100.00%
======== ======== ========
Less other items:
- ----------------
Undisbursed portion of loans in
process......................... (50,332) (36,251) (23,905)
Allowance for loan losses......... (4,968) (4,572) (4,283)
Deferred loan fees and discounts.. (4,298) (3,960) (3,913)
------- ---------- ----------
Loans - net..................... $567,975 $475,631 $430,906
======== ======== ========
<CAPTION>
March 31,
-------------------------------------------------
1994 1993
-------------------------------------------------
Amount Percent Amount Percent
-------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Adjustable rate loans:
- ---------------------
Real estate mortgage loans:
Permanent:
One- to four-family .......... $124,150 28.73% $121,051 28.71%
Multi-family ................. 28,069 6.49 24,083 5.71
Commercial ................... 68,531 15.86 64,094 15.21
Construction:
One- to four-family .......... 48,342 11.19 49,533 11.75
Multi-family ................. 2,939 0.68 6,388 1.52
Commercial ................... 3,233 0.75 4,729 1.12
Residential development land ... 32,751 7.58 29,676 7.04
Line of credit - secured by one-
to-four family residence ...... 16,345 3.78 15,553 3.69
Commercial business loans ...... 1,029 0.24 241 0.06
Consumer loans ................. 5,419 1.25 5,479 1.30
-------- -------- -------- --------
Total adjustable rate loans .. 330,808 76.55 320,827 76.12
Fixed rate loans:
- ----------------
Real estate mortgage loans:
Permanent:
One- to four-family .......... 78,896 18.26 76,418 18.13
Multi-family ................. 4,129 0.95 4,945 1.17
Commercial ................... 4,564 1.05 6,624 1.57
Construction:
One- to four-family .......... 492 0.11 -- --
Land ......................... 118 0.03 364 0.09
Line of Credit - secured by one-
to-four family residence .......... -- -- -- --
Commercial business loans ......... 1,289 0.30 1,764 0.42
Consumer loans .................... 11,877 2.75 10,559 2.50
-------- -------- -------- --------
Total fixed rate loans ........ 101,365 23.45 100,674 23.88
-------- -------- -------- --------
Total loans ................... 432,173 100.00% 421,501 100.00%
======== ========
Less other items:
- ----------------
Undisbursed portion of loans in
process......................... (27,005) (27,937)
Allowance for loan losses......... (3,973) (3,649)
Deferred loan fees and discounts.. (3,772) (3,424)
-------- --------
Loans - net..................... $397,423 $386,491
======== ========
</TABLE>
5
<PAGE> 6

LOAN CONTRACTUAL MATURITIES. The following table sets forth the estimated
contractual amortization of the Company's gross loan portfolio, assuming no
prepayments as of March 31, 1997. Loans which have adjustable rates or a prime
based rate are shown as maturing in the period during which the contract is due.
This schedule does not reflect the effects of possible prepayments or
enforcement of due-on-sale clauses.

Real Estate
---------------------------------------------------
Construction and
Residential(1) Commercial Land(2)
----------------------- ----------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
---------- ------ ---------- --------- ----------- --------
(Dollars in Thousands)
For Year Ended
March 31,
- --------------
<S> <C> <C> <C> <C> <C> <C>
1998(3)........................ $ 17,031 8.83% $ 11,704 9.07% $ 109,577 9.17%
1999 to 2002................... 49,609 8.24 28,194 8.73 44,109 9.63
2003 and following............. 240,703 7.60 75,984 8.56 2,176 8.58
----------- ---- ---------- ---- --------- ----
Total Loans............... $ 307,343 7.77% $ 115,882 8.65% $ 155,862 9.29%
========== ===== ========== ==== ========= ====
Less:
Loans in process.............
Deferred fees and
discounts..................
Allowance for losses.........

Total loans net................

<CAPTION>
Business and Consumer
Loans Total
---------------------- ------------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
--------- -------- ---------- --------

For Year Ended
March 31,
- --------------
<S> <C> <C> <C> <C>
1998(3)........................ $ 9,357 9.22% $ 147,669 9.13%
1999 to 2002................... 18,471 8.95 140,383 8.87
2003 and following............. 20,658 8.48 339,521 7.87
---------- ---- --------- ----
Total Loans............... $ 48,486 8.80% $ 627,573 8.39%
========== ==== --------- ====

Less:
Loans in process............. (50,332)
Deferred fees and
discounts.................. (4,298)
Allowance for losses......... (4,968)
----------
Total loans net................ $ 567,975
==========

<FN>
- ---------------------------
(1) Includes one- to four-family, multi-family, and lines of credit secured by
one- to four-family residences.
(2) Includes one- to four-family, multi-family, and commercial construction.
(3) Includes demand loans, and loans having no stated maturity.
</TABLE>

<PAGE> 7

The gross amount of loans due after March 31, 1998 which have fixed
interest rates is $111.8 million, while the gross amount of loans due after such
date which have floating or adjustable interest rates is $368.1 million.

ONE-TO-FOUR FAMILY RESIDENTIAL REAL ESTATE LENDING. The Company's primary
lending program is the origination of loans secured by one- to four-family
residences, substantially all of which are located in Northeast Ohio. Although
federal law permits the Company to make loans in amounts of up to 100% of the
appraised value of the underlying real estate, the Company generally makes one-
to four-family residential property loans up to 90% of the appraised value
thereof. Loans which are made in amounts which exceed 80% of the appraised value
of the underlying real estate generally require private mortgage guarantee
insurance on the excess.

In order to reduce its exposure to changes in interest rates, the Company
originates fixed-rate one- to four-family residential mortgage loans with terms
no greater than 20 years. Substantially all loans originated are held for
investment, however, the Company currently underwrites and documents its 20-year
fixed rate loans to permit sale in the secondary market. See "-- Loan
Originations, Purchases and Sales." At March 31, 1997, $54.7 million, or 23% of
the Company's one- to four-family permanent residential mortgage loan portfolio
consisted of fixed-rate one- to four-family loans, the majority of which were
15-year loans. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Asset/Liability Management" set forth in the Proxy
Statement.

The majority of the Company's current one- to four-family residential
adjustable rate mortgages ("ARMs") have interest rates that adjust every one,
three, or five years in accordance with the quarterly average cost of funds for
OTS-regulated, SAIF-insured institutions. The Company's ARMs generally limit
interest rate increases to 2% each rate adjustment period and have an
established ceiling rate at the time the loans are made, of up to 6% over the
original interest rate. To compete with other lenders in its market area, the
Company originates ARMs at interest rates which, for the first year, are below
the fully indexed rate which would have been applied to these loans. Borrowers
are qualified, however, at the fully indexed rates. At March 31, 1997, ARM loans
totaled $181.2 million, or 77%, of the Company's one- to four-family residential
mortgage loan portfolio.

Most one- to four-family real estate mortgage loans originated by the
Company contain a "due-on-sale" clause providing that the Company may declare
the unpaid principal balance due and payable upon the sale of the mortgaged
property. It is the Company's policy to enforce these due-on-sale clauses
concerning fixed-rate loans and to permit assumptions of ARMs, for a fee, to
qualified borrowers.

In underwriting one- to four-family residential real estate loans, the
Company evaluates the borrower's ability to make monthly payments, credit
history and the value of the property securing the loan. The Company requires,
in connection with the origination of residential real estate loans, title
insurance and fire and casualty insurance coverage, as well as flood insurance
where appropriate, to protect the Company's interest. The cost of this insurance
coverage is paid by the borrower.

<PAGE> 8

The Company also originates lines of credit loans. Lines of credit loans
are home equity loans which are typically secured by a second mortgage lien on
the borrower's principal residence. Substantially all of such loans have
adjustable interest rates. The underwriting standards and risks associated with
home equity lines of credit are similar to those of one- to four-family lending.

MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING. The Company's loan
portfolio includes a significant percentage of permanent real estate loans
secured by multi-family and commercial real estate. At March 31, 1997, the
outstanding permanent loan balances secured by multi-family and commercial real
estate were $53.6 million and $115.9 million, respectively, totaling 8.55% and
18.47% of the entire gross loan portfolio, respectively.

Substantially all of the Company's multi-family real estate loans are
secured by first liens on apartments and condominiums located in Northeast Ohio.
The Company's commercial real estate loans are secured by first liens mainly on
office and industrial buildings, warehouses, and retail shopping centers located
in Northeast Ohio. As a general rule, the Company does not originate loans on
recreational, time share, or special purpose properties.

At March 31, 1997, approximately $147.2 million, or 87% of the Company's
multi-family and commercial real estate loans had adjustable interest rates and
all had terms not exceeding 25 years. Interest rates adjust over one, three or
five year periods (with most loans adjusting every three or five years) based on
the quarterly average cost of funds for OTS-regulated, SAIF-insured
institutions.

In its underwriting of multi-family and commercial real estate loans,
loan-to-value ratios on such properties are generally 65% to 75% of the lesser
of the appraised value of the security property or the contract price. The
Company's underwriting criteria on these loans require an examination of debt
service coverage ratios, the borrower's creditworthiness and prior credit
history and reputation, and the Company generally requires the personal
guarantees of borrowers. The Company also carefully considers the location of
the security property. In addition, appraisals by a member of the Appraisal
Institute ("MAI") designated appraisers (the highest designation for real estate
appraisers) are required on all loans exceeding $1 Million.

Multi-family and commercial real estate lending is generally considered to
involve a higher level of risk than one- to four-family residential lending due
to the concentration of principal in a limited number of loans and borrowers and
the effects of general economic conditions on real estate development. In
addition, the nature of these loans is such that they are generally less
predictable and more difficult to evaluate and monitor. The Company's risk of
loss is that the borrowers may experience cash flow from such properties which
is inadequate to service the loan payments. The Company attempts to mitigate the
risks associated with this type of lending through its underwriting policies and
by careful monitoring of the properties, substantially all of which are located
in its market area.

The Company's multi-family and commercial real estate loans typically have
individual loan balances less than $1.0 million. At March 31, 1997, the Company
had 14 multi-family and 31 commercial real estate loans with individual balances
greater than $1.0 million, the largest being

<PAGE> 9

$2.7 million and $4.3 million, respectively. All of the multi-family loans are
permanent loans secured by apartment buildings with an average loan balance of
$1.5 million. The 31 commercial real estate loans individually exceeding $1.0
million have an average balance of $1.8 million and are secured by seven retail
shopping centers, seven industrial type properties, nine office buildings, five
golf courses, one by a restaurant party center, and one by a hotel, and one by
light manufacturing.

The Company intends to continue to originate loans secured by multi-family
and commercial real estate in the Northeast Ohio area because the adjustable
interest rates on these loans allow the Company to better meet its
asset/liability management goals and provide an attractive yield. Federal law
limits the Company's permissible level of investment in loans secured by
non-residential real property (i.e., commercial real estate lending, other than
certain multi-family residences) to four times its total capital. This maximum
limitation, which at March 31, 1997 was $233.9 million, is not expected to
materially affect the Company's operations. The Company has not experienced
significant losses in connection with its multi-family or commercial real estate
portfolio. See "Allowance for Losses on Loans and Real Estate."

CONSTRUCTION AND RESIDENTIAL DEVELOPMENT LAND LENDING. The Company provides
construction financing, including construction lines of credit, and loans for
the acquisition and development of land for residential properties. Most of the
Company's construction loans finance the building of single-family residences
($80.5 million at March 31, 1997), although at March 31, 1997, there was also
approximately $24.9 million in construction loans for multi-family and
commercial properties. These loans generally have adjustable interest rates and
terms of two years or less and are primarily with builders and developers with
whom the Company has long-standing relationships.

The construction loan agreements generally provide that principal payments
are required as individual condominium units or single family houses are built
and sold to third parties in order that the relationship between the remaining
loan balance and the amount of the remaining security remains approximately
constant over the life of the loan. Loan proceeds are disbursed in increments as
construction progresses. Site inspection by an independent building professional
is required before each significant disbursement on a construction loan.

The Company's policy generally is to limit the loan-to-value ratio of its
construction loans to a maximum of 80% of the combined appraised value of the
land and the building at the time of initial appraisal, with the loan amount not
to exceed in any event the cost of the project. Construction loans are typically
made with a takeout obligation (i.e., a commitment to provide permanent
financing) by a third party.

The Company's risk of loss on construction, rehabilitation or development
loans is dependent largely upon the accuracy of the initial estimate of the
individual property's value upon completion of the project and the estimated
cost (including interest) of the project. If the cost estimate proves to be
inaccurate, the Company may be required to advance funds beyond the amount
originally committed to permit completion of the project. See "Non-Performing
Assets, Classified Assets, Loan Delinquencies and Defaults."

<PAGE> 10

Residential development land loans, which include acquisition and
development of land as well as vacant land and developed lots, are made to
various builders and developers with whom the Company has had long-standing
relationships. All of such loans are secured by land zoned for residential
developments and are located within the Company's market area of Northeast Ohio.
Disbursements related to acquisition and development land loans are typically
based on the construction cost estimate of an independent architect or engineer
who inspects the project in connection with significant disbursement requests;
in addition, all disbursements on such projects are approved by the city or
county engineer who also makes periodic inspections.

Land lending generally affords the Company an opportunity to receive
interest at rates higher than those obtainable from residential lending. In
addition, land loans are limited to a maximum 75% loan-to-value and are made
with adjustable rates of interest and for relatively short terms. Nevertheless,
land lending is generally considered to involve a higher level of credit risk
similar to those discussed above under "Multi-family and Commercial Real Estate
Lending."

CONSUMER LENDING. The Company makes consumer loans for personal, family or
household purposes, which includes the financing of home improvements, debt
consolidations, automobiles, boats and other recreational type vehicles. The
Company originates substantially all of its consumer loans in Northeast Ohio.
The majority of consumer loans outstanding at March 31, 1997 were fixed rate
loans with maturities of six months to ten years.

The underwriting standards employed by the Company for consumer loans
include a determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. The stability of the applicant's monthly income may be determined by
verification of gross monthly income from primary employment, and additionally
from any verifiable secondary income. Although creditworthiness of the applicant
is of primary consideration, the underwriting process also includes a comparison
of the value of the security in relation to the proposed loan amount.

Consumer loans may entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciable assets such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower. In addition,
consumer loan collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Furthermore, the application of various
federal and state laws, including federal and state bankruptcy and insolvency
laws, may limit the amount which can be recovered on such loans. Such loans may
also give rise to claims and defenses by a consumer loan borrower against an
assignee of such loans (such as the Company), and a borrower may be able to
assert against such assignee claims and defenses which it has against the seller
of the underlying collateral.

Consumer loan delinquencies often increase over time as the loans age.
Accordingly, although the level of delinquencies in the Company's consumer loan
portfolio has generally been

<PAGE> 11

low, there can be no assurance that delinquencies will not increase in the
future. See "-- Non-Performing Assets, Classified Assets, Loan Delinquencies
and Defaults."

COMMERCIAL BUSINESS LENDING. The Company engages in commercial business
lending activities including loans to finance leases and accounts receivable,
inventory and equipment as well as business lines of credit. All of the
Company's commercial business loans have been to borrowers in its market area.

Unlike residential mortgage loans, which generally are made on the basis of
the borrower's ability to make repayment from employment and other income and
which are secured by real property, the value of which tends to be more easily
ascertainable, business loans are of higher risk and typically are made on the
basis of the borrower's ability to make repayment from the cash flow of the
business, and are generally secured by business assets.

LOAN ORIGINATIONS, PURCHASES AND SALES. At March 31, 1997, substantially
all of the loans originated by the Company were secured by real estate or
consumer products located in the Company's Northeast Ohio market area.

In times of rising interest rates and economic uncertainty, the Company's
ability to originate large dollar volumes of real estate loans may be
substantially reduced or restricted, with the resultant decrease in related loan
origination fees, other fee income and operating earnings.

Occasionally the Company purchases real estate loans and loan
participations from selected sellers for purchase prices equal to the unpaid
principal amount of the loans or participations, with yields to the Company
based upon current market rates. Since 1985, the Company has purchased only
adjustable rate mortgage loans. The Company carefully reviews and underwrites
all loans to be purchased to insure that they meet the Company's underwriting
standards. The seller typically continues to service these purchased loans.
During fiscal 1997, the Company purchased mortgage loans, aggregating $6.1
million.

The Company currently originates loans primarily for retention in its loan
portfolio. Security Federal, from time to time, sells small amounts of loan
participations to others in order to comply with loans-to-one borrower and other
regulations. During fiscal 1997, Security Federal sold $3.3 million of loan
participations. During fiscal 1997, the Company sold $25.4 million of seasoned
fixed-rate mortgage loans, and invested the proceeds therefrom in assets with
shorter maturities and higher rates in an effort to reduce its exposure to
interest-rate risk. As of March 31, 1997, the Company serviced for others
(primarily FHLMC and FNMA) approximately $37.3 million of mortgage loans. The
Company has not typically sold loans with servicing fees materially in excess of
normal servicing fees and, therefore, did not require an adjustment to the
selling price pursuant to SFAS No. 65.

<PAGE> 12

The following table shows loan originations, purchases, sales and
repayments for the periods indicated.
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Loan origination by type:
- ------------------------
Real estate construction, land & development loans:
One- to four-family................................ $ 80,061 $ 60,505 $ 70,792 $ 68,563 $ 69,732
Residential development land........................ 31,857 28,216 26,584 24,828 24,351
Multi-family ....................................... 1,019 4,882 1,742 1,000 350
Commercial.......................................... 28,110 4,770 3,510 2,064 4,721
------------ ---------- ---------- ----------- ----------
Total construction, land and development loans.... 141,047 98,373 102,628 96,455 99,154
------------ ---------- ---------- ----------- ----------
Real estate permanent loans:
One- to four-family dwelling units.................. 63,459 39,083 41,206 54,416 60,208
Multi-family ....................................... 15,192 9,491 3,940 4,958 9,600
Commercial ......................................... 34,039 18,748 13,417 11,614 6,765
------------ ---------- ---------- ----------- ----------
Total permanent loans............................. 112,690 67,322 58,563 70,988 76,573
------------ ---------- ---------- ----------- ----------

Commercial business................................... 6,519 1,079 845 2,467 1,160
Consumer.............................................. 20,446 23,943 16,412 9,259 10,241
------------ ---------- ---------- ----------- ----------
Total loans originated................................ 280,702 190,717 178,448 179,169 187,128
------------ ---------- ---------- ----------- ----------

Loans purchased:
- ---------------
Real estate loans and loan participations........... 6,139 7,976 4,670 5,413 1,090

Loan sales:
- ----------
Real estate loans and loan participations........... (28,711) (1,283) (1,378) (3,248) (1,670)

Other:
- -----
Principal repayments................................ (150,700) (139,788) (149,835) (170,120) (145,983)
Decrease in other items, net........................ (271) (215) (1,071) (542) (654)
------------ ---------- ---------- ----------- ----------
Increase in gross loans............................. $ 107,159 $ 57,407 $ 30,834 $ 10,672 $ 39,911
============ ========== =========== ============ ===========
</TABLE>

Outstanding loan commitments amounted to approximately $19.6 million
for one- to four-family residential real estate loans, including construction
loans and land loans, and $4.4 million for multi-family and commercial real
estate loans at March 31, 1997. See Note 4 of Notes to Consolidated Financial
Statements set forth in the proxy statement.

NON-PERFORMING ASSETS, CLASSIFIED ASSETS, LOAN DELINQUENCIES AND
DEFAULTS. When a borrower fails to make a required payment on a loan, the
Company attempts to cause the delinquency to be cured by contacting the
borrower. A notice is mailed to the borrower after a payment is 15 days past due
and again when the loan is 30 days past due. For most loans, if the delinquency
is not cured within 75 days the Company issues a notice of intent to foreclose
on the property and if the delinquency is not cured within 90 days, the Company
may institute foreclosure action. In the event of a foreclosure, the real
property is sold at a public sale and may be purchased by the Company.

The following table sets forth information concerning delinquent loans
at March 31, 1997. The amounts presented represent the total remaining principal
balances of the related loans before

<PAGE> 13

specific reserves for losses and the percentage represented of each respective
type of gross loan portfolio.
<TABLE>
<CAPTION>

One- to Four-Family
Permanent and Multi-Family and
Construction & Residential Commercial Real Estate Consumer and Business
---------------------------- --------------------------- ----------------------------
Percent of
Percent of Percent of Total
Total(1) One- Total Multi- Consumer
to Four- Family and and
Amount Family Amount Commercial Amount Commercial
Contractually Residential Contractually Real Estate Contractually Business
Delinquent Loans Delinquent Loans Delinquent Loans
--------- ------- ---------- ------ --------- -----------
(Dollars in Thousands)

Loans delinquent for:
<S> <C> <C> <C> <C> <C> <C>
30 - 59 days............... $ 1,944 .51% $ 4,778(2) 2.46% $ 124 .26%
60 - 89 days............... 1,011 .26 1,225 .63 116 .24
90 days or more............ 1,475 .38 136 .07 32 .06
--------- ------- ---------- ------ ------- -----
Total delinquent loans... $ 4,430 1.15% $ 6,139 3.16% $ 272 .56%
========= ======= ========== ====== ======= =====
</TABLE>

(1) Including home equity loans and land loans.

(2) Included in this total is a $4.3 million commercial loan to a seasonal
business experiencing a cash flow shortage at March 31, 1997. As of June 15,
1997, this loan was current.

<PAGE> 14

The table below sets forth the amounts and categories of gross
non-performing assets in the Company's loan portfolio. Loans generally are
placed on non-accrual status when the collection of principal and/or interest
becomes delinquent over 90 days, or when the collection of principal and/or
interest becomes doubtful. Repossessed assets include assets acquired in
settlement of loans.
<TABLE>
<CAPTION>

March 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accruing loans:
One- to four-family permanent residential.......... $ 1,097 $ 343 $ 792 $ 2,083 $1,839
Multi-family and commercial real estate............ 136 1,354 2,010 853 2,191
Construction or development:
One- to four-family.............................. 378 294 206 373 386
Multi-family and commercial real estate.......... --- --- --- --- ---
Consumer and commercial business................... 32 15 42 92 249
--------- --------- ---------- --------- --------
Total........................................... 1,643 2,006 3,050 3,401 4,665
-------- -------- -------- -------- --------

Accruing loans delinquent 90 days or more............ --- 522 278 284 83

Repossessed assets:
One- to four-family permanent residential......... 5 39 41 44 237
Multi-family and commercial real estate............ --- --- 200 212 350
Construction or development:
One- to four-family............................. --- --- --- --- ---
Multi-family and commercial real estate.......... --- --- --- --- ---
Consumer and commercial business................... --- --- --- --- ---
--------- ---------- ---------- ---------- ----------
Total......................................... 5 39 241 256 587
--------- --------- -------- -------- --------

Total non-performing assets........................ $1,648 $2,567 $3,569 $3,941 $5,335
======== ====== ====== ====== ======
Non-performing assets to total assets................ 0.26% 0.47% 0.70% 0.83% 1.18%
======== ====== ====== ====== ======
Non-accrual loans to total loans(1).................. 0.29% 0.53% 0.76% 0.92% 1.22%
======== ====== ====== ====== ======
Allowance for loan losses to non-accrual loans. ..... 302.37% 180.85% 128.70% 107.82% 76.85%
======== ====== ====== ====== ======
</TABLE>

- --------------------------

(1) Total loans equal total loans-net plus the allowance for loan
losses.

For the year ended March 31, 1997 gross interest income of
approximately $198,000 would have been recorded had the non-accruing loans been
current in accordance with their original terms. However, partial payments of
approximately $68,000 (included in interest income) have been received on some
of the non-accruing loans. In addition, approximately $243,000 in delinquent
interest income related to prior periods was received as a result of the
resolution of several past-due loans.

The Company's non-accruing loans at March 31, 1997 were composed of 17
one-to-four-family real estate mortgage loans having an aggregate outstanding
principal balance of $923,000; two commercial real estate loans with an
aggregate outstanding principal balance of $136,000; one land loan and one
construction loan with aggregate outstanding principal balances of $223,000 and
$156,000, respectively; and 18 consumer loans having an aggregate outstanding
principal balance of $205,000.

<PAGE> 15

Real estate acquired in settlement of loans at March 31, 1997,
consisted of one single-family property sold on land contract with a remaining
balance of $5,000.

For a further discussion of the Company's loan policy and also
non-performing assets and potential problem loans, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Asset Quality"
and Notes 1 and 4 of the Notes to Consolidated Financial Statements set forth in
the Proxy Statement.

Federal regulations provide for the classification of loans, debt,
equity securities and other assets considered to be of lesser quality as
"substandard," "doubtful" or "loss" assets. The regulation requires insured
institutions to classify their own assets and to establish conservative general
allowances for losses for assets classified "substandard" or "doubtful." For the
portion of assets classified as "loss," an institution is required to either
establish specific allowances of 100% of the amount classified or charge such
amount off its books. Assets which do not currently expose the insured
institution to sufficient risk to warrant classification in one of the
aforementioned categories but possess potential weaknesses are required to be
designated "special mention" by management. In addition, the OTS may require the
establishment of a general allowance for losses based on assets classified as
"substandard" and "doubtful" or based on the general quality of the asset
portfolio of an institution. On the basis of management's review of its assets,
at March 31, 1997, the Company had classified $2 million of its assets (loan and
real estate owned) as substandard, $151,000 of its assets as loss and none as
doubtful. Substantially all of the assets of the Company that have been
classified during the year ended March 31, 1997, are included in the table above
of non-performing assets and in the discussion of assets for which repayment by
the borrower may be in doubt.

ALLOWANCE FOR LOSSES ON LOANS. Systematic detailed reviews of the
Company's multi-family and commercial loan portfolios are performed regularly in
order to evaluate any potential credit losses. For loan balances that are
significant in total but not individually significant and are well
collateralized, the portfolios are reviewed in total. These reviews consider,
among other factors, economic conditions, delinquency patterns, and historical
loss experiences in the loan portfolio in order to assess potential credit
losses.

Management is of the opinion that the allowance for loan losses at
March 31, 1997, which represents 302.37% of total nonperforming loans, is
adequate to meet potential losses in the portfolio. It must be understood,
however, that there are inherent risks and uncertainties related to the
operation of a financial institution. By necessity, the Company's consolidated
financial statements are dependent upon estimates, appraisals, and evaluations
of loans. Therefore, the possibility exists that abrupt changes in such
estimates, appraisals, and evaluations might be required because of changing
economic conditions and the economic prospects of borrowers. See Note 4 of the
Notes to Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Asset Quality" set
forth in the Proxy Statement.

<PAGE> 16

The following table sets forth an analysis of the Company's allowance
for loan losses.
<TABLE>
<CAPTION>

Year Ended March 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Allowance at beginning of period..................... $4,572 $4,283 $3,973 $3,649 $3,002
Provision charged to expense......................... 323 377 582 695 918
------ ------ ------ ------ ------
4,895 4,660 4,555 4,344 3,920
------ ------ ------ ------ ------
Charge-offs:
One- to four-family permanent residential.......... (15) (172) (107) (163) (201)
One- to four-family construction residential....... --- --- (3) (32) (114)
Multi-family and commercial permanent.............. --- (25) (254) (193) (59)
Consumer and commercial business.................. (18) (46) (48) (93) (26)
------ ------ ------ ------ ------
Total charge-offs.................................. (33) (243) (412) (481) (400)
------ ------ ------ ------ ------

Recoveries:
One- to four-family permanent residential.......... 95 135 83 64 117
One-to four- family construction residential....... --- --- 26 16 ---
Multi-family and commercial permanent.............. 4 --- 17 6 4
Multi-family and commercial construction........... --- 5 --- --- ---
Consumer and commercial business................... 7 15 14 24 8
------ ------ ------ ------ ------
Total recoveries................................... 106 155 140 110 129
------ ------ ------ ------ ------
Net (charge-offs)/recoveries......................... 73 (88) (272) (371) (271)
------ ------ ------ ------ ------

Allowance at end of period........................... $4,968 $4,572 $4,283 $3,973 $3,649
====== ====== ====== ====== ======

Net charge-offs/(recoveries) during the period to
average loans outstanding during the period........ (0.01)% 0.02% 0.07% 0.09% 0.07%
====== ====== ====== ====== ======

Total allowance for loan losses to total loans(1).... 0.87% 0.95% 0.98% 0.99% 0.94%
====== ====== ====== ====== ======
</TABLE>

(1) Total loans equal total loans-net plus the allowance for loan losses.

<PAGE> 17

The distribution of the Company's allowance for losses on loans at the
dates indicated is summarized as follows:
<TABLE>
<CAPTION>

March 31,
-----------------------------------------------------------------------
1997 1996 1995
--------------------- ------------------- ---------------------
Percent Percent Percent
of Loans of Loans of Loans
in Each in Each in Each
Amount of Category Amount of Category Amount of Category
Loan Loss to Total Loan Loss to Total Loan Loss to Total
Allowance Loans Allowance Loans Allowance Loans
------ ------ ------ ------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family
permanent residential
and equity lines of
credit .............. $1,205 40.43% $1,064 46.36% $1,105 49.37%

Multi-family and
commercial real
estate .............. 1,227 27.01 1,118 25.54 1,022 24.47

Construction or
development ......... 1,258 24.84 859 20.80 774 20.19

Consumer ............. 297 6.74 242 6.81 190 5.54

Commercial business .. 110 0.98 37 0.49 37 0.43

Unallocated .......... 871 -- 1,252 -- 1,155 --
------ ------ ------ ------ ------ ------

Total .......... $4,968 100.00% $4,572 100.00% $4,283 100.00%
====== ====== ====== ====== ====== ======

<CAPTION>
March 31,
---------------------------------------------
1994 1993
------------------- ---------------------
Percent Percent
of Loans of Loans
in Each in Each
Amount of Category Amount of Category
Loan Loss to Total Loan Loss to Total
Allowance Loans Allowance Loans
------ ------ ------ ------
<S> <C> <C> <C> <C>
One- to four-family
permanent residential
and equity lines of
credit .............. $1,169 50.76% $ 789 50.54%

Multi-family and
commercial real
estate .............. 1,035 24.37 1,098 23.66

Construction or
development ......... 704 20.33 710 21.52

Consumer ............. 168 4.00 129 3.79

Commercial business .. 43 0.54 38 0.49

Unallocated .......... 854 -- 885 --
------ ------ ------ ------

Total .......... $3,973 100.00% $3,649 100.00%
====== ====== ====== ======
</TABLE>

INVESTMENT ACTIVITIES
- ---------------------

INVESTMENT SECURITIES. Federal thrift institutions have authority to invest
in various types of liquid assets, including U.S. Treasury obligations and
securities of various federal agencies, certificates of deposit at insured
institutions, bankers' acceptances and federal funds. At March 31, 1997, $24.6
million of the Company's investment securities were classified as
available-for-sale, while $7.0 million were classified as held to maturity. For
a summary of the Company's investment policy and investment securities see Notes
1 and 2 of the Notes to Consolidated Financial Statements set forth in the Proxy
Statement.

Federal thrift institutions may also invest a portion of their assets in
certain commercial paper and corporate debt securities. Federal thrift
institutions are also authorized to invest in mutual funds whose assets conform
to the investments that a federal thrift institution is authorized to make
directly. There are various restrictions on the foregoing investments. For
example, the commercial paper must be appropriately rated by at least two
nationally recognized investment rating services and the corporate debt
securities must be appropriately rated by at least one such service. In
addition, the average maturity of an institution's portfolio of corporate debt
securities may not, at any one time, exceed six years, and the commercial paper
must mature within nine months of issuance. Moreover, an institution's total
investment in the commercial paper and corporate debt securities of

<PAGE> 18

any one issuer may not exceed 1% of the institution's assets except that an
institution may invest 5% of its assets in the shares of any appropriate mutual
fund. As members of the FHLB System, the Associations must maintain minimum
levels of investments that are liquid assets as specified by the OTS. See
"Regulation -- Federal Home Loan Bank System." Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans.

Historically, the Company has maintained its liquid assets above the minimum
requirements imposed by federal regulations and at a level believed adequate to
meet requirements of normal daily activities, repayment of maturing debt and
potential deposit outflows. Cash flow projections are regularly reviewed and
updated to assure that adequate liquidity is provided. As of March 31, 1997, the
liquidity ratio (liquid assets as a percentage of net withdrawable savings and
short-term borrowings) was 6.81% for Security Federal and 10.76% for First
Federal. The cash management policies of the Company are designed to keep
liquidity levels within the federal regulations, but at reasonable levels in
order to maximize interest income by investing in loans, mortgage backed
securities, and other investments or minimize interest expense by repaying
short-term, higher cost borrowings.

<PAGE> 19

The following table sets forth the composition of the Company's investment
portfolio at the dates indicated.
<TABLE>
<CAPTION>

March 31,
------------------------------------------------------------------------
1997 1996 1995
------ ------ -----
Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total
---------- ----- ------- ----- ------- -----
(Dollars in Thousands)

<S> <C> <C> <C> <C> <C> <C>
Investment Securities:
Available for sale:
U.S. government and agency obligations ............. $24,048 57.32% $23,664 53.00% $21,845 45.36%
Federal National Mortgage Association
("FNMA") preferred stock ........................... 516 1.23 504 1.13 -- --
Municipal bonds .................................... 12 .03 21 0.05 29 0.06
------- ------- ------- ------- ------- -------
Subtotal ........................................ 24,576 58.58 24,189 54.18 21,874 45.43
Held to maturity:
U.S. government and agency obligations ............. 7,000 16.69 7,000 15.68 9,000 18.69
FHLB stock ............................................. 6,400 15.25 3,864 8.65 2,909 6.04
------- ------- ------- ------- ------- -------
Total investment securities and FHLB
stock ............................................ 37,976 90.52 35,053 78.51 33,783 70.16
------- ------- ------- ------- ------- -------
Other Interest-Earning Assets:
Interest-bearing deposits with banks ................. 1,826 4.35 5,334 11.95 9,760 20.27
Federal funds sold and overnight
investments ........................................ 403 0.96 1,669 3.74 3,821 7.93
Other short-term investments. . . . . . . . . . . . . 1,750 4.17 2,590 5.80 790 1.64
------- ------- ------- ------- ------- -------
Total ............................................. $41,955 100.00% $44,646 100.00% $48,154 100.00%
======= ======= ======= ======= ======= =======
Average remaining life or term to repricing of
investment securities and other interest-
earning assets, excluding FNMA preferred
stock and FHLB stock.......................... 2.37 years 2.47 years 1.85 years

</TABLE>

The composition and maturities (without consideration of issuers' call
options) of the debt investment securities portfolio, excluding FNMA preferred
stock and FHLB stock, are indicated in the following table.

<TABLE>
<CAPTION>
March 31, 1997
-----------------------------------------------------------------------------
Less Than 1 to 5 5 to 10 Over 10 Total Debt
1 Year Years Years Years Investment Securities
--------- ------- ------- ------- ---------------------------
Carrying Value Amortized Cost Fair Value
---------------------------------------------- --------------- -----------
(Dollars in Thousands)

<S> <C> <C> <C> <C> <C> <C>
U.S. government and
agency obligations................. $10,995 $20,462 $ --- $ --- $31,457 $31,034
Municipal bond...................... --- 12 --- --- 12 12
------- ------- -------- -------- ------- -------
Total debt investment securities.... $10,995 $20,474 $ --- $ --- $31,469 $31,046
======= ======= ======== ======== ======= =======

Weighted average yield.............. 6.10% 6.37% ---% ---% 6.27%
</TABLE>

<PAGE> 20

The Company's investment securities portfolio at March 31, 1997 contained no
securities of any issuer with an aggregate book or market value in excess of 10%
of the Company's stockholders' equity, excluding those issued by the United
States Government, or its agencies.

MORTGAGE-BACKED SECURITIES. At March 31, 1997, 1996 and 1995, the Company
had mortgage-backed securities issued by FHLMC securitized by pools of 30-year,
fixed rate mortgage loans with a fair value of $2.5 million, $3.3 million and
$4.2 million, respectively. For more information on the Company's
mortgage-backed securities, see Notes 1 and 3 of the Notes to Consolidated
Financial Statements set forth in the proxy statement.

The following table sets forth the contractual maturities of the Company's
mortgage-backed securities at March 31, 1997. Due to prepayments, management
anticipates actual maturities to be shorter than contractual maturities.
<TABLE>
<CAPTION>

5 to 10 10 to 20 Over 20
Years Years Years Total
----- ----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
FHLMC participation certificates..................... $642 $1,827 $--- $2,469
</TABLE>

As of March 31, 1997, mortgage-backed securities with a current value of
$1,507,000 are pledged against $1,250,000 in public funds.

Sources of Funds
- ----------------

GENERAL. Deposit accounts have traditionally been a principal source of the
Company's funds for use in lending and for other general business purposes. In
addition to deposits, the company derives funds from loan repayments, cash flows
generated from operations, which include interest credited to deposit accounts,
repurchase agreements entered into with investment banking firms and FHLB of
Cincinnati advances and convertible subordinated debentures. Contractual loan
payments are a relatively stable source of funds, while deposit inflows and
outflows and the related cost of such funds have varied widely. Borrowings may
be used on a short-term basis to compensate for reductions in deposits or
deposit inflows at less than projected levels and may be used on a longer term
basis to support expanded lending activities.

DEPOSITS. The Company attracts both short-term and long-term deposits from
the general public by offering a wide assortment of accounts and rates. The
Company offers regular passbook accounts, checking accounts, money market
accounts, fixed interest rate certificates with varying maturities, negotiated
rate $100,000 or above jumbo certificates of deposit ("Jumbo CDs") and
individual retirement accounts.

The composition of the Company's deposits at the end of recent periods is
set forth in Note 7 of the Notes to Consolidated Financial Statements set forth
in the Proxy Statement. The Company does not knowingly accept brokered deposits
and, to the best of its knowledge, did not have any at March 31, 1997, although
it may consider the use of such deposits in the future.

<PAGE> 21

Management believes that the variety of deposit accounts offered by the
Company has allowed it to be competitive in obtaining funds and has allowed it
to respond with flexibility (by paying rates of interest more closely
approximating market rates of interest) to reduce, although not eliminate, the
threat of disintermediation (the flow of funds away from depository institutions
such as thrift institutions into direct investment vehicles such as government
and corporate securities and mutual funds). In addition, the Company has become
much more subject to short-term fluctuations in deposit flows, as customers have
become more interest rate conscious. Therefore, the ability of the Company to
attract and maintain deposits, and its cost of funds, has been, and will
continue to be, significantly affected by money market conditions.

The following table sets forth the deposit flows at the Company during the
periods indicated.
<TABLE>
<CAPTION>

Year Ended March 31,
------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)

<S> <C> <C> <C>
Opening balance............................. $ 410,737 $ 393,314 $ 387,776
Net cash increase (decrease) in
deposits before interest credit............ 19,414 2,472 (6,830)
Interest credit............................. 15,031 14,951 12,368
---------- ---------- ---------
Ending balance.......................... $ 445,182 $ 410,737 $ 393,314
========= ======== =========

Net increase................................ $ 34,445 $ 17,423 $ 5,538
========= ========= =========
Percent increase............................ 8.39% 4.43% 1.43%
==== ==== ====
</TABLE>

The following table presents, as of March 31, 1997, the outstanding amount
of certificates of deposit in amounts of $100,000 or more by time remaining
until maturity.
<TABLE>
<CAPTION>

March 31, 1997
--------------
(Dollars in Thousands)

<S> <C>
Three months or less................................. $26,495
Over three through six months........................ 12,687
Over six through twelve months....................... 21,710
Over twelve months................................... 9,166
-------
$70,058
=======
</TABLE>

BORROWINGS. As a member of the FHLB of Cincinnati, the Company is
required to own capital stock in the FHLB of Cincinnati and is authorized to
apply for advances from the FHLB of Cincinnati. Each FHLB credit program has its
own interest rate, which may be fixed or variable, and range of maturities. The
FHLB of Cincinnati may prescribe the acceptable uses to which these advances may
be put, as well as limitations on the size of the advances and repayment
provisions.

The Company's borrowings may, from time to time also include securities sold
under agreements to repurchase, pledging mortgage-backed securities or other
securities as collateral.

<PAGE> 22

During the years ended March 31, 1997, 1996 and 1995, the Company did not have
any securities sold under agreements to repurchase outstanding.

The following table sets forth the maximum month-end balance and average
balance of FHLB advances at the dates indicated.
<TABLE>
<CAPTION>

Year Ended March 31,
---------------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Maximum Balance:
- ----------------
FHLB advances............................... $116,146 $68,084 $50,543

Average Balance:
- ---------------
FHLB advances............................... $ 98,980 $57,105 $39,309

Weighted average interest
rate of FHLB advances...................... 5.85% 6.04% 5.59%
</TABLE>

The following table sets forth information as to the rates and balances of
the Company's borrowings at the dates indicated.
<TABLE>
<CAPTION>

March 31,
1997 1996 1995
-------------------------- ---------
(Dollars in Thousands)

<S> <C> <C> <C>
FHLB advances............................... $115,221 $68,084 $50,543
Weighted average interest rate
of FHLB advances........................... 5.95% 5.75% 6.16%
</TABLE>

In May 1993, the Company issued $9,775,000 of 6 1/4% convertible
subordinated debentures due May 1, 2008. The payment of principal and interest
on the debentures is subordinated at all times to any indebtedness of the
Company outstanding or incurred after the date of issuance. At March 31, 1997,
the Company had no indebtedness senior to the debentures. However, certain
obligations of the Company, including deposit liabilities and FHLB advances,
have first claim on the assets of the Company. Cost incurred in the transaction
totaled approximately $812,000 and will be amortized over the life of the
debentures resulting in an effective interest rate of 7.2%. The debentures are
convertible at any time prior to maturity into common stock of the Company at a
conversion rate of 85.62 shares of common stock (as adjusted for the September
1993 two-for-one stock split) for each $1,000 principal amount of debentures. On
May 20, 1997, the Board of Directors of Security First declared a three-for-two
stock split in the form of a 50% stock dividend payable July 31, 1997, to
shareholders of record on July 15, 1997. The post-split conversion rate of the
debentures will be 128.37 shares of common stock for each $1,000 principal
amount of

<PAGE> 23

debentures. During the year ended March 31, 1997, $295,000 of such debentures
were converted into 25,253 shares of common stock.

The debentures became callable at the option of the Company on May 1, 1996
and are redeemable during the 12-month period beginning May 1, 1997 at 102.5% of
the principal amount, and thereafter at 100% of their principal amount. At this
time, the Company has not exercised its right to call the debentures. In the
indenture of the debentures, the Company is restricted as to the amounts of
additional indebtedness it may incur and the amount of dividends and other
distributions it may pay to its stockholders, depending on the Company's
regulatory capital.

SUBSIDIARY ACTIVITIES
- ---------------------

At March 31, 1997, Security Federal's net remaining investment in its
service corporation, Security Financial Corporation ("SFC"), was $1,000. The
service corporation, which in the past had been engaged in several joint
ventures for residential land development, has been inactive during the current
fiscal year.

During March 1994 the Company formed SF Development Co., a wholly owned
subsidiary of Security First, for the purpose of entering into joint ventures to
develop land for residential properties. During fiscal 1995, SF Development
entered into a joint venture with a local developer to purchase land for the
development of 81 residential lots located in Richmond Heights, Ohio, and during
fiscal 1996 entered into a second joint venture with the same developer to
develop land into 63 residential lots, also in Richmond Heights, Ohio.
Additionally, during fiscal 1997, SF Development entered into a joint venture
with a second developer to develop land and build 56 condominium units in
Medina, Ohio. See Note 18 of the Notes to Consolidated Financial Statements set
forth in the Proxy Statement.

COMPETITION
- -----------

The Company faces strong competition both in originating real estate loans
and in attracting deposits. Competition in originating real estate loans comes
primarily from other thrift institutions, commercial banks and mortgage bankers
who also make loans secured by real estate located in the Company's market area.
The Company competes for real estate loans principally on the basis of the
interest rates and loan fees it charges, the types of loans it originates and
the quality of services it provides to borrowers.

The Company faces substantial competition in attracting deposits from other
thrift institutions, commercial banks, money market and mutual funds, credit
unions and other investment vehicles. The ability of the Company to attract and
retain deposits depends on its ability to provide an investment opportunity that
satisfies the requirements of investors as to rate of return, liquidity, risk
and other factors. The Company attracts a significant amount of deposits through
its branch offices primarily from the communities in which those branch offices
are located. Therefore, competition for those deposits is principally from other
thrift institutions and commercial banks located in the same communities. The
Company competes for these deposits by offering a variety of deposit accounts at
competitive rates, convenient business hours, and convenient branch locations

<PAGE> 24

with interbranch deposit and withdrawal privileges at each. The Company also has
automated teller machines, which provide 24-hour cash availability to its
customers.

The authority to offer money market deposits, and expanded lending and other
powers authorized for thrift institutions by federal legislation, have resulted
in increased competition for both deposits and loans between thrift institutions
and other financial institutions such as commercial banks.

The Company considers its primary market area for savings and mortgage loans
to consist of Ashtabula, Cuyahoga, Geauga, Lake, and Medina and Portage counties
in Northeastern Ohio. At March 31, 1997, there were 17 thrift institutions and
14 commercial banks with offices in the Company's primary market area. The
Company estimates that its market share of savings deposits and mortgage loans
in this area is less than 5%.

REGULATION
- ----------

GENERAL. The Associations are federally chartered savings and loan
associations, the deposits of which are federally insured and backed by the full
faith and credit of the United States Government. Accordingly, the Associations
are subject to broad federal regulation and oversight extending to all their
operations. The Associations are members of the FHLB of Cincinnati and are
subject to certain limited regulation by the Board of Governors of the Federal
Reserve System ("Federal Reserve Board"). As the savings and loan holding
company of the Associations, Security First also is subject to federal
regulation and oversight. The purpose of the regulation of Security First and
other holding companies is to protect subsidiary savings associations.

Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.

FEDERAL REGULATION OF SAVINGS ASSOCIATIONS. The OTS has extensive authority
over the operations of savings associations. As part of this authority, the
Associations are required to file periodic reports with the OTS and are subject
to periodic examinations by the OTS and the FDIC.

The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Associations and
Security First. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders and to initiate injunctive actions. In general, these enforcement actions
may be initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.

Security Federal's and First Federal's general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired
capital and surplus (except for loans fully secured by certain readily
marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus). At March 31, 1997, Security Federal's lending
limit under

<PAGE> 25

this restriction was $7 million and First Federal's was $1.6 million. The
Associations are in compliance with the loans-to-one-borrower limitation.

INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC. The Associations are
members of the Savings Association Insurance Fund("SAIF"), which is administered
by the FDIC. Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the United States
Government. As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examinations of and to require reporting by FDIC-insured
institutions. Deposit insurance premiums are assessed based upon the
institution's risk classification, which is a function of its capital level and
supervisory rating. It also may prohibit any FDIC-insured institution from
engaging in any activity the FDIC determines by regulation or order to pose a
serious risk to the SAIF or the BIF. The FDIC also has the authority to initiate
enforcement actions against savings associations, after giving the OTS an
opportunity to take such action, and may terminate the deposit insurance if it
determines that the institution has engaged in unsafe or unsound practices, or
is in an unsafe or unsound condition.

The FDIC is authorized to increase assessment rates on deposits, on a
semiannual basis, if it determines that the reserve ratio of the SAIF will be
less than the designated reserve ratio of 1.25% of SAIF insured deposits. In
setting these increased assessments, the FDIC must seek to restore the reserve
ratio to that designated reserve level, or such higher reserve ratio as
established by the FDIC. The FDIC may also impose special assessments on SAIF
members to repay amounts borrowed from the United States Treasury or for any
other reason deemed necessary by the FDIC.

For the first six months of 1995, the assessment schedule for Bank
Insurance Fund ("BIF") members and SAIF members ranged from .23% to .31% of
deposits. As is the case with the SAIF, the FDIC is authorized to adjust the
insurance premium rates for banks that are insured by the BIF of the FDIC in
order to maintain the reserve ratio of the BIF at 1.25% of BIF insured deposits.
As a result of the BIF reaching its statutory reserve ratio, the FDIC revised
the premium schedule for BIF-insured institutions to provide a range of .04% to
.31% of deposits. The revisions became effective in the third quarter of 1995.
In addition, the BIF rates were further revised, effective January 1996, to
provide a range of 0% to .27%. The SAIF rates, however, were not adjusted. At
the time that the FDIC revised the BIF premium schedule, it noted that, absent
legislative action (as discussed below), the SAIF would not attain its
designated reserve ratio until the year 2002. As a result, SAIF insured members
would continue to be generally subject to higher deposit insurance premiums than
BIF until, all things being equal, the SAIF attained its insured institutions
required reserve ratio.

In order to eliminate this disparity and any competitive disadvantage
between BIF and SAIF-member institutions with respect to deposit insurance
premiums, legislation to recapitalize the SAIF was enacted in September 1996.
The legislation provided for a one-time assessment to be imposed on all deposits
assessed at the SAIF rates, as of March 31, 1995, in order to recapitalize the
SAIF. It also provided for the merger of the BIF and the SAIF on January 1, 1999
if no savings associations then exist. The special assessment rate was
established at .657% of deposits (as of March 31, 1995) by the FDIC and the
resulting assessments of $2.2 million for Security Federal and $386,000 for
First Federal were paid in November 1996. This special assessment significantly
increased

<PAGE> 26

noninterest expense and adversely affected the Associations', and therefore the
Company's, results of operations for the year ended March 31, 1997. As a result
of the special assessment, Security Federal's and First Federal's deposit
insurance premiums were reduced to zero, based upon its current risk
classification and the new assessment schedule for SAIF insured institutions.
These premiums are subject to change in future periods.

Prior to the enactment of the legislation, a portion of the SAIF assessment
imposed on savings associations was used to repay obligations issued by a
federally chartered corporation to provide financing ("FICO") for resolving the
thrift crisis in the 1980s. Although the FDIC has proposed that the SAIF
assessment be equalized with the BIF assessment schedule, effective October 1,
1996, SAIF-insured institutions will continue to be subject to a FICO assessment
as a result of this continuing obligation. Although the legislation also now
requires assessments to be made on BIF-assessable deposits for this purpose,
effective January 1, 1997, that assessment will be limited to 20% of the rate
imposed on SAIF-assessable deposits until the earlier of December 31, 1999 or
when no savings association continues to exist, thereby imposing a greater
burden on SAIF-member institutions such as the Associations. Thereafter,
however, assessments on BIF-member institutions will be made on the same basis
as SAIF-member institutions. The rates established by the FDIC to implement this
requirement for all FDIC-insured institutions are 6.3 basis points assessment on
SAIF deposits and 1.3 basis points on BIF deposits until BIF-insured
institutions participate fully in the assessment. The current semi-annual FICO
assessment for Security Federal and First Federal is $252,000 and $48,000,
respectively. These rates may be subject to change in future periods based upon
the level of SAIF and BIF deposits.

REGULATORY CAPITAL REQUIREMENTS. Federally insured savings associations,
such as the Associations, are required to maintain a minimum level of regulatory
capital. The OTS has established capital standards, including a tangible capital
requirement, a leverage ratio (or core capital) requirement and a risk-based
capital requirement applicable to such savings associations. These capital
requirements must be generally as stringent as the comparable capital
requirements for national banks. The OTS is also authorized to impose capital
requirements in excess of these standards on individual associations on a
case-by-case basis. See Note 13 of the Notes to Consolidated Financial
Statements set forth in the Proxy Statement.

The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. The OTS is generally required to take action to
restrict the activities of an "undercapitalized association" (generally defined
to be one with less than either a 4% core capital ratio, a 4% Tier 1
risked-based capital ratio or an 8% risk-based capital ratio). Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions. The OTS is authorized to impose the additional
restrictions, that are applicable to significantly undercapitalized
associations.

As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized association must agree that it will enter into a
limited capital maintenance guarantee with respect to the institution's
achievement of its capital requirements.

<PAGE> 27

Any savings association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less than 3% or a risk-based capital ratio of less than 6%) must be made
subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association.

An association that becomes "critically undercapitalized" (i.e., a tangible
capital ratio of 2% or less) is subject to further mandatory restrictions on its
activities in addition to those applicable to significantly undercapitalized
associations. In addition, the OTS must appoint a receiver (or conservator with
the concurrence of the FDIC) for a savings association, with certain limited
exceptions, within 90 days after it becomes critically undercapitalized.

Any undercapitalized association is also subject to the general enforcement
authority of the OTS and the FDIC, including the appointment of a conservator or
a receiver. The OTS is also generally authorized to reclassify an association
into a lower capital category and impose the restrictions applicable to such
category if the institution is engaged in unsafe or unsound practices or is in
an unsafe or unsound condition.

The imposition by the OTS or the FDIC of any of these measures on the
Company may have a substantial adverse effect on the Company's operations and
profitability and the value of its Common Stock. The Company shareholders do not
have preemptive rights, and therefore, if the Company is directed by the OTS or
the FDIC to issue additional shares of Common Stock, such issuance may result in
the dilution in the percentage of ownership of the Company.

LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. OTS regulations
impose various restrictions on savings associations with respect to their
ability to make distributions of capital, which include dividends, stock
redemptions or repurchases, cash-out mergers and other transactions charged to
the capital account. OTS regulations also prohibit a savings association from
declaring or paying any dividends or from repurchasing any of its stock if, as a
result, the regulatory capital of the association would be reduced below the
amount required to be maintained for the liquidation account established in
connection with its mutual to stock conversion. See "-Regulatory Capital
Requirements."

QUALIFIED THRIFT LENDER TEST. All savings associations, including the
Company, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations. This test requires a savings
association to have at least 65% of its portfolio assets (as defined by
regulation) in qualified thrift investments on a monthly average for nine out of
every 12 months on a rolling basis. As an alternative, the savings association
may maintain 60% of its assets in those assets specified in Section 7701(a)(19)
of the Internal Revenue Code. Under either test, such assets primarily consist
of residential housing related loans and investments. At March 31, 1997, each of
the Associations met the test and has always met the test since its
effectiveness.

Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC

<PAGE> 28

permits it to transfer to the BIF. If such association has not yet requalified
or converted to a national bank, its new investments and activities are limited
to those permissible for both a savings association and a national bank, and it
is limited to national bank branching rights in its home state. In addition, the
association is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends. If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank. In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties. If any
association that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies. See "- Holding Company Regulation."

COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act ("CRA"),
every FDIC insured institution has a continuing and affirmative obligation
consistent with safe and sound banking practices to help meet the credit needs
of its entire community, including low and moderate income neighborhoods. The
CRA does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the OTS, in connection with
the examination of the Association, to assess the institution's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications, such as a merger or the establishment
of a branch, by the Association. An unsatisfactory rating may be used as the
basis for the denial of an application by the OTS.

The federal banking agencies, including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's compliance
with the CRA. Due to the heightened attention being given to the CRA in the past
few years, the Associations may be required to devote additional funds for
investment and lending in their local community. Security Federal was examined
for CRA compliance in 1995 and received a rating of "satisfactory." First
Federal was examined for CRA compliance in 1996 and received a rating of
"satisfactory."

TRANSACTIONS WITH AFFILIATES. Generally, transactions between a savings
association or its subsidiaries and its affiliates are required to be on terms
as favorable to the association as transactions with non-affiliates. In
addition, certain of these transactions, such as loans to an affiliate, are
restricted to a percentage of the association's capital. Affiliates of the
Associations include Security First and any company which is under common
control with the Associations. In addition, a savings association may not lend
to any affiliate engaged in activities not permissible for a bank holding
company or acquire the securities of most affiliates. The Associations'
subsidiaries are not deemed affiliates; however, the OTS has the discretion to
treat subsidiaries of savings associations as affiliates on a case by case
basis.

Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.

<PAGE> 29

HOLDING COMPANY REGULATION. As of March 31, 1997, Security First was a
multiple savings and loan holding company subject to regulatory oversight by the
OTS. As such, Security First is required to register and file reports with the
OTS and is subject to regulation and examination by the OTS. In addition, the
OTS has enforcement authority over Security First and its non-savings
association subsidiaries which also permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary savings
association.

As a multiple savings and loan holding company, the activities of Security
First are generally limited to those approved by the OTS and those permissible
for bank holding companies. These activities include financial services related
activities, real estate development and certain insurance agency activities.

If either Security Federal or First Federal fails the QTL test, Security
First must obtain the approval of the OTS prior to continuing after such
failure, directly or through its other subsidiaries, any business activity other
than those approved for multiple savings and loan holding companies or their
subsidiaries. In addition, within one year of such failure Security First must
register as, and will become subject to, the restrictions applicable to bank
holding companies. The activities authorized for a bank holding company are more
limited than are the activities authorized for a multiple savings and loan
holding company. See "--Qualified Thrift Lender Test."

FEDERAL AND STATE TAXATION
- --------------------------

FEDERAL TAXATION. Prior to 1996, savings associations such as the
Associations that met certain definitional tests relating to the composition of
assets and other conditions prescribed by the Internal Revenue Code of 1986, as
amended (the "Code"), had been permitted to establish reserves for bad debts and
to make annual additions thereto which were allowed, within specified formula
limits, to be taken as a deduction in computing taxable income for federal
income tax purposes. The amount of the bad debt reserve deduction for
"non-qualifying loans" was computed under the experience method. The amount of
the bad debt reserve deduction for "qualifying real property loans" (generally
one-to-four family home loans secured by improved real estate) was computed
under the greater of the experience method or the percentage of taxable income
method.

Under the experience method, the bad debt reserve deduction was an amount
determined under a formula based generally upon the bad debts actually sustained
by the savings association over a period of years.

The percentage of specially computed taxable income that was used to compute
a savings association's bad debt reserve deduction under the percentage of
taxable income method (the "percentage bad debt deduction") was 8%. The
percentage bad debt deduction thus computed was reduced by the amount permitted
as a deduction for non-qualifying loans under the experience method. Prior to
1988, the availability of the percentage of taxable income method permits
qualifying savings associations to be taxed at a lower effective federal income
tax rate than that applicable to corporations generally (approximately 31.3%
assuming the maximum percentage bad debt deduction).

<PAGE> 30

If an association's specified assets (generally, loans secured by
residential real estate or deposits, educational loans, cash and certain
government obligations) constitute less than 60% of its total assets, the
association may not deduct any addition to a bad debt reserve and generally had
to include existing reserves in income over a four year period.

In August 1996, legislation was enacted that repeals the reserve method of
accounting (including the percentage of taxable income method) used by many
thrifts, including the Associations, to calculate their bad debt reserve for
federal income tax purposes. As a result, thrifts such as the Associations must
recapture that portion of the reserve that exceeds the amount that could have
been taken under the specific charge-off method for post-1987 tax years. The
legislation also requires thrifts to account for bad debts for federal income
tax purposes on the same basis as commercial banks for tax years beginning after
December 31, 1995. The recapture will occur over a six-year period, the
commencement of which will be delayed until the first taxable year beginning
after December 31, 1997, provided the institution meets certain residential
lending requirements. The management of the Company does not believe that the
legislation will have a material impact on the Associations.

In addition to the regular income tax, corporations, including savings
associations such as the Associations, generally are subject to a minimum tax.
An alternative minimum tax is imposed at a minimum tax rate of 20% on
alternative minimum taxable income, which is the sum of a corporation's regular
taxable income (with certain adjustments) and tax preference items, less any
available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax and net operating losses can offset
no more than 90% of alternative minimum taxable income. For taxable years
beginning after 1986 and before 1996, corporations, including savings
associations such as the Associations, are also subject to an environmental tax
equal to 0.12% of the excess of alternative minimum taxable income for the
taxable year (determined without regard to net operating losses and the
deduction for the environmental tax) over $2 million.

To the extent earnings appropriated to a savings association's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the association's supplemental reserves
for losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of March 31, 1997, Security Federal's and First Federal's Excess for
tax purposes totaled approximately $3.9 million and $1.6 million, respectively.

The Company and its subsidiaries file consolidated federal income tax
returns on a fiscal year basis using the accrual method of accounting. Savings
associations, such as the Association, that file federal income tax returns as
part of a consolidated group are required by applicable Treasury regulations to
reduce their taxable income for purposes of computing the percentage bad debt
deduction for losses attributable to activities of the non-savings association
members of the consolidated group that are functionally related to the
activities of the savings association member.

<PAGE> 31

The Company has been audited by the IRS with respect to its consolidated
federal income tax returns through March 31, 1990. With respect to years
examined by the IRS, either all deficiencies have been satisfied or sufficient
reserves have been established to satisfy asserted deficiencies. In the opinion
of management, any examination of still open returns (including returns of
subsidiaries and predecessors of, or entities merged into, the Company) would
not result in a deficiency which could have a material adverse effect on the
financial condition of the Company and its consolidated subsidiaries.

DELAWARE TAXATION. As a Delaware holding company, the Company is exempted
from Delaware corporate income tax but is required to file an annual report with
and pay an annual fee to the State of Delaware. The Company is also subject to
an annual franchise tax imposed by the State of Delaware.

OHIO TAXATION. Security First and the Associations conduct their business in
Ohio and consequently are subject to the Ohio corporate franchise tax. A
financial institution subject to the Ohio corporate franchise tax levied in Ohio
Revised Code pays a tax equal to 15 mills (.015) times its apportioned net
worth. The apportionment factor consists of a business done factor, determined
by reference to the total receipts of the financial institution from all
sources, and a property factor, determined by reference to the net book value of
all property owned by the financial institution. The financial institution may
claim a credit equal to the annual assessment paid to the State pursuant to the
Ohio Revised Code.

EMPLOYEES
- ---------
At March 31, 1997, the Company had a total of 169 employees, including 29
part-time employees. None of the Company's employees are represented by any
collective bargaining group. Management considers its employee relations to be
good.

EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------

The following table sets forth the names, ages and positions of each of the
executive officers of the Company. There are no arrangements or understandings
between the persons named and any other person pursuant to which such officers
were selected.
<TABLE>
<CAPTION>

Year
Name Age Position Appointed
- ----------------------- ---- ---------------------------------------------------- ---------
<S> <C> <C>
Charles F. Valentine 57 Chairman of the Board and Chief Executive Officer 1985
Austin J. Mulhern 55 President, Chief Operating Officer and Director 1985
Jeffrey J. Calabrese 45 Vice President and Secretary 1976
Mary H. Crotty 56 Chief Financial Officer, Vice President and Treasurer 1995
Thomas J. Deighton 46 Vice President 1994
Thomas F. Sullivan 44 Assistant Vice President and Controller 1996
</TABLE>

The business experience of each of the executive officers is as
follows:

<PAGE> 32

CHARLES F. VALENTINE. Mr. Valentine is Chairman of the Board and Chief
Executive Officer of Security Federal. He has been with Security Federal since
1980 in various capacities, serving as Chairman and Chief Executive Officer
since 1985.

AUSTIN J. MULHERN. Mr. Mulhern is President and Chief Operating
Officer of Security Federal, positions he has held since 1985. From 1985 to May
1988, he was also Chief Financial Officer of Security Federal.

JEFFREY J. CALABRESE. Mr. Calabrese is Vice President and Secretary of
Security Federal. He is responsible for marketing, savings and branch
operations. He joined Security Federal in 1974.

MARY H. CROTTY. Mrs. Crotty was appointed Chief Financial Officer
effective February 1, 1995. Prior to that time, she was Assistant Vice President
and Controller of Security Federal and joined Security Federal in March 1990.
Mrs. Crotty is a certified public accountant in Ohio.

THOMAS J. DEIGHTON. Mr. Deighton is Vice President-Senior Loan Officer
of Security Federal and joined the Security Federal in January 1989. He is
responsible for the Security Federal's lending operations. Mr. Deighton was
named an executive officer of the Company in May 1994.

THOMAS F. SULLIVAN. Mr. Sullivan is Assistant Vice President and
Controller of Security Federal and joined Security Federal in August 1996. He
was Controller of Metropolitan Savings Bank from 1993 to 1996 and Accounting
Systems Officer of Ohio Savings Bank from 1992 to 1993.

ITEM 2. PROPERTIES
- -------------------
The Company conducts its business at its main office headquartered in
Mayfield Heights, Ohio and its 14 branch office locations in its market area in
northeast Ohio. The Company owns eight of its offices, and leases six. The total
net book value of the Company's premises and equipment (including land, building
and leasehold improvements and furniture, fixtures and equipment) at March 31,
1997, was $8.9 million. See Note 9 of Notes to Consolidated Financial Statements
set forth in the Proxy Statement.

The Company believes that its current facilities are adequate to meet
the present and foreseeable needs of the Company.

The Company's accounting and record keeping activities are maintained
on an on-line basis with an independent service bureau. The net book value of
the Company's computer equipment at March 31, 1997 was approximately $1.2
million.

ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company is a party to a legal proceeding titled U.S. Die Casting
& Development Company, an Ohio Corporation v. Security First Corp., Charles F.
Valentine, Austin J. Mulhern, Robert L. Anderson, Fred J. Ball, Nicholas E.
Rinaldi, D.D.S., Donald E. Snow and Paul V. Voinovich which was filed on June 6,
1996, in the Court of Chancery of the State of Delaware in

<PAGE> 33

and for New Castle County. The plaintiff, on behalf of itself and as a
shareholder derivative action, is alleging that the Company improperly
terminated the merger agreement with Mid Am, Inc. in 1994. The plaintiff is
seeking unspecified damages as well as reasonable attorney's fees, costs and
expenses. The ultimate resolution of this proceeding and its potential effect on
the consolidated financial position and results of operations of the Company
cannot be determined at this time.

The Company is also involved in routine litigation arising from its
operations. Management also believes that the outcome of such routine
litigation, individually and in the aggregate, will not have a material effect
on the Company's consolidated financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.

PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- --------------------------------------------------------------------------
MATTERS
- -------
Information concerning the Market for the Registrant's Common Equity
and Related Stockholder Matters is incorporated herein by reference from the
Company's definitive proxy statement for the Annual Meeting of Shareholders to
be held in July, 1997, except for the information contained under the heading
"Compensation Committee Report" and "Stockholder Return Performance
Presentation," a copy of which is attached hereto as Exhibit 99.

ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------

Information concerning the Selected Financial Data is incorporated
herein by reference from the Company's definitive proxy statement for the Annual
Meeting of Shareholders to be held in July, 1997, except for the information
contained under the heading "Compensation Committee Report" and "Stockholder
Return Performance Presentation," a copy of which is attached hereto as Exhibit
99.

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

Information concerning Management's Discussion and Analysis of
Financial Condition and Results of Operations is incorporated herein by
reference from the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held in July, 1997, except for the information contained
under the heading "Compensation Committee Report" and "Stockholder Return
Performance Presentation," a copy of which is attached hereto as Exhibit 99.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------

Information concerning the Financial Statements and Supplemental Data
is incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of

<PAGE> 34

Shareholders to be held in July, 1997, except for the information contained
under the heading "Compensation Committee Report" and "Stockholder Return
Performance Presentation," a copy of which is attached hereto as Exhibit 99.

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

There has been no Current Report on Form 8-K filed within 24 months
prior to the date of the most recent financial statements reporting a change in
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.

PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------

Information concerning Directors of the Registrant is incorporated
herein by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held in July 1997, except for the information
contained under the heading "Compensation Committee Report" and "Stockholder
Return Performance Presentation," a copy of which is attached hereto as Exhibit
99.

ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------

Information concerning executive compensation is incorporated herein
by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held in July 1997, except for the information
contained under the heading "Compensation Committee Report" and "Stockholder
Return Performance Presentation," a copy of which is attached hereto as Exhibit
99.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------

Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held in July 1997,
except for the information contained under the heading "Compensation Committee
Report" and "Stockholder Return Performance Presentation," a copy of which is
attached hereto as Exhibit 99.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------

Information concerning certain relationships and transactions is
incorporated herein by reference from the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held in July 1997, except for the
information contained under the heading "Compensation Committee Report" and
"Stockholder Return Performance Presentation," a copy of which is attached
hereto as Exhibit 99.

<PAGE> 35

PART IV
-------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(A) (1) FINANCIAL STATEMENTS:
------------------------------
The following financial statements are included under Part II, Item 8
of this Form 10-K:

1. Report of Independent Auditors.
2. Consolidated Statements of Balance Sheet at March 31, 1997 and 1996.
3. Consolidated Statements of Income for the fiscal years ended March 31,
1997, 1996 and 1995.
4. Consolidated Statements of Changes in Shareholders' Equity for the fiscal
years ended March 31, 1997, 1996 and 1995.
5. Consolidated Statements of Cash Flows for the fiscal years ended March 31,
1997, 1996 and 1995.
6. Notes to Consolidated Financial Statements
7. Security First Quarterly Financial Data

(A) (2) FINANCIAL STATEMENT SCHEDULES:
---------------------------------------

All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to Consolidated
Financial Statements.

(A) (3) EXHIBITS:
-----------------

See Exhibit Index.

(B) REPORTS ON FORM 8-K:
-------------------------

There were no reports on Form 8-K filed during the quarter ended March
31, 1997.

<PAGE> 36

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SECURITY FIRST CORP.

By: /s/Austin J. Mulhern Date: June 26, 1997
-------------------------------------- -------------
Austin J. Mulhern
(Duly Authorized Representative)

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

By: /s/Charles F. Valentine Date: June 26, 1997
------------------------------------------------- -------------
Charles F. Valentine,
Chairman of the Board and
Chief Executive Officer

By: /s/Austin J. Mulhern Date: June 26, 1997
------------------------------------------------- -------------
Austin J. Mulhern, President
Chief Operating Officer
and Director

By: /s/Robert L. Anderson Date: June 26, 1997
------------------------------------------------- -------------
Robert L. Anderson, Director

By: /s/James P. Myers Date: June 26, 1997
------------------------------------------------- -------------
James P. Myers, Director

By: /s/Nicholas E. Rinaldi Date: June 26, 1997
------------------------------------------------- -------------
Nicholas E. Rinaldi, Director

<PAGE> 37

By: /s/Larry E. Rogers Date: June 26, 1997
------------------------------------------------- -------------
Larry E. Rogers, Director

By: /s/Donald E. Snow Date: June 26, 1997
------------------------------------------------- -------------
Donald E. Snow, Director

By: /s/Louis J. Sorboro Date: June 26, 1997
------------------------------------------------- -------------
Louis J. Sorboro, Director

By: /s/Paul V. Voinovich Date: June 26, 1997
------------------------------------------------- -------------
Paul V. Voinovich, Director

By: /s/Mary H. Crotty Date: June 26, 1997
------------------------------------------------- -------------
Mary H. Crotty, Vice President
Treasurer, and Chief
Financial Officer

<PAGE> 38

EXHIBIT INDEX

Exhibit
Number Document
--------- -------------------------------------------------------------
<S> <C>
3 The Articles of Incorporation and Bylaws, filed on December
11, 1992 as exhibits to Registrant's Registration Statement
on Form S-4 (File No. 33-55674), are incorporated herein by
reference.

4.1 Registrant's Specimen Stock Certificate, filed on December 11,
1992 as an exhibit to Registrant's Registration Statement on
Form S-4 (File No. 33-55674), is incorporated herein by
reference.

4.2 Indenture, dated as of May 5, 1993, with respect to the
Registrant's 6 1/4% Convertible Subordinated Debentures, due
May 1, 2008, filed on March 18, 1993, filed as an exhibit to
Registrant's Registration Statement on Form S-2 (File No.
33-59830), is incorporated herein by reference.

10.1 Registrant's 1987 Stock Option and Incentive Plan, filed as an
exhibit to Registrant's Report on Form 8-K dated May 12, 1993
(File No. 0-21212), is incorporated herein by reference.

10.2 Employment Contracts with Charles V. Valentine (dated April
10, 1996), Austin J. Mulhern (dated April 10, 1996), Jeffrey
J. Calabrese (dated April 10, 1996), Mary H. Crotty (dated
April 10, 1996), Geoffrey Lant (dated April 10, 1996) and
Louis J. Sorboro (dated April 10, 1996), filed as exhibits to
Registrant's Report on Form 10-K for the fiscal year ended
March 31, 1996 (File No. 0-21212), are incorporated herein by
reference.

10.3 Registrant's Management Incentive Compensation Plan, filed as
an exhibit to Registrant's Report on Form 10-K for the fiscal
year ended March 31, 1993 (File No. 0-21212), is incorporated
herein by reference.

10.4 Registrant's 401(k) Plan, filed as an exhibit to Registrant's
Report on Form 10-K for the fiscal year ended March 31, 1993
(File No. 0-21212), is incorporated herein by reference.

10.5 Registrant's 1996 Stock Option and Incentive Plan, filed as
Appendix A to Registrant's Proxy Statement on Schedule 14A for
the annual meeting of shareholders held on July 25, 1996, is
incorporated herein by reference.

11 Statement re computation of per share earnings

12 Statement re computation of ratios

21 Subsidiaries of the Registrant

23.1 Consent of Deloitte & Touche LLP

23.2 Consent of Crowe, Chizek and Company LLP

23.3 Consent of Brott Mardis & Co.

27 Financial Data Schedule

99 Proxy Statement

</TABLE>

<PAGE> 1

<TABLE>
<CAPTION>
Exhibit 11
----------
SECURITY FIRST CORP.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE

Year Ended March 31,
----------------------------------------
1997 1996 1995(1)

<S> <C> <C> <C>
PRIMARY: ....................................... $6,410,000 $5,606,000 $6,532,000
========== ========== ==========
Net Income
Shares:
Weighted average number of common shares
outstanding ............................... 4,956,594 4,779,760 4,675,361
Shares issuable from assumed exercise of
stock options .............................. 92,346 143,948 143,611
---------- ---------- ----------
Total primary shares ......................... 5,048,940 4,923,708 4,818,972
========== ========== ==========
Primary earnings per share .................... $ 1.27 $ 1.14 $ 1.36
========== ========== ==========

FULLY DILUTED:

Net Income ................................... $6,410,000 $5,606,000 $6,532,000
Adjustment for interest expense on convertible
subordinated debentures, net of tax ........ 391,000 391,000 409,000
---------- ---------- ----------
Net income applicable to fully diluted shares $6,801,000 $5,997,000 $6,941,000
========== ========== ==========
Shares:
Weighted average number of
common shares outstanding .................. 4,956,594 4,779,760 4,675,361
Shares issuable from assumed exercise of
stock options .............................. 122,008 145,625 147,344

Shares issuable from assumed conversion
of convertible subordinated debentures ..... 748,017 752,500 796,205
---------- ---------- ----------
Total fully diluted shares ................... 5,826,619 5,677,885 5,618,910
========== ========== ==========

Fully diluted earnings per share .............. $ 1.17 $ 1.06 $ 1.24
========== ========== ==========
</TABLE>

(1) Primary and fully diluted earnings per share of First Kent Financial
Corporation, former parent of First Federal, subsequent to First Federal's
mutual to stock conversion in June 1994 are calculated based on net income
subsequent to the stock conversion divided by the weighted average shares
outstanding subsequent to the stock conversion.

<PAGE> 1

Exhibit 12
----------

Statement Regarding Computation of Ratios

Year Ended March 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(Dollars in Thousands)
Earnings:
- ---------
<S> <C> <C> <C> <C> <C>
Income before income taxes .................. $ 9,781 $ 8,940 $10,114 $10,015 $ 8,882

Fixed charges, excluding interest on deposits 6,462 4,141 2,906 3,230 3,367
------- ------- ------- ------- -------
Income before taxes and fixed charges,
excluding interest on deposits ................ 16,243 13,081 13,020 13,245 12,249
Interest on deposits ........................ 19,191 18,569 15,307 14,896 17,300
------- ------- ------- ------- -------

Income before taxes and fixed charges,
including interest on deposits ................ $35,434 $31,650 $28,327 $28,141 $29,549
======= ======= ====== ======= =======

Fixed Charges:
- --------------
Interest expense excluding interest on
deposits ................................... $ 6,372 $ 4,039 $ 2,816 $ 3,104 $ 3,239
One-third net rental expense ............. 90 102 90 126 128
------- ------- ------- ------- -------
Total fixed charges, excluding interest on
deposits ................................... 6,462 4,141 2,906 3,230 3,367
Interest on deposits ..................... 19,191 18,569 15,307 14,896 17,300
------- ------- ------- ------- -------
Total fixed charges, including interest on
deposits ................................... $25,653 $22,710 $18,213 $18,126 $20,667
======= ======= ====== ======= =======
Earnings To Fixed Charges Ratios:
- ---------------------------------
Excluding interest on deposits ........... 2.51x 3.16x 4.48x 4.10x 3.64x

Including interest on deposits ........... 1.38x 1.39x 1.56x 1.55x 1.43x

</TABLE>

<PAGE> 1

Exhibit 21
---------
<TABLE>
<CAPTION>

SUBSIDIARIES OF THE REGISTRANT

Parent Subsidiary Ownership Organization
- ------------------ ---------------------------- ---------- ------------
<S> <C> <C>
Security First Corp. Security Federal Savings and 100% Federal
Loan Association of Cleveland

Security First Corp. First Federal Savings Bank of 100% Federal
Kent

Security First Corp. SF Development Corp. 100% Ohio

Security Federal Savings Security Financial Corporation 100% Ohio
and Loan Association of
Cleveland

SF Development Corp. Richwood Development 50% Ohio

SF Development Corp. Rushmore Subdivision Ltd. 50% Ohio

SF Development Corp. Courts of Weymouth 33% Ohio
Development, Ltd.
</TABLE>

The financial statements of the Registrant are consolidated with those of
its subsidiaries.

<PAGE> 1
Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statements No.
33-65288, No. 33-65320 and No. 333-4372 of Security First Corp. on Forms S-8 of
our report dated April 25, 1997 (May 20, 1997 as to Note 20), which expresses
an unqualified opinion, refers to the report of other auditors on the
consolidated financial statements of a company that was merged with Security
First Corp., and includes an explanatory paragraph relating to adjustments
applied to restate the September 30, 1995 and 1994 consolidated financial
statements to conform to the fiscal year of Security First Corp. for each of
the two years in the period ended March 31, 1996 as a result of a merger
accounted for as a pooling of interests, incorporated by reference in the
Annual Report on Form 10-K of Security First Corp. for the year ended March 31,
1997.

/s/ Deloitte & Touche LLP

Cleveland, Ohio
June 25, 1997

<PAGE> 1

Exhibit 23.2
------------
INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statements
No. 33-65288, No. 33-65230 and No. 333-4372 of Security First Corp. on Form S-8
of our report dated October 27, 1995, relating to the consolidated balance sheet
of First Kent Financial Corporation as of September 30, 1995, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the year ended September 30, 1995 (which expresses an unqualified
opinion and refers to the report of the predecessor auditor), incorporated by
reference in the Annual Report on Form 10-K of Security First Corp. for the year
ended March 31, 1997.

/s/ Crowe, Chizek and Company LLP
- ----------------------------------
Crowe, Chizek and Company LLP
Cleveland, Ohio

June 25, 1997

<PAGE> 1
Exhibit 23.3

[BROTT MARDIS & CO. LETTERHEAD]

June 18, 1997

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statements No.
33-65288, No. 33-65320 and No. 333-34372 of Security First Corp. on Forms S-8
of our report dated November 4, 1994, relating to the consolidated balance
sheet of First Kent Financial Corporation and Subsidiary as of September 30,
1994 and the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for the six month period ended September
30, 1994 incorporated by reference in the Annual Report on Form 10-K of
Security First Corp. for the year ended March 31, 1997.

/s/ Brott Mardis & Co.

<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 4,685
<INT-BEARING-DEPOSITS> 1,826
<FED-FUNDS-SOLD> 2,153
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,576
<INVESTMENTS-CARRYING> 7,000
<INVESTMENTS-MARKET> 6,986
<LOANS> 567,975
<ALLOWANCE> 4,968
<TOTAL-ASSETS> 634,761
<DEPOSITS> 445,182
<SHORT-TERM> 80,541
<LIABILITIES-OTHER> 6,444
<LONG-TERM> 34,680
0
0
<COMMON> 50
<OTHER-SE> 59,385
<TOTAL-LIABILITIES-AND-EQUITY> 634,761
<INTEREST-LOAN> 46,165
<INTEREST-INVEST> 2,789
<INTEREST-OTHER> 224
<INTEREST-TOTAL> 49,178
<INTEREST-DEPOSIT> 19,191
<INTEREST-EXPENSE> 25,563
<INTEREST-INCOME-NET> 23,615
<LOAN-LOSSES> 323
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 15,209
<INCOME-PRETAX> 9,781
<INCOME-PRE-EXTRAORDINARY> 6,410
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,410
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 4.12
<LOANS-NON> 1,643
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,400
<ALLOWANCE-OPEN> 4,572
<CHARGE-OFFS> 33
<RECOVERIES> 106
<ALLOWANCE-CLOSE> 4,968
<ALLOWANCE-DOMESTIC> 4,097
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 871

</TABLE>

<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

Security First Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

---------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

---------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

---------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

---------------------------------------------------------------------
(5) Total fee paid:

---------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

---------------------------------------------------------------------
(3) Filing Party:

---------------------------------------------------------------------
(4) Date Filed:

---------------------------------------------------------------------
<PAGE> 2
[SECURITY FIRST CORP. LETTERHEAD]

June 27, 1997

Dear Fellow Shareholders:

On behalf of the Board of Directors and management of Security First
Corp., we cordially invite you to attend the 1997 Annual Meeting of
Shareholders. The meeting will be held at 2:00 p.m., Thursday, July 31, 1997 at
Landerhaven, 6111 Landerhaven Drive, Mayfield Heights, Ohio.

The matters expected to be acted upon at the meeting are described in
the enclosed Proxy Statement. In addition, we will report on Security First's
financial and operating performance as well as the Company's progress during the
past fiscal year.

We encourage you to attend the meeting in person. Whether or not you
attend, we hope you read the Proxy Statement and then complete, sign and date
the proxy card and return it in the enclosed postage-paid envelope. This will
save the Company additional expense in soliciting proxies and will ensure that
your shares are represented at the meeting. Please note that you may vote in
person at the meeting even if you have previously returned the proxy.

Thank you for your attention to this important matter.

Sincerely,

/s/ Charles F. Valentine

CHARLES F. VALENTINE
Chairman and Chief Executive Officer

/s/ Austin J. Mulhern

AUSTIN J. MULHERN
President and Chief Operating Officer

<PAGE> 3
SECURITY FIRST CORP.
1413 Golden Gate Boulevard
Mayfield Heights, Ohio 44124
(216) 449-3700

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on July 31, 1997

Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of Security First Corp. ("Security First" or the "Company") will be
held at Landerhaven, 6111 Landerhaven Drive, Mayfield Heights, Ohio, on July 31,
1997 at 2:00 P.M.

A Proxy Card and a Proxy Statement for the Meeting are enclosed.

The Meeting is for the purpose of considering and acting upon:

1. The election of three directors of the Company;

2. Approval of an amendment to Article Fourth of Security First's
Certificate of Incorporation to increase the total number of
shares of common stock, par value $.01 per share, which the
Company shall have the authority to issue from ten million
(10,000,000) to twenty million (20,000,000);

3. The ratification of the appointment of Deloitte & Touche LLP
as auditors for the Company for the fiscal year ending March
31, 1998; and

such other matters as may properly come before the Meeting, or any adjournments
thereof. The Board of Directors is not aware of any other business to come
before the Meeting.

Any action may be taken on any of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which the
Meeting may be adjourned. Shareholders of record at the close of business on
June 13, 1997 are the shareholders entitled to vote at the Meeting, and any
adjournments thereof.

You are requested to fill in and sign the enclosed Form of Proxy which
is solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The Proxy will not be used if you attend and vote at the
Meeting in person.

By Order of the Board of Directors

/s/ Charles F. Valentine

Charles F. Valentine
Chairman of the Board and
Chief Executive Officer

Mayfield Heights, Ohio
June 27, 1997

- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE> 4
PROXY STATEMENT

SECURITY FIRST CORP.
1413 GOLDEN GATE BOULEVARD
MAYFIELD HEIGHTS, OHIO 44124
(216) 449-3700

ANNUAL MEETING OF SHAREHOLDERS
JULY 31, 1997

This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Security First Corp. ("Security First" or
the "Company") of proxies to be used at the Annual Meeting of Shareholders of
the Company (the "Meeting") which will be held at Landerhaven, located at 6111
Landerhaven Drive, Mayfield Heights, Ohio on July 31, 1997, at 2:00 P.M.
Mayfield Heights, Ohio time, and all adjournments of the Meeting. The
accompanying Notice of Annual Meeting of Shareholders and this Proxy Statement
and Form of Proxy are first being mailed to shareholders on or about June 27,
1997. Certain of the information provided herein relates to Security Federal
Savings and Loan Association of Cleveland ("Security Federal") and First Federal
Saving Bank of Kent ("First Federal"), wholly-owned, first-tier subsidiaries of
the Company. Security Federal and First Federal are referred to herein
collectively as the "Associations". Unless otherwise noted, references to
Security First or the Company include the Associations.

At the Meeting, the shareholders of Security First are being asked to
consider and vote upon (i) the election of three directors of the Company, (ii)
the approval of an amendment to Article Fourth of Security First's Certificate
of Incorporation to increase the total number of shares of common stock, par
value $.01 per share, which the Company shall have the authority to issue from
ten million (10,000,000) to twenty million (20,000,000); and (iii) the
ratification of the appointment of Deloitte & Touche LLP as auditors for the
Company for the fiscal year ending March 31, 1998.

PROXIES AND PROXY SOLICITATION

If a shareholder properly executes the enclosed proxy distributed by
Security First, the proxies named will vote the shares represented by that proxy
at the Meeting. Where a shareholder specifies a choice, the proxy will be voted
in accordance with the shareholder's instructions. If no specific direction is
given, the proxies will vote the shares "FOR" the election of management's
nominees for directors of the Company, "FOR" approval of the amendment to
Article Fourth of the Company's Certificate of Incorporation, and "FOR" the
appointment of Deloitte & Touche LLP as auditors for the fiscal year ending
March 31, 1998. If other matters are presented at the Meeting, the shares for
which proxies have been received will be voted in accordance with the discretion
of the proxies.

Any proxy given pursuant to this solicitation or otherwise may be
revoked by the shareholder giving it at any time before it is voted by
delivering to the Secretary of the Company at the above address, on or before
the taking of the vote at the Meeting, a written notice of revocation bearing a
later date than the proxy or a later dated proxy relating to the same shares of
common stock, par value $.01 per share, of Security First (the "Common Stock"),
or by attending the Meeting and voting in person. Attendance at the Meeting will
not in itself constitute the revocation of a proxy.

The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Security First Common Stock. In addition, Security
First has engaged Corporate Investors Communications ("CIC") to assist the
Company in distributing proxy materials and contacting record and beneficial
owners of Security First Common Stock. The Company has agreed to pay CIC
approximately $1,000 plus out-of-pocket expenses for its services to be rendered
on behalf of the Company. In addition to solicitation by mail, directors and
officers of the Company and employees of the Associations may solicit proxies
personally or by telegraph or telephone, without additional compensation.
<PAGE> 5
VOTING RIGHTS; VOTE REQUIRED

Shareholders of record as of the close of business on June 13, 1997
(the "Voting Record Date"), will be entitled to one vote on each matter
presented for a vote at the Meeting for each share of Security First Common
Stock then held. Such vote may be exercised in person or by a properly executed
proxy as discussed above. Directors shall be elected by a plurality of the
shares present in person or represented by proxy at the Meeting and entitled to
vote on the election of directors. Approval of the proposal to amend the
Company's Certificate of Incorporation requires the affirmative vote of the
holders of at least a majority of the shares entitled to be voted at the
Meeting. The appointment of Deloitte and Touche LLP as auditors for the year
ending March 31, 1998 requires the affirmative vote of the majority of shares
present in person or represented by proxy at the Meeting and entitled to vote on
the matter.

With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all
proposals except the election of directors and will be counted as present for
purposes of the item on which the abstention is noted. Since the amendment to
the Company's Certificate of Incorporation requires the approval of a majority
of the outstanding shares, abstentions will have the effect of a negative vote.
Abstentions on the proposal to ratify Deloitte and Touche LLP as the Company's
auditors will also have the effect of a negative vote because it requires the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote at the Meeting. Under applicable Delaware law, a broker
non-vote will have the same effect as a vote against the proposed amendment to
the Company's Certificate of Incorporation, and will have no effect on the
outcome of the election of directors or ratification of auditors.

BENEFICIAL OWNERSHIP

The following table sets forth information, as of the Voting Record
Date, regarding beneficial share ownership of executive officers (who are not
directors of the Company) for which disclosure is required to be provided under
the "Summary Compensation Table" herein and all directors and executive officers
of the Company as a group. See "Proposal I -- Election of Directors" for
information on the beneficial share ownership of the Company's Directors and
Chief Executive Officer. The address of the executive officers named in the
table is the same as the Company's address. As of the Voting Record Date, the
Company had 5,048,793 shares of Common Stock issued and outstanding. No persons
or entities were known by management to beneficially own more than 5% of the
outstanding shares of Company Common Stock as of the Voting Record Date.

BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- ----------------------------------- ------------------------- ----------------

<S> <C> <C>
Jeffrey A. Calabrese 39,242(1) .77%

Mary H. Crotty 19,412(2) .38%

All directors and executive officers of 1,074,172(3) 20.35%
the Company as a group (13 persons)
</TABLE>

- ---------------------

(1) Mr. Calabrese has reported sole voting and investment power with
respect to all shares reported as beneficially owned in the table
above, except with respect to 11,664 shares as to which he reported
shared beneficial ownership. Included in the shares beneficially owned
by Mr. Calabrese are 1,712 shares subject to conversion rights with
respect to 20 of the Company's Convertible Subordinated Debentures and
options to purchase 20,120 shares of Common Stock.

(2) Ms. Crotty has reported sole voting and investment power with respect
to all shares reported as beneficially owned in the table above.
Included in the shares beneficially owned by Ms. Crotty are 428 shares
subject to conversion rights with respect to 5 of the Company's
Convertible Subordinated Debentures and options to purchase 14,655
shares of Common Stock.

(3) Includes shares held directly, 49,743 shares subject to conversion
rights with respect to 581 of the Company's Convertible Subordinated
Debentures, 181,005 shares subject to options granted by the Company
and shares held by controlled corporations and family members, with
respect to which shares the listed individuals or group members may be
deemed to have sole voting and investment power. The amounts exclude
shares held by family members that do not live in the same household as
such officers and directors and with respect to which beneficial
ownership is expressly disclaimed.
<PAGE> 6
PROPOSAL I -- ELECTION OF DIRECTORS

The Company's Board of Directors is currently composed of nine members.
Directors are generally elected to serve for three year terms or until their
respective successors are elected and qualified. The directors are divided into
three classes, with one-third of the directors elected annually.

The following table sets forth certain information regarding the
composition of the Company's Board of Directors, including terms of office and
share ownership as of the Voting Record Date. It is intended that the proxies
solicited on behalf of the Board of Directors (other than proxies in which the
vote is withheld as to the nominees) will be voted at the Meeting for the
election of the following nominees. If any nominee is unable to serve, the
shares represented by all valid proxies will be voted "For" the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why any nominee might be unable to serve if
elected. Except as set forth herein, there are no arrangements or understandings
between any director or nominee and any other person pursuant to which such
director or nominee was selected.

<TABLE>
<CAPTION>
PERCENT
DIRECTOR TERM TO OWNERSHIP OF
NAME AGE POSITIONS SINCE EXPIRE BENEFICIAL(1) CLASS
- ------ --- ----------- ------- -------- --------------- -------

NOMINEES
--------

<S> <C> <C> <C> <C> <C> <C>
Charles F. Valentine 57 Chairman of the Board and 1981 2000 216,860 4.26%
Chief Executive Officer
Robert L. Anderson 55 Director 1987 2000 184,331 3.64%
Donald E. Snow 72 Director 1987 2000 33,892(2) .67%

DIRECTORS REMAINING IN OFFICE
-----------------------------

Nicholas E. Rinaldi, D.D.S 56 Director 1992 1999 68,922 1.36%
Louis J. Sorboro 58 Director 1996 1999 112,766 2.22%
Paul V. Voinovich 54 Director 1987 1999 74,531 1.48%
Austin J. Mulhern 55 Director and President 1985 1998 169,827(3) 3.34%
James P. Myers 65 Director 1996 1998 52,313 1.03%
Larry E. Rogers 58 Director 1995 1998 85,372 1.68%
</TABLE>
- --------------------

(1) The nature of beneficial ownership for shares reported in this column
is sole voting and investment power, except as otherwise set forth in
these footnotes. Included in the shares beneficially owned by the named
individuals are options to purchase shares of Common Stock as follows:
Mr. Valentine - 46,795; Mr. Anderson - 1,000; Mr. Snow - 1,000; Dr.
Rinaldi - 4,000; Mr. Sorboro - 35,185; Mr. Voinovich - 1,000; Mr.
Mulhern - 33,400; Mr. Myers - 7,295; and Mr. Rogers - 1,000.

(2) Includes 31,180 shares in which Mr. Snow has reported shared ownership.

(3) Includes 50,940 shares in which Mr. Mulhern has reported shared
ownership.

The principal occupation of each Director of the Company is set forth
below. All Directors have held their present position for at least five years
unless otherwise indicated.

CHARLES F. VALENTINE. Mr. Valentine is Chairman of the Board and Chief
Executive Officer of Security Federal. He has been with Security Federal since
1980 in various capacities. Mr. Valentine has been Chairman of the Board and
Chief Executive Officer of the Company since its formation in December 1992. In
April 1996, Mr. Valentine was appointed to the Board of Directors of First
Federal.

ROBERT L. ANDERSON. Mr. Anderson is Chairman of the Board and Chief
Executive Officer of Wiseco Piston, Inc., a piston manufacturing company.

DONALD E. SNOW. Mr. Snow retired in 1987, after 19 years as District
Manager of the Ohio Edison Co., an electric utility company in Medina, Ohio.

3
<PAGE> 7
NICHOLAS E. RINALDI, D.D.S. Dr. Rinaldi is practicing dentistry with
the organization of Drs. Rhodes, Rinaldi and Associates, Inc. which operates
five offices in the Cleveland area. Dr. Rinaldi has been a practicing dentist
since 1967.

LOUIS J. SORBORO. Mr. Sorboro has served as President and Chief
Executive Officer of First Federal since 1976, and its holding company from
March 1994 until its acquisition by Security First in April 1996.

PAUL V. VOINOVICH. Mr. Voinovich is President and Secretary of
Voinovich Companies, a planning, construction and development company based in
Cleveland, Ohio.

AUSTIN J. MULHERN. Mr. Mulhern is President and Chief Operating Officer
of Security Federal, positions he has held since 1985. From 1985 to May, 1988,
he was also Chief Financial Officer of Security Federal. Mr. Mulhern has been
President and Chief Operating Officer of the Company since the formation of the
Company in December 1992. In April 1996, Mr. Mulhern was appointed to the Board
of Directors of First Federal.

JAMES P. MYERS. Mr. Myers served on the Board of Directors of First
Kent from March 1994 until its acquisition by Security First in April 1996. He
has also served on the Board of Directors of First Federal since 1972 and as
First Federal's Treasurer from 1975 to 1994. Mr. Myers has been a pharmacist at
Hale B. Thompson, Inc., a retail drug store located in Kent, Ohio since 1958. In
1989, he was appointed President of Hale B. Thompson, Inc.

LARRY E. ROGERS. Mr. Rogers is President and Chief Executive Officer of
the PIE Mutual Insurance Company, a Cleveland-based medical professional
liability insurer and has been associated with them since 1981.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

Meetings of the Company's Board of Directors are generally held at
least monthly. The Board of Directors met 12 times during fiscal 1997. During
fiscal 1997, no incumbent director attended fewer than 75% of the aggregate of
the total number of meetings of the Board of Directors and the total number of
meetings held by committees on which he served, except for Director Rogers.

The principal committee of the Company is the Audit Committee. The
Audit Committee was composed of outside Directors Anderson, Myers, Rinaldi,
Rogers, Snow and Voinovich during fiscal 1997. The Audit Committee reviews audit
reports and related matters of the Company and the Associations to ensure
effective compliance with regulatory and internal policies and procedures. The
Audit Committee met twice during fiscal 1997.

The Company also has a Stock Option Committee which is responsible for
determining awards under the Company's 1996 Stock Option and Incentive Plan (the
"Stock Option Plan"). Directors Anderson, Rinaldi, Snow and Voinovich currently
serve on this committee. The Stock Option Committee met once during fiscal 1997.

The Company does not have standing compensation or nominating
committees. The full Board of Directors of the Company acts as a nominating
committee for the annual selection of its nominees for election as directors.
While the Board of Directors will consider nominees recommended by others, it
has neither actively solicited recommendations for nominees nor established any
procedures for this purpose.

The Company has not paid any compensation to its executive officers
since its formation and does not presently anticipate paying any compensation to
such persons until the Company becomes actively involved in the operation or
acquisition of businesses other than the Associations. Security Federal,
however, has a standing compensation committee which is responsible for making
recommendations of the salaries, bonuses and incentives for all officers of
Security Federal. Directors Anderson, Myers, Rinaldi, Rogers, Snow and
Voinovich, all of whom are also directors of the Company, were the members of
the compensation committee for Security Federal during fiscal 1997. During
fiscal 1997, Security Federal's compensation committee met three times.

First Federal's entire Board of Directors, four of whom are also
directors of the Company, act as the compensation committee for First Federal.
Directors of First Federal who are also employees of First Federal do not
participate in compensation discussions relating to themselves. During fiscal
1997, First Federal's Board of Directors met twice to discuss compensation
matters.

4
<PAGE> 8
COMPENSATION OF DIRECTORS

Directors of the Company who are not employees of the Company or the
Associations ("Non-Employee Directors") are paid a fee of $150 per regular,
special or committee meeting of the Board of Directors attended. Certain
directors of the Company also serve on the Boards of one or both of the
Associations. At March 31, 1997, Directors Valentine and Mulhern, both of whom
are employees of the Company and/or the Associations ("Employee Directors"),
served on the Boards of both Security Federal and First Federal. Directors
Anderson, Myers, Rinaldi, Rogers, Snow and Voinovich, all of whom are
Non-Employee Directors, served on the Board of Security Federal and Directors
Sorboro, an Employee Director, and Myers, a Non-Employee director, served on the
Boards of both Security Federal and First Federal. Director Rogers, a
Non-Employee Director, resigned from the Board of Security Federal in April 1997
due to his excessive travel schedule which hindered his ability to attend
meetings.

During fiscal 1997, Non-Employee Directors of Security Federal received
an annual fee of $3,600 plus $700 per meeting of the Board of Directors of
Security Federal attended. Non-Employee Directors of Security Federal also
receive fees of $250 per committee meeting attended. During fiscal 1997, First
Federal paid each of its Non-Employee Directors an annual fee of $8,700 for
services rendered.

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth for the three years ended March 31,
1997, information as to the compensation of the Company's Chief Executive
Officer and the other most highly compensated executive officers of the Company
or the Associations whose salary and bonus exceeded $100,000 during fiscal 1997.

SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
- ----------------------------------------------------------------------------------- --------------------
Restricted
Other Annual Stock All Other
Name and Principal Position Fiscal Salary Bonus Compensation Awards Options Compensation
Year ($) ($) ($)(1) ($) (#) ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles F. Valentine
Chairman of the Board and 1997 $198,125 $124,100 --- --- 9,765 $28,809(2)
CEO of the Company and 1996 188,225 81,225 --- --- 10,500 28,587
Security Federal 1995 178,400 85,500 --- --- 3,500 30,834

Austin J. Mulhern
President and COO of the 1997 $159,250 $ 99,800 --- --- 8,370 $31,198(3)
Company and Security 1996 151,275 65,250 --- --- 9,000 30,198
Federal 1995 143,363 68,700 --- --- 3,000 13,005

Jeffrey J. Calabrese
Vice President and Secretary 1997 $ 78,675 $ 35,000 $12,429 --- 4,650 $18,323(4)
of the Company and Security 1996 74,925 25,600 $10,657 --- 5,000 17,096
Federal 1995 71,000 27,000 --- --- 1,500 7,787

Mary H. Crotty
Vice President, Treasurer and 1997 $ 81,000 $ 35,000 --- --- 4,185 $ 8,813(5)
Chief Financial Officer of the 1996 74,000 22,800 --- --- 4,500 7,296
Company and Security Federal 1995 60,029 24,000 --- --- 1,000 6,514

Louis J. Sorboro
President of First Federal 1997 $112,074 $ 31,400 --- --- --- $ 8,597(6)
1996 107,168 28,590 --- --- --- 7,146
1995 102,234 15,911 --- 127,745(7) 30,215 5,081
</TABLE>

5
<PAGE> 9
- -------------------------------------

(1) The named executive officers in the table did not receive any
additional benefits or perquisites which, in the aggregate, exceeded
the lesser of 10% of their salary and bonus or $50,000, except for Mr.
Calabrese who received benefits in fiscal 1997 and 1996 of $8,154 and
$6,408, respectively, in connection with the use of a Company car,
$3,803 and $3,793, respectively, paid on behalf of Mr. Calabrese for
club dues and $472 and $456, respectively paid on behalf of Mr.
Calabrese for disability insurance.

(2) Includes annual premiums for a split dollar life insurance policy equal
to $16,600 (including certain amounts reimbursable to the Company for
its prior payments of premiums upon termination of the arrangement) and
contributions made by Security Federal to a 401(k) plan on behalf of
Mr. Valentine equal to $12,209 for fiscal 1997.

(3) Includes annual premiums for a split dollar life insurance policy equal
to $19,000 (including certain amounts reimbursable to the Company for
its prior payments of premiums upon termination of the arrangement) and
contributions made by Security Federal to a 401(k) plan on behalf of
Mr. Mulhern equal to $12,198 for fiscal 1997.

(4) Includes annual premiums for a split dollar life insurance policy equal
to $9,500 (including certain amounts reimbursable to the Company for
its prior payments of premiums upon termination of the arrangement) and
contributions made by Security Federal to a 401(k) plan on behalf of
Mr. Calabrese equal to $8,823 for fiscal 1997.

(5) Includes contributions made by Security Federal to a 401(k) plan on
behalf of Ms. Crotty for fiscal 1997.

(6) Includes life insurance premiums of $643 and contributions of $7,954
made to a 401(k) plan by First Federal on behalf of Mr. Sorboro during
fiscal 1997.

(7) Represents the dollar value at the time of the grant of 12,590 shares
(adjusted pursuant to the acquisition of First Federal by the Company)
of restricted common stock granted to Mr. Sorboro in connection with
First Federal's mutual to stock conversion. At March 31, 1997, the
value of such shares of restricted stock was $232,915, based upon the
average of the closing bid and asked price of the Common Stock of
$18.50 per share, as reported on The Nasdaq Stock Market as of such
date.

The following table sets forth certain information concerning grants of
stock options pursuant to the Company's Stock Option Plan to the named officers
during the fiscal year ended March 31, 1997. No stock appreciation rights or
limited stock appreciation rights have been granted to date.

OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(2)
- --------------------------------------------------------------------------------- -------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles F. Valentine 9,765 21% $12.25 05-21-06 $75,361 $190,125
Austin J. Mulhern 8,370 18% $12.25 05-21-06 $64,616 $162,964
Jeffrey J. Calabrese 4,650 10% $12.25 05-21-06 $35,898 $ 90,536
Mary H. Crotty 4,185 9% $12.25 05-21-06 $32,308 $ 81,482
</TABLE>

(1) These options are all immediately exercisable.

(2) Represents the potential realizable value of the option grant assuming
that the market price of the underlying security appreciates in value
from the date of grant to the end of the option term (10 years) at the
annualized rates as set forth in the table above.

6
<PAGE> 10
The following table sets forth certain information concerning the
number and value of in-the-money (when the fair market value of the common stock
exceeds the exercise price of the option) stock options at March 31, 1997 held
by the named executive officers and stock options exercised during fiscal 1997.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)(1)
------------------------------ -----------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles F. Valentine --- --- 54,225 --- $582,858 ---
Austin J. Mulhern 40,225 $676,970 28,370 --- $218,883 ---
Jeffrey J. Calabrese --- --- 15,150 --- $114,848 ---
Mary H. Crotty 3,000 $ 37,860 9,685 --- $ 55,526 ---
Louis J. Sorboro --- --- 12,086 18,129 $101,039 $151,558
</TABLE>
- ----------------

(1) The value of options held is based upon the average of the bid and
asked price of the Company's common stock of $18.50 per share as quoted
on the Nasdaq National Stock Market on March 31, 1997, less the
respective exercise prices.

EMPLOYMENT AGREEMENTS

Security Federal maintains employment agreements with Messrs.
Valentine, Mulhern, Calabrese and Ms. Crotty. First Federal maintains an
employment agreement with Mr. Sorboro. The employment agreements provide for
initial annual base salaries in amounts not less than their current salaries.
Each of the agreements is for a term of three years which may be extended for an
additional one year in addition to the then-remaining term if Security Federal's
or First Federal's Board of Directors, as the case may be, reviews and approves
the extension. The agreements provide for termination upon the employee's death,
for cause or in certain events specified by regulations or by the Board of
Directors at any time, but without prejudice to the employee's right to
compensation or benefits under the employment agreements. The employment
agreements are terminable by the employees upon 90 days written notice to
Security Federal or First Federal, as applicable. Each of the employment
agreements provides for payment to the employee of 299% of base amount of
compensation as defined by the Internal Revenue Code in the event there is a
change in control of Security Federal or First Federal, as appropriate, where
employment terminates involuntarily in connection with such change in control or
within 12 months thereafter. If an event triggering the change in control
provision under such agreements occurred at March 31, 1997, the amounts payable
to Messrs. Valentine, Mulhern, Calabrese and Sorboro and Ms. Crotty would have
been approximately $807,000, $648,000, $288,000, $358,000 and $260,000,
respectively. The agreements also provide, among other things, for participation
in an equitable manner in employee benefits applicable to executive personnel.
The respective committees for the Associations determined that each of Messrs.
Valentine, Mulhern, Calabrese and Sorboro and Ms. Crotty had met the
requirements and standards of the Associations relative to executive officer
performance and as such the employment agreement of each was renewed for one
additional year.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

General. The Company has not paid any cash compensation to its
executive officers since its formation. All executive officers of the Company
also currently hold positions with Security Federal, the Company's lead bank
subsidiary, and receive cash compensation from Security Federal. The function of
administering the executive compensation policies of Security Federal is
currently performed by the Compensation Committee of the Board of Directors of
Security Federal. Messrs. Valentine and Mulhern are excluded from discussion and
board deliberations

7
<PAGE> 11
regarding compensation paid to them as executive officers. For compensation of
executive officers other than themselves, Messrs. Valentine and Mulhern make
recommendations to the Compensation Committee for the compensation of all
executive officers of Security Federal. In this process, the officers are
evaluated as to their performance during the year and compared to Security
Federal's performance, thrift industry compensation surveys and comparable
positions at other thrift institutions. The Compensation Committee generally
follows management's recommendations. The Compensation Committee, all of whom
are independent board members, determines the compensation for Messrs. Valentine
and Mulhern.

Base salaries and annual adjustments are determined by evaluating the
responsibilities of the position held and the experience of the individual.
Reference is also made to the competitive marketplace for management talent,
including a comparison of base salaries for comparable positions within the
thrift and banking industry to ensure that base salaries approximate the average
of comparable salary ranges. Adjustments also reflect the performance of
Security Federal, the performance of the executive and any increased
responsibilities assumed by the executive.

Compensation of Executive Officers. Adopted in 1992 as a formal
incentive compensation program for executive officers of Security Federal, the
Management Incentive Compensation Plan focuses on return on assets and return on
shareholders' equity as specific annual corporate goals that should lead to the
enhancement of shareholder value. The plan provides for a bonus pool in an
amount that is based on Security Federal's pretax return on assets for the plan
year, as adjusted for nonrecurring items and extraordinary gains or losses not
related to operations. Incentive compensation awards under the plan are based on
Security Federal's achievement of predetermined goals relating to return on
average equity, return on average assets and overall corporate performance and
on the participants' achievement of goals relating to their individual
contributions to Security Federal. Threshold, target and maximum goals for
corporate performance are generally established at the beginning of each fiscal
year. Participants, depending on their salary grade levels, can receive
incentive compensation awards that vary between a maximum of 25% and 65% of a
participant's aggregate base salary. For fiscal 1997 bonuses were paid in an
aggregate amount of $570,800 or 68.9% of the maximum bonus pool allowable based
on Security Federal's adjusted pretax return on assets for the year.

Effective April 10, 1996, the Company acquired First Federal Savings
Bank of Kent ("First Federal"). First Federal's Management Incentive
Compensation Plan was established January 1995. Because First Federal had a much
different capital structure than Security Federal, First Federal's Management
Incentive Compensation Plan was designed to focus solely on First Federal's
return on assets. Participants, depending on their salary grade levels, can
receive incentive compensation awards that vary between a maximum of 14% and 27%
of a participant's aggregate base salary. For fiscal 1997, First Federal
employees received bonuses in an aggregate amount of $66,700 or 94.6% of the
maximum bonus pool allowable based on First Federal's adjusted pretax return on
assets for the year. The function of administering the executive compensation
policies of First Federal is currently performed by First Federal's Board of
Directors. Mr. Sorboro is excluded from discussion and board deliberations
regarding compensation paid to him as an executive officer. For compensation of
executive officers other than himself, Mr. Sorboro makes recommendations to
First Federal's Board of Directors for the compensation of all executive
officers of First Federal. First Federal's compensation practices follow a
methodology similar to Security Federal.

The Company recently engaged the services of a nationally recognized
compensation consulting firm to provide a comprehensive compensation study
concerning the executive compensation practices for the Company's two thrift
subsidiaries. The comprehensive compensation study, when delivered to the
Company, may result in amendment or consolidation of the Management Incentive
Compensation Plans maintained by Security Federal and First Federal, as well as
revision of other elements of executive compensation.

Because the Compensation Committee views Messrs. Valentine and Mulhern
as having the greatest impact on corporate performance the independent Board
members have established a compensation philosophy of providing base pay and
incentive compensation for Security Federal's top two executive officers
reflective of Security Federal's superior financial performance relative to
comparably situated thrifts. Compensation Committee members also expressed their
philosophy that base salary and incentive compensation for Messrs. Valentine and
Mulhern at levels near the top percentiles in thrift industry compensation
surveys were contingent on satisfactory regulatory examinations relative to (i)
safety and soundness, (ii) Community Reinvestment Act compliance and (iii)
regulatory compliance. For other than Messrs. Valentine and Mulhern, the
Compensation Committee seeks to establish executive officer base

8
<PAGE> 12
salaries at a level commensurate with the thrift subsidiary's corporate
performance, peer group competitors, and the individual officer's performance.

Stock options have been included as key elements in the total executive
officer compensation package for many years. Equity-based compensation provides
a long-term link between the results achieved for shareholders and the rewards
provided to key executive officers. As a result of Security First exceeding
targeted performance objectives for fiscal 1997, the Stock Option Committee
granted options on May 20, 1997 representing the right to purchase 73,500 shares
of Common Stock. Directors and executive officers named in the Summary
Compensation Table received options to purchase Common Stock as follows: Mr.
Valentine - 12,000 shares; Mr. Mulhern - 10,000 shares; Mr. Calabrese - 5,000
shares; Ms. Crotty - 5,000 shares; Mr. Sorboro - 5,500 shares; and Directors
Anderson, Myers, Rinaldi, Rogers, Snow and Voinovich - 1,000 shares each.
Certain of the options granted to Messrs. Valentine, Mulhern, Calabrese, Sorboro
and Ms. Crotty are subject to future vesting requirements. The remaining 30,000
options were granted to other officers and employees of the Company and the
Associations.

Through the programs described above, a significant portion of the
executive compensation program is linked directly to individual and corporate
performance and long-term stock price appreciation. The Compensation Committee
continues to review all elements of executive compensation to insure that the
total compensation program, and each element therein, meets the business
objectives and philosophy of the Company's two thrift subsidiaries, as discussed
above.

In 1993, Section 162(m) was added to the Internal Revenue Code, the
effect of which is to eliminate the deductibility of compensation over $1
million, with certain exclusions, paid to certain highly compensated executive
officers of publicly held corporations, such as, in the Company's case, those
executive officers identified in the "Summary Compensation Table." Section
162(m) applies to all remuneration (both cash and non-cash) that would otherwise
be deductible for tax years beginning on or after January 1, 1994, unless
expressly excluded. While the current compensation of each of the Company's
executive officers is well below the $1 million threshold, if certain executives
exercise sufficient stock options, it could be possible for the executive's
compensation to exceed $1 million.

As a general rule, it will be the Stock Option Committee's policy to
take into account tax and financial accounting considerations in connection with
the granting of options or other forms of grants and awards under the Company's
Stock Option and Incentive Plan. The Board of Directors through its Stock Option
Committee (in the case of stock option grants and other awards to executive
officers) does not expect that grants or awards will be made which would exceed
the limit on deductibility.

Compensation of Chief Executive Officer. The base salary of Mr.
Valentine as the Chief Executive Officer was increased in fiscal 1997 by 6.0% as
a result of Security Federal exceeding targeted performance objectives.

Like other executive officers, Mr. Valentine participated in the
Management Incentive Compensation Plan. Mr. Valentine, as well as President
Mulhern, is eligible to receive up to 65% of base salary in short-term incentive
compensation. Because Security Federal's core pretax earnings increased 20% on
an annualized basis, the Compensation Committee authorized a 1997 incentive
compensation award to Mr. Valentine in the amount of 60% of current base salary.
The 1997 incentive compensation award represents an amount approximately 50%
greater than 1996's incentive compensation award. In contrast, 1996 overall
financial performance decreased from 1995's results and accordingly incentive
compensation awards during 1996 were determined to correlate with Security
First's diminished profitability.

9
<PAGE> 13
In reviewing Mr. Valentine's performance as Chief Executive Officer and
the justification for Security Federal to renew his employment agreement for an
additional year, the Compensation Committee favorably considered Mr. Valentine's
performance relative to the following factors (without, however, assigning any
such factor a specific weight): corporate performance (return on assets and
return on equity), the Company's stock price performance, the Company's growth
in loan volume and the compliance posture of Security Federal.

Compensation Committee of Security Federal

Robert L. Anderson
James P. Myers
Nicholas E. Rinaldi, D.D.S.
Larry E. Rogers
Donald E. Snow
Paul V. Voinovich

Board of Directors of First Federal

Richard E. Dunn Louis J. Sorboro
Joseph Giulitto Charles F. Valentine
Austin J. Mulhern Richard C. Wiland
James P. Myers John A. Williams

STOCK PERFORMANCE GRAPH

The following graph shows the performance of Security First's stock
(based on an assumed $100 investment) since April 1, 1992 in comparison to the
Nasdaq Market Index and the Media General Savings and Loan Index.

03/31/92 03/31/93 03/31/94 03/31/95 03/31/96 03/31/97
-------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Security First Corp. ..... $ 100.00 $ 200.50 $ 230.58 $ 295.84 $ 275.86 $ 438.54
Selected Thrift Index .... 100.00 143.33 147.54 167.18 236.49 329.24
Nasdaq Market Index ...... 100.00 111.91 129.33 137.21 184.56 206.47
</TABLE>

10
<PAGE> 14
PROPOSAL II - AMENDMENT TO SECURITY FIRST'S CERTIFICATE OF INCORPORATION

On May 20, 1997, the Board of Directors unanimously approved and
recommended that the shareholders of Security First consider and approve an
amendment to Article FOURTH of the Company's Certificate of Incorporation (the
"Certificate") that would increase the number of authorized shares of the
Company's Common Stock from ten million (10,000,000) shares to twenty million
(20,000,000) shares. The increase in the number of authorized shares is for
general corporate purposes. The Company currently has no plans to issue these
additional shares. To be adopted, this proposal requires the affirmative vote of
the holders of a majority of all of the outstanding shares of Common Stock of
the Company entitled to vote thereon at the Meeting. The Board of Directors
believes that this proposed amendment is in the best interests of the Company
and its shareholders.

Article FOURTH, paragraph A. of the Certificate, as amended by
the proposed amendment, is set forth below:

FOURTH: A. The total number of shares of all classes of stock
which the Company shall have the authority to issue is twenty-one
million (21,000,000) consisting of:

(a) one million (1,000,000) shares of preferred stock, par
value one cent ($.01) per share (the "Preferred Stock"); and

(b) twenty million (20,000,000) shares of common stock, par
value one cent ($.01) per share (the "Common Stock").

The Board of Directors considers the proposed increase in the number of
authorized shares of Common Stock desirable because it would give the Board the
necessary flexibility to issue Common Stock in connection with stock dividends
and stock splits, acquisitions, financings and employee benefits and for other
general corporate purposes without the expense and delay incidental to obtaining
shareholder approval of an amendment to the Certificate increasing the number of
authorized shares at the time of such action, except as may be required for a
particular issuance by Delaware law or the rules of any stock exchange on which
the Company's securities may then be listed. For example, The Nasdaq Stock
Market currently requires shareholder approval as a prerequisite to listing
shares in several instances, including in connection with acquisition
transactions where the present or potential issuance of shares could result in
an increase in the number of shares of common stock outstanding by 20 percent or
more.

As of the Voting Record Date, no shares of Preferred Stock and
5,048,793 shares of Common Stock were issued and outstanding. The issuance of
Common Stock by the Company in connection with its acquisition of First Kent
Financial Corporation in April 1996 and three previous stock splits (paid in the
form of stock dividends) in 1994, 1993 and 1990 has reduced the number of
authorized but unissued shares substantially. Moreover, on May 20, 1997, the
Board of Directors declared a 3-for-2 stock split (to be paid in the form of a
stock dividend) payable on July 31, 1997 to holders of record of Security First
Common Stock on July 15, 1997. Approximately 2,524,396 additional shares of
Common Stock will be issued pursuant to the 3-for-2 stock split. Further, as of
the Voting Record Date, approximately 1,799,392 shares (adjusted for the 3-for-2
stock split discussed above) of Common Stock may be issued in the aggregate
pursuant to the Company's Stock Option Plan and in connection with the
conversion rights with respect to the Company's Convertible Subordinated
Debentures. This leaves a balance of approximately 627,419 authorized shares of
Common Stock available for future use.

The additional shares of Common Stock for which authorization is being
sought would be identical to the shares of Common Stock of the Company now
authorized. Holders of Common Stock do not have preemptive rights to subscribe
to additional securities which may be issued by the Company. In this regard, the
issuance of additional shares of Common Stock may have a dilutive effect on
earnings per share and on the equity and voting power of existing holders of
Common Stock. The Company may consider repurchasing its shares in the future in
order to minimize or avoid any such dilutive effects.

11
<PAGE> 15
The issuance of additional shares of Common Stock by the Company may
potentially have an antitakeover effect by making it more difficult to obtain
shareholder approval of various actions, such as a merger or removal of
management. The issuance of authorized shares of Preferred Stock could also make
it more difficult to obtain shareholder approval of such actions, particularly
in light of the power of the Board of Director to specify certain rights and
preferences of the Preferred Stock, such as voting rights, without shareholder
approval. Under the Certificate, the Board has the authority to issue authorized
shares of Preferred Stock in series and to fix the number, designation, relative
rights, preferences and limitations of the shares of each series of Preferred
Stock, subject to Delaware law and the Certificate. The authority of the Board
includes the right to fix for each series the dividend rate, redemption price,
liquidation rights, sinking fund provisions, conversion rights and voting
rights. Until the Board determines the specific rights, preferences and
limitations of any shares of Preferred Stock to be issued, the actual effect on
the holders of Common Stock of the issuance of such shares cannot be
ascertained. However, such effects might include restriction on dividends of
Common Stock if dividends on Preferred Stock are in arrears, dilution of the
voting power of the Common Stock to the extent that any series of Preferred
Stock has voting rights, and reduction of amounts available on liquidation as a
result of any liquidation preference granted to any series of Preferred Stock.
The Company is neither seeking to increase the authorized shares of Preferred
Stock available under the Certificate nor does it currently have any plans to
issue any Preferred Stock.

The Company has in place certain other provisions which have an
antitakeover effect. The Company's Certificate includes provisions which
provide, among other things, limited voting rights of beneficial owners of more
than 10% of the Common Stock, staggered terms for directors (see "Election of
Directors"), noncumulative voting for directors, limits on the calling of
special meetings, and a fair price/supermajority vote requirement for certain
business combinations. In addition, the Company's bylaws contain a provision
requiring any shareholder who wishes to make a nomination for director at an
annual shareholder's meeting to give written notice to the Company at least 60
days in advance of the meeting. Additionally, certain executive officers of the
Company have employment agreements with the Associations containing severance
provisions which could be triggered in the event of termination of employment
following an change of control of the Associations or the Company, therefore
making an acquisition more costly to the acquiror. See "Executive Compensation -
Employment Agreements."

The increase in the authorized shares of Common Stock has not been
proposed for an antitakeover-related purpose and the Board of Directors and
management have no knowledge of any current efforts to obtain control of the
Company or to effect a large accumulation of its Common Stock.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION.

PROPOSAL III -- RATIFICATION OF APPOINTMENT OF AUDITORS

The Board of Directors has renewed the Company's arrangement for
Deloitte & Touche LLP to be its auditors for the 1998 fiscal year, subject to
the ratification of the appointment by the Company's shareholders. A
representative of Deloitte & Touche LLP is expected to attend the Meeting to
respond to appropriate questions and will have an opportunity to make a
statement if he or she so desires.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 1998.

SHAREHOLDER PROPOSALS

In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the Company's main office, 1413
Golden Gate Boulevard, Mayfield Heights, Ohio 44124 no later than March 2, 1998.
Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended.

12
<PAGE> 16
OTHER MATTERS

The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Charles F. Valentine

Charles F. Valentine
Chairman of the Board and
Chief Executive Officer

Mayfield Heights, Ohio
June 27, 1997

13
<PAGE> 17

APPENDIX A

SECURITY FIRST CORP.

INDEX

Page
----

Description of the Company's Business ................................ A-2

Five Year Summary Selected Consolidated Financial Information ........ A-3

Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................... A-5

Independent Auditors' Report ......................................... A-15

Consolidated Financial Statements .................................... A-16

Notes to Consolidated Financial Statements ........................... A-20

Market Price and Dividend Information ................................ A-43

Independent Auditors ................................................. A-43

Board of Directors and Executive Officers ............................ A-44

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED MARCH 31, 1997 IS AVAILABLE TO SHAREHOLDERS FREE OF CHARGE. REQUESTS
SHOULD BE DIRECTED TO MARY H. CROTTY, VICE PRESIDENT, SECURITY FIRST CORP., 1413
GOLDEN GATE BOULEVARD, MAYFIELD HEIGHTS, OHIO 44124.

A-1
<PAGE> 18
DESCRIPTION OF THE BUSINESS

Security First Corp. ("Security First") is a Delaware corporation
organized in 1992, the principal assets of which are Security Federal Savings
and Loan Association of Cleveland ("Security Federal") and First Federal Savings
Bank of Kent ("First Federal" and together with Security Federal, the
"Associations"). Security First is also the parent company of SF Development Co.
The Company's primary business, through the Associations, consists of attracting
deposits from the general public and originating real estate loans and other
types of investments. Security Federal conducts its operations through its main
office located in Mayfield Heights, Ohio and 11 other full-service branch
offices located in Medina, Chardon, Cleveland, Painesville, Geneva, Madison,
Parma Heights, Broadview Heights, Strongsville and Willoughby, Ohio. First
Federal conducts its operations through its main office located in Kent, Ohio
and its full service branch office located in Ravenna, Ohio.

The Company's main office is located at 1413 Golden Gate Boulevard,
Mayfield Heights, Ohio 44124. The Company's telephone number at this address is
(216) 449-3700.

A-2
<PAGE> 19
SECURITY FIRST CORP.

FIVE YEAR SUMMARY

SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS Year Ended March 31,(1)
- ----------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Dollars in thousands, except per share amounts)

<S> <C> <C> <C> <C> <C>
Interest income............................ $ 49,178 $ 43,593 $ 39,410 $ 38,578 $ 39,024
Interest expense........................... 25,563 22,608 18,123 18,000 20,539
-------- -------- -------- -------- --------
Net interest income...................... 23,615 20,985 21,287 20,578 18,485
Provision for loan losses.................. 323 377 582 695 918
-------- -------- -------- -------- --------
Net interest income after provision for
loan losses............................ 23,292 20,608 20,705 19,883 17,567
Other income............................... 1,698 1,699 1,418 1,518 1,567
Merger expenses............................ --- (737) --- --- ---
Terminated merger costs.................... --- --- (504) --- ---
Amortization of goodwill................... (107) (111) (112) (111) (101)
SAIF assessment............................ (2,567) --- --- --- ---
Other expenses............................. (12,535) (12,519) (11,393) (11,275) (10,151)
Federal income tax......................... (3,371) (3,334) (3,414) (3,433) (3,199)
-------- -------- -------- -------- --------
Income before extraordinary charge and
cumulative effect of accounting change... 6,410 5,606 6,700 6,582 5,683
Extraordinary charge for prepayment of
debt, net of federal income tax benefit.. --- --- --- --- (1,896)
Cumulative effect of accounting change
for income taxes......................... --- --- --- 1,168 ---
-------- -------- -------- -------- --------
Net income................................. $ 6,410 $ 5,606 $ 6,700 $ 7,750 $ 3,787
======== ======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
SUMMARY OF FINANCIAL CONDITION At March 31,(1)
- ----------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Dollars in thousands, except per share amounts)

<S> <C> <C> <C> <C> <C>
Cash and deposits with banks............... $ 4,685 $ 6,314 $ 7,513 $ 8,067 $ 7,207
Investments, interest-bearing deposits,
federal funds sold, and short-term
investments.............................. 35,555 40,782 45,245 46,786 33,995
Loans receivable and mortgage-backed
securities............................... 570,498 478,906 435,119 402,926 394,895
Goodwill................................... 1,028 1,135 1,246 1,358 1,398
Other assets............................... 22,995 20,090 18,628 17,773 14,718
-------- -------- -------- -------- --------
Total assets........................... $634,761 $547,227 $507,751 $476,910 $452,213
======== ======== ======== ======== ========

Deposits................................... $445,182 $410,737 $393,314 $387,776 $373,875
Borrowings................................. 123,700 76,858 59,347 47,513 44,900
Other liabilities.......................... 6,444 5,251 4,881 4,920 4,087
Shareholders' equity....................... 59,435 54,381 50,209 36,701 29,351
-------- -------- -------- -------- --------
Total liabilities and equity........... $634,761 $547,227 $507,751 $476,910 $452,213
======== ======== ======== ======== ========
</TABLE>

- --------------

(1) On April 10, 1996 Security First Corp. acquired First Kent Financial
Corporation, the holding company for First Federal Savings Bank of
Kent. The acquisition was accounted for as a pooling of interest and,
accordingly, the financial statements for the Company for all periods
presented have been restated to reflect the acquisition.

A-3
<PAGE> 20
<TABLE>
<CAPTION>
OTHER STATISTICAL AND OPERATING DATA Year Ended March 31,
- ----------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Dollars in thousands, except per share amounts)

<S> <C> <C> <C> <C> <C>
Return on average assets .................. 1.07% 1.07% 1.37% 1.64% 0.86%
Excluding non-recurring items (1) ....... 1.36% 1.21% 1.44% 1.40% 1.30%

Return on average equity .................. 11.33% 10.64% 14.58% 23.23% 13.39%
Excluding non-recurring items (1) ....... 14.33% 12.04% 15.30% 19.73% 20.10%

Equity to assets:
Average for the year .................... 9.47% 10.02% 9.42% 7.08% 6.45%
At year end ............................. 9.36% 9.94% 9.89% 7.70% 6.49%

Net interest income to other
expenses ................................ 188.39% 167.63% 186.84% 182.51% 182.10%

Efficiency ratio (2) ...................... 49.52% 55.19% 50.18% 51.03% 50.62%
Net yield on average interest-earning
assets (3) .............................. 4.12% 4.16% 4.57% 4.56% 4.39%
Interest rate spread during period (4) 3.78% 3.80% 4.30% 4.39% 4.20%

Per share information (5):
Earnings per share (8) .................. $ 1.17 $ 1.06 $ 1.24(10) $ 1.73(10) $ 0.87(10)
Core earnings per share (6)(8) .......... $ 1.46 $ 1.19 $ 1.29(10) $ 1.45(10) $ 1.42(10)
Dividends paid per share (9) ............ $ 0.44 $ 0.40 $ 0.31 $ 0.18 $ 0.12
Dividend payout ratio (8) ............... 37.61% 37.74% 25.00% 10.40% 13.79%
Book value per share .................... $ 11.88 $ 11.03 $ 10.35 $ 11.00 $ 8.92
Tangible book value per share (7) ....... $ 11.67 $ 10.80 $ 10.09 $ 10.59 $ 8.50

Weighted average shares
outstanding (5):
Common shares............................ 4,956,594 4,779,760 4,675,361(10) 3,315,886(10) 3,289,582(10)
Common and common stock
equivalent shares...................... 5,826,619 5,677,885 5,618,910(10) 4,250,407(10) 3,478,586(10)
</TABLE>

- ---------------

(1) The non-recurring items are SAIF assessment in the current period, and
merger expenses, terminated merger costs, extraordinary charge for
prepayment of debt, and cumulative effect of an accounting change in
the prior periods.

(2) Non-interest expense less goodwill divided by the sum of net interest
income and other income, not including one-time gains or non-recurring
expenses.

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

(4) Average yield earned on interest-earning assets less average rates paid
on interest-bearing liabilities.

(5) All share and per share information has been adjusted for the stock
splits in fiscal 1994 and 1993.

(6) Represents earnings excluding gains (losses) on sale of assets and
before nonrecurring or extraordinary items.

(7) Represents shareholders' equity less goodwill divided by common shares
outstanding.

(8) Represents or utilizes fully diluted earnings, shares, and amounts, as
appropriate.

(9) The amounts herein are historical per share amounts declared and paid
by the Company, as adjusted for stock splits. No adjustment has been
made for the acquisition of First Kent Financial Corporation, which was
accounted for as a pooling of interests.

(10) Primary and fully diluted earnings per share of First Kent Financial
Corporation, former parent of First Federal, subsequent to First
Federal's mutual to stock conversion in June 1994 are calculated based
on net income subsequent to the stock conversion divided by the
weighted average shares outstanding subsequent to the stock conversion.
Primary and fully diluted earnings per share for the fiscal years ended
March 31, 1994 and 1993 (prior to First Federal's mutual to stock
conversion) do not include the results of First Federal.

A-4
<PAGE> 21
SECURITY FIRST CORP.

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

GENERAL

Security First Corp. ("Security First" or the "Company"), a savings and
loan holding company, is the parent corporation to Security Federal Savings and
Loan Association of Cleveland ("Security Federal"), First Federal Savings Bank
of Kent ("First Federal") and SF Development Co. Security Federal has 12
branches in a five-county area in Northeast Ohio. Security Federal has one
wholly-owned subsidiary, Security Financial Corporation ("Security Financial")
which is largely inactive. First Federal was acquired on April 10, 1996 in a
transaction that was accounted for as a pooling of interests and, accordingly,
the financial statements for the Company for all periods presented prior to the
acquisition have been restated to include the results of First Federal and its
former parent Company, First Kent Financial Corporation. First Federal, which
has two branches in Portage County, Ohio, operates as a separate subsidiary of
Security First. SF Development Co. was established in March 1994 for the purpose
of entering into joint ventures to purchase and develop land for residential
properties.

The Company's earnings depend primarily on its net interest income,
which is the difference between the amount it receives from interest earned on
its loans and investments and the amount it pays on its savings deposits and
borrowings. The Company's interest income and interest expense are significantly
impacted by general economic conditions, particularly changes in market interest
rates, government policies, and regulations. The operations of the Company can
also be affected by the economic conditions in its market area, Northeast Ohio.

Certain statements in this report that relate to Security First's
plans, objectives, or future performance may be deemed to be forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are based on Management's current expectations. Actual
strategies and results in future periods may differ materially from those
currently expected because of various risks and uncertainties. Additional
discussion of factors affecting Security First's business and prospects is
contained in the Company's periodic filings with the Securities and Exchange
Commission.

OVERVIEW OF FINANCIAL CONDITION

Total assets of nearly $635 million at year-end 1997 reflect an
increase of approximately 16% from $547 million at March 31, 1996. The Company's
16% growth in assets during the year ended March 31, 1997 was the result of a
$92.3 million increase in the Company's loan portfolio, which increase was
funded by increases in both retail savings deposits and Federal Home Loan Bank
borrowings. The level of liquid assets, including cash, deposits with banks,
federal funds sold, and qualifying investment securities, averaged 6.94% for
Security Federal and 11.86% for First Federal for the year ended March 31, 1997
as compared to 7.37% and 17.75%, respectively, for fiscal 1996.

The Company increased shareholders' equity in each of the years 1997,
1996 and 1995 through the retention of net earnings, after the payment of cash
dividends to shareholders. Both Security Federal and First Federal are
categorized as well-capitalized institutions by the Office of Thrift Supervision
("OTS") based on their regulatory capital ratios. See Note 13 of the Notes to
Consolidated Financial Statements.

A-5
<PAGE> 22
LENDING ACTIVITIES.

The following table shows the composition of the Company's loan
portfolio as of the dates indicated

<TABLE>
<CAPTION>
March 31,
----------------------------------
1997 1996 1995
-------- -------- --------
(In millions)
<S> <C> <C> <C>
Real Estate Loans:
Permanent - one-to four-family $ 236.0 $ 225.6 $ 213.9
Permanent - multi-family and commercial 169.5 132.9 113.3
Construction 105.5 64.8 59.8
Residential development 50.5 43.4 33.7
Lines of credit 17.7 15.7 14.7
Other loans 48.4 38.0 27.6
Less: net items (59.6) (44.8) (32.1)
-------- -------- --------
Total $ 568.0 $ 475.6 $ 430.9
======== ======== ========
</TABLE>

One- to four-family permanent real estate mortgage loans are generally
considered to have a lower level of credit risk because the collateral is
generally more liquid than multi-family and commercial real estate and not
subject to significant fluctuations in the near-term.

Multi-family and commercial real estate lending is generally considered
to involve a higher level of risk than does one- to four-family residential
lending due to the concentration of principal in a limited number of loans and
borrowers and the effects that general economic conditions have on real estate
development. In addition, the nature of these loans is such that the collateral
is less liquid than one- to four-family properties, and such loans are generally
less predictable and more difficult to evaluate and monitor. A significant
potential risk of loss is that the cash flows from the properties may be
inadequate to service the loan payments. The Company attempts to mitigate the
risks associated with this type of lending through its underwriting policies and
its monitoring of the properties, substantially all of which are located in its
market area.

The Company's construction loans often are larger individually, and
also generally involve a greater degree of risk, than its single-family mortgage
loans secured by existing homes. Repayment of construction loans usually is
dependent on both the successful completion of construction within the estimated
time and budget, and the successful marketing of the units. If loan defaults
resulting in foreclosure occur before construction is completed, the Company
would be required either to arrange for the completion of construction or the
disposition of the unfinished units. In either case, the Company may incur
substantial additional costs in the administration of the loans. If loan
defaults resulting in foreclosure occur after construction is completed, the
Company may incur additional costs in marketing and selling the completed units.
The Company attempts to minimize these risks by making construction loans to
established builders in its market area, by monitoring the quality, progress,
and cost of construction and originating loans mainly on single-family, pre-sold
residences.

At March 31, 1997, $80.5 million of Security First's construction loan
portfolio consisted of loans on single-family residences, the majority of which
were pre-sold, i.e. the structure was not built on a speculative basis and the
contract purchaser had a commitment for permanent financing (generally not from
the Company) prior to the commencement of construction.

The Company, through its subsidiary SF Development Co., makes land
acquisition and development loans for single-family residential projects,
usually to developers that have pre-sold some of the lots. All of these
residential development loans are located in the Company's market area.
Residential development lending generally is considered to involve risks similar
to those discussed above regarding multi-family and commercial real estate
lending.

A-6
<PAGE> 23
ASSET QUALITY

General. The Company's goal is to maintain the asset quality level of
its loan portfolio through the use of conservative lending policies and
underwriting standards. The majority of loan delinquencies that do arise are
generally remedied within 90 days as a result of the Company's collection
efforts. At March 31, 1997, the Company's percentage of non-performing assets to
total assets was .26%.

Systematic detailed reviews of the Company's multi-family and
commercial loan portfolios are performed regularly in order to evaluate any
potential credit losses. For loan balances that are significant in total but not
individually significant and are well collateralized, the portfolios are
reviewed in total. These reviews consider, among other factors, economic
conditions, delinquency patterns, and historical loss experiences in the loan
portfolio in order to assess potential credit losses.

Management is of the opinion that the allowance for loan losses at
March 31, 1997, which represents 302% of total nonperforming loans, is adequate
to meet potential losses in the portfolio. It must be understood, however, that
there are inherent risks and uncertainties related to the operation of a
financial institution. By necessity, the Company's consolidated financial
statements are dependent upon estimates, appraisals, and evaluations of loans.
Therefore, the possibility exists that abrupt changes in such estimates,
appraisals, and evaluations might be required because of changing economic
conditions and the economic prospects of borrowers.

Non-performing Assets. Generally, it is the Company's policy to
discontinue the accrual of interest on all loans which are 90 days or more past
due or when collectibility of the loan is in doubt. The following table
summarizes non-performing assets at the end of the three most recent years.

<TABLE>
<CAPTION>
March 31,
----------------------------------
1997 1996 1995
----------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
NON-PERFORMING ASSETS:
NON-ACCRUING LOANS $ 1,643 $ 2,006 $ 3,050
ACCRUING LOANS PAST DUE 90 DAYS --- 522 278
------- ------- -------
TOTAL NON-PERFORMING LOANS 1,643 2,528 3,328
REAL ESTATE OWNED 5 39 241
------- ------- -------
TOTAL NON-PERFORMING ASSETS $ 1,648 $ 2,567 $ 3,569
======= ======= =======

ALLOWANCE FOR LOAN LOSSES $ 4,968 $ 4,572 $ 4,283
======= ======= =======

RATIOS:
NON-PERFORMING ASSETS TO TOTAL ASSETS 0.26% 0.47% 0.70%
NON-PERFORMING LOANS TO TOTAL LOANS (BEFORE ALLOWANCE FOR 0.29% 0.53% 0.76%
LOAN LOSSES)
ALLOWANCE FOR LOAN LOSSES TO NON-PERFORMING LOANS 302.37% 180.85% 128.70%
NET CHARGE-OFFS (RECOVERIES) TO AVERAGE LOANS FOR THE YEAR (0.01)% 0.02% 0.07%
</TABLE>

Potential Problem Loans. As of March 31, 1997, there were three
commercial loans totaling $1.4 million which are not reflected in the above
table where known information about possible credit problems of the borrower
caused management to have doubts as to the ability of the borrower to comply
with present loan repayment terms and which may result in disclosure of such
loans in the future.

Although management believes that these loans are adequately secured
and no material loss is expected, certain circumstances may cause the borrower
to be unable to comply with the present loan repayment terms at some future
date. The Company is closely monitoring the status of these loans.

A-7
<PAGE> 24
Allowance for Loan Losses. The Company's provision for loan losses was
$323,000 for the fiscal year ended March 31, 1997 compared to $377,000 and
$582,000 for the previous two years. Although management believes that the
procedures used to evaluate potential losses in the loan portfolio have resulted
in an adequate allowance for loan losses in accordance with generally accepted
accounting principles, recovery of the carrying value of such loans is dependent
to a great extent on economic, operating, and other conditions that may be
beyond the Company's control and, therefore, future adjustments to the allowance
for loan losses may be necessary.

CAPITAL AND DIVIDENDS

The OTS, has implemented a statutory framework for capital requirements
which establishes five categories of capital strength, ranging from "well
capitalized" to "critically undercapitalized." An institution's category depends
upon its capital level in relation to relevant capital measures, including two
risk-based capital measures, a leverage capital measure, and certain other
factors. At fiscal year-end 1997, both Security Federal and First Federal
exceeded the level required to meet the definition of a well-capitalized
institution. See Note 13 of the Notes to Consolidated Financial Statements for a
further analysis of both Security Federal's and First Federal's regulatory
capital.

The Company has paid regular cash dividends each quarter since June
1988. During the current fiscal year, a total of $2.2 million ($.44 per share)
in dividends was declared and paid. The dividend payout rate as a percentage of
earnings per share (fully diluted) was 37.61%, 37.74%, and 25.00% for the fiscal
years ended March 31, 1997, 1996 and 1995, respectively.

Cash dividend payout levels are continually reviewed by management and
the Board of Directors. The Company intends to continue its policy of paying
quarterly dividends; however, such payment will depend on a number of factors,
including capital requirements, regulatory limitations, the Company's financial
condition and results of operations, and Security Federal's and First Federal's
ability to pay dividends to the Company. At present, the Company has no
significant source of income other than dividends from the Security Federal and
First Federal; therefore, the Company depends upon such dividends to accumulate
earnings for payment of cash dividends to its shareholders. See Note 12 of the
Notes to Consolidated Financial Statements for additional restrictions on
dividend payments.

LIQUIDITY

The term "liquidity" refers to the ability of the Company to generate
adequate amounts of cash to meet its needs. The Company's liquidity is a measure
of its ability to fund loans and meet withdrawals of deposits and other cash
outflows in a cost effective manner. The principal sources of funds for the
Company's operations are cash flows generated from earnings, savings deposits,
scheduled amortization and prepayment of loans and mortgage-backed securities,
maturities of investment securities, and borrowings from the Federal Home Loan
Bank ("FHLB") of Cincinnati. Because a significant portion of the Company's loan
originations consists of relatively short-term construction and development
loans, the funding source for new loan originations is frequently derived from
maturities and prepayments of other construction loans.

While loan and mortgage-backed securities payments and maturing
investments are relatively stable sources of funds, deposit flows and loan
prepayments are greatly influenced by prevailing interest rates, economic
conditions and competition.

Management regularly reviews the Company's need for cash to fund its
operations and believes, as in the past, that the aforementioned resources are
adequate for its projected requirements. Federal regulations require that
Security Federal and First Federal maintain an average daily balance of liquid
assets of at least 4% of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. The
average liquid assets ratio for the month of March 1997 was 6.81% and 10.76% for
Security Federal and First Federal, respectively. The Company invests excess
cash in federal funds and short-term investments and also receives interest on
excess funds held in its FHLB demand account. The cash management policies of
the Company are designed to keep liquidity levels within the Federal regulatory
requirements.

A-8
<PAGE> 25
The Company has a relatively stable retail deposit base and, therefore,
management believes that significant additional borrowings will not be necessary
to maintain its current liquidity position. Certificates of deposit scheduled to
mature in one year or less at March 31, 1997 totaled approximately $232 million.
Management believes that a significant portion of the amounts maturing during
fiscal 1998 will be reinvested with the Company because they are retail deposits
and historically such deposits have remained with the Company; however, no
assurances can be made that this will occur.

As of March 31, 1997, the Company had commitments to originate loans
and commitments on unfunded lines of credit (typically secured by single-family
residences) totaling $54.3 million. There were no commitments to purchase or
sell loans at March 31, 1997. The Company anticipates that it will have
sufficient funds available during fiscal 1998 from loan and mortgage-backed
security repayments and investment maturities to meet current and future loan
commitments.

ASSET AND LIABILITY MANAGEMENT

Security Federal and First Federal each have an Asset and Liability
Committee to monitor the level and relative mix of their respective
interest-sensitive assets and liabilities. The Asset and Liability Committees of
Security Federal and First Federal includes senior management representatives of
the respective institutions.

The asset and liability management programs of Security Federal and
First Federal are designed to minimize the impact of significant changes in
interest rates on net interest income. The key components of successful interest
rate and credit risk management include the monitoring and management of rate
sensitivity and repricing characteristics of the balance sheet components, as
well as the creditworthiness of borrowers and the quality of assets.

Both Security Federal and First Federal, like other financial
institutions, are subject to interest rate risk to the extent that
interest-bearing liabilities mature or reprice on a different basis than
interest-earning assets. The OTS provides a Net Portfolio Value ("NPV") approach
to the quantification of interest rate risk. This approach calculates the
difference between the present value of expected cash flows from assets and the
present value of expected cash flows from liabilities, as well as cash flows
from off-balance sheet contracts.

Thrift institutions with greater than "normal" interest rate exposure
must take a deduction from their total capital available to meet their
risk-based capital requirement. The amount of the deduction is one-half of the
difference between (a) the institution's actual calculated exposure to a 200
basis point interest rate increase or decrease (whichever results in the greater
pro forma decrease in NPV) and (b) its "normal" level of exposure which is
defined as 2% of the present value of its assets. The regulation, however, will
not become effective until the OTS evaluates the process by which savings
associations may appeal an interest rate risk deduction determination. It is
uncertain as to when this evaluation may be completed.

Presented below, as of March 31, 1997, is an analysis of Security
Federal and First Federal's interest rate risk as measured by changes in NPV for
instantaneous and sustained parallel shifts in the yield curve, in 100 basis
point increments, up and down 400 basis points. This analysis was prepared by an
independent third party analysis service. As illustrated in the table, NPV is
generally more sensitive to rising rates than declining rates. This occurs
principally because, as rates rise, the market value of fixed-rate loans
declines due to both the rate increase and slowing prepayments. When rates
decline, Security Federal and First Federal do not experience a significant rise
in market value for these loans because borrowers prepay at relatively high
rates. The value of the banks' deposits and borrowing change in approximately
the same proportion in rising or falling rate scenarios.

A-9
<PAGE> 26
SECURITY FEDERAL AND FIRST FEDERAL

<TABLE>
<CAPTION>
Market Value of Portfolio Equity
--------------------------------------------
Change in Interest Rate Estimated $ %
(Basis Points) NPV Change Change
----------------------- -------- ------- ------
(Dollars in thousands)

In addition to monitoring selected measures on NPV, management also
monitors effects of net interest income resulting from increases or decreases in
rates. This measure is used in conjunction with NPV measures to assess interest
rate risk.

Certain shortcomings are inherent in the method of analysis presented
in the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, certain assets, such as adjustable-rate mortgage
loans, have features which restrict changes in interest rates on a short-term
basis and over the life of the asset. Further, in the event of a change in
interest rates, prepayments and early withdrawal levels would likely deviate
significantly from those assumed in calculating the tables. Finally, the ability
of many borrowers to service their debt may decrease in the event of an interest
rate increase.

RESULTS OF OPERATIONS

General. Security First's consolidated net income was $6.4 million or
$1.17 per share (fully diluted) for the year ended March 31, 1997 compared to
$5.6 million or $1.06 per share (fully diluted) for the year ended March 31,
1996 and $6.7 million or $1.24 per share (fully diluted) for the year ended
March 31, 1995. Net income for the current year as well as the prior two fiscal
years was affected by non-recurring items. During fiscal 1997, net income was
reduced by $2.6 million ($1.7 million after tax) due to a special one-time
Savings Association Insurance Fund Assessment ("SAIF") assessment for the
recapitalization of the FDIC insurance fund, which provides government insurance
on deposits at savings and loan institutions. As a result of the assessment, the
deposit insurance premiums paid by Security Federal and First Federal were
reduced from 23 basis points to zero, based upon their current risk
classifications and the new assessment schedule for SAIF insured institutions.
These premiums are subject to change in future periods. Net income for fiscal
1996 was impacted by merger costs of $737,000 related to the successful
acquisition of First Kent Financial Corporation. Net income for the year ended
March 31, 1995, was decreased by $333,000 after-tax cost related to the
termination of the proposed merger with Mid Am, Inc. Excluding the
aforementioned non-recurring items, net income for fiscal years 1997, 1996 and
1995 would have been $8.1 million, $6.3 million and $7.0 million, or $1.46,
$1.19 and $1.29 per share (fully diluted), respectively.

Interest Income. Total interest income for the year ended March 31,
1997 was $49.2 million compared to $43.6 million and $39.4 million for the years
ended March 31, 1996 and 1995, respectively, largely as a result of increased
lending activity. Average loans outstanding during fiscal 1997 were $525.7
million compared with $453.5 million and $410.2 million for 1996 and 1995,
respectively. The average yield on the loan portfolio decreased slightly to
8.78% from 8.90% during 1996. The average yield on loans during fiscal 1995 was
8.82%.

A-10
<PAGE> 27
Additionally, interest income included amortization of net deferred
loan fees of $1.6 million, $1.7 million, and $2.0 million for the years ended
March 31, 1997, 1996, and 1995, respectively. Origination fees received on
loans, net of certain direct origination costs, are deferred and amortized to
interest income over the contractual life of the loans.

Interest income on total investments during 1997 was $2.8 million which
was comparable to 1996 and 1995. As noted in the table below, the average
balance outstanding of investment securities and short-term investments was
slightly lower during the current fiscal year compared with 1996 and 1995 but
was offset by somewhat higher rates on such investments.

Interest income on mortgage-backed securities was $224,000 in fiscal
1997 compared with $301,000 and $377,000 in 1996 and 1995, respectively. The
annual decreases were principally due to a decline in the average balance
outstanding as a result of scheduled amortization and prepayments of the
underlying loans.

Interest Expense. Total interest expense for the year ended March 31,
1997 was $25.6 million compared to $22.6 million and $18.1 million for the years
ended March 31, 1996 and 1995, respectively, as a result of higher volume on
both deposits and borrowings to support lending activity offset slightly by a
lower interest rate environment. Average deposits outstanding during fiscal 1997
were $425.1 million at an average cost of 4.51% compared with $401.4 million
outstanding at an average cost of 4.63% for 1996 and $388.0 million outstanding
at 3.95 % for 1995.

Interest expense on total FHLB advances for the year ended March 31,
1997 increased by $2.3 million from the prior year and by $3.6 million compared
with fiscal 1995. This increase was due to greater short-term borrowings in the
current year offset slightly by somewhat lower rates on short-term FHLB advances
compared with the previous year. The average rate paid on short-term advances
was 5.82% in the current year compared with 6.07% last year and 6.02% in fiscal
1995. The amount of long-term borrowings remained relatively constant, although
rates paid on such borrowings were slightly higher during fiscal 1997 and 1996
compared to fiscal 1995.

A-11
<PAGE> 28
The following table presents the total dollar amounts of interest
income and interest expense on the indicated amounts of average interest-earning
assets or interest-bearing liabilities for the years ended March 31, 1997, 1996,
and 1995. Average balance calculations were based on daily and monthly balances.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED For the Year Ended For the Year Ended
MARCH 31, 1997 March 31, 1996 March 31, 1995
---------------------------- --------------------------- -----------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- -------- ------ -------- -------- ------ ------- -------- ------

(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNINGS ASSETS:
Loans(1)........................ $525,678 $ 46,165 8.78% $453,491 $40,374 8.90% $410,185 $36,173 8.82%
Mortgage-backed securities...... 2,783 224 8.05% 3,705 301 8.12% 4,681 377 8.05%
Investment securities........... 36,837 2,353 6.39% 37,900 2,409 6.36% 42,733 2,455 5.74%
Short-term investments.......... 8,156 436 5.35% 9,504 509 5.36% 8,693 405 4.66%
-------- -------- ------ -------- ------- ------ -------- ------- ------
Total interest-earning assets 573,454 49,178 8.58% 504,600 43,593 8.64% 466,292 39,410 8.45%
Non-interest-earning assets..... 24,031 21,255 21,509
-------- -------- --------
Total Assets................. $597,485 $525,855 $487,801
======== ======== ========
INTEREST-BEARING LIABILITIES:
Passbook accounts............... $ 58,751 $ 1,587 2.70% $ 62,787 $ 1,606 2.56% $ 69,143 $ 1,685 2.44%
Money market/NOW Accounts....... 82,364 1,456 1.77% 76,476 1,537 2.01% 79,757 1,763 2.21%
Certificate of deposit
accounts...................... 283,989 16,148 5.69% 262,156 15,426 5.88% 239,091 11,859 4.96%
-------- -------- ------ -------- ------- ------ -------- ------- ------
Total deposits............... 425,104 19,191 4.51% 401,419 18,569 4.63% 387,991 15,307 3.95%
-------- -------- ------ -------- ------- ------ -------- ------- ------
Short-term FHLB advances........ 75,547 4,394 5.82% 35,723 2,170 6.07% 18,881 1,137 6.02%
Long-term FHLB advances......... 23,433 1,392 5.94% 21,382 1,279 5.98% 20,428 1,059 5.18%
-------- -------- ------ -------- ------- ------ -------- ------- ------
Total advances............... 98,980 5,786 5.85% 57,105 3,449 6.04% 39,309 2,196 5.59%
-------- -------- ------ -------- ------- ------ -------- ------- ------
Convertible subordinated
debentures.................... 8,742 586 6.70% 8,789 590 6.71% 9,307 620 6.66%
-------- -------- ------ -------- ------- ------ -------- ------- ------
Total interest-bearing
liabilities................... 532,826 25,563 4.80% 467,313 22,608 4.84% 436,607 18,123 4.15%
Non-interest-bearing
liabilities................... 8,089 5,855 5,233
-------- -------- --------
Total Liabilities............ 540,915 473,168 441,840
Shareholders' equity............ 56,570 52,687 45,961
-------- -------- --------
Total Liabilities and
Shareholders' Equity.......... $597,485 $525,855 $487,801
======== ======== ========
NET INTEREST INCOME/ INTEREST
RATE SPREAD..................... $ 23,615 3.78% $20,985 3.80% $21,287 4.30%
======== ====== ======= ====== ======= ======
NET INTEREST EARNING ASSETS/NET
YIELD ON INTEREST-EARNING
ASSETS.......................... $ 40,628 4.12% $ 37,287 4.16% $ 29,685 4.57%
======== ====== ======== ====== ======== ======
PERCENTAGE OF INTEREST-EARNING
ASSETS TO INTEREST-BEARING
LIABILITIES..................... 107.63% 107.98% 106.80%
====== ====== ======
</TABLE>

- ---------------

(1) Average balances include non-accrual loans, and interest income includes
deferred loan fee amortization of $1,579,000, $1,683,000 and $1,980,000
for the years ended March 31, 1997, 1996, and 1995, respectively.

A-12
<PAGE> 29
The changes in net interest income compared to the prior period for the
years ended March 31, 1997, and 1996 are analyzed in the following table. The
table shows the changes by major component, distinguishing between changes
related to volume as opposed to changes in interest rates and the net effect of
both. Changes not solely attributable to volume or rate changes have been
allocated in proportion to the changes due to volume and rate.

<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------------------------------------
1997 VS. 1996 1996 vs. 1995
-------------------------------- ---------------------------------
Increase (Decrease) Increase (Decrease)
Due to Total Due to Total
------------------- Increase -------------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease)
------- ----- ---------- ------ ----- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans ................................ $ 6,331 $(540) $ 5,791 $ 3,852 $ 349 $ 4,201
Mortgage-backed securities ........... (74) (3) (77) (79) 3 (76)
Investment securities ................ (68) 12 (56) (776) 730 (46)
Short- term investments .............. (72) (1) (73) 40 64 104
------- ----- ------- ------- ------ -------
Total interest-earning assets .... $ 6,117 $(532) 5,585 $ 3,037 $1,146 4,183
======= ===== ------- ======= ====== -------
INTEREST-BEARING LIABILITIES
Deposits ............................. $ 1,210 $(588) 622 $ 975 $2,287 3,262
Short-term FHLB advances ............. 2,312 (88) 2,224 1,023 10 1,033
Long-term FHLB advances .............. 122 (9) 113 51 169 220
Convertible subordinated debentures .. (3) (1) (4) (30) 0 (30)
------- ----- ------- ------- ------ -------
Total interest-bearing liabilities $ 3,641 $(686) 2,955 $ 2,019 $2,466 4,485
======= ===== ------- ======= ====== -------
Changes in Net Interest Income..... $ 2,630 $ (302)
======= =======
</TABLE>

OTHER INCOME. Other income was $1.7 million for 1997 and 1996 and $1.4
million in fiscal 1995. The increase in other income during fiscal 1997 and 1996
over fiscal 1995 was the result of higher service fee income as well as
approximately $89,000 in equity income received from joint ventures in real
estate development activities by SF Development Co.

OTHER EXPENSE. Other operating expenses for fiscal 1997 were $15.2
million compared to $13.4 million and $12.0 million for the prior two fiscal
years. The increase in operating expenses was largely due to data processing
expense and costs related to the opening of a Security Federal branch office in
Willoughby, Ohio. These increases in expenses were somewhat offset by a decrease
in the Federal Deposit Insurance premium after the one time special assessment
incurred in September 1996.

FEDERAL INCOME TAXES. The Company's Federal income taxes for the year
ended March 31, 1997 were $3.4 million compared with $3.3 million and $3.4
million for 1996 and 1995, respectively. The effective Federal tax rate was
higher in fiscal 1996 because of the tax effect of non-deductible merger
expenses.

A-13
<PAGE> 30
IMPACT OF INFLATION AND CHANGING PRICES

The consolidated financial statements of the Company and the related
data presented herein have been prepared in accordance with generally accepted
accounting principles, which require measurement of financial position and
operating results in terms of historical dollars without considering changes in
the relative purchasing power of money over time due to inflation.

Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the price
of goods and services.

ACCOUNTING AND REPORTING DEVELOPMENTS

See Note 1 to the Notes to Consolidated Financial Statements for a
discussion of accounting and reporting developments affecting the Company and
newly promulgated FASB Statements that have not yet been adopted by the Company.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents selected quarterly financial data for the
years ended March 31, 1997 and 1996.

<TABLE>
<CAPTION>
1997 FIRST SECOND THIRD FOURTH
- -----------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)

<S> <C> <C> <C> <C>
Interest income $11,614 $12,106 $12,584 $12,874
Interest expense 5,822 6,266 6,680 6,795
Net interest income 5,792 5,840 5,904 6,079
Provision for loan losses 96 84 84 59
Net income 1,934 286(1) 2,040 2,150
Net income per common share 0.39 0.06(1) 0.40 0.42
Dividends per common share 0.11 0.11 0.11 0.11
Return on average assets 1.38% .19%(1) 1.33% 1.37%
Return on average equity 14.08% 2.04%(1) 14.39% 14.70%
Interest rate spread 3.98% 3.80% 3.67% 3.68%
</TABLE>

<TABLE>
<CAPTION>
1996 FIRST SECOND THIRD FOURTH
- -----------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)

<S> <C> <C> <C> <C>
Interest income $10,561 $10,895 $11,166 $10,971
Interest expense 5,424 5,679 5,832 5,673
Net interest income 5,137 5,216 5,334 5,298
Provision for loan losses 84 84 84 125
Net income 1,608 1,648 1,693 657(2)
Net income per common share 0.33 0.34 0.34 0.13(2)
Dividends per common share 0.10 0.10 0.10 0.10
Return on average assets 1.26% 1.27% 1.26% 0.49%(2)
Return on average equity 12.67% 12.67% 12.67% 4.82%(2)
Interest rate spread 3.85% 3.81% 3.78% 3.77%
</TABLE>

- ---------------

(1) The decrease in the second quarter is due to the one time special SAIF
Assessment of $2.6 million ($1.7 million after tax).

(2) The decrease reflects the impact of non-deductible merger expenses of
$417,000.

A-14

<PAGE> 31

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors
Security First Corp.

We have audited the accompanying consolidated statements of financial condition
of Security First Corp. and subsidiaries as of March 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits. The consolidated financial statements give retroactive effect to the
merger of Security First Corp. and First Kent Financial Corporation, which has
been accounted for as a pooling of interests as described in Note 19 to the
consolidated financial statements. We did not audit the consolidated financial
statements of First Kent Financial Corporation and subsidiary for the year ended
September 30, 1995 and the six months ended September 30, 1994, which statements
reflect total assets of $77,876,500, $77,564,000, respectively, and net income
of $813,700 and $571,000 for the year ended September 30, 1995 and the six
months ended September 30, 1994, respectively. Those financial statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for First Kent Financial
Corporation and subsidiary for such periods, is based solely on the reports of
such other auditors. As described in Note 19 to the consolidated financial
statements, subsequent to the issuance of the reports of the other auditors, the
consolidated financial statements of First Kent Financial Corporation were
restated to conform to the fiscal year of Security First Corp. for the years
ended March 31, 1996 and 1995.

We conducted our audits in accordance with generally accepted auditing
standards. 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 and the reports of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial condition of Security First Corp. and
subsidiaries as of March 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997 in conformity with generally accepted accounting principles.

We also audited the adjustments described in Note 19 that were applied to
restate the September 30, 1995 and 1994 consolidated financial statements of
First Kent Financial Corporation. In our opinion, such adjustments are
appropriate and have been properly applied.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Cleveland, Ohio
April 25, 1997 (May 20, 1997 as to Note 20)

A-15
<PAGE> 32
SECURITY FIRST CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
March 31,
---------------------------
1997 1996
-------- ---------
(Dollars in thousands, except
per share data)
<S> <C> <C>
ASSETS
Cash and deposits with banks................................................ $ 4,685 $ 6,314
Interest-bearing deposits with banks........................................ 1,826 5,334
Federal funds sold and short-term investments............................... 2,153 4,259
-------- ---------
Total cash and cash equivalents........................................... 8,664 15,907
-------- --------
Investment securities - available for sale (amortized cost of $24,969 at
March 31, 1997 and $24,379 at March 31, 1996)............................. 24,576 24,189
Investment securities - held to maturity (market value of $6,986 at
March 31, 1997 and $7,014 at March 31, 1996).............................. 7,000 7,000
Mortgage-backed securities-available for sale (amortized cost of $2,469
at March 31, 1997 and $3,173 at March 31, 1996)........................... 2,523 3,275
Loans - net (including allowance for loan losses of $4,968 at March 31,
1997 and $4,572 at March 31, 1996).......................................... 567,975 475,631
Accrued interest receivable................................................. 4,032 3,466
Federal Home Loan Bank stock - at cost...................................... 6,400 3,864
Premises and equipment - net................................................ 8,853 8,451
Cost in excess of fair value of net assets acquired ("goodwill")............ 1,028 1,135
Prepaid expenses and other assets........................................... 3,710 4,309
-------- --------
TOTAL ASSETS............................................................ $634,761 $547,227
======== ========
LIABILITIES:
Deposits.................................................................... $445,182 $410,737
Advances from Federal Home Loan Bank........................................ 115,221 68,084
Convertible subordinated debentures......................................... 8,479 8,774
Advance payments by borrowers for taxes and insurance ("escrow")............ 1,498 1,345
Accrued interest payable.................................................... 2,058 1,473
Accounts payable and other accrued expenses................................. 2,888 2,433
-------- --------
Total liabilities 575,326 492,846
------- --------
SHAREHOLDERS' EQUITY:
Preferred stock (1,000,000 shares authorized, none issued).................. --- ---
Common stock, par value $.01 per share; 10,000,000
shares authorized; 5,003,099 shares issued and outstanding at March 31,
1997 and 4,928,968 at March 31, 1996...................................... 50 49
Capital in excess of par value.............................................. 14,915 14,453
Net unrealized loss on investments and mortgage-backed securities, net
of tax benefit of $111 at March 31, 1997 and $30 at March 31, 1996........ (224) (59)
Unearned compensation....................................................... (216) (293)
Unearned ESOP shares........................................................ --- (447)
Retained earnings (substantially restricted)................................ 44,910 40,678
-------- --------
Total shareholders' equity................................................ 59,435 54,381
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. $634,761 $547,227
======== ========
</TABLE>

See notes to consolidated financial statements.

A-16
<PAGE> 33
SECURITY FIRST CORP.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
For the Year Ended March 31,
----------------------------------------------
1997 1996 1995
--------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest Income:
Loans................................................... $46,165 $40,374 $36,173
Mortgage-backed securities.............................. 224 301 377
Investment securities................................... 2,353 2,409 2,455
Short-term investments.................................. 436 509 405
------- ------- ---------
Total interest income................................. 49,178 43,593 39,410
------- ------- ---------
Interest Expense:
Deposits................................................ 19,191 18,569 15,307
Short-term FHLB advances................................ 4,394 2,170 1,137
Long-term FHLB advances................................. 1,392 1,279 1,059
Convertible subordinated debentures..................... 586 590 620
------- ------- -------
Total interest expense................................ 25,563 22,608 18,123
------- ------- -------
Net interest income....................................... 23,615 20,985 21,287
Provision for loan losses................................. 323 377 582
------- ------- -------
Net interest income after provision for loan losses....... 23,292 20,608 20,705
------- ------- -------
Other income.............................................. 1,698 1,699 1,418
Other expenses:
SAIF special assessment................................. 2,567 --- ---
Amortization of goodwill................................ 107 111 112
Merger expenses......................................... --- 737 ---
Terminated merger costs................................. --- --- 504
Other................................................... 12,535 12,519 11,393
------- ------- -------
Total other expenses.................................. 15,209 13,367 12,009
------- ------- -------
Income before federal income taxes........................ 9,781 8,940 10,114
Federal income taxes...................................... 3,371 3,334 3,414
------- ------- -------
Net income............................................ $ 6,410 $ 5,606 $ 6,700
======= ======= =======
Earnings per share:
Primary................................................. $ 1.27 $ 1.14 $ 1.36
======= ======= =======
Fully diluted........................................... $ 1.17 $ 1.06 $ 1.24
======= ======= =======
Cash dividends per share.................................. $ 0.44 $ 0.40 $ 0.31
======= ======= =======
</TABLE>

See notes to consolidated financial statements.

A-17
<PAGE> 34
SECURITY FIRST CORP.

CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
Year Ended March 31,
1997 1996 1995
------------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income..................................................... $ 6,410 $ 5,606 $ 6,700
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses...................................... 323 377 582
Accretion of discounts, amortization of premiums, and other
deferred yield items......................................... 540 45 150
Depreciation and amortization.................................. 782 708 598
Amortization of goodwill....................................... 107 111 112
Effect of change in accrued interest receivable and payable.... 19 71 (58)
Equity income from joint ventures.............................. (89) (83) ---
FHLB stock dividends........................................... (376) (231) (212)
Deferred federal income taxes.................................. 239 424 (37)
Amortization of unearned compensation.......................... 77 298 90
Net change in accounts payable, accrued expenses,
and other assets............................................. 1,020 747 (902)
Other.......................................................... 2 (200) 212
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................... 9,054 7,873 7,235
---------- ---------- ----------
INVESTING ACTIVITIES:
Loans originated............................................... $(280,702) $(190,717) $(178,448)
Increase (decrease) in loans in process........................ 14,080 12,346 (3,108)
Loan principal repayments and maturities....................... 150,700 139,761 149,672
Proceeds from:
Sales of:
Loans and loan participations............................... 28,711 1,283 1,378
Real estate owned........................................... 151 324 813
Investment securities....................................... --- 500 3,025
Mortgage-backed security principal repayments
and maturities............................................. 704 1,040 1,290
Investment security maturities............................... 4,407 30,574 10,261
Purchases of:
Loans....................................................... (6,139) (7,976) (4,670)
Investment securities....................................... (4,993) (24,788) (15,271)
Premises and equipment...................................... (1,193) (1,323) (637)
FHLB stock.................................................. (2,160) (725) (19)
---------- ---------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......................... (96,434) (39,701) (35,714)
---------- ---------- -----------
FINANCING ACTIVITIES:
Net increase in savings deposits............................... $ 34,445 $ 17,424 $ 5,538
Proceeds from additional FHLB advances......................... 328,300 132,400 73,750
Payment of FHLB advances....................................... (281,164) (114,859) (60,945)
Proceeds from termination of employee stock ownership plan..... 457 --- ---
Net increase (decrease) in mortgage escrow funds............... 153 (552) 291
Payment of dividends on common stock........................... (2,186) (1,915) (1,286)
Proceeds from exercise of stock options........................ 132 128 64
Net proceeds from issuance of common stock..................... --- --- 6,976
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................... 80,137 32,626 24,388
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... (7,243) 798 (4,091)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............... 15,907 15,109 19,200
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................... $ 8,664 $ 15,907 $ 15,109
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings.......................... $ 24,978 $ 22,297 $ 17,896
Income taxes................................................. 3,254 3,286 4,210
Noncash investing and financing activities:
Transfer from loans to real estate acquired
through foreclosure....................................... 124 128 899
Effect of conversion of convertible subordinated
debentures................................................. 295 30 971
Issuance of shares to the employee stock ownership plan...... --- --- 592
Shares issued with respect to the recognition
and retention plan......................................... --- --- 383
</TABLE>

See notes to consolidated financial statements.

A-18
<PAGE> 35
SECURITY FIRST CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Net Unrealized
Loss on
Capital in Securities
Common Excess of Par Retained Available for Unearned
Stock Value Earnings Sale ESOP shares
------- ------- ---------- ------ -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1994.......... $33 $ 5,095 $31,573 $ --- $ ---
Sale of 1,259,020 shares of common
stock, net of conversion costs.. 13 6,963
Issuance of 100,721 shares of
common stock to Employee Stock
Option Plan (ESOP).............. 1 591 (592)
Issuance of 37,767 shares
with respect to Recognition and
Retention Plan.................. 383
Issuance of 83,136 shares of common
stock in connection
with conversions of subordinated
debentures...................... 2 893
Issuance of 33,184 shares of common
stock in connection with
exercise of stock options....... 64
Dividends paid $.31 Per Share..... (1,286)
Net income for the year ended
March 31, 1995.................. 6,700
Other............................. 98 42
--- ------- ------- ---- -----
Balance at March 31, 1995......... 49 14,087 36,987 --- (550)
Issuance of 75,500 shares of
common stock in connection with
exercise of stock options....... 128
Issuance of 2,568 shares of common
stock in connection with conversions
of subordinated debentures...... 28
Dividends paid - $.40 Per Share... (1,392)
Net Income for the year ended
March 31, 1996.................. 5,606
Net unrealized loss on securities
available for sale.............. (59)
Other............................. 210 (523) 103
--- ------- ------- ---- -----
Balance at March 31, 1996......... 49 14,453 40,678 (59) (447)
Issuance of 48,878 shares of common
stock in connection with
exercise of stock options....... 132
Issuance of 25,253 shares in
connection with conversions of
subordinated debentures......... 1 275
Effect of termination of ESOP..... 25 8 424
Dividends paid - $.44 Per Share... (2,186)
Net income for the year ended
March 31, 1997.................. 6,410
Net unrealized loss on securities
available for sale.............. (165)
Other............................. 30 23
--- ------- ------- ---- -----
Balance as of March 31, 1997...... $50 $14,915 $44,910 $(224) ---
=== ======= ======= ===== =====
</TABLE>

Total
Unearned Shareholders'
Compensation Equity
------------ -------
(Dollars in thousands,
except per share data)
<S> <C> <C>
Balance at April 1, 1994.......... $ --- $36,701
Sale of 1,259,020 shares of common
stock, net of conversion costs.. 6,976
Issuance of 100,721 shares of
common stock to Employee Stock
Option Plan (ESOP).............. ---
Issuance of 37,767 shares with respect
to Recognition and Retention Plan (383) ---
Issuance of 83,136 shares of common
stock in connection with conversions
of subordinated debentures...... 895
Issuance of 33,184 shares of common
stock in connection with exercise of
stock options................... 64
Dividends paid $.31 Per Share..... (1,286)
Net income for the year ended
March 31, 1995.................. 6,700
Other............................. 19 159
----- -------
Balance at March 31, 1995......... (364) 50,209
Issuance of 75,500 shares of common
stock in connection with exercise of
stock options................... 128
Issuance of 2,568 shares of common
stock in connection with conversions
of subordinated debentures...... 28
Dividends paid - $.40 Per Share... (1,392)
Net Income for the year ended 5,606
March 31, 1996..................
Net unrealized loss on securities
available for sale.............. (59)
Other............................. 71 (139)
----- -------
Balance at March 31, 1996......... (293) 54,381
Issuance of 48,878 shares of common
stock in connection with exercise of
stock options................... 132
Issuance of 25,253 shares in
connection with conversions of
subordinated debentures......... 276
Effect of termination of ESOP..... 457
Dividends paid - $.44 Per Share... (2,186)
Net income for the year ended
March 31, 1997.................. 6,410
Net unrealized loss on securities
available for sale.............. (165)
Other............................. 77 130
----- -------
Balance as of March 31, 1997...... $(216) $59,435
===== =======
</TABLE>

See notes to consolidated financial statements.

A-19
<PAGE> 36
SECURITY FIRST CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of Security First Corp. ("the Company" or "Security
First"), conform to generally accepted accounting principles and prevailing
practices within the banking and thrift industry. A summary of the more
significant policies follows:

NATURE OF OPERATIONS - Security First is a multiple savings and loan
holding company whose wholly owned subsidiaries are Security Federal Savings and
Loan Association of Cleveland, (the "Association" or "Security Federal"), First
Federal Savings Bank of Kent, ("First Federal"), acquired on April 10, 1996, and
SF Development Corp. The Company is principally engaged in the business of
attracting deposits from the general public and using such deposits, together
with borrowings and other funds, to make loans secured by real estate, various
types of consumer loans and commercial loans primarily in its market area. The
Company's principal market area consists of a six county area in Northeast Ohio,
and the Company's business is conducted through its corporate office located in
Mayfield Heights, Ohio, 12 Security Federal branch offices and two First Federal
offices. Loans and deposits are primarily generated from the areas where its
banking offices are located. The Company's income is derived predominately from
interest on loans and investments and, to a lesser extent, other income. The
Company's principal expenses are interest paid on deposits and borrowings, and
normal operating costs. The Company's operations are principally in the savings
industry, which constitutes a single industry segment. The Company also engages
in real estate development activities which are discussed in Note 18.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and all subsidiaries. All significant intercompany
transactions and balances have been eliminated. Investments in affiliates that
are not majority-owned or controlled are accounted for using the equity method.

INVESTMENT AND MORTGAGE-BACKED SECURITIES - In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," investments and mortgage-backed
securities are classified as trading, available for sale, or held to maturity
upon their acquisition. Securities classified as trading are carried at
estimated market value with the unrealized gain or loss recorded in the
statement of income. Securities classified as available for sale are carried at
estimated market value with the unrealized gain or loss reflected as a component
of shareholders' equity. Securities classified as held to maturity are carried
at amortized cost unless there is an other than temporary impairment in value.
Premiums and discounts are recognized in interest income over the period to
maturity.

LOANS - Loans are stated at the principal amount outstanding, adjusted for
amortization of premiums and accretion of discounts using the interest method.
Interest is accrued as earned. An allowance for uncollected interest is provided
separately from the allowance for loan losses when payments are 90 days or more
past due or when collectibility of a loan is in doubt. The allowance is
established by a charge to interest income equal to all accrued interest. Income
is subsequently recognized only to the extent that cash payments are received
until the loan is current and, in management's judgment, the borrower has the
ability and intent to make periodic interest and principal payments, at which
time the loan is returned to accrual status.

A-20
<PAGE> 37
On April 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures" which impose
certain requirements on the measurement of impaired loans. The Company had
previously measured such loans in accordance with methods that approximated the
result of using SFAS No.114. Consequently, no additional loss provisions were
required by the adoption of these statements. SFAS No. 114 also requires that
impaired loans for which foreclosure is probable should be accounted for as
loans. The adoption of SFAS No. 114 and SFAS No. 118 did not have a material
effect on the Company's financial position or results of operations, and prior
period amounts have not been restated.

A loan is considered to be impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. In general, the
Company considers a loan on income-producing properties to be impaired when the
debt service ratio is less than 1.0. Loans on non-income producing properties
are considered impaired whenever fair value is less than book value. The Company
performs reviews of all loans over $500,000 to determine if the impairment
criteria have been met. If the impairment criteria have been met, a reserve is
calculated according to the provisions of SFAS No. 114. For loans which are
individually not significant and represent a homogeneous population, the Company
evaluates impairment based on the level and extent of delinquencies in the
portfolio and the Company's prior charge-off experience with those
delinquencies. Such loans include all mortgage loans secured by one-to-four
family residential property, all consumer loans, and certain multi-family real
estate loans, non-residential real estate loans, business loans, and leases. The
Company charges off principal at the earlier of (1) when a total loss of
principal has been deemed to have occurred as a result of book value exceeding
the fair value or net realizable value or (2) when collection efforts have
ceased.

PROVISION FOR LOAN LOSSES - The Company provides valuation reserves for
estimated losses on loans when any significant and permanent decline in value is
identified. Such provisions are based on management's estimate of the net
realizable value or fair value of the collateral, as applicable, considering
current and currently anticipated future operating or sales conditions, thereby
causing these estimates to be particularly susceptible to changes that could
result in a material adjustment to results of operations. In estimating possible
losses on loans, management considers the remaining principal balance and
estimated market value of the property collateralizing the loan, less estimated
selling expenses and holding costs. Recovery of the carrying value of such loans
and real estate is dependent to a great extent on economic, operating, and other
conditions which may be beyond the Company's control. Management also provides
valuation reserves based on the Company's past loan loss experience, known and
inherent risks in the portfolio and current economic conditions. Management
believes that the allowance for loan losses has been recorded in accordance with
generally accepted accounting principles.

LOAN FEES - Loan origination fees, net of certain direct origination costs,
are deferred and amortized to interest income over the contractual life of the
loan using the level-yield method. Fees received for loan commitments that are
expected to be drawn are deferred and amortized over the life of the loan using
the level-yield method. Unamortized net fees are recognized upon early repayment
of loans. Fees for other loan commitments are deferred and amortized over the
loan commitment period on a straight-line basis. Unamortized deferred loan fees
related to loans repaid are included in income.

PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is calculated using the
straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized on a straight-line basis over the lease
term or useful life, whichever is shorter. For tax purposes, depreciation on
certain assets is computed using accelerated methods.

REAL ESTATE OWNED - Real estate owned, which consists of property acquired
in settlement of foreclosed loans, is recorded at the lower of cost or estimated
fair value less estimated selling costs at the date of acquisition. Costs
relating to the development or improvement of real estate owned are capitalized,
whereas those relating to holding and maintaining the property are charged to
expense.

A-21
<PAGE> 38
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED - Cost in excess of
fair value of net assets acquired ("goodwill") is stated net of accumulated
amortization. Goodwill is being charged to operations over the estimated
remaining life of the long-term interest-bearing assets acquired using the
level-yield method. The amortization period for all intangible assets is
monitored to determine if events and circumstances require such period to be
reduced.

FEDERAL INCOME TAXES - The Company and its wholly owned subsidiaries file a
consolidated income tax return. In accordance with generally accepted accounting
principles, deferred tax assets and liabilities are computed annually for
differences between financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to periods in which the differences are expected
to affect taxable income. Valuation allowances are established, if necessary, to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the amount of tax payable or refundable for the period adjusted for
the change during the period in deferred tax assets and liabilities.

EARNINGS PER SHARE - Primary earnings per share of common stock was
calculated using the weighted average number of shares of common stock and
common stock equivalents outstanding during each year.

Fully diluted earnings per share was computed giving appropriate
consideration to the dilutive effect of stock options and shares issuable upon
conversion of the 6.25% Convertible Subordinated Debentures. In computing fully
diluted net income per share, net income has been adjusted to eliminate interest
expense associated with the debentures, net of estimated income taxes.

Primary and fully diluted earning per share of First Kent Financial
Corporation, former parent of First Federal, subsequent to First Federal's
mutual to stock conversion in June 1994, are calculated based on net income
subsequent to the stock conversion divided by the weighted average shares
outstanding subsequent to the stock conversion.

STATEMENT OF CASH FLOWS - For purposes of the Statement of Cash Flows, the
Company considers as cash equivalents all short-term, highly liquid investments
which are readily convertible to known amounts of cash and which have an
original maturity of three months or less. Such investments include all cash,
deposits with banks, federal funds sold and other short-term investments.

NEW ACCOUNTING STANDARDS - On April 1, 1996, the Company adopted Statement
of Financial Accounting Standards ("SFAS') No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
This statement requires that long-lived assets and certain identified
intangibles held and used by an entity, along with goodwill related to those
assets, be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss must be recognized if the estimate of the future cash flows
(undiscounted and without interest charges) resulting from the use of the asset
and its eventual disposition is less than the carrying amount of the asset. The
impact of adopting this statement on the Company's financial condition and
results of operations was not significant.

On April 1, 1996, the Company adopted SFAS No. 122, "Accounting For
Mortgage Servicing Rights." This statement requires, among other things, that,
for lenders who sell originated loans, the recognition as separate assets of the
rights to service mortgage loans for others. It also requires that capitalized
mortgage servicing rights be assessed for impairment based on the fair value of
those rights. The impact of adopting this statement on the Company's financial
condition and results of operations was not significant.

On April 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." The new standard defines a fair value method of
accounting for stock options and similar equity instruments. Under the fair
value method, compensation cost is measured at the grant date based on the fair
value of the award and is recognized over the service period, which is usually
the vesting period. Pursuant to the new standard, companies are encouraged, but
not required, to adopt the fair value method of accounting for stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose in
a note to the financial statements pro forma net income and, if presented,
earnings per share as if the company had applied the new method of accounting.
The accounting requirements of the new method are effective for all employee
awards granted after the beginning of

A-22
<PAGE> 39
the fiscal year of adoption. Management has elected to continue using the APB
No. 25 method of accounting for stock-based compensation and to include pro
forma disclosures. See Note 14.

On January 1, 1997, the Company adopted SFAS No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. "
SFAS No. 125 amends portions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," amends and extends to all servicing
assets and liabilities the accounting standards for mortgage servicing rights
now in SFAS No. 65 , and supersedes SFAS No. 122. SFAS No. 125 provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. Those standards are based upon
consistent application of a financial components approach that focuses on
control. The statement also defines accounting treatment for servicing assets
and other retained interests in the assets that are transferred. SFAS No. 125 is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996 and is to be applied
prospectively. The impact of adopting this statement on the Company's financial
condition and results of operations was not significant.

The Financial Accounting Standard Board ("FASB") has also issued SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of SFAS No. 125,"
that defers the effective date of certain provisions of SFAS No. 125 related to
secured borrowings and collateral, repurchase agreements, dollar rolls,
securities lending, and similar transactions until December 31, 1997. Management
has not completed the process of evaluating this statement and therefore has not
determined the impact, if any, that adopting this statement will have on the
financial position and results of operations.

In February 1997, the FASB issued SFAS No. 128 "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock. This statement
simplifies the standards for computing EPS previously found in APB Opinion No.
15 "Earnings Per Share," and makes them comparable to international EPS
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures.
This Statement is effective for financial statements for both interim and annual
periods ending after December 15, 1997.

In February 1997, the FASB issued SFAS No. 129 "Disclosure of Information
about Capital Structure." This Statement establishes standards for disclosing
information about an entity's capital structure. It supersedes specific
disclosure requirements of APB Opinions No. 10 "Omnibus Opinion-1966" and No. 15
"Earnings Per Share" and SFAS No. 47 "Disclosure of Long-Term Obligations" and
consolidates them in this Statement for ease of retrieval and for greater
visibility to nonpublic entities. This Statement is effective for financial
statements for periods ending after December 15, 1997. It contains no changes in
disclosure requirements for entities that were previously subject to APB
Opinions No. 10 and No. 15 and SFAS No. 47 and, therefore, is not expected to
have a significant impact on the financial condition or results of operations of
the Company.

RECLASSIFICATION - Certain items in the consolidated financial statements
for 1996 and 1995 have been reclassified to conform with the 1997 presentation.

A-23
<PAGE> 40
2. INVESTMENT SECURITIES

Investment securities classified as available for sale at March 31, 1997,
are summarized as follows:

<TABLE>
<CAPTION>
March 31, 1997
-------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------- ----- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. Government and agency obligations.................... $22,456 $14 ($410) $22,060
Federal National Mortgage Association preferred stock..... 500 16 --- 516
Federal National Mortgage Association bonds............... 2,001 --- (13) 1,988
Municipal bond............................................ 12 --- --- 12
--------- ----- ------ ----------
Total................................................. $ 24,969 $ 30 $ (423) $ 24,576
========= ===== ====== ==========
</TABLE>

Investment securities classified as held to maturity at March 31, 1997,
are summarized as follows:

Investment securities classified as available for sale at March 31, 1996,
are summarized as follows:

<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------- ----- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. Government and agency obligations.................... $21,856 64 ($247) $21,673
Federal National Mortgage Association
preferred stock......................................... 500 4 --- 504
Federal National Mortgage Association bonds............... 2,002 3 (14) 1,991
Municipal bond............................................ 21 --- --- 21
--------- ----- ------ ----------
Total................................................. $ 24,379 $ 71 $ (261) $ 24,189
========= ===== ====== ==========
</TABLE>

Investment securities classified as held to maturity at March 31, 1996,
are summarized as follows:

A-24
<PAGE> 41
The maturity distribution of debt investment securities at March 31, 1997,
is as follows:

<TABLE>
<CAPTION>
Weighted
Amortized Fair Average
Cost Value Yield
---------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C>
U.S. Government and agency obligations - due in one
year or less............................................ $ 3,996 $ 3,992 5.98%
U.S. Government and agency obligations - due after
one year through five years............................. 18,460 18,068 6.29
Federal National Mortgage Association bond - due in
one year or less........................................ 1,000 1,000 6.05
Federal Mortgage Association bonds - due after one
year through five years................................. 1,001 988 5.37
Municipal bond - due after one year through five years 12 12 6.60
---------- ---------- ----
Total debt investment securities...................... $ 24,469 $ 24,060 6.19%
========== ========== ====
</TABLE>

3. MORTGAGE-BACKED SECURITIES

Mortgage-backed securities classified as available for sale at March 31,
1997, are summarized as follows:

<TABLE>
<CAPTION>
March 31, 1997
----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corporation participation
certificates............................................ $2,469 $54 --- $2,523
====== === === ======
</TABLE>

Mortgage-backed securities classified as available for sale at March 31,
1996, are summarized as follows:

<TABLE>
<CAPTION>
March 31, 1996
----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corporation participation
certificates............................................ $3,173 $102 --- $3,275
====== ==== === ======
</TABLE>

As of March 31, 1997, mortgage-backed securities with a current value of $
1,507,000 were pledged against $ 1,250,000 in public funds. At March 31, 1996,
there were no mortgage-backed securities pledged as collateral against public
deposits.

A-25
<PAGE> 42
4. LOANS

Loans consist of the following:

<TABLE>
<CAPTION>
March 31,
------------------------------------
1997 1996
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Real estate mortgage loans:
Permanent:
One-to-four family............................................. $235,959 $225,573
Multi-family................................................... 53,628 38,057
Commercial..................................................... 115,882 94,880
Construction:
One-to-four family............................................. 80,498 56,754
Multi-family................................................... 1,051 5,002
Commercial..................................................... 23,881 3,101
Residential development land..................................... 50,432 43,387
Lines of credit - secured by one-to-four family residences....... 17,756 15,667
---------- ----------
Total mortgage loans......................................... 579,087 482,421
Business loans................................................... 6,165 2,571
Consumer loans................................................... 42,321 35,422
---------- ----------
Total loans.................................................. 627,573 520,414
Less:
Undisbursed portion of loans in process.......................... (50,332) (36,251)
Allowance for loan losses........................................ (4,968) (4,572)
Deferred loan fees and discounts................................. (4,298) (3,960)
--------- ---------
Loans - net.................................................. $567,975 $475,631
======== ========
</TABLE>

Loans with adjustable rates, included above, totaled $503 million
(approximately 80% of total loans) and $402 million (approximately 77%) at March
31, 1997 and 1996, respectively. Adjustable rate loans include loans which
reprice based on the prime rate, as well as loans ("ARMs") which have interest
rate adjustments of one, three, or five years based on the quarterly national
average of federally insured thrift institutions' cost of funds. The Company's
ARMs generally limit interest rate increases to 2% each rate adjustment period
and have an established ceiling rate of 6% over the original interest rate on
such loans.

Commitments to borrowers to originate loans and for unfunded lines of
credit (typically secured by single-family residences) are summarized below:

<TABLE>
<CAPTION>
March 31,
---------------------------------
1997 1996
------- -------
(Dollars in thousands)
<S> <C> <C>
Commitments to originate:
Fixed-rate loans............................................... $ 2,435 $ 4,398
Adjustable-rate loans.......................................... 21,533 25,424
Unfunded lines of credit......................................... 30,323 25,772
</TABLE>

As of March 31, 1997, 1996, and 1995, the Association was servicing loans
for others (on a non-recourse basis) totaling approximately $37,300,000,
$14,167,000, and $18,003,000, respectively. Custodial escrow balances maintained
in connection with the foregoing loan servicing were approximately $241,000, and
$213,000 at March 31, 1997 and 1996, respectively.

A-26
<PAGE> 43
The Company's primary lending area is within the six county area in
Northeast Ohio wherein its branches are located. At March 31, 1997 and 1996,
substantially all of the Company's loans were to borrowers located in Northeast
Ohio. Although, the Company has a diversified loan portfolio, its borrowers'
ability to honor their contracts is substantially dependent upon general
economic conditions of the region.

The Company originates commercial real estate loans, both permanent and
construction. Such loans are generally higher risk than single-family
residential real estate loans due to the dependency on income production or
future development of real estate for the repayment of the loan.

The following table summarizes the Company's commercial real estate and
commercial construction loan portfolios by type of collateral.

<TABLE>
<CAPTION>
March 31,
------------------------------------------------------------
% of % of
Collateral 1997 Total 1996 Total
- ----------------------------------------------- ----- ------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Industrial/warehouses.................. $38,284 27.4% $29,659 30.3%
Strip shopping centers/retail.......... 31,925 22.9 23,971 24.4
Office buildings....................... 34,766 24.9 19,957 20.4
Golf courses........................... 14,290 10.2 9,725 9.9
Churches............................... 2,853 2.0 2,820 2.9
Other.................................. 17,645 12.6 11,849 12.1
------ ---- ------ ----
$139,763 100.0% $97,981 100.0%
======== ===== ======= =====
</TABLE>

The Company's commercial real estate loan portfolio is comprised of loans,
typically less than $1 million individually, which are collateralized by
property located within its six county market area. Of the $139.8 million in
commercial real estate loans at March 31, 1997, 31 loans were individually
greater than $1 million; seven of such loans were collateralized by retail
shopping centers, seven by industrial properties, nine by office buildings, five
by golf courses, one by a restaurant party center, one by a hotel, and one by
light manufacturing. The average loan balance of those loans exceeding $1
million was $1.8 million. Of the commercial real estate loans under $1 million,
the average loan balance at March 31, 1997, was approximately $190,000.

Residential development land consists of loans secured by land which is
zoned for residential development and located within the Company's market area
of Northeast Ohio. These loans are made to various builders and developers with
whom the Company has generally had long-standing lending relationships.

Activity in the allowance for loan losses is as follows:

<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------
1997 1996 1995
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Balance, beginning of period................ $4,572 $4,283 $3,973
Provision charged to expense................ 323 377 582
Charge-offs................................. (33) (243) (412)
Recoveries.................................. 106 155 140
------ ------ ------
Balance, end of period...................... $4,968 $4,572 $4,283
====== ====== ======
</TABLE>

For fiscal year ending March 31, 1997 and as of March 31, 1997 there were
no loans that were considered to be impaired under SFAS No. 114 "Accounting by
Creditors for Impairment of a Loan" adopted April 1995.

A-27
<PAGE> 44
Nonperforming loans totaled $1.7 million, $2.6 million, and $3.6 million at
March 31, 1997 , 1996, and 1995, respectively. Interest income that would have
been recorded under the original terms of the loans and the income actually
recognized for the years ended March 31, 1997, 1996, and 1995 are summarized
below.

<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------
1997 1996 1995
----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C>
Interest income that would have been recorded
based on original terms.............................. $198 $215 $343
Interest income recognized............................. 312 179 192
----- ---- ----
Interest income foregone (received).................... $(114) $ 36 $151
===== ==== ====
</TABLE>

5. ACCRUED INTEREST RECEIVABLE

Accrued interest receivable consists of the following:

<TABLE>
<CAPTION>
March 31,
----------------------------------
1997 1996
-------- --------
(Dollars in thousands)
<S> <C> <C>
Loans............................................................ $3,556 $2,953
Investments...................................................... 441 468
Mortgage-backed securities....................................... 35 45
------ ------
Total........................................................ $4,032 $3,466
====== ======
</TABLE>

6. PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

<TABLE>
<CAPTION>
March 31,
-----------------------------------
1997 1996
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Land............................................................. $ 1,640 $ 1,640
Buildings and improvements....................................... 8,685 8,407
Furniture, fixtures, and equipment............................... 3,398 4,422
------- -------
Total........................................................ 13,723 14,469
Less accumulated depreciation and amortization................... 4,870 6,018
------- -------
Premises and equipment - net................................. $ 8,853 $ 8,451
======= =======
</TABLE>

A-28
<PAGE> 45
7. DEPOSITS

Deposits by interest rate are summarized as follows:

<TABLE>
<CAPTION>
March 31,
---------------------------------------
1997 1996
------------------ ------------------
Type of Account and Interest Rate Amount Percent Amount Percent
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Passbook accounts : (2.50% to 4.00% at March 31, 1997
and 1996) ................................................ $ 58,009 13% $ 60,927 15%
NOW accounts:
Interest-bearing (1.79% to 2.00% at March 31, 1997 and 1996) 41,589 10 40,444 10
Non-interest-bearing ....................................... 14,755 3 12,674 3
-------- --- -------- ---
114,353 26 114,045 28
-------- --- -------- ---
Money market deposit accounts:
(variable - 2.52% to 3.00% at March 31, 1997 and 1996) ... 25,040 6 27,978 7
-------- --- -------- ---
Certificate of deposit accounts:
5.9% and less ............................................ 224,499 50 198,618 48
6.0% to 7.9% ............................................. 80,643 18 69,288 17
8.0% to 9.9% ............................................. 475 -- 642 --
10.0% to 11.9% ........................................... 72 -- 66 --
12.0% to 13.9% ........................................... 100 -- 100 --
-------- --- -------- ---
305,789 68 268,714 65
-------- --- -------- ---
Total .................................................. $445,182 100% $410,737 100%
======== === ======== ===
</TABLE>

Included in the above table at March 31, 1997 are $70.1 million in
certificates of deposit greater than $100,000, substantially all of which mature
within twelve months. At March 31, 1997 and 1996, the Company did not have any
brokered deposits.

A summary of certificates of deposit by maturity follows:

<TABLE>
<CAPTION>
March 31,
-----------------------------------
1997 1996
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Within 12 months................................................. $231,722 $194,542
12 months to 24 months........................................... 37,751 34,446
24 months to 36 months........................................... 21,175 17,903
36 months to 48 months........................................... 8,245 13,504
Over 48 months................................................... 6,896 8,319
-------- --------
Total........................................................ $305,789 $268,714
======== ========
</TABLE>

A-29
<PAGE> 46
The following is a summary of interest expense on deposits:

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------
1997 1996 1995
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Passbook accounts...................................... $ 1,587 $ 1,604 $ 1,684
NOW accounts........................................... 689 677 715
Money market deposit accounts.......................... 767 860 1,047
Certificate of deposit accounts........................ 16,148 15,428 11,861
------- ------- -------
Total.............................................. $19,191 $18,569 $15,307
======= ======= =======
</TABLE>

8. BORROWINGS

FHLB ADVANCES:

Advances from the FHLB consist of the following:

<TABLE>
<CAPTION>
March 31,
-----------------------------------------------
Rate Rate Type 1997 1996
- -------------------------------------------------- ------------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C>
5.01% to 6.00%.............................. Variable $ 21,449 $ 30,300
6.01% to 6.50%.............................. Variable 12,772 ---
-------- --------
Total variable rate advances............ 34,221 30,300
-------- --------
5.01% to 6.00%.............................. Fixed 47,000 24,212
6.01% to 7.00%.............................. Fixed 34,000 8,572
7.01% to 8.00%.............................. Fixed --- 5,000
-------- ---------
Total fixed rate advances............... 81,000 37,784
-------- --------
Total FHLB advances..................... $115,221 $ 68,084
======== ========
</TABLE>

Scheduled payments on FHLB advances at March 31, 1997 are as follows:

<TABLE>
<CAPTION>
Weighted
Years ending Principal Average Interest
March 31, Repayments Rate
- ---------------------- -------------- -----------------
<S> <C> <C>
1998 $ 84,504 5.85%
1999 24,717 6.17
2000 4,119 6.20
2001 1,139 6.50
2002 to 2005 742 5.50
-----------
$ 115,221 5.95%
===========
</TABLE>

CONVERTIBLE SUBORDINATED DEBENTURES

On May 5, 1993, the Company sold $9,775,000 of 15 year, 6.25% convertible
subordinated debentures in a public offering. The debentures are convertible by
the holders at any time prior to maturity, unless previously redeemed, into
common stock of the Company at a conversion rate of 85.62 shares of common stock
for each $1,000 principal amount of debentures (equivalent to a conversion price
of $11.68 per share), as adjusted for the two-for-one stock split in September
1993. The debentures are redeemable, in whole or in part, at the option of the
Company on and after May 1, 1996, and if redeemed during the 12-month periods
beginning May 1, 1996 and 1997, at 105% and 102.5% of the principal amount,
respectively, and thereafter at 100% of their principal amount. During fiscal
1997, $295,000 of the debentures were converted into 25,253 shares of common
stock.

A-30
<PAGE> 47
9. LEASE COMMITMENTS

At March 31, 1997, the Company was obligated under a number of
noncancellable leases for land and buildings. One of the branch leases is
accounted for as a capital lease and the others are accounted for as operating
leases. Rental expense under all leases aggregated $309,000, $270,000, and
$230,000 for the years ended March 31, 1997, 1996, and 1995, respectively.

The following is a schedule of future minimum annual lease commitments
as of March 31, 1997:

<TABLE>
<CAPTION>
Commitments Under
--------------------------------------------------------------------------------
Fiscal Year Capital Lease (Building) Operating Leases Total
----------- ------------------------ ---------------- -----
(Dollars in thousands)
<S> <C> <C> <C>
1998 $ 15 $ 299 $ 314
1999 16 300 316
2000 16 295 311
2001 17 250 267
2002 17 245 262
Thereafter 85 1,156 1,241
---- ------ ------
Total minimum payments $166 $2,545 $2,711
---- ====== ======
Less interest (55)
----
Capitalized lease obligation $111
====
</TABLE>

Additionally, the Company leases office space to tenants in office
buildings that it owns or rents. Rental income for the years ended March 31,
1997, 1996, and 1995 was $148,556, $148,571, and $151,167, respectively. The
minimum future rental income to be received under all such leases at March 31,
1997 is $124,977 in 1998, $27,904 in 1999, and $5,270 in 2000.

10. OTHER INCOME AND EXPENSES

<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Other income consists of the following:
Service charges and other fees ............. $ 1,520 $ 1,513 $ 1,322
Equity income from joint ventures .......... 89 83 --
Other ...................................... 89 103 96
------- ------- -------
Total .................................. $ 1,698 $ 1,699 $ 1,418
======= ======= =======

Other expenses consist of the following:
Salaries and employee benefits ............. $ 5,690 $ 5,828 $ 5,257
Occupancy and equipment .................... 1,807 1,727 1,576
Federal insurance premium .................. 719 908 888
Professional fees .......................... 537 494 480
Other taxes ................................ 673 679 522
Data processing ............................ 548 459 405
Marketing .................................. 437 497 314
Printing and supplies ...................... 304 298 266
Supervisory assessment ..................... 133 124 123
Other ...................................... 1,687 1,505 1,562
------- ------- -------
Total .................................. $12,535 $12,519 $11,393
======= ======= =======
</TABLE>

A-31

<PAGE> 48
11. FEDERAL INCOME TAXES

The provision for federal income taxes consists of the following
components:

<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Current ......... $3,132 $2,910 $ 3,491
Deferred ........ 239 424 (77)
------ ------ -------
Total ....... $3,371 $3,334 $ 3,414
====== ====== =======
</TABLE>

A reconciliation between the statutory federal income tax rate and the
effective consolidated federal income tax rate is as follows:

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------------------------------------------
1997 1996 1995
--------------------- -------------------------- ----------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate ................ $3,423 35.0% $3,129 35.0% $3,540 35.0%
Benefit of graduated tax rates ....... (98) (1.0) (93) (1.0) (101) (1.0)
Purchase accounting .................. 24 .3 24 .3 25 .3
Other - net .......................... 22 .2 274 3.1 (50) --
------ ---- ------ ---- ------ ----
Effective income tax provision...... $3,371 34.5% $3,334 37.4% $3,414 34.3%
====== ==== ====== ==== ====== ====
</TABLE>

Significant components of the deferred tax assets and liabilities are
as follows (no valuation allowance was considered necessary):

<TABLE>
<CAPTION>
March 31,
--------------------------------------
1997 1996 1995
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Deferred tax assets:
Book allowance for loan losses ............. $1,692 $1,446 $1,379
Deferred loan fees ......................... 694 964 1,255
SFAS 106 health care expense ............... 236 191 131
Other ...................................... 151 126 139
------ ------ ------
Total deferred tax assets ................ $2,773 $2,727 $2,904
------ ------ ------

Deferred tax liabilities:
FHLB stock dividends ....................... 565 438 359
Tax bad debt reserves ...................... 582 445 258
Difference between book and tax depreciation 110 128 161
Other ...................................... 156 118 104
------ ------ ------
Total deferred tax liabilities ........... 1,413 1,129 882
------ ------ ------
Net deferred tax asset ................... $1,360 $1,598 $2,022
====== ====== ======
</TABLE>

During 1996, legislation was passed that repealed Section 593 of the
Internal Revenue Code of 1986, as amended (the "Code") for taxable years
beginning after December 31,1995. Section 593 allowed thrift institutions to use
the percentage-of-taxable income bad debt accounting method, if more favorable
than the specific charge-off method, for federal income tax purposes. The excess
reserve (deduction based on the percentage-of-taxable income less the deduction
based on the specific charge-off method) accumulated post-1987 are required to
be recaptured ratably over a six-year period beginning in 1996. The recapture
has no effect on the Company's statement of operations as taxes were provided
for in prior years in accordance with SFAS No. 109 "Accounting for Income
Taxes". The timing of this recapture may be delayed for a one or two-year period
to the extent that Security First originates more residential loans than the
average originations in the past six years. Security First will meet the
origination requirement for 1996 and,

A-32
<PAGE> 49
therefore, will delay the recapture at least until the six-year period beginning
in 1997. The recapture amount of $1.7 million will result in payments totaling
$582,000 which has been previously accrued. The pre-1988 reserve provisions are
subject only to recapture requirements in the case of certain excess
distributions to, and redemptions of shareholders or if the Bank no longer
qualifies as a "bank". Tax bad debt deductions accumulated prior to 1988 by the
Company are approximately $4,761,000. No deferred income taxes have been
provided on these bad debt deductions and no recapture of these amounts is
anticipated.

12. SHAREHOLDER'S EQUITY

During 1997, the Company's most significant source of income was
dividends from the Security Federal and First Federal. Consequently, the Company
depends upon such dividends from both Security Federal and First Federal to
accumulate earnings for payment of cash dividends to its shareholders. The
Company received $2,450,000 and $4,800,000 in cash dividends from Security
Federal and First Federal in the aggregate in fiscal 1997 and 1996,
respectively. At March 31, 1997, the dollar amount of Security Federal's and
First Federal's retained earnings available to pay dividends to the Company
without prior regulatory approval was $5.7 million.

During fiscal 1997, the Board of Directors of the Company announced its
intention to repurchase up to 200,000, or nearly 4 percent, of its outstanding
shares in the open market over a 12-month period. Commencing in January, 1997,
these shares will be purchased at the prevailing market prices from time to time
depending on market conditions.

13. REGULATORY CAPITAL REQUIREMENTS

Under current regulatory capital regulations at a minimum, the banking
subsidiaries of the Company must have: (a) core capital equal to 3% of adjusted
total assets, (b) tangible capital equal to 1.5% of adjusted total assets, and
(c) total capital equal to 8.0% of risk-weighted assets. Risk-weighted assets
are comprised of both on-and off-balance sheet items and are assigned a risk
weight ranging from 0-100% based on their relative risk.

As indicated in the following table, the Company exceeded all the
regulatory capital requirements at March 31, 1997 and has been categorized as a
well-capitalized institution by the OTS for prompt corrective action purposes.

<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------------------------ ----------------------- ---------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1997:
Total Capital (to Risk Weighted Assets):
Consolidated.................................. $57,639 12.30% $37,491 8.0% $46,864 10.0%
Security Federal.............................. 46,668 11.39% 32,780 8.0% 40,975 10.0%
First Federal................................. 10,971 18.63% 4,711 8.0% 5,889 10.0%

Tier 1 Capital (to Risk Weighted Assets)
Consolidated.................................. 52,823 11.27% 18,746 4.0% 28,119 6.0%
Security Federal.............................. 42,217 10.30% 16,390 4.0% 24,585 6.0%
First Federal................................. 10,606 18.01% 2,356 4.0% 3,534 6.0%

Tier 1 capital (to Adjusted Tangible
Assets):
Consolidated.................................. 52,823 8.53% 18,584 3.0% 30,974 5.0%
Security Federal.............................. 42,217 7.92% 15,991 3.0% 26,652 5.0%
First Federal................................. 10,606 12.27% 2,593 3.0% 4,322 5.0%
</TABLE>

A-33
<PAGE> 50
Management believes that under the current regulations, the banking
subsidiaries of the Company will continue to meet its minimum capital
requirements in the coming year. However, events beyond the Company's control,
such as fluctuations in interest rates or a downturn in the economy in areas in
which the Company's loans are concentrated, could adversely affect future
earnings and, consequently, the Company's ability to meet its future capital
requirements.

14. STOCK OPTION PLAN

Under the Company's stock option and incentive plan, shares of common
stock are reserved for issuance in connection with options granted by the Board
of Directors. Pursuant to the terms of the plan, options to purchase shares are
granted to directors, officers and employees at not less than the fair market
value of the shares at the date of the grant. The plan is administered by a
committee comprised of all of the outside directors. The following table
summarizes data concerning this plan:

<TABLE>
<CAPTION>
Option Price
Number of ----------------------------------
Options Outstanding Options Per Share Total
- ------------------- ------- --------- -----
<S> <C> <C> <C>
Balance at April 1, 1994............................... 201,468 $1.67 - $5.88 $517,984
Granted................................................ 93,335 $10.14 - $11.63 644,395
Exercised.............................................. (33,184) $1.67 - $4.25 (64,297)
------- ----------
Balance at March 31, 1995.............................. 261,619 $1.67 - $12.56 1,098,082

Granted................................................ 47,500 $13.50 641,250
Exercised.............................................. (75,500) $1.67 - $4.25 (127,138)
Forfeited.............................................. (500) $13.50 (6,750)
------- ----------
Balance at March 31, 1996.............................. 233,119 $1.67 - $13.50 1,605,444

Granted................................................ 46,035 $12.25 563,929
Exercised.............................................. (50,752) $1.67 - $13.50 (125,219)
Forfeited.............................................. (500) $13.50 (6,750)
------- ----------
Balance at March 31, 1997.............................. 227,902 $1.67 - $13.50 $2,037,404
======= ==========
</TABLE>

The expiration dates of the stock options outstanding at March 31, 1997
are October 29, 1997 for 14,460 of the options granted at $1.67; April 29, 2002
for the 30,000 granted at $5.88; September 23, 2003 for the 3,000 options at
$12.56; May 13, 2004 for the 11,500 options at $11.63; December 15, 2004 for the
79,317 options at $10.14; May 17, 2005 for the 45,500 options at $13.50; and May
21, 2006 for the 44,125 options at $12.25. The weighted average exercise price
of the outstanding options was $10.23, and the weighted average remaining
contractual life was 7.6 years at March 31, 1997.

On July 25, 1996, shareholders of Security First ratified the adoption
of the 1996 Stock Option and Incentive Plan whereby the Company increased the
number of shares available for future grant by 4.99% of the Company's
outstanding common shares as of March 31, 1996. At March 31, 1997, there were
options to purchase 311,415 shares of common stock available for future grants
to participants, including directors of the Company.

The fair value of each option grant was estimated on the date of the
grant using the Black-Scholes option pricing model with the following
assumptions made: risk-free interest rate of 6.40% and 6.31% for the options
granted in fiscal 1997 and 1996, respectively; dividend yield of 2.40%; expected
lives of 10 years for options; and volatility of 42%.

A-34
<PAGE> 51
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plan. Accordingly, no compensation expense has
been recognized. Had compensation expense been determined consistent with SFAS
No. 123, the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
1997 1997 1996 1996
-------- --------- -------- ---------
As As
Reported Pro Forma Reported Pro Forma
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net Income ..................... $ 6,410 $ 6,270 $ 5,606 $ 5,447
Primary earnings per share ..... 1.27 1.24 1.14 1.11
Fully diluted earnings per share 1.17 1.14 1.06 1.03
</TABLE>

15. EMPLOYEE BENEFITS

401(k) PLAN

The Company has a qualified, tax-exempt profit sharing plan with a
cash-or-deferred feature qualifying under Section 401(k) of the Code (the
"401(k) Plan"). With certain exceptions, all employees who have attained age 21
and have completed one year of employment, during which they worked at least
1,000 hours, are eligible to participate. Participants are permitted to make
contributions to the 401(k) Plan from one to ten percent of annual eligible
compensation on a pre-tax basis as established by the Company up to a current
maximum of $9,500 per year.

The Company's contributions to the 401(k) Plan are as follows:

1) The Company contributes a discretionary percentage (two percent in 1997
and 1996) of participants' eligible compensation as a base
contribution. The cost to the Company of the base contribution during
fiscal 1997 was approximately $47,000 compared with $40,000 for fiscal
1996.

2) In addition, participants' salary reduction contributions will be
matched by the Company in an amount equal to 50% of the amount of the
salary reduction elected by the participants up to five percent of the
participants' eligible compensation. The cost to the Company of
matching contributions was $63,000 for both fiscal 1997 and 1996.

3) Also, an additional profit-sharing contribution in a discretionary
amount as determined by the Board of Directors may be made by the
Company each year. For fiscal 1997, the discretionary contribution was
$129,000 compared with $82,000 in the prior year.

OTHER EMPLOYEE BENEFITS

The Association provides post-retirement medical insurance benefits to
all employees who retire at age 55 or more with at least five years of service
and whose combined age and years of full-time service equal at least 80 at the
time of retirement. Under this plan, retirees contribute a portion of their
monthly medical premiums.

As a result of the adoption of SFAS No. 106, "Employers' Accounting for
Post-Retirement Benefits Other than Pensions," in fiscal 1994, the Company
incurred a transition obligation (the initial unfunded and unrecognized
accumulated post-retirement benefit obligation) of $1.1 million, which will be
amortized over 20 years.

A-35
<PAGE> 52
The post-retirement benefit plan is unfunded. Net periodic
post-retirement benefit cost for fiscal years ended March 31, 1997, 1996 and
1995 included the following components:

<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the year...... $ 61 $ 72 $ 85
Interest cost - on accumulated post-retirement
benefit obligation ............................... 61 83 85
Amortization of transition obligation .............. 54 54 54
Amortization of gain ............................... (24) (10) --
----- ----- ----
Net period post-retirement benefit cost ........ $ 152 $ 199 $224
===== ===== ====
</TABLE>

The following table sets forth the amount recorded in the Company's
consolidated balance sheet at March 31, 1997 and 1996:

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1997 1996
---- ----
(Dollars in thousands)
<S> <C> <C>
Accumulated post-retirement benefit obligation ("APBO"):
Retirees ............................................. $ 435 $ 403
Eligible active participants ......................... 66 60
Other active plan participants ....................... 495 425
----- -----
Total APBO ............................................. 996 888
Unrecognized transition obligation ..................... (856) (909)
Unrecognized gain ...................................... 553 584
----- -----
Accrued post-retirement benefit cost ............... $ 693 $ 563
===== =====
</TABLE>

The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.00% for 1997 and 8.00% for 1996. For
fiscal 1997, the health care trend rate was projected to be 8.5% in the first
year, gradually decreasing to 5.5% in the year 2008 and thereafter. For fiscal
1996, the health care trend rate was projected to be 15% in the first year,
gradually decreasing to 5.5% in the year 2018 and thereafter. Increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the APBO and related costs by $221,000 and $216,000 as of March 31,
1997 and 1996, respectively, and would increase the aggregate of the service and
interest components of net periodic post-retirement benefit cost by $33,000 for
fiscal 1997 and $40,000 for fiscal 1996.

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires the disclosure in the financial statements, or notes thereto, of fair
value information for financial instruments, as defined, whether or not
recognized in the balance sheet, for which it is practical to estimate fair
value. 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 estimates
presented herein are not necessarily indicative of the amounts the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts. In addition, SFAS No. 107 excludes all non-financial instruments
from disclosure requirements; therefore, the aggregate fair value amounts
presented do not represent, and should not be construed to represent, the full
underlying value of the Company.

A-36
<PAGE> 53
The fair value estimates presented herein are based on pertinent
information available to management as of March 31, 1997 and March 31, 1996, as
appropriate. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since
that date and, therefore, current estimates of fair value may differ
significantly from the amounts presented herein.

<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------
1997 1996
-------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents ......... $ 8,664 $ 8,664 $ 15,907 $ 15,907
Investment securities ............. 31,576 31,562 31,189 31,203
Mortgage-backed securities ........ 2,523 2,523 3,275 3,275
Loans ............................. 567,975 571,942 475,631 484,241
FHLB stock ........................ 6,400 6,400 3,864 3,864

Financial Liabilities:
Demand deposits ................... $139,348 $139,348 $142,023 $142,023
Time deposits ..................... 305,834 306,875 268,714 268,265
Advances from the FHLB ............ 115,221 115,337 68,084 67,476
Convertible subordinated
debentures....................... 8,479 8,283 8,774 8,419
</TABLE>

CASH AND CASH EQUIVALENTS. For cash, deposits with banks, and federal
funds sold, the carrying amount is a reasonable estimate of fair value.

INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES. Estimated fair
values for investment securities and mortgage-backed securities are based on
quoted market prices.

LOANS. For variable rate loans that reprice based on the prime rate,
fair values are based on carrying values. The fair values of other loans are
estimated using discounted cash flow analyses and employ interest rates
currently being offered at the reporting date for loans with similar terms. The
fair value of loans is reduced by an estimate of losses inherent in the loan
portfolio.

FEDERAL HOME LOAN BANK STOCK. The fair value is estimated to be the
carrying value which is par. All transactions in the capital stock of the
Federal Home Loan Bank of Cincinnati are executed at par.

DEPOSITS. The fair value of demand deposits, which includes passbook
accounts, money market accounts, and NOW accounts, is the amount payable on
demand at the reporting date. The fair value of fixed-maturity certificates of
deposit is estimated using discounted cash flows based on rates currently
offered at the reporting date for deposits of similar remaining maturities.

BORROWINGS. Rates currently available to the Company at the reporting
date for debt with similar terms and remaining maturities were used to estimate
the fair value of existing borrowings, including advances from the FHLB and
convertible subordinated debentures.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS. The fair value of off-balance
sheet financial instruments, including commitments to originate loans, is
considered to be equivalent to the value of the current fees charged to enter
into such commitments. At March 31, 1997 and 1996, such fees were not considered
significant.

A-37
<PAGE> 54
17. SECURITY FIRST CORP. FINANCIAL INFORMATION

Following are the summarized financial statements of Security First
(parent company only) as of March 31, 1997 and 1996, and for the years ended
March 31, 1997, 1996, and 1995:

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
March 31,
---------------------------
1997 1996
-------- --------
(Dollars in thousands, except
per share data)
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................................. $ 2,801 $ 6,201
Investments ........................................................... 5,962 4,006
Loans ................................................................. 4,861 2,917
Investment in First Federal Savings Bank .............................. 10,606 10,038
Investment in Security Federal Savings & Loan Association ............. 43,041 39,660
Prepaid expenses and other assets ..................................... 867 829
-------- --------
Total assets ...................................................... $ 68,138 $ 63,651
======== ========

Liabilities:
Convertible subordinated debentures ................................... $ 8,479 $ 8,774
Accounts payable and accrued expenses ................................. 225 496
-------- --------
Total liabilities ................................................. 8,703 9,270
-------- --------

Shareholders' Equity:
Preferred stock, (1,000,000 shares authorized; none issued) ........... -- --
Common stock, par value $.01 per share; 10,000,000 shares authorized;
5,003,099 shares issued and outstanding at March 31, 1997 and
4,928,968 at March 31, 1996 ......................................... 50 49
Unrealized gain on investments, net of tax benefit of $111 at March 31,
1997 and $30 at March 31, 1996 ...................................... (224) (59)
Additional paid-in capital ............................................ 14,915 14,453
Unearned Compensation ................................................. (216) (293)
Unearned ESOP shares .................................................. -- (447)
Retained earnings ..................................................... 44,910 40,678
-------- --------
Total shareholders' equity ........................................ 59,435 54,381
-------- --------
Total liabilities and shareholders' equity ........................ $ 68,138 $ 63,651
======== ========
</TABLE>

A-38

<PAGE> 55
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
For the year ended March 31,
------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Income:
Dividends from subsidiaries ..................... $2,450 $4,800 $2,200
Interest income ................................. 948 877 678
------ ------ ------
Total income .................................. 3,398 5,677 2,878
------ ------ ------

Expense:
Interest expense ................................ 590 592 620
Employee compensation and benefits .............. 284 417 217
Professional fees ............................... 224 207 120
Merger expenses ................................. -- 737 --
Terminated merger costs ......................... -- -- 504
Other expenses .................................. 142 192 193
------ ------ ------
Total expenses ................................ 1,240 2,145 1,654
------ ------ ------

Income before federal income taxes ................ 2,158 3,532 1,224
Federal income tax benefit ........................ 103 118 333
------ ------ ------
Income before equity in undistributed net income of
subsidiaries .................................... 2,261 3,650 1,557
Equity in undistributed net income
of subsidiaries.................................. 4,149 1,956 5,143
------ ------ ------
Net income .................................... $6,410 $5,606 $6,700
====== ====== ======
</TABLE>

A-39

<PAGE> 56
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Operating Activities:
Net Income .................................................. $ 6,410 $ 5,606 $ 6,700
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in undistributed net earnings of subsidiary .......... (4,149) (2,756) (5,143)
Amortization of unearned compensation ....................... 76 72 19
ESOP expense ................................................ 27 213 72
Net change in accounts payable, accrued expenses, and
other assets .............................................. (223) 454 1
Other ....................................................... (8) 6 --
------- ------- --------
Net cash provided by operating activities ................... 2,133 3,595 1,649
------- ------- --------

Investing Activities:
Loans originated ............................................ (2,371) (1,540) (1,397)
Loan principal repayments ................................... 427 -- 1,505
Purchase of investment securities ........................... (3,993) (2,300) (5,980)
Sales of investment securities .............................. -- 500 --
Maturities of investment securities ......................... 2,000 4,800 --
Net change in note due from First Federal ................... -- 900 (900)
Investment in First Federal ................................. -- -- (3,488)
Additional investment in subsidiary ......................... -- -- (2,000)
------- ------- --------
Net cash provided by (used in) investing activities ......... (3,937) 2,360 (12,260)
------- ------- --------

Financing Activities:
Net cash provided by issuance of common stock for First
Kent ....................................................... -- -- 6,976
Payment of dividends on common stock ........................ (2,187) (1,916) (1,285)
Proceeds from ESOP termination .............................. 457 -- --
Proceeds from exercise of stock options ..................... 135 128 64
Cash paid for fractional shares from conversion of First Kent
common stock ............................................... (1) -- --
------- ------- --------
Net cash provided by (used in) financing activities ......... (1,596) (1,788) 5,755
------- ------- --------
Net increase (decrease) in cash and cash equivalents ........ (3,400) 4,167 (4,856)
Cash and cash equivalents at beginning of period ............ 6,201 2,034 6,890
------- ------- --------
Cash and cash equivalents at end of period .................. $ 2,801 $ 6,201 $ 2,034
======= ======= ========

Noncash financing activities:
Effect of conversion of subordinated debentures ............. $ 295 $ 30 $ 971
</TABLE>

A-40
<PAGE> 57
18. INVESTMENT IN REAL ESTATE JOINT VENTURES

The Company's wholly owned subsidiary , SF Development Corp., is
involved as a partner (50% interest) in two joint venture agreements, and (33
1/3% interest) in a third joint venture agreement with a real estate developer
to sell residential lots and condominium units to builders within the
Association's lending area. Profits and losses of the joint ventures are
allocated based upon contractual terms.

Combined condensed financial statements of the joint ventures are as
follows:

COMBINED CONDENSED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
March 31,
---------------------
1997 1996
---- ----
(Dollars in thousands)
<S> <C> <C>
Assets:
Cash ................................. $ 102 $ 136
Notes receivable ..................... 1,686 646
Real estate .......................... 2,463 1,504
Other assets ......................... 719 400
------ ------
Total Assets .............. $4,970 $2,686
====== ======

Liabilities and Equity:
Loans payable ........................ $4,576 $2,400
Accounts payable and
accrued expenses.................... 50 120
Equity ............................... 344 166
------ ------
Total Liabilities
and Equity................ $4,970 $2,686
====== ======
</TABLE>

COMBINED CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Year ended March 31,
-------------------------
1997 1996
------- -------
(Dollars in thousands)
<S> <C> <C>
Sales ...................... $ 2,921 $ 1,350
Cost of sales .............. (2,378) (1,019)
------- -------
Gross profit ...... 543 331

Interest income ............ 40 62
Operating expenses ......... (406) (227)
------- -------
Net income ....... $ 177 $ 166
======= =======

SF Development Corp.'s
share..................... $ 89 $ 83
======= =======
</TABLE>

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<PAGE> 58
19. BUSINESS COMBINATION

Effective April 10, 1996, the Company acquired 100% of the outstanding
shares of common stock of First Kent Financial Corporation ("First Kent") by
exchanging 1.70 shares of Security First Corp. stock for each share of First
Kent. The merger was accounted for as a pooling of interests and, accordingly,
the financial statements of the Company for all periods prior to the merger have
been restated to include the results of First Kent.

Total assets and shareholders' equity of First Kent as of March 31,
1996 were $77,571,000 and $13,480,000, respectively. First Kent paid dividends
of $524,000 and $225,000 for year ended March 31, 1996 and March 31, 1995,
respectively.

The following table shows the effect on results of operations for the
periods prior to the merger. Security First's fiscal year ends March 31, while
First Kent changed its fiscal year-end from March 31 to September 30 during
1994. Accordingly, First Kent's historical results as previously reported for
periods subsequent to September 30, 1994 have been restated to conform to
Security First's fiscal year.

<TABLE>
<CAPTION>
Total Income Net Income
--------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Security First Corp... $39,466 $35,296 $5,282 $5,714
First Kent ........... 5,826 5,532 324 986
------- ------- ------ ------
Total ........ $45,292 $40,828 $5,606 $6,700
======= ======= ====== ======
</TABLE>

Reconciliation of amounts previously reported by Security First and
First Kent to the amounts included in the restated statements of the Company for
1996 and 1995.

<TABLE>
<CAPTION>
Total Income Net Income
-------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
---------- ----------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
As reported by Security
First Corp. ............... $39,466 $35,296 $ 5,282 $5,714
As reported by First
Kent ...................... 5,736 2,707 814 571
Adjustment to conform fiscal
year-end ................. 90 2,825 (490) 415
------- ------- ------- ------
Total, as restated ... $45,292 $40,828 $ 5,606 $6,700
======= ======= ======= ======
</TABLE>

20. SUBSEQUENT EVENT

On May 20, 1997, the Board of Directors of the Company declared a
three-for-two stock split, in the form of a 50% stock dividend, payable July 31,
1997, to shareholders of record on July 15, 1997. The Board of Directors also
declared a cash dividend of $.12 per share on the pre-split shares ($.08 per
share post-stock split) which will be payable on June 30, 1997, to shareholders
of record on June 16, 1997.

A-42
<PAGE> 59
STOCK PRICE AND DIVIDEND INFORMATION

On March 31, 1997 there were 5,003,009 shares of Security First Common
Stock issued and outstanding, which were held of record by approximately 1,185
shareholders. This does not include the number of persons whose stock is in
nominee or "street name" accounts through brokers.

The following table sets forth, for the periods shown, the high and low
prices of the common stock and cash dividends per share declared. The prices
reflect inter-dealer quotations without retail mark-up, mark-down or
commissions, and do not necessarily represent actual transactions.

Dividend restrictions are described in the notes to consolidated
financial statements included in this report.

<TABLE>
<CAPTION>
CASH
DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
- ----------------------------------------------- ------ ------ ---------
<S> <C> <C> <C>
June 30, 1995.................................. $14.00 $12.50 $ .10
September 30, 1995............................. 15.75 13.25 .10
December 31, 1995.............................. 15.75 13.50 .10
March 31, 1996................................. 15.00 11.50 .10
June 30, 1996.................................. 14.25 11.50 .11
September 30, 1996............................. 14.50 13.25 .11
December 31, 1996.............................. 18.13 13.75 .11
March 31, 1997................................. 19.25 17.50 .11
</TABLE>

DEBENTURES

Security First Corp.'s 6.25% convertible subordinated debentures due
May 1, 2008, are traded by McDonald & Company Securities, Inc.

INDEPENDENT AUDITORS

Deloitte & Touche LLP
Cleveland, Ohio

A-43
<PAGE> 60
BOARD OF DIRECTORS
SECURITY FIRST CORP.

CHARLES F. VALENTINE
Chairman of the Board and
Chief Executive Officer

AUSTIN J. MULHERN
President and Chief Operating Officer

ROBERT L. ANDERSON
Chairman and Chief Executive Officer
Wiseco Piston, Inc.

JAMES P. MYERS
President
Hale B. Thompson, Inc.

NICHOLAS E. RINALDI, D.D.S.
Drs. Rhodes, Rinaldi and Associates, Inc.

LARRY E. ROGERS
President and Chief Executive Officer
The P.I.E. Mutual Insurance Co.

DONALD E. SNOW
Retired, Former District Manager
Ohio Edison Company

LOUIS J. SORBORO
President
First Federal Savings Bank of Kent

PAUL V. VOINOVICH
President
Voinovich Companies

EXECUTIVE OFFICERS OF
SECURITY FIRST CORP.

CHARLES F. VALENTINE
Chairman of the Board and
Chief Executive Officer

AUSTIN J. MULHERN
President and Chief Operating Officer

JEFFREY J. CALABRESE
Vice President and Secretary

MARY H. CROTTY
Vice President, Treasurer, and
Chief Financial Officer

THOMAS J. DEIGHTON
Vice President

THOMAS F. SULLIVAN
Assistant Vice President and Controller

A-44