MBLA FINANCIAL CORP, 10KSB40, 1998-09-25

MBLA FINANCIAL CORP
10KSB40, 1998-09-25
SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB

Annual report pursuant to Section 13 of the
Securities Exchange Act of 1934

For the fiscal year ended June 30, 1998

Commission File No. 0-21482

MBLA FINANCIAL CORPORATION
(exact name of registrant as specified in its charter)

DELAWARE 43-1637679
(State of Incorporation) (IRS Employer I.D. No.)

101 Vine Street, Macon, Missouri 63552
(Address of principal executive office)

(660) 385-2122
(registrant's telephone number, including area code)

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)

The registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subjected 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 considered herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part II of the Form 10-KSB
or any amendment to this Form 10-KSB. .
-------------
The aggregate market value of the voting stock held by non-affiliates of
the registrant, i.e., persons other than directors and executive officers of
the registrant is $27,489,354 and is based upon the last sales price as quoted
on the NASDAQ National Market for June 30, 1998.

As of June 30, 1998, the Registrant had 1,247,021 shares outstanding.

Revenues for the fiscal year ended June 30, 1998: $15,278,000.

Transitional Small Business Disclosure Format (check one): Yes No X .
-- ---
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended June 30,
1998 are incorporated by reference into Part II of this Form 10-KSB.

The Proxy Statement for the 1998 Annual Meeting of Stockholders is
incorporated by reference into Part III of this Form 10-KSB.

<PAGE>
<PAGE>
INDEX

PAGE
PART I ----

Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 33
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 33
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . 33

PART II

Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . 33
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 33
Item 7. Financial Statements . . . . . . . . . . . . . 34
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . 34

PART III

Item 9. Directors and Executive Officers of the Registrant
and Control Persons; Compliance with Section 16(a)
of the Exchange Act . . . . . . . . . . . . . . 34
Item 10. Executive Compensation. . . . . . . . . . . . .
34
Item 11. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . 34

Item 12. Certain Relationships and Related Transactions. 34

Item 13. Exhibits and Reports on Form 8-K. . . . . . . . 35

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 36

<PAGE>
<PAGE>
PART I

Item 1. Business.
- -------------------

On June 24, 1993, MBLA Financial Corporation (the "Company") closed its
public offering for 1,725,000 shares of its common stock and acquired Macon
Building and Loan Association, Macon, Missouri (the "Association" or "Macon")
as a part of the Association's conversion from a mutual to a stock state
chartered savings and loan association. The Company was incorporated under
Delaware law on February 23, 1993. The Company is a savings and loan holding
company and is subject to regulation by the Office of Thrift Supervision (the
"OTS"), the Federal Deposit Insurance Corporation (the "FDIC") and the
Securities and Exchange Commission (the "SEC"). Currently, the Company does
not transact any material business other than through the Association.
Approximately 50% of the net conversion proceeds amounting to $8.2 million
which was retained by the Company was principally invested in deposits with
the Association and a $685,000 loan to the Association's Employee Stock
Ownership Plan ("ESOP") in order to fund the ESOP's purchase of stock in the
Association's conversion. The Company paid dividends of $ .50 per share,
representing a dividend payout ratio of 32.9%, for the year ended June 30,
1998. At June 27, 1998, the Company had approximately 375 stockholders of
record of the 1,247,021 shares of common stock outstanding. This number does
not reflect the number of persons or entities who may hold their stock in
nominee or "street" name through brokerage firms.

The Association has operated for over 100 years and was originally
organized in 1885 as a Missouri-chartered building and loan association.
The Association converted to a Federal chartered savings & loan effective June
1, 1995. The Association is a member of the Federal Home Loan Bank (the
"FHLB") System and its deposit accounts are insured up to applicable limits by
the FDIC. At June 30, 1998 the Company had total assets of $203.2 million and
stockholders' equity of $27.8 million.

The Association offers a variety of financial services to meet the needs
of the communities it serves. The Association's principal business has been
and continues to be attracting retail deposits from the general public and
investing those deposits, together with funds generated from operations,
primarily in one- to four-family residential mortgage loans through purchases
and originations. To a lesser extent, the Association invests in U.S.
government federal agency securities and mortgage-backed and related
securities, interest-earning deposits, commercial and multi-family real estate
loans and consumer loans. The Association's revenues are derived principally
from interest on its mortgage loan and mortgage-backed and related securities
portfolios and earnings on its investment securities. The Association's
primary sources of funds are deposits and principal and interest payments on
loans and mortgage-backed and related securities. The Association's primary
expense is interest paid on deposits.

Market Area

The Association currently operates out of its main office in Macon and
one branch office located in Moberly, Missouri. The Association's deposit
gathering base is concentrated in Macon and Randolph Counties in Missouri.
Due to the low demand for loans in the Association's primary market area, at
June 30, 1998, approximately $120.6 million or 87.8% of the Association's
total loan portfolio consisted of loans purchased from selected mortgage
banking companies and financial institutions secured by properties located
primarily in Columbia, Missouri, and to a lesser extent, other cities in
central Missouri.

Lending Activities

Loan Portfolio Composition. The Association's loan portfolio consists
primarily of conventional adjustable-rate and fixed-rate first mortgage loans
secured by one- to four-family residences. The Association also originates
multi-family and commercial real estate mortgage loans, and consumer loans.
At June 30, 1998, the Association's mortgage loans outstanding were $136.5
million, of which $122.3 million were one- to four-family

1
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residential mortgage loans. Of the total loans outstanding at that date,
$120.5 million were adjustable-rate mortgage ("ARM") loans and $16.8 were
fixed-rate loans. At that same date, commercial real estate loans totalled
$13.4 million. At June 30, 1998, purchased whole mortgage loans and
participations totalled $120.6 million or 87.8% of the Association's loan
portfolio. These loans were purchased without recourse and are serviced by
the sellers.

Other loans held by the Association, which primarily consisted of
consumer loans, totalled $.8 million or .60% of total loans outstanding at
June 30, 1998. There were no loans held for sale at June 30, 1998.

Loan Purchases and Originations. The Association purchases and
originates loans, which are secured by first mortgages on owner-occupied one-
to four-family residences and commercial real estate located primarily in
Columbia, Missouri and to a lesser extent, other cities in central Missouri.
The Association has purchased and originated primarily ARM loans and to a
lesser extent 15 and 20 year fixed-rate mortgage loans the amount of which is
dependent upon relative customer demand as well as current and expected future
levels of interest rates. The Association has historically had a low demand
for loans in its primary market area and thus purchases loans, primarily one-
to four-family ARM loans from selected mortgage banking companies and
financial institutions. The Association utilizes the same underwriting
standards for loan purchases as it uses for the loans it originates. The
servicing rights on substantially all of the loans purchased by the
Association are retained by the loan originator.

2
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The following table sets forth as of June 30, 1998, the portions of the
Association's loan portfolio which had been purchased from others and
originated by the Association.

At June 30, 1998
-------------------------------------------------------
Purchased (1) Originated Total
------------------ --------------- ----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in thousands)
Mortgage Loans:
One-to four-family $ 107,507 78.30% $ 14,821 10.80% $122,328 89.10%
Multi-family 639 .46 75 0.05 714 0.52
Commercial real
estate 12,182 8.87 1,252 0.91 13,434 9.78
-------- ----- ------- ----- -------- ------
Total mortgage
loans 120,328 87.63 16,148 11.76 136,476 99.40
-------- ----- ------- ----- -------- ------
Other loans:
Home improvement -- -- 188 0.14 188 0.14
Loans on savings
accounts -- -- 412 0.30 412 0.30
Other 224 0.16 -- -- 224 0.16
-------- ----- ------- ----- -------- ------
Total other loans 224 0.16 600 0.44 824 .60
-------- ----- ------- ----- -------- ------
Total gross loans $120,552 87.79% $16,748 12.20% $137,300 100.00%
======== ===== ======= ===== ======== ======

(1) Includes both purchased whole loans and loan participations.

3
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<TABLE>

The following table sets forth the composition of the Association's mortgage and other loan portfolios
and mortgage-backed securities portfolio in dollar amounts and in percentages at the dates indicated.

At June 30,
-------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------- ---------------- ---------------- ------------------ ---------------
Percent Percent Percent Percent Percent
of of of of
Amount Total Amount Total Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One-to-four
family $122,328 89.10% $115,104 90.52% $ 97,017 90.67% $ 92,731 88.01% $80,055 85.67%
Multi-family 714 0.52 1,247 .98 1,367 1.27 4,401 4.18 4,708 5.04
Commercial real
estate 13,434 9.78 9,824 7.73 7,643 7.15 7,102 6.74 7,411 7.93
-------- ------ -------- ------ -------- ------ -------- ------ ------- ------
Total mortgage
loans 136,476 99.40 126,175 99.23 106,027 99.09 104,234 98.93 92,174 98.64

Other loans:
Home improvement 188 0.14 270 0.21 277 0.26 378 0.36 406 0.43
Loans on savings
accounts 412 0.30 342 0.27 283 0.26 289 0.27 363 0.39
Other loans -- FHA
Non-mortgage 224 0.16 372 0.29 415 0.39 459 0.44 502 0.54
-------- ------ -------- ------ ------- ------ -------- ------ ------- ------
Total other loans 824 0.60 984 .77 975 .91 1,126 1.07 1,271 1.36

Total loans
receivable $137,300 100.00% $127,159 100.00% $107,002 100.00% $105,360 100.00% $93,445 100.00%
-------- ------ -------- ------ -------- ------ -------- ------ ------- ------
Add:
Premium on
purchased
loans $ 6 $ 8 $ 8 $ 9 $ 11

Deferred loan costs 31 27 26 31 29

Less:
Loans in process -- 116 16 165 111
Unearned discounts,
premiums and
deferred loan
fees, net -- -- -- -- --
Allowance for loan
losses 690 630 535 535 425
-------- -------- -------- -------- -------
Loans receivable,
Net $136,647 $126,448 $106,485 $104,700 $92,949
======== ======== ======== ======== =======
Mortgage-backed
securities, net:
FHLMC $ 675 1.40% $ 950 1.37% $ 1,220 1.72% $ 1,470 2.11% $ 1,798 12.21%
FHLMC ARM 164 .34 245 .36 335 .47 507 .73 658 4.47
FNMA/GNMA ARM 12,695 26.32 16,458 23.86 19,529 27.46 25,062 36.07 600 4.08
FNMA/FHLMC REMIC 33,586 69.65 50,586 73.34 50,546 71.06 43,224 62.21 12,130 82.39
-------- ------ -------- ------ -------- ------ ------- ------ ------- ------
Total mortgage-
backed
securities 47,120 97.71 68,239 98.93 71,630 100.71 70,263 101.12 15,186 103.15
Net premiums and
discounts (231) (.48) (351) (.51) (779) (1.10) (1,044) (1.50) 3 0.02
SFAS #115 Adjustment
to Fair Value 1,337 2.77 1,087 1.58 278 .39 263 .38 (467) (3.17)
-------- ------ -------- ------ -------- ------ ------- ------ ------- ------
Net mortgage-
backed securities $ 48,226 100.00% $ 68,975 100.00% $ 71,129 100.00% $ 69,482 100.00% $14,722 100.00%
======== ====== ======== ====== ======== ====== ======== ====== ======= ======

</TABLE> 4
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<PAGE>
The following table sets forth the Association's mortgage loan purchases and
originations, other loans and mortgage-backed securities purchased, sales and
principal repayments for the periods indicated:

Year ended June 30,
----------------------------------
1998 1997 1996
---- ---- ----
(in thousands)
Mortgage loans (gross):
At beginning of period $126,175 $ 106,027 $104,234
Mortgage loans purchased:
One-to four-family 24,668 29,077 14,872
Multi-family 2,379 1,464 --
Commercial real estate 2,655 1,672 1,631
-------- --------- --------
Total mortgage loans purchased 29,702 32,213 16,503
-------- --------- --------
Mortgage loans originated:
One-to four-family 6,763 983 978
Multi-family -- -- --
Commercial real estate -- 319 --
-------- --------- --------
Total mortgage loans originated 6,763 1,302 978

Total mortgage loans purchased and
originated 36,465 33,515 17,481
-------- --------- --------
Transfer of mortgage loans to
foreclosed REO -- 30 103
Principal repayments 26,164 13,337 15,585
-------- --------- --------
At end of period $136,476 $ 126,175 $106,027
======== ========= ========
Other loans:
At beginning of period $ 984 $ 975 $ 1,126
Other loans originated 523 449 307
Other loans purchased -- -- --
Principal repayments (683) (440) (458)
-------- --------- --------
At end of period $ 824 $ 984 $ 975
======== ========= ========
Mortgage-backed securities:
At beginning of period $ 68,975 $ 71,129 $ 69,482
Mortgage-backed securities purchased 4,000 17,000 11,023
Mortgage-backed securities sold/
called (20,891) (16,576) (3,501)
Amortization and repayments (4,109) (3,387) (5,890)
SFAS #115 Adjustment to Fair Value 251 809 15
-------- --------- --------
At end of period $ 48,226 $ 68,975 $ 71,129
======== ========= ========

5
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<TABLE>

Loan and Mortgage-backed Securities by Contractual Maturity

The following table shows the maturity of the Association's loan and mortgage-backed securities
portfolios at June 30, 1998. The table does not include prepayments or scheduled principal amortization.
Prepayments and scheduled principal amortization on loans and mortgage-backed securities totalled $31.0
million, $17.2 million, and $21.9 million for the years ended June 30, 1998, 1997 and 1996, respectively.

At June 30, 1998
----------------------------------------------------------------------------
Mortgage Loans Totals
-------------------------------- ------------------------------------------
(In Thousands)
Total Mortgage-
One-to- Multi- Commercial Other Loans Backed
Four-Family Family Real Estate Loans Receivable Securities Total
----------- ------ ----------- ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Amounts due:
Within 1 year $ 41 $ -- $ -- $ 419 $ 460 $ -- $ 460
--------- ----- -------- ----- --------- -------- ---------
After 1 year:
1 to 3 years 935 -- 21 21 977 -- 977
3 to 5 years 1,823 -- 26 62 1,911 -- 1,911
5 to 10 years 3,443 -- -- 322 3,765 696 4,461
10 to 20 years 100,079 714 10,454 -- 111,247 308 111,555
over 20 years 16,007 -- 2,933 -- 18,940 47,222 66,162
--------- ----- -------- ----- --------- -------- ---------
Total due after 1 year 122,287 714 13,434 405 136,840 48,226 185,066
--------- ----- -------- ----- --------- -------- ---------
Total amounts due 122,328 714 13,434 824 137,300 48,226 185,526
--------- ----- -------- ----- --------- -------- ---------
Loans in process -- -- -- -- -- -- --
Unearned deferred loan fees 31 -- -- -- 31 -- 31
Allowance for loan losses (615) (4) (67) (4) (690) -- (690)
Premiums on purchased
loans -- -- -- 6 6 -- 6
--------- ----- -------- ----- --------- -------- ---------
Loans receivable and
mortgage-backed
securities, net $ 121,744 $ 710 $ 13,367 $ 826 $ 136,647 $ 48,226 $ 184,873
========= ===== ======== ===== ========= ======== =========

</TABLE>
<TABLE>

The following table sets forth at June 30, 1998, the dollar amount of all loans and mortgage-backed
securities due after June 30, 1999, and whether such loans have fixed interest rates or adjustable
interest rates.

Due after
June 30, 1999
--------------------------------------
Fixed Adjustable Total
----- ---------- -----
(in thousands)
<S> <C> <C> <C>
Mortgage loans:
One-to four-family $ 7,632 $ 114,655 $122,287
Multi-family -- 714 714
Commercial real estate 7,376 6,058 13,434
Other loans 9 396 405
------- --------- --------
Total loans receivable 15,017 121,823 136,840

Mortgage-backed securities 696 47,530 48,226
Total loans receivable and ------- --------- --------
mortgage-backed securities $15,713 $ 169,353 $185,066
======= ========= ========

6
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<PAGE>
Purchased Loans. Due to low loan demand in its primary market area, the
Association has historically purchased a significant amount of mortgage
loans, substantially all of which have been ARM loans, including one- to four-
family, commercial real estate and multi-family. The Association purchases
both whole mortgage loans, and to a lesser extent, participation interests of
less than 100 percent from selected mortgage banking companies and financial
institutions. At June 30, 1998, purchased mortgage loans totalled $120.6
million, or 87.8%, of the gross loan portfolio. Approximately $119.1 million
or 98% of the loans purchased by the Association are from thrift institutions
located in Fulton and Columbia, Missouri and a mortgage banking company
located in Columbia, Boone County, Missouri. The Association has done
business with these institutions for over ten years. Substantially all of the
purchased loans are first mortgage loans and are secured by one- to
four-family residential properties consisting of single family homes. The
Association has occasionally purchased commercial real estate loans. The
Association does not issue forward commitments to purchase loans.

The vast majority of one- to four-family residential mortgage loans
purchased by the Association are secured by properties that serve as the
primary residence of the borrower. As part of management's strategy to reduce
the Association's vulnerability to interest rate risk, substantially all of
the loans purchased have been ARM loans. Although the terms of the purchased
ARM loans vary, all provide for qualification of the borrowers at the fully
indexed rate. The Association does not purchase delinquent loans or any loan
that has ever shown a history of late mortgage payments.

One- to Four-Family Mortgage Lending. The Association's primary lending
activity is the purchase and origination of first mortgage loans secured by
one- to four-family residences. Typically, such residences are single-family
homes that serve as the primary residence of the owner. The Association
generally purchases and originates one- to four-family residential mortgage
loans in amounts up to 95% of the lesser of the appraised value or selling
price of the mortgaged property. Loans purchased or originated in amounts
over 80% of the lesser of the appraised value or selling price of the
mortgaged property, other than loans to facilitate the sale of real estate
acquired through foreclosure, must be owner-occupied and private mortgage
insurance must be provided by the borrower on the amount in excess of 80%.
The Association had 46 one- to four-family loans with principal balances that
exceeded $250,000 to one borrower at June 30, 1998. The largest of such
loans had an outstanding balance of $2.5 million. All such loans are current.

At June 30, 1998, the purchased one- to four-family loans were being
serviced by approximately 14 companies. Substantially all of these loans are
being serviced by two servicers who service approximately $115.8 million or
approximately 96% of Macon's purchased loans. Servicers generally receive a
fee of 25 to 38 basis points on all loans serviced. The Association has
experienced low levels of delinquencies and losses from its purchased one- to
four-family mortgage loans. At June 30, 1998, loans totalling $924,000, or
.67% of the Association's portfolio were 90 days or more delinquent.

Loan originations are generally obtained from existing or past customers,
members of the local community, and realtors within the Association's lending
area. The Association offers both fixed-rate and ARM loans. Mortgage loans
originated and held by the Association in its portfolio generally include
due-on-sale clauses which provide the Association with the contractual right
to deem the loan immediately due and payable in the event that the borrower
transfers ownership of the property without the Association's consent.

The Association offers fixed-rate mortgage loans with a 15-year and
20-year term that are underwritten by the Association on terms consistent with
prevailing secondary mortgage market standards. The Association's current
policy is to retain such loans in its portfolio.

7
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At June 30, 1998, 89.1% of total loans consisted of one- to four-family
residential loans. Borrower demand for ARMs versus fixed-rate mortgage loans
is a function of the level of interest rates, the expectations of changes in
the level of interest rates and the difference between the interest rates and
loan fees offered for fixed-rate mortgage loans and loan fees for ARMs. The
relative amount of fixed-rate mortgage loans and ARMs that can be originated
at any time is largely determined by the demand for each in a competitive
environment. The Association currently offers ARM loans, which adjust
annually. The Association's ARM loans may carry an initial interest rate
which is slightly less than the fully-indexed rate for the loan. The initial
discounted rate is determined by the Association in accordance with market and
competitive factors. The ARM loans currently being purchased and originated
by the Association adjust by a maximum of 1% to 2% per adjustment and have a
lifetime cap of 4% to 6% over the initial interest rate. ARM loans are
originated for a term of up to 30 years.

Commercial Real Estate/Multi-Family Lending. The Association also
purchases and originates loans secured by commercial real estate and
multi-family dwelling units (more than four units) primarily secured by
apartments and professional office buildings. At June 30, 1998, $14.1 million
of the Association's total loan portfolio was invested in loans, secured by
commercial real estate and multi-family dwelling units, located primarily in
central Missouri. Multi-family real estate loans are generally originated
at 80% or less of the appraised value of the property or selling price,
whichever is less, and are generally originated on an adjustable rate basis
for one to three year terms with the principal amortized on a basis of up to
25 years. The commercial real estate and multi-family ARM loans currently
being purchased and originated by the Association adjust, by a maximum of 1%
to 2%, per adjustment and have a lifetime cap of 4% to 6% over the initial
interest rate.

The Association originates permanent loans on commercial real estate up
to 80% of the appraised value. These loans generally have repayment schedules
based upon a 10 to 25 year constant payment amortization and are currently
originated with an interest rate that floats and is indexed to the Eleventh
District FHLB Cost of Funds. The Eleventh District FHLB Cost of Funds is a
lagging index, which may cause the yield on loans indexed to it to adjust more
slowly than the rest of the Association's interest-bearing liabilities,
especially in a rapidly rising interest rate environment.

Of primary concern in commercial real estate and multi-family lending is
the feasibility and cash flow potential of the project and the borrower's
creditworthiness. Loans secured by income properties are generally larger and
involve greater risks than one- to four-family residential mortgage loans
because payments on loans secured by income properties are often dependent on
successful operation or management of the properties. As a result, repayment
of such loans may be subject to a greater extent than one- to four-family real
estate loans to adverse conditions in the real estate market or the economy.

Consumer and Other Loans. The Association also offers consumer loans to
existing customers in the form of share loans, home improvement loans and
automobile loans. These loans totalled $.60 million or .44% of total loans
receivable at June 30, 1998. Federal regulations permit savings associations
to make secured and unsecured loans up to 35% of an institution's assets. In
addition, a savings association has lending authority above the 35% category
for certain consumer loans, such as home equity loans, property improvement
loans, and loans secured by savings accounts.

In connection with consumer loan applications, the Association receives
the borrower's income statement and reviews a credit bureau report. In
addition, the relationship of the loan to the value of the collateral is
considered. All automobile loan applications are reviewed and approved by the
Association's President. The Association reviews the credit report of the
borrower as well as the value of the unit which secured the loan.

8
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Under state and federal regulations, savings associations are permitted
to make secured or unsecured loans for commercial, corporate, business or
agricultural purposes, including the issuance of letters of credit secured by
real estate, business equipment, inventories, accounts receivable and cash
equivalents. The aggregate amount of such loans outstanding may not exceed
15% of such institution's assets. The Association does not make unsecured
commercial loans unless they are U.S. government insured.

Loan Approval Authority and Underwriting. All mortgage loans purchased
and originated by the Association must have the approval of the Executive
Committee. The Executive Committee meets as needed. One- to four-family
residential mortgage loans are generally underwritten according to the
Association's written loan underwriting guidelines. For all loans originated
by the Association, upon receipt of a completed loan application from a
prospective borrower, a credit report is ordered, income and certain other
information is verified and, if necessary, additional financial information is
requested. An appraisal of the real estate intended to secure the proposed
loan is required which currently is performed by an independent appraiser
designated and approved by the Association. It is the Association's policy to
obtain abstracts certified by licensed abstract officers and title companies
or title insurance on all real estate first mortgage loans. Borrowers must
also obtain hazard and flood insurance (for loans on property located in a
flood zone) prior to closing the loan. For all loans, borrowers are required
to advance funds on a monthly basis together with each payment of principal
and interest to an escrow account from which the Association makes
disbursements for items such as real estate taxes and hazard insurance
premiums. For other loans, the escrow of such funds is at the borrower's
option.

The Association uses the same underwriting standards for loans it
purchases as loans it originates. The Association generally requires income
and deposit verification of each borrower at the time of origination of the
loan. All loans must be documented, including an appraisal that substantiates
the value of the subject property at the time of origination of the loan.
Agreements to purchase loans include provisions allowing the Association to
review all documentation to ensure compliance with the Association's
underwriting standards and the right to inspect or appraise the properties
within 90 to 120 days after purchase and to put back to the seller or
substitute loans that do not comply with the Association's underwriting
standards. In addition, the Association or its custodian obtains the original
signed promissory notes after endorsement to the Association and currently
requires that each mortgage or deed of trust be assigned to the Association.
Furthermore, the Association generally has the right to sell a purchased loan
back to the seller for a period of six months to one year, depending on which
company the loan was purchased from, as a result of any material misstatement
of the seller or breach by the seller of any material warranty regarding the
loan. The servicing agreement generally provides that the Association may
terminate the servicing agreement if (i) the seller-servicer, in the sole
opinion of the Association, fails to perform its obligations under the
agreement; (ii) the seller-servicer becomes insolvent or bankrupt or is placed
in conservatorship or receivership; or (iii) the seller-servicer assigns or
attempts to assign its rights and obligations under the agreement, without
written consent of the Association. The Board of Directors ratifies all loans
and participations approved by the Executive Committee.

Mortgage-Backed Securities. The Company also invests in mortgage-backed
and related securities. At June 30, 1998, net mortgage-backed and related
securities aggregated $48.2 million, or 23.73% of total assets of which $47.5
million were adjustable-rate and $.7 million were fixed-rate. All securities
in the mortgage-backed and related securities portfolio at June 30, 1998, were
insured or guaranteed by either the FNMA, GNMA or the FHLMC. All of the
mortgage-backed and related securities in the portfolio have coupon rates as
of June 30, 1998 ranging from 6.01% to 9.01% with a weighted average yield of
6.43% at June 30, 1998. At June 30, 1997, mortgage-backed securities totalled
$69.0 million or 29.37% of total assets.

Mortgage related securities at June 30, 1998, consisted of Real Estate
Mortgage Investment Conduits ("REMICs"). REMICs are securities derived by
reallocating cash flows from mortgage pass-through securities or from pools
of mortgage loans held by a trust. At June 30, 1998, the Association owned
REMICs with an amortized cost of $33.3 million and a market value of $34.5
million and a weighted average yield of 7.11%. The

9
<PAGE>
<PAGE>
REMICs that the Association owned at June 30, 1998 are long-term with an
average estimated life of ten to fourteen years and range in original
principal amount from $.5 million to $5.3 million. Management considers REMIC
investments to be advantageous since they offer yields above those available
for investments of comparable credit quality and duration and qualify as
thrift investments under the QTL Test. Under OTS guidelines, certain REMICs
are considered high risk because principal payments are distributed on a lower
priority basis to these tranches (the support tranches) of the REMICs than the
higher priority, planned amortization tranches. In addition, the actual terms
to maturity of the support tranches may be more volatile than those of
standard mortgage securities. The REMICs acquired by the Association are not
interest only or principal only or residual interests. The Association has
limited REMIC purchases to those that are adjustable rate and not classified
as high risk under the Federal Financial Institutions Examination Counsel
high-risk test. Therefore, the Association believes that the risk associated
with the REMICs in its portfolio is significantly reduced.

Non-Performing and Problem Assets
- ---------------------------------

Collection Procedures. With respect to originated mortgage loans, the
Association's collection procedures include sending a past due notice after 10
days and a late notice after payment is 30 days past due. In the event that
payment is not received, letters are sent or phone calls are made to the
borrower. When contact is made with the borrower at any time prior to
foreclosure, the Association will attempt to obtain full payment or work out a
repayment schedule with the borrower to avoid foreclosure. Generally,
foreclosure notices are sent when a loan is over 60 days delinquent.

The Association had $120.6 million in purchased loans and participations
at June 30, 1998. The sellers retained servicing on substantially all of such
purchased loans. The Association has no recourse against the seller on whole
mortgage loans and loan participations purchased. The Association receives
monthly reports from the loan servicers which it uses to closely monitor its
purchased mortgage loan and loan participation portfolio. On purchased loans,
the Association uses the servicer to commence foreclosure proceedings.

The collection procedures are similar to those for the Association's own
loans except that the first late notice is sent when the loan becomes 15 days
delinquent.

Uncollectible interest on loans that are contractually past due 90 days
or more is charged off or an allowance is established based on management's
periodic evaluation unless the obligation is well secured and in the process
of collection. The allowance is established by a charge to interest income
equal to all interest previously accrued.

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

When an insured institution classifies problem assets as either
substandard or doubtful, it is required to establish general allowances for
losses in an amount deemed prudent by management. General allowances
represent loss allowances which have been established to recognize the
inherent risk associated with lending activities, but

10
<PAGE>
<PAGE>
which, unlike specific allowances, have not been allocated to particular
problem assets. When an insured institution classifies problem assets as
"loss", it is required to establish a specific allowance for losses equal to
100% of the amount of the asset so classified or to charge-off such amount.
The Association regularly reviews the assets in its portfolio to determine
whether any assets require classification in accordance with applicable
regulations.

As of June 30, 1998, the Association had total classified assets of
$1,374,610 of which $671,690 were classified as substandard and $326,838 were
classified as doubtful. Special mention assets totalled $376,795 at June 30,
1998.

11
<PAGE>
<PAGE>
Delinquent Loans.

At June 30, 1998, 1997 and 1996, delinquent loans in the Association's
portfolio were as follows:

At June 30, 1998 At June 30, 1997
----------------------------- ------------------------------
60-90 Days 90 Days or More 60-90 Days 90 Days or More
------------ --------------- ------------ ---------------
Num- Bal- Nem- Bal- Num- Bal- Num- Bal-
ber ance ber ance ber ance ber ance
of of of of of of of of
Loans Loans Loans Loans Loans Loans Loans Loans
----- ----- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
One- to four-
family 13 $ 451 21 $ 924 8 $ 115 11 $ 577
Multi-family -- -- -- -- -- -- -- --
Commercial real
estate -- -- -- -- -- -- -- --
--- ----- --- ----- --- ----- --- -----
Total mortgage
loans 13 $ 451 21 $ 924 6 $ 115 11 $ 577
=== ===== === ===== === ===== === =====
Delinquent loans
to total gross
loans 0.33% 0.67% 0.09% 0.46%

At June 30, 1996
----------------------------------------
60-90 Days 90 Days or More
------------------- -----------------
Number Principal Number Principal
of Balance of Balance
Loans of Loans Loans of Loans
----- -------- ----- --------

One- to four-family 6 $ 122 13 $ 663
Multi-family -- -- -- --
Commercial real estate -- -- -- --
---- ------- ---- ------
Total mortgage loans 6 $ 122 13 $ 663
==== ======= ==== ======
Delinquent loans to
total gross loans 0.11% 0.62%

Non-Performing Assets. The following table sets forth information regarding
delinquent loans and real estate owned by the Association at the dates
indicated. At June 30, 1998, 1997 and 1996, the Association had no
restructured loans within the meaning of FASB Statement 15.

At June 30,
------------------------
1998 1997 1996
---- ---- ----
(Dollars in thousands)

Non-accrual mortgage loans $ 924 $ 577 $ 663
Non-accrual other loans -- -- --
----- ----- -----
Total non-performing loans 924 577 663
----- ----- -----
Total foreclosed real estate,
net of related reserves -- -- 23
----- ----- -----
Total non-performing assets (1) $ 924 $ 577 $ 686
===== ===== ======
Non-performing loans to total loans 0.67% 0.46% 0.62%
Total non-performing assets to total
assets 0.45% 0.25% 0.34%

(1) All non-performing assets at June 30, 1998 were included in classified
assets at that date.

12
<PAGE>
<PAGE>
ALLOWANCE FOR LOAN LOSSES AND REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS

The Association provides valuation allowances for estimated losses from
uncollectible loans. Management's periodic evaluation of the adequacy of the
allowance for loan losses is based on loss experience, known and inherent risk
in the portfolio, prevailing market conditions, and management's judgement as
to their collectibility. The allowance for loan losses is increased by
charges to earnings and decreased by charge-offs (net of recoveries).

The following table sets forth the Association's allowance for loan losses at
the dates indicated:

At or For the Year
-----------------------------------------
Ended June 30,
-----------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)

Balance at beginning of period $ 630 $ 535 $ 535 $ 425 $ 350
Provision for loan losses 60 95 -- 115 75
Charge-offs -- -- -- (5) --
Recoveries -- -- -- -- --
----- ----- ----- ----- -----
Balance at end of period $ 690 $ 630 $ 535 $ 535 $ 425
===== ===== ===== ===== =====
Ratio of net charge-offs during
the period to average loans
outstanding during the period -- -- -- -- --

Ratio of allowance for loan losses
to non-performing loans at
end of period 74.68% 109.19% 80.69% 126.16% 185.39%

Ratio of allowance for loan losses
to total non-performing assets at
the end of period 74.68% 109.19% 77.99% 126.16% 183.39%

Ratio of allowance for loan losses
to total loans receivable at
the end of period 0.50% 0.50% 0.50% 0.51% 0.46%

13
<PAGE>
<PAGE>
The following table sets forth the Association's general allowance for loan
losses by type of loan at the dates indicated.

At June 30,
--------------------------------------------------------
1998 1997 1996
------------------ ------------------ ----------------
Percent- Percent- Percent-
age of age of age of
loans in loans in loans in
Category Category Category
to Total to Total to Total
Outstand- Outstand- Outstand-
ing ing ing
Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ -----
(Dollars in thousands)
General Allowances
Allocated to:

Mortgage loans:
One- to four-
family $ 615 89.10% $ 570 90.48% $ 485 90.65%
Multi-family 4 .52 6 .95 7 1.31
Commercial real
estate 67 9.78 51 8.10 38 7.11

Other loans:
Home improvement 3 0.44 1 0.16 2 0.37
Loans on savings -- -- -- -- -- --
Consumer 1 0.16 2 0.31 3 0.56
----- ------ ----- ------ ----- ------
Total general
allowance $ 690 100.00% $ 630 100.00% $ 535 100.00%
===== ====== ===== ====== ===== ======

14
<PAGE>
<PAGE>

Investment Activities
The investment policy of the Association, which is established by the Board of
Directors and implemented by the Asset/Liability Committee, is designed
primarily to provide and maintain liquidity, to generate a favorable return on
investments without incurring undue interest rate and credit risk, and to
complement the Association's lending activities. Investments generally are
made with the intent to hold them to maturity. Savings institutions have the
authority to invest in various types of liquid assets, including United States
Treasury obligations, securities of various federal agencies, certain
certificates of deposit of insured banks and savings institutions, certain
bankers acceptances, repurchase agreements and loans on federal funds.
Subject to various restrictions, savings institutions may also invest a
portion of their assets in commercial paper, corporate debt securities and
asset-backed securities. At June 30, 1998, the Association had investment
securities with a fair value of $62.8 million as shown in the following
table.

15
<PAGE>
<PAGE>
INVESTMENT ACTIVITIES:

The following table sets forth certain information regarding the amortized
cost and fair values of the Company's investment securities portfolio at the
dates indicated.

At June 30,
-----------------------------------------------------------
1998 1997 1996
------------------ -------------------- -----------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
-------- ------- --------- --------- -------- ------
(In thousands)
Interest-earning
deposits:
FHLB daily time $ 2,523 $ 2,523 $ 3,265 $ 3,265 $ 4,100 $ 4,100
FHLB demand
deposit 483 483 1,184 1,184 672 672
Passbook
savings 48 48 35 35 39 39
-------- -------- --------- --------- -------- -------
Total interest-
earning deposits 3,054 3,054 4,484 4,484 4,811 4,811

Investment securities:
U.S. Government and
federal agency
obligations
available-for-
sale 9,745 9,770 26,971 27,039 12,471 12,437

FHLB Stock 3,134 3,134 5,652 5,652 4,256 4,256

Mortgage-backed
securities
available-for-
sale 46,889 48,226 67,889 68,975 70,852 71,129
-------- -------- --------- --------- -------- -------
Total $ 62,822 $ 64,184 $ 104,996 $ 106,150 $ 92,390 $92,633
======== ======== ========= ========= ======== =======

16
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<PAGE>
<TABLE>

The table below sets forth certain information regarding the carrying value, weighted average yields and
maturities of the Company's investment securities at June 30, 1998.

At June 30, 1998
--------------------------------------------------------------------------------------------
After One After Five
One Year Through Through After Total Investment
or less Five Years 10 Years 10 Years Securities
------------------ ------------------ ------------------ ----------------- ----------------
Annualized Annualized Annualized Annualized Annualized
Weighted Weighted Weighted Weighted Weighted
Fair Average Fair Average Fair Average Fair Average Fair Average
Value Yield Value Yield Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(Dollars in thousands)

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.
Government
obligations $6,015 6.085% $ 752 5.691% $ -- -- $ -- -- $ 6,767 6.041%

FHLB
Debentures -- -- 3,003 5.770 -- -- -- -- 3,003 5.770%
------ ------ ---- ----- -------
Total $6,015 6.085% $3,755 5.754% $ -- -- $ -- -- $ 9,770 5.958%
====== ===== ====== ===== ==== === ===== === ======= =====

17
</TABLE
<PAGE>
<PAGE>

</TABLE>
<TABLE>

AVERAGE BALANCE SHEET
The following table sets forth certain information relating to the Company's consolidated statement of
financial condition at June 30, 1998, 1997 and 1996 and reflects the average yield on assets and average
cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the periods shown. Average
balances are derived from monthly balances. The yields and costs include fees which are considered
adjustments to yields. Average balances include nonaccruing loans.

Year Ended June 30,
---------------------------------------------------------------------------------------
1998 1997 1996
---------------------------- ---------------------------- ----------------------------
Average Average Average
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>
Assets:
Interest-earning
assets:
Loans $130,745 $9,619 7.36% $113,387 $8,254 7.28% $104,044 $7,322 7.04%
Interest-earning
deposits 6,044 331 5.48 4,000 197 4.93 6,340 270 4.26
Investment
securities and
FHLB stock 18,157 1,118 6.16 27,142 1,860 6.85 16,615 1,040 6.26
Mortgage-backed
securities 61,182 4,210 6.88 69,330 4,729 6.82 69,328 4,768 6.88
Total interest- -------- ------ -------- ------ -------- ------
earning
assets 216,128 15,278 7.07 213,859 15,040 7.03 196,327 13,400 6.83
Non-interest ------ ------ ------
earning assets 2,366 2,484 2,127
-------- -------- --------
Total assets $218,494 $216,343 $198,454
======== ======== ========
Liabilities:
Interest-bearing
liabilities:
Passbook
accounts $ 6,059 $ 183 3.02 $ 6,815 $ 170 2.49 $ 7,506 $ 244 3.25
Certificates
and money
market 102,510 5,952 5.81 85,670 4,937 5.76 78,522 4,434 5.65
FHLB Advances 79,922 4,553 5.70 94,327 5,329 5.65 81,025 4,911 6.06

-------- ------ ----- -------- ------ ----- -------- ------- -----
Total Interest-
bearing
liabilities 188,491 10,688 5.67 186,812 10,436 5.59 167,053 9,589 5.74
Non-interest ------ ------ -------
bearing
liabilities 1,654 1,896 2,661
-------- -------- --------
Total
liabilities 190,145 188,708 169,714
Stockholders'
equity 28,349 27,635 28,740
-------- -------- --------
Total liabili-
ties and
Stockholders'
Equity $218,494 $216,343 $198,454
======== ======== ========
Net interest
income/interest
rate spread (1) $4,590 1.40% $4,604 1.44% $ 3,811 1.09%
====== ==== ====== ==== ======= ====
Net interest
margin/net
earning assets(2) 2.12% 2.15% 1.94%
==== ==== ====

Ratio of interest-
earning assets
to interest-bearing
liabilities 114.66% 114.48% 117.52%
======== ======== ========

1) Interest rate spread represents the difference between the average on interest-earning assets and the
average cost of interest-bearing liabilities.
2) Net interest margin represents net income before the provision for loan losses divided by average
interest-earning assets.

18
</TABLE>
<PAGE>
<PAGE>
<PAGE>
Sources of Funds

The Association's primary sources of funds are deposits, repayments on loans
and mortgage-backed and related securities. The Association offers a variety
of deposit accounts having a range of interest rates and terms. The
Association's deposits principally consist of fixed-term certificates, regular
passbook accounts, and IRAs. The Association does not offer transaction
accounts. The flow of deposits is influenced significantly by general
economic conditions, the restructuring of the thrift industry, changes in
money market and other prevailing interest rates and competition. The
Association's deposits are typically obtained from the area in which its
offices are located. The Association relies primarily on customer service and
long-standing relationships with customers to attract and retain these
deposits. The Association has no brokered deposits.

The Association seeks to maintain a high level of stable core deposits by
advertising. The volume of passbook accounts has been increasing because of
the low interest rate environment. When pricing deposits, consideration is
given to local competition, the Association's gap position, U.S. Treasury
rates and the need for funds. Management's strategy is to price at or just
below the median competition, contingent upon the need for funds, and to
stratify the pricing system to attract deposits and maintain a controlled gap
position. At the present time, in order to manage its gap position, the
Association has offered a more attractive rate on longer term certificates of
deposit.

The following table presents the deposit activity of the Association for the
periods indicated.

Year Ended June 30,
--------------------------------------
1998 1997 1996 1995
---- ---- ---- ----
(In thousands)

Deposits . . . . . . . . . . . . . $23,216 $24,207 $ 9,691 $ 9,915
Withdrawals. . . . . . . . . . . . 13,153 12,245 11,057 15,677
------- ------- ------- -------
Withdrawals in excess of
deposits . . . . . . . . . . . . 10,063 11,962 (1,366) (5,762)
Interest credited on deposits . . 4,088 3,281 2,920 2,544
------- ------- ------- -------
Total increase
(decrease) in deposits . . . . . $14,151 $15,243 $ 1,554 $(3,218)
======= ======= ======= =======

At June 30, 1998, the Association had deposit accounts in the amounts of
$100,000 or more maturing as follows (in thousands):

One month through three months . . $ 2,145
Three through six months . . . . . 3,708
Six through 12 months. . . . . . . 7,911
Over 12 months . . . . . . . . . . 5,001
-------
Total. . . . . . . . . . . . . . $18,265
=======

19
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<PAGE>
<TABLE>

The following table sets forth the distribution of the Association's deposit accounts based on original
maturity at the dates indicated and the weighted average interest rates on each category of deposits
presented. Management does not believe that the use of period end balances instead of average daily
balance resulted in any difference in the information presented.

At June 30,
------------------------------------------------------------------------------------
1998 1997 1996
---------------------------- ---------------------------- -------------------------
Weighted Weighted Weighted
Percent Average Percent Average Percent Average
of Total Nominal of Total Nominal of Total Nominal
Amount Deposits Rate Amount Deposits Rate Amount Deposits Rate
------ -------- ---- ------ -------- ---- ------ -------- ----
(Dollars in thousands)

Passbook accounts $ 5,975 5.18% 3.00% $ 6,299 6.18% 3.00% $ 7,575 8.74% 3.00%
-------- ------ -------- ------ ------- -----
Certificate accounts:
Within one year 82,784 71.78 5.79 70,030 68.69 5.79 47,923 55.26 5.53

One year to three
years 19,051 16.52 5.84 18,133 17.78 5.87 22,056 25.43 5.89

Over three years 1,415 1.23 5.80 1,449 1.42 5.79 3,233 3.73 6.21

Individual retirement
accounts 6,105 5.29 5.84 6,048 5.93 5.80 5,929 6.84 5.93
-------- ------ -------- ------ ------- ------
Total
Certificates 109,355 94.82 95,660 93.82 79,141 91.26
-------- ------ -------- ------ ------- ------
Total deposits $115,330 100.00% $101,959 100.00% $86,716 100.00%
======== ====== ======== ====== ======= ======

20
</TABLE>
<PAGE>
<PAGE>
<TABLE>

The following table presents, by various rate categories, the amount of certificate accounts outstanding
at June 30, 1998, 1997 and 1996 and the periods to maturity of the certificate accounts at June 30, 1998.

Period to Maturity from
At June 30, June 30, 1998
-------------------------------- ------------------------------------------
Within Two to
1998 1997 1996 One Year Three Years Thereafter Total
---- ---- ---- -------- ----------- ---------- -----
(in thousands)

<S> <C> <C> <C> <C> <C> <C> <C>
Certificate accounts:

3.00% to 3.99% $ -- $ -- $ 2 $ -- $ -- $ -- $ --

4.00% to 4.99% 18 1,277 5,363 18 -- -- 18

5.00% to 5.99% 99,672 59,634 51,732 79,184 18,937 1,551 99,672

6.00% to 6.99% 8,356 33,383 20,303 7,174 1,182 -- 8,356

7.00% to 7.99% 1,308 1,365 1,730 -- 1,308 -- 1,308

8.00% to 8.99% 1 1 11 -- 1 -- 1
--------- -------- -------- -------- -------- ------- ---------
Total $ 109,355 $ 95,660 $ 79,141 $ 86,376 $ 21,428 $ 1,551 $ 109,355
========= ======== ======== ======== ======== ======= =========

21
</TABLE>
<PAGE>
<PAGE>
Borrowings

Deposits are the Association's primary source of funds. The
Association's policy has been to utilize borrowings only when necessary and
when they are a less costly source of funds or can be invested at a positive
rate of return. The Association may obtain advances from the FHLB-Des Moines
upon the security of its capital stock of the FHLB-Des Moines and certain of
its mortgage loans.

Subsidiary Activities

MBL Financial Services. The Association has one wholly-owned subsidiary,
MBL Financial Services ("MBL") which was formed to offer various financial
services to its customers. MBL is engaged in offering credit life insurance,
discount brokerage services, mutual funds, unit investment trusts, and other
related securities. At June 30, 1998, MBL had total assets of $5,367.

Competition

The Association faces strong competition. The Association's competition
for loans comes principally from savings and loan associations, mortgage
banking companies, and commercial banks. Its most direct competition for
deposits has historically come from commercial banks and credit unions. The
Association faces additional competition for deposits from short-term money
market funds and other corporate and government securities funds. The
Association also faces increased competition from other financial institutions
such as brokerage firms. Competition may also increase as a result of the
lifting of restrictions on the interstate operations of financial
institutions.

The Association is a community-oriented financial institution serving its
market area with a wide selection of residential loans and retail financial
services. Management considers the Association's reputation for financial
strength and customer service as its major competitive advantage in attracting
and retaining customers in its market area. The Association also believes it
benefits from its community orientation as well as its relatively high core
deposit base.

Personnel

As of June 30, 1998, the Association had 12 full-time employees and one
part-time employee. The employees are not represented by a collective
bargaining unit, and the Association considers its relationship with its
employees to be excellent.

22
<PAGE>
<PAGE>
<TABLE>

Rate/Volume Analysis

The following table presents the extent of which changes in interest rates and changes in the volume
of interest-earning assets and interest-bearing liabilities have affected the Association's interest
income and interest expense during the periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate),
(ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the
net change (the sum of the prior columns). The changes attributable to the combined impact of volume and
rate have been allocated proportionately to the changes due to volume and changes due to rate.

Year ended June 30, 1997 Year ended June 30, 1996 Year ended June 30, 1995
Compared to Compared to Compared to
Year ended June 30, 1998 Year ended June 30, 1997 Year ended June 30, 1996
Increase (Decrease) Increase (Decrease) Increase (Decrease)
---------------------- --------------------- ----------------------
Due to Due to Due to
---------------------- --------------------- ----------------------
Volume Rate Net Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- --- ------ ---- ---
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning
assets:

Loans, net $1,273 $ 92 $1,365 $ 675 $ 257 $ 932 $ 149 $ 134 $ 283
Mortgage-backed
securities (560) 41 (519) -- (39) (39) 1,768 (170) 1,598
Interest-earning
deposits 110 24 134 (110) 37 (73) 176 9 185
Investment
securities (568) (174) (742) 714 106 820 (44) 188 144
------ ------ ------ ------ ----- ------ ------ ------ ------
Total interest-
earning
assets $ 255 $ (17) $ 238 $1,279 $ 361 $1,640 $2,049 $ 161 $2,210
====== ====== ====== ====== ===== ====== ====== ====== ======
Interest-bearing
liabilities:

Deposits $ 952 $ 76 $1,028 $ 359 $ 70 $ 429 $ (36) $ 639 $ 603
FHLB Advances (823) 47 (776) 766 (348) 418 1,849 (83) 1,766
------ ------ ------ ------ ----- ------ ------ ------ ------
Total interest-
bearing
liabilities $ 129 $ 123 $ 252 $1,125 $(278) $ 847 $1,813 $ 556 $2,369
====== ====== ====== ====== ===== ====== ====== ====== ======
Net change in
interest income $ 126 $ (140) $ (14) $ 154 $ 639 $ 793 $ 236 $ (395) $ (159)
====== ====== ====== ====== ===== ====== ====== ====== ======

23
</TABLE>
<PAGE>
<PAGE>
REGULATION

Set forth below is a brief description of certain laws which related to
the regulation of the Company and the Association. As of June 1, 1995, the
Association became a federally chartered stock savings association.
Therefore, the following discussion relates to the regulation of a federally
chartered savings association. The description does not purport to be
complete and is qualified in its entirety by reference to applicable laws and
regulations.

General

The Association is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer
of its deposits. The activities of federal savings institutions are governed
by the Home Owners' Loan Act, as amended (the "HOLA") and, in certain
respects, the Federal Deposit Insurance Act ("FDIA") and the regulations
issued by the OTS and the FDIC to implement these statutes. These laws and
regulations delineate the nature and extent of the activities in which federal
savings associations may engage. Lending activities and other investments
must comply with various statutory and regulatory capital requirements. In
addition, the Association's relationship with its depositors and borrowers is
also regulated to a great extent, especially in such matters as the ownership
of deposit accounts and the form and content of the Association's mortgage
documents. The Association must file reports with the OTS and the FDIC
concerning its activities and financial condition in addition to obtaining
regulatory approvals prior to entering into certain transactions such as
mergers with, or acquisitions of, other financial institutions. There are
periodic examinations by the OTS and the FDIC to review the Association's
compliance with various regulatory requirements. The regulatory structure
also gives the regulatory authorities extensive discretion in connection with
their supervisory and enforcement activities and examination policies,
including policies with respect to the classification of assets and the
establishment of adequate loan loss reserves for regulatory purposes. Any
change in such policies, whether by the OTS, the FDIC or Congress, could have
a material adverse impact on the Association and its operations.

Federal Regulation of Savings Associations

Office of Thrift Supervision. The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the
Treasury. The OTS generally possesses the supervisory and regulatory duties
and responsibilities formerly vested in the Federal Home Loan Bank Board.
Among other functions, the OTS issues and enforces regulations affecting
federally insured savings associations and regularly examines these
institutions.

Federal Home Loan Bank System. The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to supervise the FHLBs, to ensure that the
FHLBs carry out their housing finance mission, to ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets, and to
ensure that the FHLBs operate in a safe and sound manner. The Association, as
a member of the FHLB-Des Moines, is required to acquire and hold shares of
capital stock in the FHLB-Des Moines in an amount equal to the greater of (i)
1.0% of the aggregate outstanding principal amount of residential mortgage
loans, home purchase contracts and similar obligations at the beginning of
each year, or (ii) 1/20 of its advances (i.e., borrowings) from the FHLB-Des
Moines. The Association is in compliance with this requirement with an
investment in FHLB-Des Moines stock of $3.1 million at June 30, 1998. Among
other benefits, the FHLB-Des Moines provides a central credit facility
primarily for member institutions. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It
makes advances to members in accordance with policies and procedures
established by the FHFB and the Board of Directors of the FHLB-Des Moines.

Federal Deposit Insurance Corporation. The FDIC is an independent
federal agency that insures the deposits, up to prescribed statutory limits,
of depository institutions. The FDIC currently maintains two separate

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insurance funds: the Association Insurance Fund ("BIF") and the SAIF. As
insurer of the Association's deposits, the FDIC has examination, supervisory
and enforcement authority over the Association.

The Association's accounts are insured by the SAIF to the maximum extent
permitted by law. The Association pays deposit insurance premiums based on a
risk-based assessment system established by the FDIC. Under applicable
regulations, institutions are assigned to one of three capital groups that are
based solely on the level of an institution's capital -- "well capitalized"
and "undercapitalized" -- which are defined in the same manner as the
regulations establishing the prompt corrective action system, as discussed
below. These three groups are then divided into three subgroups which reflect
varying levels of supervisory concern, from those which are considered to be
healthy to those which are considered to be of substantial supervisory
concern. The matrix so created results in nine assessment risk
classifications, with rates that until September 30, 1996 ranged from 0.23%
for well capitalized, financially sound institutions with only a few minor
weaknesses, to 0.31% for undercapitalized institutions that pose a substantial
risk of loss to the SAIF unless effective corrective action is taken.

Pursuant to the Deposit Insurance Funds Act ("DIF Act"), which was
enacted on September 30, 1996, the FDIC imposed a special assessment on each
depository institution with SAIF-assessable deposits which resulted in the
SAIF achieving its designated reserve ratio. In connection therewith, the
FDIC reduced the assessment schedule for SAIF members, effective January 1,
1997, to a range of 0% to 0.27%, with most institutions, including the
Association, paying 0%. This assessment schedule is the same as that for the
BIF, which reached its designated reserve ratio in 1955. In addition, since
January 1, 1997, SAIF members are charged an assessment of .065% of
SAIF-assessable deposits for the purpose of paying interest on the obligations
issued by the Financing Corporation (FICO") in the 1980s to help fund the
thrift industry cleanup. BIF-assessable deposits will be charged an
assessment to help pay interest on the FICO bonds at a rate of approximately
.013% until the earlier of December 31, 1999 or the date upon which the last
savings association ceases to exist, after which time the assessment will be
the same for all insured deposits.

The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date. The DIF Act contemplates
the development of a common charter for all federally chartered depository
institutions and the abolition of separate charters for national banks and
federal savings associations. It is not known what form the common charter
may take and what effect, if any, the adoption of a new charter would have on
the operation of the Association.

The FDIC may terminate the deposit insurance of any insured depository
institution it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations, or has violated any applicable law,
regulation, order or any condition imposed by an agreement with the FDIC. It
also may suspend deposit insurance temporarily during the hearing process for
the permanent termination of insurance, if the institution has no tangible
capital. If insurance of accounts is terminated, the accounts at the
institution at the time of termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances that could
result in termination of the deposit insurance of the Association.

Liquidity Requirements. Under OTS regulations, each savings institution
is required to maintain an average daily balance of liquid assets (cash,
certain time deposits and savings accounts, bankers' acceptances, and
specified U.S. Government, state or federal agency obligations and certain
other investments) equal to a monthly average of not less than a specified
percentage (currently 4.0%) of its net withdrawable accounts plus short-term
borrowings. Monetary penalties may be imposed for failure to meet liquidity
requirements. At June 30, 1998, the Association's liquidity ratio was 6.23%.

Prompt Corrective Action. Under the FDIC, each federal banking agency is
required to implement a system of prompt corrective action for institutions
that it regulates. The federal banking agencies have promulgated
substantially similar regulations to implement this system of prompt
corrective action. Under the

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regulations, an institution shall be deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10.0% or more, has a Tier 1 risk-based
capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not
subject to specified requirements to meet and maintain a specific capital
level for any capital measure; (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8.0% or more, has a Tier 1 risk-based capital
ratio of 4.0% or more, has a leverage ratio of 4.0% or more (3.0% under
certain circumstances) and does not meet the definition of "well capitalized";
(iii) "undercapitalized" if it has a total risk-based capital ratio that is
less than 8.0%, has a Tier 1 risk-based capital ratio that is less than 4.0%
or has a leverage ratio that is less than 4.0% (3.0% in certain
circumstances); (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, has a Tier 1 risk- based
capital ratio that is less than 3.0% or has a leverage ratio that is less than
3.0%; and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%.

A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized
and may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has
received in its most recent examination, and has not corrected, a less than
satisfactory rating for asset quality, management, earnings or liquidity.
(The OTS may not, however, reclassify a significantly undercapitalized
institution as critically undercapitalized.)

An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an institution shall become subject to various mandatory and
discretionary restrictions on its operations.

At June 30, 1998, the Association was categorized as "well capitalized"
under the prompt corrective action regulations of the OTS.

Standards for Safety and Soundness. The federal banking regulatory
agencies have prescribed, by regulation, standards for all insured depository
institutions relating to: (i) internal controls, information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii)
earnings; and (viii) compensations, fees and benefits ("Guidelines"). The
Guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the OTS determines that the
Association fails to meet any standard prescribed by the Guidelines, the
agency may require the Association to submit to the agency an acceptable plan
to achieve compliance with the standard. OTS regulations establish deadlines
for the submission and review of such safety and soundness compliance plans.

Qualified Thrift Lender Test. All savings associations are required to
meet a qualified thrift lender ("QTL") test to avoid certain restrictions on
their operations. A savings institution that fails to become or remain a QTL
shall either convert to a national bank charter or be subject to the following
restrictions on its operations: (i) the Association may not make any new
investment or engage in activities that would not be permissible for national
banks; (ii) the Association may not establish any new branch office where a
national bank located in the savings institution's home state would not be
able to establish a branch office; (iii) the Association shall be ineligible
to obtain new advances from any FHLB; and (iv) the payment of dividends by the
Association shall be subject to the rules regarding the statutory and
regulatory dividend restrictions applicable to national banks. Also,
beginning three years after the date on which the savings institution ceases
to be a QTL, the savings institution would be prohibited from retaining any
investment or engaging in any activity not permissible for a national bank and
would be required to repay any outstanding advances to any FHLB. In addition,
within one year of the date on which a

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savings association controlled by a company ceases to be a QTL, the company
must register as a bank holding company and become subject to the rules
applicable to such companies. A savings institution may requalify as a QTL if
it thereafter complies with the QTL test.

Currently, the QTL test requires that either an institution qualify as a
domestic building and loan association under the Internal Revenue Code or that
65% of an institution's "portfolio assets" (as defined) consist of certain
housing and consumer-related assets on a monthly average basis in nine out of
every 12 months. Assets that qualify without limit for inclusion as part of
the 65% requirement are loans made to purchase, refinance, construct, improve
or repair domestic residential housing and manufactured housing; home equity
loans; mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards. In addition, the following
assets, among others, may be included in meeting the test subject to an
overall limit of 20% of the savings institution's portfolio assets: 50% of
residential mortgage loans originated and sold within 90 days of origination:
100% of consumer loans; and stock issued by Freddie Mac or Fannie Mae.
Portfolio assets consist of total assets minus the sum of (i) goodwill and
other intangible assets, (ii) property used by the savings institution to
conduct its business, and (iii) liquid assets up to 20% of the institution's
total assets. At June 30, 1998, the Association was in compliance with the
QTL test.

Capital Requirements. Under OTS regulations, a savings association must
satisfy three minimum capital requirements: core capital, tangible capital
and risk-based capital. Savings associations must meet all of the standards
in order to comply with the capital requirements.

OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital
is defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries", which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion
of certain assets from capital and to account appropriately for the
investments in and assets of both includable and non-includable subsidiaries.
Institutions that fail to meet the core capital requirement would be required
to file with the OTS a capital plan that details the steps they will take to
reach compliance. In addition, the OTS's prompt corrective action regulation
provides that a savings institution that has a leverage ratio of less than 4%
(3% for institutions receiving the highest CAMEL examination rating) will be
deemed to be "undercapitalized" and may be subject to certain restrictions.
See "-- Federal Regulation of Savings Associations -- Prompt Corrective
Action."

Savings associations also must maintain "tangible capital" not less than
1.5% of adjusted total assets. "Tangible capital" is defined, generally, as
core capital minus any "intangible assets" other than purchased mortgage
servicing rights.

Savings associations must maintain total risk-based capital equal to at
least 8% of risk-weighted assets. Total risk-based capital consists of the
sum of core and supplementary capital, provided that supplementary capital
cannot exceed core capital, as previously defined. Supplementary capital
includes (i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt and mandatory convertible
subordinated debt; (ii) maturing capital instruments such as subordinated
debt, intermediate-term preferred stock and mandatory convertible subordinated
debt, subject to an amortization schedule, and (iii) general valuation loan
and lease loss allowances up to 1.25% of risk-weighted assets.

The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories

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range from 0% for cash and securities that are backed by the full faith and
credit of the U.S. Government to 100% for repossessed assets or assets more
than 90 days past due. Qualifying residential mortgage loans (including
multi-family loans) are assigned to a 50% risk weight. Consumer, commercial,
home equity and residential construction loans are assigned a 100% risk
weight, as are nonqualifying residential mortgage loans and that portion of
land loans and nonresidential construction loans that do not exceed an 80%
loan-to-value ratio. The book value of assets in each category is multiplied
by the weighing factor (from 0% to 100%) assigned to that category. These
products are then totalled to arrive at total risk-weighted assets.
Off-balance sheet items are included in risk-weighted assets by converting
them to an approximate balance sheet "credit equivalent amount" based on a
conversion schedule. These credit equivalent amounts are then assigned to
risk categories in the same manner as balance sheets assets and included as
risk-weighted.

The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal: interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
outdoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of
the Association's assets, as calculated in accordance with guidelines set
forth by the OTS. A savings association whose measured interest rate risk
exposure exceeds 2% must deduct an interest rate risk component in an amount
equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
Association's assets. That dollar amount is deducted from an association's
total capital in calculating compliance with its risk-based capital
requirement. Under the rule, there is a two quarter lag between the reporting
date of an institution's financial data and the effective date for the new
capital requirement based on that data. A savings association with assets of
less than $300 million and risk-based capital ratios in excess of 12% is not
subject to the interest rate risk component, unless the OTS determines
otherwise. The rule also provides that the Director of the OTS may waive or
defer an association's interest rate risk component on a case-by-case basis.
Under certain circumstances, a savings association may request an adjustment
to its interest rate risk component if it believes that the OTS-calculated
interest rate risk component overstates its interest rate risk exposure. In
addition, certain "well capitalized" institutions may obtain authorization to
use their own interest rate risk model to calculate their interest rate risk
component in lieu of the OTS-calculated amount. The OTS has postponed the
date that the component will first be deducted from an institution's total
capital.

For information regarding the Association's capital levels as of June 30,
1998, see Note 11 Regulatory Matters in the Annual Report, Page 30.

Limitations on Capital Distributions. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Association to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends. The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.

A Tier 1 savings association has capital in excess of its capital
requirement (both before and after the proposed capital distribution). A Tier
1 savings association may make (without application but upon prior notice to,
and no objection made by, the OTS) capital distributions during a calendar
year up to 100% of its net income to date during the calendar year plus
one-half of its surplus capital ratio (i.e., the amount of capital in excess
of its requirement) at the beginning of the calendar year or the amount
authorized for a Tier 2 association. Capital distributions in excess of such
amount require advance notice to the OTS. A Tier 2 savings association has
capital equal to or in excess of its minimum capital requirement but below its
requirement (both before and after the proposed capital distribution). Such
an association may make (without application) capital distributions up to an
amount equal to 75% of its net income during the previous four quarters
depending on how close the Association is to meeting its capital requirement.
Capital distributions exceeding this amount require prior OTS approval. Tier

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3 associations are savings associations with capital below the minimum capital
requirement (either before or after the proposed capital distribution). Tier
3 associations may not make any capital distributions without prior approval
from the OTS.

The Association currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of
the calendar year less any distributions previously paid during the year.

Loans to One Borrower. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of the Association's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such
loan is secured by readily-marketable collateral, which is defined to include
certain financial instruments and bullion. The OTS by regulation has amended
the loans to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower
in additional amounts under circumstances limited essentially to loans to
develop or complete residential housing units. At June 30, 1998, the
Association's regulatory limit on loans to one borrower was $4.1 million.

Activities of Associations and Their Subsidiaries. A savings association
may establish operating subsidiaries to engage in any activity that the
savings association may conduct directly and may establish service corporation
subsidiaries to engage in certain preapproved activities or, with approval of
the OTS, other activities reasonably related to the activities of financial
institutions. When a savings association establishes or acquires a subsidiary
or elects to conduct any new activity through a subsidiary that the
Association controls, the savings association must notify the FDIC and the OTS
30 days in advance and provide the information each agency may, by regulation,
require. Savings associations also must conduct the activities of
subsidiaries in accordance with existing regulations and orders.

The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the Association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The
FDIC also may determine by regulation or by order that any specific activity
poses a serious threat to the SAIF. If so, it may require that no SAIF member
engage in that activity directly.

Transactions with Affiliates. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act relative to transactions with
affiliates in the same manner and to the same extent as if the savings
association were a Federal Reserve member bank. A savings and loan holding
company, its subsidiaries and any other company under common control are
considered affiliates of the subsidiary savings association under the HOLA.
Generally, Sections 23A and 23B: (i) limit the extent to which the insured
association or its subsidiaries may engage in certain covered transactions
with an affiliate to an amount equal to 10% of such institution's capital and
surplus and place an aggregate limit on all such transactions with affiliates
to an amount equal to 20% of such capital and surplus and (ii) require that
all such transactions be on terms substantially the same, or at least as
favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
the purchase of assets, the issuance of a guarantee and similar types of
transactions. Any loan or extension of credit by the Association to an
affiliate must be secured by collateral in accordance with Section 23A.

Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank
holding companies; (ii) a savings association may not purchase or invest in
securities issued by an affiliate (other than securities of a subsidiary); and
(iii) the OTS may, for reasons of safety and soundness, impose more stringent
restrictions on savings associations but may not exempt transactions from or
otherwise abridge Section 23A or 23B.

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Exemptions from Section 23A or 23B may be granted only by the Federal Reserve,
as is currently the case with respect to all FDIC-insured banks.

The Association's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such
persons, is currently governed by Sections 22(g) and 22(h) of the Federal
Reserve Act, and Regulation O thereunder. Among other things, these
regulations require that such loans be made on terms and conditions
substantially the same as those offered to unaffiliated individuals and not
involve more than the normal risk of repayment. Regulation O also places
individual and aggregate limits on the amount of loans the Association may
make to such persons based, in part, on the Assoication's capital position,
and requires certain board approval procedures to be followed. The OTS
regulations, with certain minor variances, apply Regulation O to savings
institutions.

Community Reinvestment Act. Savings association are also subject to the
provisions of the Community Reinvestment Act of 1977, which requires the
appropriate federal bank regulatory agency, in connection with its regular
examination of a savings association, to assess the saving association's
record in meeting the credit needs of the community serviced by the savings
association, including low and moderate income neighborhoods. The regulatory
agency's assessment of the savings association's record is made available to
the public. Further, such assessment is required of any savings association
which has applied, among other things, to establish a new branch office that
will accept deposits, relocate an existing office or merge or consolidate
with, or acquire the assets or assume the liabilities of, a federally
regulated financial institution.

Savings and Loan Holding Company Regulations

Holding Company Acquisitions. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without
prior OTS approval, from acquiring more than 5% of the voting stock of any
other savings association or savings and loan holding company or controlling
the assets thereof. They also prohibit, among other things, any director or
officer of a savings and loan holding company, or any individual who owns or
controls more than 25% of the voting shares of such holding company, from
acquiring control of any savings association not a subsidiary of such savings
and loan holding company, unless the acquisition is approved by the OTS.

Holding Company Activities. As a unitary savings and loan holding
company, the Company generally is not subject to activity restrictions under
the HOLA. If the Company acquires control of another savings association as a
separate subsidiary other than in a supervisory acquisition, it would become a
multiple savings and loan holding company. There generally are more
restrictions on the activities of a multiple savings and loan holding company
than on those of a unitary savings and loan holding company. The HOLA
provides that, among other things, no multiple savings and loan holding
company or subsidiary thereof which is not an insured association shall
commence or continue for more than two years after becoming a multiple savings
and loan association holding company or subsidiary thereof, any business
activity other than: (i) furnishing or performing management services for a
subsidiary insured institution, (ii) conducting an insurance agency or escrow
business, (iii) holding, managing, or liquidating assets owned by or acquired
from a subsidiary insured institution, (iv) holding or managing properties
used or occupied by a subsidiary insured institution, (v) acting as trustee
under deeds of trust, (vi) those activities previously directly authorized by
regulation as of March 5, 1987 to be engaged in by multiple holding companies
or (vii) those activities authorized by the Federal Reserve Board as
permissible for bank holding companies, unless the OTS by regulation,
prohibits or limits such activities for savings and loan holding companies.
Those activities described in (vii) above also must be approved by the OTS
prior to being engaged in by a multiple savings and loan holding company.

Qualified Thrift Lender Test. The HOLA provides that any savings and
loan holding company that controls a savings association that fails the QTL
test, as explained under "-- Federal Regulation of Savings

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Associations -- Qualified Thrift Lender Test", must, within one year after
the date on which the Association ceases to be a QTL, register as and be
deemed a bank holding company subject to all applicable laws and regulations.

TAXATION

Federal Taxation

General. The Company and the Association report their income on a fiscal
year basis using the accrual method of accounting and are subject to federal
income taxation in the same manner as other corporations with some exceptions,
including particularly the Association's reserve for bad debts discussed
below. The following discussion of tax matters is intended only as a summary
and does not purport to be a comprehensive description of the tax rules
applicable to the Association or the Company.

Bad Debt Reserve. Historically, savings institutions such as the
Association which met certain definitional tests primarily related to their
assets and the nature of their business ("qualifying thrift") were permitted
to establish a reserve for bad debts and to make annual additions thereto,
which may have been deducted in arriving at their taxable income. The
Association's deductions with respect to "qualifying real property loans",
which are generally loans secured by a certain interest in real property, were
computed using an amount based on the Association's actual loss experience, or
a percentage equal to 8% of the Association's taxable income, computed with
certain modifications and reduced by the amount or any permitted additions to
the non-qualifying reserve. Due to the Association's loss experience, the
Association generally recognized a bad debt deduction equal to 8% of taxable
income.

The thrift bad debt rules were revised by Congress in 1996. The new
rules eliminated the percentage of taxable income method for deducting
additions to the tax bad debt reserves for all thrifts for tax years beginning
after December 31, 1995. These rules also required that all institutions
recapture all or a portion of their bad debt reserves added since the base
year (last taxable year beginning before January 1, 1988). For taxable years
beginning after December 31, 1995, the Association's bad debt deduction must
be determined under the experience method using a formula based on actual bad
debt experience over a period of years or, if the Association is a "large"
association (assets in excess of $500 million) on the basis of net charge-offs
during the taxable year. The new rules allowed an institution to suspend bad
debt reserve recapture for the 1996 and 1997 tax years if the institution's
lending activity for those years is equal to or greater than the institution's
average mortgage lending activity for the six taxable years preceding 1996
adjusted for inflation. For this purpose, only home purchase or home
improvement loans are included and the institution can elect to have the tax
years with the highest and lowest lending activity removed from the average
calculation. If an institution is permitted to postpone the reserve
recapture, it must begin its six year recapture no later than the 1998 tax
year. The unrecaptured tax year reserves will not be subject to recapture as
long as the institution continues to carry on the business of banking. In
addition, the balance of the pre-1988 bad debt reserve in the case of certain
excess distributions to shareholders.

Distributions. To the extent that the Association makes "nondividend
distributions" to the Company, such distributions will be considered to result
in distributions from the balance of its bad debt reserve as of December 31,
1987 (or a lesser amount if the Association's loan portfolio decreased since
December 31, 1987) and then from the supplemental reserve for losses on loans
("Excess Distributions"), and an amount based on the Excess Distributions will
be included in the Association's taxable income. Nondividend distributions
include distributions in excess of the Association's current and accumulated
earnings and profits, distributions in excess of the Association's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation. However, dividends paid out
of the Association's current or accumulated earnings and profits, as
calculated for federal income tax purposes, will not be considered to result
in a distribution from the Association's bad debt reserve. The amount of
additional taxable income created from an Excess Distribution is an amount
that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution. Thus, if the Association makes a "nondividend
distribution", then approximately one and one-half times the Excess

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Distribution would be includable in gross income for federal income tax
purposes, assuming a 34% corporate income tax rate (exclusive of state and
local taxes). See "REGULATION" and for limits on the payment of dividends by
the Association. The Association does not intend to pay dividends that would
result in a recapture of any portion of its tax bad debt reserve.

Corporate Alternative Minimum Tax. The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%. The excess of the tax bad
debt reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI. In addition,
only 90% of AMTI can be offset by net operating loss carryovers. AMTI is
increased by an amount equal to 75% of the amount by which the Association's
adjusted current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses). For taxable
years beginning after December 31, 1986, and before January 1, 1996, an
environmental tax of 0.12% of the excess of AMTI (with certain modification)
over $2.0 million is imposed on corporations, including the Association,
whether or not an Alternative Minimum Tax is paid.

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

Audits. The Association's federal income tax returns have been audited
through the tax year ended September 30, 1994 without material adjustment.

State Taxation

Missouri Taxation. Missouri-based thrift institutions, such as the
Association, are subject to a special financial institutions tax, based on net
income without regard to net operating loss carryforwards, at the rate of 7%
of net income. This tax is in lieu of certain other state taxes on thrift
institutions, on their property, capital or income, except taxes on tangible
personal property owned by the Association and held for lease or rental to
others and on real estate, contributions paid pursuant to the Unemployment
Compensation Law of Missouri, social security taxes, sales taxes and use
taxes. In addition, the Association is entitled to credit against this tax
all taxes paid to the State of Missouri or any political subdivision, except
taxes on tangible personal property owned by the Association and held for
lease or rental to others and on real estate, contributions paid pursuant to
the Unemployment Compensation Law of Missouri, social security taxes, sales
and use taxes, and taxes imposed by the Missouri Financial Institutions Tax
Law. Missouri thrift institutions are not subject to the regular corporate
income tax.

Delaware. As a Delaware holding company not earning income in Delaware,
the Company is exempt from Delaware corporate income tax, but is required to
file an annual report with and pay an annual franchise tax to the State of
Delaware.

32
<PAGE>
<PAGE>
Item 2. Properties.
- ---------------------

The Company is located and conducts its business at the Association's
office in Macon, located at 101 Vine Street in Macon, Missouri. The
Association also has a branch office at 801 North Morley in Moberly, Missouri.
See Note 6 to the "Notes to Consolidated Financial Statements" for the net
book value of the Association's premises and equipment in the Annual Report to
Stockholders. Both offices are owned by the Company.

Item 3. Legal Proceedings.
- ----------------------------

Neither the Company nor its subsidiaries are involved in any pending
legal proceedings, other than routine legal matters occurring in the ordinary
course of business, which in the aggregate involve amounts which are believed
by management to be immaterial to the consolidated financial condition or
results of operations of the Company.

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

None applicable.

Executive Officers of the Registrant.

Position Held With The
Name Age (1) Association
---- ------- -----------

Clyde D. Smith . . . . . . . 38 Vice President, Chief
Financial Officer and
Secretary
Tom Robison. . . . . . . . . 51 Vice President Mortgage
Operations
Sarah Hartung. . . . . . . . 40 Vice President and Savings
Supervisor
Melinda Masten . . . . . . . 39 Treasurer

- ------------
(1) At June 30, 1998

PART II

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

Information relating to the market for Registrant's common equity and
related stockholder matters appears under "Corporate Information" in the
Registrant's 1998 Annual Report to Stockholders on page 37 and is incorporated
herein by reference.

Item 6. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations.
----------------------

The above-captioned information appears under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the
Registrant's 1998 Annual Report to Stockholders on pages 2 through 7 and is
incorporated herein by reference.

33
<PAGE>
<PAGE>
Item 7. Financial Statements
- ------------------------------

The Consolidated Financial Statements of MBLA Financial Corporation and
its subsidiaries, together with the report thereon by Lockridge, Constant &
Conrad, LLC appear in the Registrant's 1998 Annual Report to Stockholders on
pages 12 through 35 and are incorporated herein by reference.

Item 8. Change in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure.
---------------------

None.

PART III

Item 9. Directors and Executive Officers of the Registrant and Control
- ------------------------------------------------------------------------
Persons; Compliance with Section 16(a) of the Exchange Act
----------------------------------------------------------

The information relating to Directors and Executive Officers of the
Registrant is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on October 27,
1998, at page 4. Information concerning Executive Officers who are not
directors is contained in Part I of this report pursuant to paragraph (b) of
Item 401 of Regulation S-K in reliance on Instruction G. For information
relating to compliance with Section 16(a) of the Exchange Act, the information
in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to
be held on October 27, 1998, at page 8, is incorporated herein by reference.

Item 10. Executive Compensation.
- ----------------------------------

The information relating to executive compensation is incorporated herein
by reference to the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on October 27, 1998 at page 7.

Item 11. Security Ownership of Certain Beneficial Owners and Management.
- --------------------------------------------------------------------------

The information relating to security ownership of certain beneficial
owners and management is incorporated herein by reference to the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held on October
27, 1998 at page 3.

Item 12. Certain Relationships and Related Transactions.
- ----------------------------------------------------------

The information relating to certain relationships and related
transactions is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on October 27,
1998 at page 9.

34
<PAGE>
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
- --------------------------------------------

Financial Statements

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

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

PAGE
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . AR-37
Consolidated Statements of Financial Condition
as of June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . AR-12
Consolidated Statements of Income for each of the
Years in the Three-Year Period Ended June 30, 1998 . . . . . . . . . AR-13
Consolidated Statements of Stockholders' Equity for
each of the Years in the Three-Year Period
Ended June 30, 1998. . . . . . . . . . . . . . . . . . . . . . . . . AR-14
Consolidated Statements of Cash Flows for each of the Years
in the Three-Year Period Ended June 30, 1998 . . . . . . . . . . . . AR-15
Notes to Consolidated Financial Statements . . . . . . . . . . . . . AR-17

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

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

Exhibits
- --------

(a) The following exhibits are filed as part of this report:
10.6 Form of Employment Agreement between MBLA Financial Corporation,
Macon Building and Loan Association Executive. (Filed as an
exhibit to the Form 10-K for fiscal year ending June 30, 1993.
Filed with the Securities and Exchange Commission on September 24,
1993 and is herein incorporated by reference.)
11.0 Computations of earnings per share (filed herewith)
13.0 1998 Annual Report to Stockholders
21.0 Proxy Statement for 1998 Annual Meeting
22.0 Subsidiary information is incorporated herein by reference to "Part
I -- Subsidiaries"
24.0 Consent of Lockridge, Constant and Conrad (filed herewith)

Reports on Form 8-K
- -------------------

No reports on form 8-K have been filed during the last quarter of the fiscal
year covered by this report.

35
<PAGE>
<PAGE>
SIGNATURES

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

MBLA FINANCIAL CORPORATION

By: /s/ John T. Neer
-------------------------------------
John T. Neer
DATED: September 15, 1998 President, Chief Executive Officer and
Director

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

Name Title Date

/s/ John T. Neer President, Chief Executive September 15, 1998
- ---------------------------- Officer and Director
John T. Neer

/s/ Charles L. Hutton Chairman of the September 15, 1998
- ---------------------------- Board of Directors
Charles L. Hutton

/s/ Carl B. Barrows Vice Chairman of the September 15, 1998
- ---------------------------- Board of Directors
Carl B. Barrows

/s/ Truman L. Gehringer Vice President and September 15, 1998
- ---------------------------- Director
Truman L. Gehringer

/s/ Richard C. Miller, Jr. Director September 15, 1998
- ----------------------------
Richard C. Miller, Jr.

/s/ Arnold L. Walter Director September 15, 1998
- ----------------------------
Arnold L. Walter

/s/ Robert M. Wilhite Director September 15, 1998
- ----------------------------
Robert M. Wilhite

/s/ Melinda Masten Principal Accounting September 15, 1998
- ---------------------------- Officer
Melinda Masten

/s/ Clyde D. Smith Principal Financial September 15, 1998
- ----------------------------
Clyde D. Smith

36
<PAGE>
<PAGE>
Exhibit 11.0
Computation of Earnings Per Share

<PAGE>
<PAGE>
Exhibit 11.0 Computation of Earnings Per Share
- -------------------------------------------------

Basic and diluted earnings per share were determined by dividing net
income for the year by the weighted average number of shares of common stock
and common stock equivalents outstanding.

Stock options are regarded as common stock equivalents and are considered
in diluted earnings per share calculations. Common stock equivalents are
computed using the treasury stock method.

Earnings per share were determined as follows for the year ended June 30,
1998:

Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Net Income $1,884,000 $1,240,977 $1.52

Effect of Dilutive Securities
Stock Options -- 65,181 --
---------- ---------- -----
Diluted EPS
Net Income +
Assumed Conversions $1,884,000 $1,306,158 $1.44
========== ========== =====

<PAGE>
<PAGE>
Exhibit 13.0
1998 Annual Report to Stockholders

<PAGE>
<PAGE>
MBLA Financial Corporation

SIXTH ANNUAL REPORT
MBLA
'98

<PAGE>
<PAGE>
TABLE OF CONTENTS

President's Message. . . . . . . . . . . . . . . . . . . . . . . 1

Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . 2

Consolidated Financial Statements. . . . . . . . . . . . . . . . 9

Notes to Consolidated Financial Statements . . . . . . . . . . . 17

Independent Auditors' Report . . . . . . . . . . . . . . . . . . 37

Corporate Information. . . . . . . . . . . . . . . . . . . . . . 38

<PAGE>
<PAGE>
PRESIDENT'S MESSAGE TO OUR STOCKHOLDERS:

MBLA Financial Corporation
is pleased to announce another consecutive year of outstanding earnings.

Macon Building and Loan Association, F.A. officially became a subsidiary
of MBLA Financial Corporation when the Association converted to stock form on
June 24, 1993. The Conversion to a stock form of organization occurred after
108 years of operation as a mutual state-chartered savings and loan
association.

We wish to thank our officers and employees for their hard work and
dedication during this past year, for our profitable year and our
"Outstanding" rating as one of the highest capitalized savings and loans in
the nation.1

Earnings for the year ended June 30, 1998, were $1,884,000 or $1.44 per
share. This was an increase of 38% over the previous fiscal year. Our return
on assets for the year ended June 30, 1998 was .86% and our return on equity
was 6.64%.

Our total assets as of June 30, 1998 were $203.2 million with loans
receivable of $136.6 million (an increase of $10.2 million) and deposits of
$115.3 million. Our stockholders' equity was $27.8 million or 13.70% of total
assets. The Association had regulatory capital ratios of tangible and core
capital to assets of 13.2% and risk-based capital of 32.1%. Our capital
percentages are among the highest of all banks and savings and loans in the
nation.1

The Company's stock price closed at $24.75 at year end, which is 147%
over the initial offering price on June 24, 1993. In addition, the Company
paid its stockholders $ .50 per share in dividends during fiscal 1998. The
Company's book value at June 30, 1998 was $22.32 per share, an increase of
$.34 per share. During 1998 the Company repurchased 78,491 shares of its
Common Stock for $2.048 million or an average of $26.09 per share.

At June 30, 1998, non-performing assets were $924,000, an increase of
$347,000 from June 30, 1997. Loan loss reserves at June 30, 1998 were
$690,000 or 74.68% of non-performing loans.

We continue to look at ways to enhance shareholder value by increasing
profitability. We were pleased with our results in 1998 and we look forward
to a profitable year in 1999.

Sincerely,

/s/ John T. Neer

John T. Neer
President and Chief Executive Officer

1. Source -- Sheshunoff Corp.

1
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION
and Analysis of Financial Condition and
Results of Operation

General
- -------

MBLA Financial Corporation ("Company") is the savings and loan holding company
for Macon Building and Loan Association, F.A. (the "Association" or "Macon").
Apart from the operations of the Association, the Company did not engage in
any significant operations during the year ended June 30, 1998.

The business of the Association consists principally of attracting deposits
from the general public and using such deposits to purchase and originate
mortgage loans secured by one- to four-family residences. The servicing
rights on substantially all loans purchased by the Association are retained by
the sellers. In addition, the Association in vests in U.S. government and
federal agency securities and mortgage-backed and related securities,
interest-earning deposits and commercial and multi-family real estate loans
and consumer loans. The Association's profitability depends primarily on its
net interest income which is the difference between the income it receives on
its loans and in vestment portfolio and its cost of funds, which consists of
interest paid on deposits and other borrowed funds. Net interest income is
also affected by the relative amounts of interest-earning assets and
interest-bearing liabilities. When interest-earning assets approximate or
exceed interest-bearing liabilities, any positive interest rate spread will
generate net interest income. To a lesser extent, the Association's
profitability is also affected by the level of other income and non-interest
expenses. Other income has not been significant. Other expenses consists of
compensation and benefits, occupancy related expenses, deposit insurance
premiums, losses on the sale of real estate acquired through foreclosure and
other operating expenses.

The Association's loan portfolio has increased to $136.6 million at June 30,
1998 from $126.4 million at June 30, 1997. The Association decreased its
investment in mortgage-backed and other investment securities in fiscal years
1998. While management cannot predict the duration of the increase in loan
demand, the Association will pursue other possible investment alternatives to
help diversify its portfolio while raising appropriate funds for these
purposes.

The Association's operating strategies have been developed to respond to the
economic conditions prevailing in the Association's primary market area.
However, due to traditional low local loan demand, the Association has, for
over 32 years, purchased the majority of its loans from selected mortgage
banking companies and financial institutions located primarily in Columbia,
Boone County, Missouri, and to a lesser extent other cities in central
Missouri. The sellers retain servicing rights on the loans purchased by the
Association. By extending its lending market area and employing alternative
investment opportunities, such as mortgage-backed and investment securities,
the Association has attempted to limit, and believes it has been successful in
limiting, the impact of low local loan demand on its results of operations.

The economy of Boone County depends primarily on the service and government
industries. The education industry also plays an important role in the
economy of Boone County as three colleges and universities are located there.

The population of Macon and Randolph Counties declined between 1980 and 1994
and this trend is assumed to now be stabilized. In contrast, the population of
Boone County has grown faster than the
2
PAGE
<PAGE>
state and national growth rates during the last thirteen years, and the
population of Boone County is expected to continue to grow. Boone County's per
capita income in 1996 was higher than the income levels for Macon and Randolph
Counties, but was still lower than the state and national per capita income
levels.

The Association continues to maintain a high level of asset quality and has
remained profitable notwithstanding the decline in the local economy and
traditional low demand for mortgage loans in its market area.

The operations of Macon are influenced significantly by local economic
conditions and by policies of financial institution regulatory agencies,
including the OTS and the FDIC. The Association's cost of funds is influenced
by interest rates on competing investments and general market interest rates.
Lending activities are affected by the demand for financing of real estate and
other types of loans, which in turn are affected by the interest rates at
which such financing may be offered. Historically, the Association has
foregone growth to maintain profitability.

The Association has employed various strategies intended to minimize the
adverse effect of interest rate risk on future operations by providing a close
match between the interest rate sensitivity of its assets and liabilities and
by expanding its activities which are not directly dependent on interest rate
spreads. The Association's strategies are intended to stabilize net interest
income for the long-term by protecting its interest rate spread against
changes in interest rates.

The Board of Directors has appointed an Asset/Liability Committee comprised of
the President and the entire Board of Directors. It is the responsibility of
this committee to manage the interest rate sensitivity of the Association's
balance sheet in order to minimize large fluctuations in the net income of the
Association. The Association utilizes adjustable rate mortgages ("ARMs") to
provide repricing opportunities more closely matched within the time frames in
which its deposits are repriced. The committee is charged with the
responsibility to manage interest rate risk while remaining sensitive to the
Board's directive that credit risk not be substituted for interest rate risk.
As a result of these efforts, approximately 87.78% of Macon's mortgage loan
portfolio as of June 30, 1998, consisted of ARMs, including ARMs secured by
commercial real estate.

The difference between the amount of interest-earning assets and interest-
bearing liabilities to be repriced during a specific time period is referred
to as the "GAP position." The amounts of assets or liabilities which mature
or reprice during a particular period are determined in accordance with the
contractual terms of the asset or liability but are not adjusted for loan
amortization. Adjustable rate loans and mortgage-backed securities are
adjusted for scheduled repayments and prepayments. The Association's passbook
accounts generally are subject to immediate withdrawal and are included in the
three months or less category on the Association's one year GAP projection.
The GAP position of the Association's assets and liabilities could vary
substantially if different assumptions were used.

The balance sheet structure poses a challenge of interest rate risk to the
management. The Association's one year GAP at June 30, 1998, was a negative
5.26% or $10.7 million.

The Association's one year GAP is reflected in the following table:

3
<PAGE>
<PAGE>
Maturities
within
One Year
--------

Assets: $ 129,624,000
Liabilities: 140,352,000
-------------
GAP: $ -10,728,000
-------------

A negative one year GAP is defined to be the excess of interest-bearing
liabilities over interest-earning assets that mature or reprice in one year.
Generally, during a period of rising interest rates, a negative gap within a
given period of time would adversely affect net interest income, while a
positive gap within a given period of time would result in an increase in net
interest income; during a period of falling interest rates, a negative gap
within a given period of time would result in an increase in net interest
income while a positive gap within a given period of time would have the
opposite effect. Many factors affect the one-year GAP position which are
beyond the control of the Association such as regulatory policy changes and
customer reactions to interest rate changes. However, Macon believes that its
asset/liability management enables it, in part, to avoid large swings in the
profitability of the Association.

Effect of Inflation and Changing Prices

The Financial Statements and related data presented herein have been prepared
in accordance with generally accepted accounting principles which require the
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. The primary impact of inflation on the operations
of Macon is reflected in increased operating costs. Unlike most industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates generally
have a more significant impact on a financial institution's performance than
does inflation. Interest rates do not necessarily move the same direction or
to the same extent as the price of goods and services. However, long-term
mortgage rates, which are influenced by inflationary expectations, have a
significant impact on the types of loans originated. For example, ARMs are
more acceptable to the borrowing public during times of higher interest rates
and are originated to be retained for the loan portfolio by Macon. In the
current interest rate environment, liquidity and the maturity structure of
Macon's assets and liabilities are critical to the maintenance of acceptable
performance levels.

Liquidity and Capital Resources

The Association's principal sources of funds are proceeds from maturities of
investment securities, principal payments received on mortgage-backed and
related securities, loan repayments and deposits.

The primary investing activities of the Association are originating and
purchasing loans and purchasing investments and mortgage-backed securities.
Proceeds from maturities of investment securities and principal payments
received on mortgage-backed and related securities provided $32.1 million of
liquidity for the year ended June 30, 1998. New loan closing exceeded
originations by $19.4 million.

The Association's most significant financing activities are deposit
accounts, FHLB borrowings, taxes and insurance on behalf of borrowers, and the
payment of dividends. During the year ended June 30, 1998, the Association
repaid $44.2 million of FHLB advances while the net increase in deposits and
escrow balances was $13.3 million.

Federal regulations require the Association to maintain minimum levels of
liquid assets (i.e., cash and eligible investments). The required percentage
has varied from time to time based upon economic conditions and savings flows
and is currently 4% of the average daily balance of its net withdrawable
savings deposits and short-term borrowings. The Association attempts to
maintain levels of liquidity at levels in excess of those required by
regulation. Maintaining levels of liquidity acts, in part, to reduce the
Association's balance sheet exposure to interest rate risk. At June 30, 1998,
the Association's

4
<PAGE>
<PAGE>
liquidity ratio (liquid assets as a percentage of net withdrawable savings
deposits and short-term borrowings) was 5.59%.

The Association must also maintain adequate levels of liquidity to ensure the
availability of funds to satisfy loan commitments and deposit withdrawals. At
June 30, 1998, the Association had outstanding commitments to originate loans
of $9.5 million. At the same time, certificates of deposit which are
scheduled to mature in one year or less totalled $86.4 million. Based upon
historical experience, management believes the majority of maturing
certificates of deposit will remain with the Association. In addition,
management of the Association believes that it can adjust the offering rates
of certificates of deposit to retain deposits in changing interest rate
environments. In the event that a significant portion of these deposits are
not retained by the Association, the Association would be able to utilize FHLB
advances to fund deposit withdrawals, which would result in an increase in
interest expense to the extent that the average rate paid on such advances
exceeds the average rate paid on deposits of similar duration.

Management believes its ability to generate funds internally will satisfy its
liquidity requirements. If the Association requires funds beyond its ability
to generate them internally, it has the ability to borrow funds from the FHLB
under a blanket agreement which assigns all investments in FHLB stock as well
as qualifying first mortgage loans equal to 150% of the outstanding advances
as collateral to secure the amounts borrowed. At June 30, 1998, the
Association had approximately $71.6 million available to it under the
above-mentioned borrowing arrangement. At June 30, 1998, the Association had
$58.6 in advances from the FHLB.

The Association is required to maintain specific amounts of capital pursuant
to OTS regulations on minimal capital standards. As of June 30, 1998, the
Association complied with all regulatory capital requirements as of that date
with tangible and risk-based capital ratios of 13.2% and 31.2% respectively.
For a detailed discussion of regulatory capital requirements, see "REGULATION
- -- Federal Regulation of Savings Associations -- Capital Requirements."

Comparison of Operating Results for the Years Ended June 30, 1998 and 1997

Net Income. Net income for fiscal 1998 increased $443,000 from fiscal 1997.
The increase in net income primarily resulted from an increase in mortgage
lending activity and was offset somewhat from a decrease in mortgage-backed
and related securities activity and a decrease in SAIF deposit insurance
premiums. Interest rates remained stabilized on interest-earning assets and
interest-bearing liabilities during the period.

Interest Income. Interest income increased $238,000 for fiscal year 1998 due
primarily to increased mortgage loan activity. The higher balance of loans
outstanding during fiscal 1998 reflects an increase in deposit growth,
improved local loan demand and a continued volume of purchased loans. Total
loans originated and purchased during fiscal 1998 increased loans outstanding
by $10.1 million. During this period, the Association reduced its
mortgage-backed securities portfolio by $20.7 million.

Interest Expense: Interest expense for fiscal 1998 was $10.7 million as
compared to $10.4 million for fiscal 1997. The increase in interest expense
was primarily due to the increase in deposits and off-set by the decrease in
Federal Home Loan Bank advances. The average cost of deposits increased from
5.52% for fiscal 1997 to 5.65% for fiscal 1998. Due to current interest
rates, customers continue to move funds into shorter term certificates of
deposit.

Net Interest Income. Net interest income for fiscal 1998 remained relatively
at the same level as fiscal year 1997.

5
<PAGE>
<PAGE>
Although the Association's mortgage loan activity increased during fiscal
1998, net interest income decreased due to a decrease in mortgage-backed and
related securities.

Provisions for Loan Losses. During fiscal 1998, the Association decreased its
provision for loan losses to $60,000 from $95,000 in fiscal 1997. The loan
loss allowance was at $690,000 at June 30, 1998. The Association has
historically experienced low losses. However, no assurances can be given as to
future loss levels. The Association's policy requires that a loan loss
provision be equal to 1/2 of 1% of outstanding mortgage loans.

Other Income. Other income for fiscal 1998 totalled $44,000 as compared to
$10,000 for fiscal 1997. Other income is not considered a significant part of
the total income of the Association.

Other Expense. Other expenses during fiscal 1998 were $1.6 million as
compared to $2.1 million for fiscal 1997. The decrease of approximately
$480,000 was due to the decrease in the SAIF deposit insurance of accounts
premium offset by a slight increase in compensation and benefits.

Income Taxes. The provision for federal and state income taxes increased
$93,000 to $1.1 million in fiscal 1998 from $1.0 million in fiscal 1997. The
effective tax rate was 36.4% in fiscal 1998 as compared to 40.6% in fiscal
1997.

Comparison of Operating Results for the Years Ended June 30, 1997 and 1996

Net Income. Net income for fiscal 1997 increased $48,000 from fiscal 1996.
The increase in net income primarily resulted from increased loan activity and
investments. During the period, interest rates in general decreased on
interest-earning assets and interest-bearing liabilities; net interest income
increased by $793,000. In addition, non-interest expenses increased for
deposit insurance.

Interest Income. Interest income increased $1.64 million or 12.2%, to
$15.04 million for fiscal 1997 from $13.40 million for fiscal 1996. This
increase resulted from an increase in the interest on mortgage loans,
investment and related securities. Interest on loans in- creased by $932,000
or 12.73% to $8.3 million in fiscal 1997. The higher balance of loans
outstanding during fiscal 1997 reflects an increase in refinancing of
purchased mortgage loans and a continued volume of purchased loans. Total
mortgage loans originated and purchased during fiscal 1997 were $33.5 million
compared to $17.5 million in fiscal 1996. Management believes that this trend
of increased mortgage lending activity for the Association's portfolio will
continue based on continued higher loan activity and the Association's desire
to originate adjustable rate mortgages. During this period, the Association
continued investing in mortgage-backed and other related securities in order
to obtain higher interest rates than what were provided by short-term liquid
investments.

Interest Expense. Interest expense for fiscal 1997 was $10.4 million as
compared to $9.6 million for fiscal 1996, an increase of $ .8 million, or
8.83%. The increase resulted from an increase in borrowed money. The average
cost of deposits increased from 5.47% during fiscal 1996 to 5.52% for fiscal
1997. The level of deposits increased $15.2 million or 17.58% to $102.0
million in fiscal 1997 over the fiscal 1996 level of $86.7 million. Due to
current interest rates, customers moved more funds into shorter-term
certificates of deposits. In addition, passbook accounts continued to further
deteriorate.

Net Interest Income. Net interest income for fiscal 1997 increased $793,000
or 20.8% over fiscal 1996. Net interest income increased during this period,
due to an increase in mortgage loan interest income. This was a result of the
increase in refinancing due to lower

6
<PAGE>
<PAGE>
interest rates and increased purchased loans and mortgage-backed and related
securities.

Provision for Loan Losses. During fiscal 1997, the Association made a $95,000
additional provision for loan losses. The loan loss allowance was at
$630,000 at June 30, 1997. The Association historically experienced low loan
losses. No answers, however, can be given as to future loss levels. However,
the Association's policy requires that a loan loss provision be equal to 1/2
of 1% of outstanding mortgage loans.

Other Income. Other income for fiscal 1997 totalled $10,000 as compared to
$21,000 for fiscal 1996. Other income is not considered a significant part of
the total income of the Association.

Other Expenses. Other expenses during fiscal 1997 were $2.09 million as
compared to $1.54 million for fiscal 1996. The increase of approximately
$550,000 in fiscal 1997 reflects an increase due to a one-time SAIF insurance
assessment of $558,000.

Income Taxes. The provision for federal and state income taxes increased
$88,000 to $986,000 in fiscal 1997 from $898,000 in fiscal 1996, primarily as
a result of lower earnings. The effective tax rate was 40.6% in fiscal 1997
as compared to 39% in fiscal 1996.

Capital Requirements

At June 30, 1998, the Association exceeded each of its capital requirements.
The decrease in capital levels are attributed to the Association's continued
effort to leverage its capital. This was mentioned in the "Liquidity and
Capital Resources" section of Management's Discussion and Analysis. See
"Capital Levels" graph which sets forth in terms of percentages the OTS
tangible, leverage and risk-based capital requirements for the Association.

Effect of Stock Repurchase

The effect of the Company's stock repurchases resulting in ownership of
Treasury stock, would be reflected in a possible increase in earnings per
share and the possibility of an increase in book value of the remaining shares
outstanding, depending on the price paid for the shares repurchased. Stock
repurchases would also reduce the company's capital ratio to assets.

Year 2000

The Year 2000 issue exists because many computer systems and applications use
two-digit date fields to designate a year. As the century date change occurs,
date-sensitive systems may recognize the Year 2000 as 1900, or not at all.
This inability to recognize or properly treat the Year 2000 may cause systems
to process financial and operational information incorrectly. The Association
has been in contact with their data processing service provider. Their
tentative Year 2000 testing schedule begins in September 1998 and continues
through January 1999. As of this date, the Association expects a cost of no
more than $25,000 to be Year 2000 compliant.

The Association has contacted software vendors and does not foresee any major
capital expenditures. In-house testing of major software packages the
Association utilizes (as well as Association hardware) have been initiated and
expect to be completed by March 31, 1999. The Association should have all
testing completed by June 30, 1999.

7
<PAGE>
<PAGE>
CAPITAL LEVELS AS OF JUNE 30, 1998
(Thousands of Dollars)

Tangible Core Risk-Based
-------- ---- ----------
Required $ 3,420 $ 8,099 $ 6,840
Actual $26,716 $26,716 $27,406

SUMMARY OF HISTORICAL NET INCOME

Net Income
(Thousands of Dollars)

NET INCOME FOR FISCAL YEAR ENDING
1998 - $1,884
1997 - $1,441
1996 - $1,393
1995 - $1,452
1994 - $1,231
1993 - $1,012
1992 - $1,246
1991 - $1,303
1990 - $1,233

8
<PAGE>
<PAGE>
See accompanying notes to consolidated financial statements.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

At or for the Year Ended June 30,
----------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in Thousands, Except Per Share Data)
Selected Financial Data:
Total assets $203,228 $234,823 $201,039 $197,252 $129,211
Loans receivable, net 136,647 126,448 106,485 104,700 92,949
Interest-earning deposits 3,055 4,484 4,811 2,390 3,599
Investment securities (2) 9,770 27,039 12,437 14,604 15,294
Mortgage-backed securities,
net (2) 48,226 68,975 71,129 69,482 14,722
Foreclosed real estate -- -- 23 -- 3
Deposits 115,330 101,959 86,716 85,162 88,380
Federal Home Loan Bank
Advances 58,640 102,870 85,086 81,787 10,475
Earnings per Share --
Basic (3) 1.52 1.11 1.03 .99 .73
Dividends per Share .50 .40 .40 .40 .40
Stockholders' Equity
(1)(2) 27,841 28,536 28,067 29,088 28,697

Selected Operating Data:
Interest Income $ 15,278 $ 15,040 $ 13,400 $ 11,190 $ 7,807
Interest expense on
deposits and
borrowed funds 10,688 10,436 9,589 7,220 4,097
-------- -------- -------- -------- --------
Net interest income 4,590 4,604 3,811 3,970 3,710
Less provision for loan
losses 60 95 -- 115 75
Net interest income -------- -------- -------- -------- --------
after provision
for loan losses 4,530 4,509 3,811 3,855 3,635
-------- -------- -------- -------- --------
Non-interest income:
Loan origination fees -- -- -- -- 5
Net gain on sale of
investment securities 14 -- 10 -- --
Other 30 10 11 14 19
-------- -------- -------- -------- --------
Total non-interest income 44 10 21 14 24
-------- -------- -------- -------- --------
Non-interest expense:
Compensation and benefits 1,099 927 991 878 981
Office occupancy and
equipment 84 81 80 99 86
Federal deposit insurance
premiums 127 740 252 240 244
Loss (gain) from
foreclosed real estate
activities -- 10 14 6 (1)
Net loss on sale of
investment securities -- 59 -- -- --
Data processing 70 56 52 58 57
Other 231 219 152 203 274
Total non-interest -------- -------- -------- -------- --------
expense 1,611 2,092 1,541 1,484 1,641
-------- -------- -------- -------- --------
Income before income taxes 2,963 2,427 2,291 2,385 2,018
Income tax expense 1,079 986 898 933 787
-------- -------- -------- -------- --------
Net income $ 1,884 $ 1,441 $ 1,393 $ 1,452 $ 1,231
======== ======== ======== ======== ========

(1) The Association may not pay dividends to the Company on its stock if its
regulatory capital would thereby be reduced below (i) the aggregate amount
then required for the liquidation account, or (ii) the amount of its
regulatory capital requirements.

(2) Investment securities, mortgage-backed securities and stockholders' equity
have been adjusted to reflect the adoption of FAS 115 during fiscal year
ended June 30, 1994.

(3) Earnings per Share - basic have been restated for 1994 through 1997 to
reflect SFAS No. 28, "Earnings Per Share".

9
<PAGE>
<PAGE>
<TABLE>

SUMMARY OF UNAUDITED QUARTERLY OPERATING RESULTS

Year Ended June 30, 1998 Year Ended June 30, 1997
--------------------------------------- ---------------------------------------
(Dollars in Thousands, Except for Per Share Data)

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
------ ------ ------ ------ ------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Interest income $3,991 $3,936 $3,816 $3,535 $15,278 $3,504 $4,061 $3,539 $3,936 $15,040
Interest expense 2,798 2,768 2,652 2,470 10,688 2,418 2,785 2,511 2,722 10,436
------ ------ ------ ------ ------- ------ ------ ------ ------ -------
Net interest income
before provision
for loan losses 1,193 1,168 1,164 1,065 4,590 1,086 1,276 1,028 1,214 4,604
Provision for loan
losses 15 15 15 15 60 20 5 15 55 95
------ ------ ------ ------ ------- ------ ------ ------ ------ -------
Net interest income
after provision
for loan losses 1,178 1,153 1,149 1,050 4,530 1,066 1,271 1,013 1,159 4,509

Gain (loss) on sale
of assets -- 14 -- -- 14 -- -- (59) -- (59)

Income (loss) from real
estate operation -- -- -- -- -- -- -- -- -- --

Other income 4 1 10 15 30 -- 5 5 -- 10

Non-interest expense 341 377 502 391 1,611 925 419 333 356 2,033
------ ------ ------ ------ ------- ------ ------ ------ ------ -------
Income (loss)
before tax 841 791 657 674 2,963 141 857 626 803 2,427

Income tax expense 336 317 152 274 1,079 35 335 255 361 986
------ ------ ------ ------ ------- ------ ------ ------ ------ -------
Net income (loss) $ 505 $ 474 $ 505 $ 400 $ 1,884 $ 106 $ 522 $ 371 $ 442 $ 1,441
====== ====== ====== ====== ======= ====== ====== ====== ====== =======
Earnings per share --
basic 0.40 0.38 0.41 0.33 1.52 0.08 0.40 0.29 0.34 1.11

Earnings per share --
diluted 0.38 0.36 0.39 0.31 1.44 0.08 0.37 0.27 0.32 1.04

10
</TABLE>
<PAGE>
<PAGE>
SELECTED FINANCIAL RATIOS
At or for the Year Ended June 30,
---------------------------------------
(Dollars in thousands)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
SELECTED FINANCIAL RATIOS AND
OTHER DATA:

Return on average assets 0.86% 0.67% 0.70% 0.87% 1.00%
Return on average retained earnings 6.64 7.93 8.08 8.79 7.71
Average retained earnings to
average assets 12.97 8.40 8.68 9.88 12.93
Retained earnings to total assets 9.36 7.89 8.79 8.52 12.33
Interest rate spread during period 1.40 1.44 1.09 1.51 2.03
Net interest margin 2.12 2.15 1.94 2.40 3.08
Operating expenses to average
assets .74 0.97 0.78 0.89 1.33
Net interest income to operating
expenses 284.82 220.13 247.31 267.47 226.01
Non-performing loans (1) to
total loans .68 0.46 0.62 0.41 0.25
Non-performing assets (2)
to total assets .45 0.25 0.34 0.22 0.18
Allowance for loan losses to
non-performing loans (1) 74.68 109.19 80.69 126.16 185.39
Allowance for loan losses to
non-performing assets (2) 74.68 109.19 77.99 126.16 183.39
Allowance for loan losses
to total loans .50 0.50 0.50 0.51 0.46
Average interest-earning
assets to average interest-
bearing liabilities 114.66 114.48 117.52 120.32 130.81
Dividend payout ratio 32.9 38.5 41.2 43.1 55.6

Loan originations $ 7,286 $ 1,751 $ 1,283 $ 2,432 $ 3,350
Loan Purchase $29,702 $32,213 $16,503 $22,706 $35,891

Number of:
Deposit account $ 7,686 $ 7,477 $ 6,749 $ 6,922 $ 7,352
Full-service customer
service facilities 2 2 2 2 2

(1) Non-performing loans consist of loans delinquent 90 days or more.
(2) Includes non-performing loans and real estate acquired through
foreclosure.

11
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30,
--------------------------
1998 1997
-------- ------
(In thousands)
ASSETS

Cash on hand and noninterest-earning deposits $ 580 $ 230
Interest-earning deposits in other institutions 3,055 4,484
Investment securities (Note 2)
Securities available-for-sale, at fair value 9,770 27,039
Mortgage-backed securities (Note 3)
Securities available-for-sale, at fair value 48,226 68,975
Loans receivable, net (Notes 4 and 15) 136,647 126,448
Accrued interest receivable (Note 5) 1,162 1,595
Investment required by law --
Stock in Federal Home Loan Bank, at cost 3,134 5,652
Real estate owned --- ---
Premises and equipment (Note 6) 282 308
Other assets 372 92
--------- ---------
Total assets $ 203,228 $ 234,823
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits (Note 7) $ 115,330 $ 101,959
Federal Home Loan Bank advances (Note 8) 58,640 102,870
Advances from borrowers for taxes and insurance 165 171
Income taxes liability (Note 10) 541 590
Accrued expenses and other liabilities 711 697
--------- ---------
Total liabilities 175,387 206,287
--------- ---------
Commitments and contingencies (Note 13)

Preferred stock, $.01 par value; authorized
500,000 shares; none outstanding --- --
Common stock $.01 par value; authorized
2,500,000 shares, issued 1,765,211
shares in 1998 and 1,738,111 shares in 1997 17 17
Additional paid-in capital 17,526 16,944
Retained earnings, substantially restricted 19,022 18,535
Less:
Treasury stock, 518,190 shares in 1998,
439,699 shares in 1997, at cost (9,395) (7,347)
Unrealized gain (loss) on securities
available-for-sale, net of applicable
deferred income taxes 859 727
Common stock acquired by the ESOP (Note 9) (188) (282)
Common stock awarded by Association Recognition
and Retention Plan (Note 9) --- (58)
--------- ---------
Total stockholders' equity 27,841 28,536
--------- ---------
Total liabilities and stockholders' equity $ 203,228 $ 234,823
========= =========
See accompanying notes to consolidated financial statements.

12
PAGE
<PAGE>
For the Three Years Ended June 30, 1998

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30
------------------------------
1998 1997 1996
---- ---- ----
(In thousands)
Interest income:
Loans receivable (Note 4) $ 9,619 $ 8,254 $ 7,322
Investment securities and FHLB stock 1,118 1,860 1,040
Mortgage-backed and related securities 4,210 4,729 4,768
Other interest-earning assets 331 197 270
------- ------- -------
Total interest income 15,278 15,040 13,400
------- ------- -------
Interest expense:
Deposits (Note 7) 6,135 5,107 4,678
Federal Home Loan Bank advances 4,553 5,329 4,911
------- ------- -------
Total interest expense 10,688 10,436 9,589
------- ------- -------
Net interest income 4,590 4,604 3,811

Provision for loan losses (Note 4) 60 95 -
------- ------- -------
Net interest income after provision for
loan losses 4,530 4,509 3,811
------- ------- -------
Noninterest income:
Other (Note 12) 44 10 21
------- ------- -------
Total noninterest income 44 10 21
------- ------- -------
Noninterest expense:
Compensation and benefits (Note 9) 1,099 927 991
Occupancy and equipment (Note 6) 84 81 80
SAIF deposit insurance premiums 127 740 252
Loss (gain) on sale of real estate owned --- 10 14
Net loss on sale of mortgage-backed
securities --- 59 --
Other (Note 12) 301 275 204
------- ------- -------
Total noninterest expense 1,611 2,092 1,541
------- ------- -------
Income before income taxes 2,963 2,427 2,291
Income tax expense (Note 10) 1,079 986 898
------- ------- -------
Net income $ 1,884 $ 1,441 $ 1,393
======= ======= =======
Earnings per share -- basic $ 1.52 $ 1.11 $ 1.03

Earnings per share -- diluted $ 1.44 $ 1.04 $ .97

See accompanying notes to consolidated financial statements.

13
<PAGE>
<PAGE>
<TABLE>
For the Three Years Ended June 30, 1998
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

THREE YEARS ENDED JUNE 30, 1998
-------------------------------------------------------------------------
(IN THOUSANDS)
Unrealized
Gain (Loss)
on Secu-
rities
Available-
for-Sale,
Net of
Appli-
cable
Addi- De- Common Common
tional ferred Stock Stock
Common Paid-In Retained Treasury Income Acquired Awarded
Stock Capital Earnings Stock Taxes by ESOP by RRP Total
---- -------- -------- -------- ----- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 $ 17 $ 16,615 $ 16,806 $ (3,667) $ 198 $ (524) $(357) $ 29,088

Additions (deductions) for the
year ended June 30, 1996:
Net income -- -- 1,393 -- -- -- -- 1,393
Stock options exercised -- -- -- -- -- -- -- --
Dividends declared ($.40
per share) -- -- (534) -- -- -- -- (534)
Compensation expense related
to ESOP -- 120 -- -- -- -- -- 120
Deferred tax on RRP -- 19 -- -- -- -- -- 19
Reduction of employee stock
ownership plan obligation -- -- -- -- -- 134 -- 134
Amortization of executive
stock plan -- -- -- -- -- -- 149 149
Purchase of treasury stock
(126,664 shares) -- -- -- (2,257) -- -- -- (2,257)
Change in unrealized gain
(loss) on securities
available-for-sale, net
of deferred income tax of
$26,000 -- -- -- -- (45) -- -- (45)
---- -------- -------- -------- ----- ------ ---- --------
Balance, June 30, 1996 17 16,754 17,665 (5,924) 153 (390) (208) 28,067
==== ======== ======== ======== ===== ====== ==== ========
Additions (deductions) for
the year ended June 30, 1997:
Net income -- -- 1,441 -- -- -- -- 1,441
Stock options retired -- -- (58) -- -- -- -- (58)
Dividends declared ($.40
per share) -- --- (513) -- -- -- -- (513)
Compensation expense related
to ESOP -- 119 -- -- -- -- -- 119
Deferred tax on RRP -- 71 -- -- -- -- -- 71
Reduction of employee stock
ownership plan obligation -- -- -- -- -- 108 -- 108
Amortization of executive stock
plan -- -- -- -- -- -- 150 150
Purchase of treasury stock
(66,699 shares) -- -- -- (1,423) -- -- -- (1,423)
Change in unrealized gain
(loss) on securities
available-for-sale,
net of deferred income
tax of $337,000 -- -- --- -- 574 -- -- 574
---- -------- -------- -------- ----- ------ ---- --------
Balance, June 30, 1997 17 16,944 18,535 (7,347) 727 (282) (58) 28,536
==== ======== ======== ======== ===== ====== ==== ========
Additions (deductions) for the
year ended June 30, 1998:
Net income -- -- 1,884 -- -- -- -- 1,884
Stock options exercised -- 270 -- -- -- -- -- 270
Stock options retired -- -- (779) -- -- -- -- (779)
Dividends declared ($.50
per share) -- -- (618) -- -- -- -- (618)
Compensation expense related
to ESOP -- 151 -- -- -- -- -- 151
Deferred tax on RRP -- 73 -- -- -- -- -- 73
Reduction of employee stock
ownership plan obligation -- -- -- -- -- 94 -- 94
Amortization of executive
stock plan -- 88 -- -- -- -- 58 146
Purchase of treasury stock
(78,491 shares) -- -- -- (2,048) -- -- -- (2,048)
Change in unrealized gain
(loss) on securities
available-for-sale, net
of deferred income tax of
$77,000 -- -- -- -- 132 -- -- 132
---- -------- -------- -------- ----- ------ ---- --------
Balance, June 30, 1998 $ 17 $ 17,526 $ 19,022 $ (9,395) $ 859 $ (188) $ -- $ 27,841
==== ======== ======== ======== ===== ====== ==== ========

See accompanying notes to consolidated financial statements.

14
</TABLE>
<PAGE>
<PAGE>
For the Three Years Ended June 30, 1998

CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended June 30,
------------------------------
1998 1997 1996
---- ---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 1,884 $ 1,441 $ 1,393
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Provision for loan losses 60 95 --
Net loss (gain) on sale of
real estate owned -- 10 14
(Gain) loss on sale of
mortgage-backed securities (14) 59 (10)
Depreciation 48 45 42
Amortization of premiums and discounts (22) (58) (79)
RRP compensation expense 135 38 87
FHLB stock dividend -- -- (82)
Decrease (increase) in interest receivable 433 (443) (12)
Decrease (increase) in other assets (279) 42 35
Increase (decrease) in income tax payable (126) 13 77
Increase (decrease) in other liabilities 26 33 7
Excess of fair value over cost of ESOP
unallocated shares 151 118 121
Deferred tax on RRP 73 72 19
------- ------- -------
Net cash provided by operating
activities 2,369 1,465 1,612
------- ------- -------
Cash flows from investing activities:
Loans purchased (29,702) (32,213) (16,503)
(Increase) decrease in loans, net 19,443 12,126 14,613
Proceeds from maturities of investment
securities 27,992 31,927 9,669
Sale of investment securities 1,174 -- --
Proceeds from sale of mortgage-backed
securities 3,891 16,516 3,510
Mortgage-backed securities called 17,000 -- --
Purchase of investment securities
and FHLB stock (11,915) (47,799) (7,556)
Principal collected on repayments and
maturities of mortgage-backed and
related securities 4,119 3,431 5,955
Purchase of mortgage-backed and
related securities (4,000) (17,000) (11,007)
Proceeds from the sale of real estate owned -- 42 66
FHLB stock redeemed 2,518 -- --
Purchase of equipment (22) (69) (13)
------- ------- -------
Net cash provided (used) by
investing activities 30,498 (33,039) (1,266)
------- ------- -------

See accompanying notes to consolidated financial statements.

15
<PAGE>
<PAGE>
For the Three Years Ended June 30, 1998

CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)

Years Ended June 30,
------------------------------
1998 1997 1996
---- ---- ----
(In thousands)
Cash flows from financing activities:
Net proceeds from the issuance of common
stock $ 271 $ -- $ --
Purchase of treasury stock (2,048) (1,423) (2,257)
Net increase (decrease) in deposits 13,371 15,243 1,553
Stock options retired (779) (58) --
Net increase (decrease) in advances from
borrowers for taxes and insurance (6) 15 (42)
Dividends paid (618) (513) (534)
Proceeds from FHLB advances 62,000 18,000 7,000
Principal payments on FHLB advances (106,231) (215) (3,701)
Unearned ESOP compensation decrease 94 108 135
------- ------- -------
Net cash provided (used) by financing
activities (33,946) 31,157 2,154
------- ------- -------
Increase (decrease) in cash and
cash equivalents (1079) (417) 2,500

Cash and cash equivalents at beginning
of period 4,714 5,131 2,631
------- ------- -------
Cash and cash equivalents at end of period $ 3,635 $ 4,714 $ 5,131
======= ======= =======
Supplemental cash flow disclosures:
Cash paid for:
Interest $ 1,955 $ 1,800 $ 1,757
======= ======= =======
Income taxes $ 1,133 $ 903 $ 802
======= ======= =======
Noncash activity:
Loans transferred to real estate owned $ -- $ 30 $ 103
======= ======= =======

See accompanying notes to consolidated financial statements.

16
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS
- ---------
MBLA Financial Corporation (the "Company") is a Delaware corporation
incorporated February 23, 1993, for the purpose of being the savings and loan
holding company for Macon Building and Loan Association, F.A. (the
"Association").

The Association provides financial services to individuals and corporate
customers, and is subject to competition from other financial institutions.
The Association is also subject to the regulations of certain Federal agencies
and undergoes periodic examination by those regulatory authorities.

BASIS OF FINANCIAL STATEMENT PRESENTATION
- -----------------------------------------
The accompanying consolidated financial statements include the accounts of
the Company, and its wholly-owned subsidiary, Macon Building and Loan
Association, F.A., and MBL Financial Services, Inc., the Association's wholly
owned subsidiary. All significant intercompany transactions and balances are
eliminated in consolidation.

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the statement of financial condition and revenues and expenses for the year.
Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowances
for losses on loans and foreclosed real estate, management obtains independent
appraisals for significant properties.

While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically
review the Association's allowances for losses on loans and foreclosed real
estate. Such agencies may require the Association to recognize additions to
the allowances based on their judgements about information available to them
at the time of their examination.

Cash Equivalents
- ----------------
Cash equivalents of $3.6 million and $4.7 million at June 30, 1998 and 1997,
respectively, consist of cash on hand and funds due from banks. For purposes
of the statements of cash flows, the Association considers all highly liquid
debt instruments with original maturities when purchased of three months or
less to be cash equivalents.

INVESTMENT SECURITIES
- ---------------------
Investment securities that are held for short-term resale are classified as
trading securities and are carried at fair value. Debt securities that
management has the ability and intent to hold to maturity are classified as
held-to-maturity and are carried at cost, adjusted for amortization of premium
and accretion of discounts using methods approximating the interest method.
Other marketable securities are classified as available-for-sale and are
carried at fair value. Realized and unrealized gains and losses on trading
securities are included in net income. Unrealized gains and losses, net of
tax, on securities available-for-sale are recognized as direct increases or
decreases in stockholders' equity. Cost of securities sold is determined using
the specific identification method.

MORTGAGE-BACKED AND RELATED SECURITIES
- --------------------------------------
Mortgage-backed securities represent participating interest in pools of
long-term first mortgage loans originated and serviced by issuers of the
securities. Mortgage-backed securities are classified as available for sale
and are carried at fair value. Premiums and discounts are amortized using
methods approximating the interest method over the remaining period to
contractual maturity, adjusted for anticipated prepayments. The Company
evaluates mortgage-backed securities on a monthly basis to monitor prepayments
and the resulting effects on yields and valuations. Management considers the
concentration of credit risk to be minimal on mortgage-backed securities
because all such securities are guaranteed as to timely payment of principal
and interest by FNMA, FHLMC or GNMA. Should any be sold, gains and losses are
recognized based on the specific-identification method. All sales are made
without recourse.

At June 30, 1998 and 1997, the Company had no outstanding commitments to
sell loans or securities.

Equity securities that are nonmarketable are carried at cost. Nonmarketable
equity securities held by the Association consists of stock in the Federal
Home Loan Bank. The Association, as a member of the Federal Home Loan Bank
system, is required to maintain an investment in capital stock of the Federal
Home Loan Bank in an amount based on its outstanding loans and advances.

17
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

No ready market exists for the Bank stock and they have no quoted market
value. For reporting purposes, these investments are assumed to have a market
value equal to cost.

LOANS RECEIVABLE
- -----------------
Loans receivable are stated at unpaid principal balances, less the allowance
for loan losses, and net deferred loan origination fees and costs.

PROVISIONS OF LOSSES ON LOANS AND INTEREST RECEIVABLE
- -----------------------------------------------------
Provision for losses on loans receivable are based upon management's
estimate of the amount required to maintain an adequate allowance for losses,
relative to the risks in the loan portfolio. The estimate is based on reviews
of the portfolio, including assessment of the carrying value of the loans to
the estimated net realizable value of the related underlying collateral,
considering past loss experience, current economic conditions and such other
factors which, in the opinion of management, deserve current recognition. The
Association is subject to the regulations of certain federal agencies and
undergoes periodic examinations by those regulatory authorities. As an
integral part of those examinations, the various regulatory agencies
periodically review the Association's allowance for loan losses. Such agencies
may require the Association to recognize changes to the allowance based on
their judgements about information available to them at the time of their
examination.

Accrual of interest income on loans is discontinued for those loans with i
interest more than ninety days delinquent or sooner if management believes
collectibility of the interest is not probable. Management's assessment of
collectibility is primarily based on a comparison of the estimated value of
underlying collateral to the related loan and accrued interest receivable
balances.

Financial accounting standards define the recognition criteria for loan
impairment and the measurement methods for certain impaired loans and loans
for which terms have been modified in troubled-debt restructurings (a
restructured loan). Specifically, a loan is considered impaired when it is
probable a creditor will be unable to collect all amounts due - both principal
and interest - according to the contractual terms of the loan agreement. When
measuring impairment, the expected future cash flows of an impaired loan are
required to be discounted at the loan's effective interest rate.
Alternatively, impairment can be measured by reference to an observable market
price, if one exists, or the fair value of the collateral for a
collateral-dependent loan.

Regardless of the historical measurement method used, a creditor is required
to measure impairment based on the fair value of the collateral when the
creditor determines foreclosure is probable. Additionally, impairment of a
restructured loan is measured by discounting the total expected future cash
flows at the loan's effective rate of interest as stated in the original loan
agreement.

The Association applies the recognition criteria to multifamily real estate
loans, commercial real estate loans and restructured loans. Smaller balance,
homogeneous loans, including one-to-four family residential and construction
loans and consumer loans, are collectively evaluated for impairment. A
creditor is allowed to use existing methods for recognizing interest income on
impaired loans. The Association has elected to continue to use its existing
nonaccrual methods for recognizing interest on impaired loans.

LOAN ORIGINATION FEES, COMMITMENT FEES, AND RELATED COSTS
- ---------------------------------------------------------
Loan fees and certain direct loan origination costs are deferred, and the
net fee or cost is recognized as an adjustment to interest income using the
interest method over the contractual life of the loans, adjusted for
prepayments.

FORECLOSED REAL ESTATE
- ----------------------
Real estate properties acquired through, or in lieu of, loan foreclosures
are initially recorded at the estimated fair value less estimated selling
costs at the date of foreclosure. Costs relating to development and
improvement of property are capitalized, whereas costs relating to the holding
of property are expensed.

Valuations are periodically performed by management, and losses are charged
to operations if the carrying value of a property exceeds its estimated net
realizable value.

All foreclosed real estate owned is held for sale.

18
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

INCOME TAXES
- ------------
The Company files a consolidated federal income tax return with the
Association. The provision for federal and state taxes on income is based on
earnings reported in the financial statements.

Deferred income taxes arise from temporary differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.

An asset and liability approach is used for financial accounting and
reporting of income taxes which, among other things, requires the Company to
take into account changes in the tax rates when valuing the deferred income
tax accounts recorded on the balance sheet. A deferred tax liability or asset
is recognized for the estimated future tax effects attributable to temporary
differences and loss carryforwards. Temporary differences include differences
between financial statement income and tax return income which are expected to
reverse in future periods as well as differences between the tax bases of
assets and liabilities and their amounts for financial reporting which are
also expected to be settled in future periods. To the extent a deferred tax
asset is established which is not realizable, a valuation allowance shall be
established against such asset.

PREMISES AND EQUIPMENT
- ----------------------
Land is carried at cost. Buildings, furniture, fixtures, and equipment are
carried at cost, less accumulated depreciation and amortization. Buildings
and furniture, fixtures, and equipment are depreciated using straight-line and
accelerated methods over the estimated useful lives of the assets.

EARNINGS PER SHARE
- ------------------
Earnings per share has been computed in accordance with Financial Accounting
Standards Board Statement No. 128 (SFAS No.128). This Statement, which is
effective for periods ending after December 15, 1997, requires disclosure of
basic earnings per share and diluted earnings per share, and also requires
restatement of earnings per share data for prior periods. Basic earnings per
share was computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the periods. Diluted
earnings per share reflects the potential dilution that could occur if stock
options were converted into common stock under the treasury stock method.

The following shows the amounts used in computing earnings per share and the
effect on income and the weighted average number of shares of dilutive
potential common stock. The earnings per share information for 1997 have been
restated from the amounts previously reported to comply with SFAS No. 128.
<PAGE>
<TABLE>
1998 1997 1996
--------------------------- --------------------------- ----------------------------
Income Shares Per- Income Shares Per- Income Shares Per-
(numera- (denomi- Share (numera- (denomi- Share (numera- (denomi- Share
tor) ator Amount tor nator Amount tor nator Amount

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS Net
Income $1,884,000 1,240,977 $1.52 $1,441,000 1,303,465 $1.11 $1,393,000 1,353,576 $1.03
Effect of ===== ===== =====
Dilutive
Securities stock
options -- 65,181 -- -- 76,404 -- -- 71,293 --
---------- --------- ---------- --------- ---------- ---------
Diluted EPS Net
Income and
assumed conver
sions $1,884,000 1,306,158 $1.44 $1,441,000 1,379,869 $1.04 $1,393,000 1,424,869 $ .97
========== ========= ===== ========== ========= ===== ========== ========= =====

</TABLE>
<PAGE>
NOTE 2: INVESTMENT SECURITIES

Securities available-for-sale consist of the following:

June 30, 1998
----------------------------------
Gross Gross
Amor- Unrea- Unrea-
tized lized lized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)

U.S. Government and federal agencies $ 9,745 $ 26 $ (1) $ 9,770
======= ===== ===== =======

June 30, 1997
----------------------------------
Gross Gross
Amor- Unrea- Unrea-
tized lized lized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)

U.S. Government and federal agencies $ 26,971 $ 76 $ (8) $ 27,039
======== ===== ===== ========

19
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

The following is a summary of maturities of investment securities
available-for-sale as of June 30:

1998 1997
---------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------- ------- ------- -------
(In thousands)
Amounts maturing in:

One year or less $ 5,996 $ 6,015 $ 5,991 $ 5,991
After one year through five years 3,749 3,755 5,980 5,993
After five years through ten years -- -- 15,000 15,055
------- ------- ------- -------
$ 9,745 $ 9,770 $26,971 $27,039
======= ======= ======= =======

There were no sales of investment securities during the years ended June 30,
1998, 1997, or 1996.

U.S. Government and federal agency securities with fair value of $501,400
were pledged to collateralized short-term loans from the Federal Home Loan
Bank of $58,640,000 at June 30, 1997. (See Note 8.) Additionally, $5,013,000
of U.S. Government and federal agency securities were pledged to collateralize
customer deposit accounts of $5,118,000 at June 30, 1998.

NOTE 3: MORTGAGE-BACKED AND RELATED SECURITIES

June 30, 1998
--------------------------------------
Gross Gross
Unrea- Unrea-
Amortized lized lized Fair
Cost Gains Losses Value
-------- ------- ----- --------
(In thousands)

FHLMC-REMIC $ 27,064 $ 1,010 $ (8) $ 28,066
FNMA-REMIC 6,278 144 (27) 6,395
GNMA ARM certificate 12,400 193 -- 12,593
FHLMC certificates 659 37 -- 696
FNMA-ARM certificates 320 -- (12) 308
FHLMC-ARM certificates 168 -- -- 168
-------- ------- ----- --------
$ 46,889 $ 1,384 $ (47) $ 48,226
======== ======= ===== ========

June 30, 1997
--------------------------------------
Gross Gross
Unrea- Unrea-
Amortized lized lized Fair
Cost Gains Losses Value
-------- ------- ----- --------
(In thousands)

FHLMC-REMIC $ 40,051 $ 765 $ -- $ 40,816
FNMA-REMIC 10,169 79 (27) 10,221
GNMA-ARM 16,099 244 -- 16,343
FHLMC certificates 929 42 -- 971
FNMA-ARM certificates 390 -- (20) 370
FHLMC-ARM certificates 251 3 -- 254
-------- ------- ----- --------
$ 67,889 $ 1,133 $ (47) $ 68,975
======== ======= ===== ========

20
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

The amortized cost and fair value of mortgage-backed securities by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

June 30, 1998 June 30, 1997
-------------------- ------------------
Available-for-Sale Available-for-Sale
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- ------- --------
(In thousands)

Due in one year or less $ -- $ -- $ 62 $ 63
Due after one year through five years -- -- -- --
Due after five years through ten years 659 696 867 909
Due after ten years 46,230 47,530 66,960 68,003
-------- -------- ------- --------
$ 46,889 $ 48,226 $67,889 $ 68,975
======== ======== ======= ========

Mortgage-backed and related securities with a fair value of $38,353,000 were
pledged to collateralized short-term loans from the Federal Home Loan Bank of
$58,640,000 at June 30, 1998. (See Note 8)

Gross proceeds from the sales of mortgage-backed and related securities were
$3,905,000 for the year ended June 30, 1998. Gross realized gains were
$13,700. There were no realized losses.

NOTE 4: LOANS RECEIVABLE

Loans receivable are summarized as follows: 1998 1997
------- ------
(In thousands)
Mortgage loans:
One- to four-family $122,328 $115,104
Multi-family 714 1,247
Commercial real estate 13,434 9,824
-------- --------
Total mortgage loans 136,476 126,175
-------- --------
Other loans:
Home improvement 188 270
Loans on savings accounts 412 342
Other loans - FHA Non-mortgage 224 372
-------- --------
Total other loans 824 984
-------- --------
Total loans receivable 137,300 127,159
Add:
Premium on purchased loans 6 8
Deferred loan costs 31 27
Less:
Loans in process -- 116
Allowance for loan losses 690 630
-------- --------
Loans receivable, net $136,647 $126,448
======== ========

At June 30, 1998, the Association's loan portfolio consisted of $16,774,000
of fixed rate loans and $120,526,000 of variable rate loans. The fixed rate
loans had a weighted average term to maturity of 9.6 years and a weighted
average interest rate of 8.30%. The variable rate loans had a weighted average
term to maturity of 17.1 years and a weighted average interest rate of 7.24%.

The Association is required to maintain qualifying collateral for the
Federal Home Loan Bank of Des Moines (the "Bank") representing 150 percent of
current Bank credit. (See Note 8) At June 30, 1998, the Association met this
requirement. Qualifying collateral is defined as fully disbursed, whole first
mortgage loans on improved residential property or securities representing a
whole interest in such mortgages. The mortgages must not be past due more than
60 days. Loans pledged at June 30, 1998 total $46.4 million.

21
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

They must not be otherwise pledged or encumbered as security for other
indebtedness, and the documents must be in the physical possession or control
of the Association. The documents that govern the determination of the
qualifying mortgage collateral are the (a) Federal Home Loan Bank of Des
Moines's Credit Policy Statement, dated January 1, 1998, and (b) the Agreement
for Advances, Pledge and Security Agreement between the Association and the
Federal Home Loan Bank of Des Moines, dated April 14, 1989.

Activity in the allowance for loan losses is summarized as follows:

June 30,
---------------------
1998 1997 1996
---- ---- ----
(In thousands)

Balance at beginning of period $ 630 $ 535 $ 535
Provision charged to income 60 95 --
Charge-offs and recoveries, net -- -- --
----- ----- -----
Balance at end of period $ 690 $ 630 $ 535
===== ===== =====

Nonaccrual and renegotiated loans for which interest has been reduced
totaled approximately $924,000 and $577,000 at June 30, 1998 and 1997,
respectively. Interest that would have been recognized on nonaccrual loans
under their original terms but for which an allowance has been established
amounted to $64,000 and $39,000 at June 30, 1998 and 1997, respectively. The
amount that was included in income on such loans was $46,000 and $7,000 for
the years
ended June 30, 1998 and 1997, respectively.

The Association is not committed to lend additional funds to debtors whose
loans have been modified.

NOTE 5: ACCRUED INTEREST RECEIVABLE

Accrued interest receivable is summarized as follows:

1998 1997
---- ----
(In thousands)

Investment securities $ 164 $ 408
Mortgage-backed and related securities 216 337
Loans receivable 782 850
------ ------
$1,162 $1,595
====== ======

NOTE 6: PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:
1998 1997
---- ----
(In thousands)
Cost:
Land $ 37 $ 37
Buildings 472 471
Furniture, fixtures and equipment 322 478
------ ------
831 986

Less accumulated depreciation and amortization (549) (678)
------ ------
$ 282 $ 308
====== =====

Depreciation expense for the years ended June 30, 1998, 1997, and 1996 was
$48,000, $45,000, and $42,000, respectively.

22
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 7: DEPOSITS

Deposits are summarized as follows:

1998 1997
--------------------- ----------------------
Weighted Weighted
Average Average
Rate Amount % Rate Amount %
---- ------- ------ ---- -------- ------
(In Thousands)

Passbook savings 3.00% $ 5,975 5.18 3.00% $ 6,299 6.18
---- ------- ------ ---- -------- ------
Certificates of deposit:
4.00% to 4.99% 4.45 18 .02 4.86% 1,277 1.25
5.00% to 5.99% 5.76 99,672 86.42 5.62% 59,634 58.49
6.00% to 6.99% 6.17 8,356 7.25 6.13% 33,383 32.74
7.00% to 7.99% 7.00 1,308 1.13 7.04% 1,365 1.34
8.00% to 8.99% 8.00 1 -- 8.00% 1 --
---- ------- ------ ---- -------- ------
5.80 109,355 94.82 6.33% 95,660 93.82
---- ------- ------ ---- -------- ------
5.67 $115,330 100.00 5.78% $101,959 100.00
==== ======== ====== ==== ======== ======

The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 was approximately $18.3 and $11.1 million at June 30,
1998 and 1997, respectively.

Scheduled maturities of certificates of deposit are as follows:

Year Ending June 30, 1998
---------------------------------------------------
There-
1999 2000 2001 2002 2003 after
------- ------- ------- ------- ------ -----
(In thousands)

4.00% to 4.99% $ 18 $ -- $ -- $ -- $ -- $ --
5.00% to 5.99% 79,184 12,690 6,247 1,432 119 --
6.00% to 6.99% 7,174 894 288 -- -- --
7.00% to 7.99% -- 1,308 -- -- -- --
8.00% to 8.99% -- 1 -- -- -- --
------- ------- ------- ------- ------ ----
$86,376 $14,893 $ 6,535 $ 1,432 $ 119 $ --
======= ======= ======= ======= ====== ====

Year Ending June 30, 1997
---------------------------------------------------
There-
1999 2000 2001 2002 2003 after
------- ------- ------- ------- ------ -----
(In thousands)

4.00% to 4.99% $ 1,277 $ -- $ -- $ -- $ -- $ --
5.00% to 5.99% 41,924 11,415 4,212 1,787 296 --
6.00% to 6.99% 29,710 3,339 324 10 -- --
7.00% to 7.99% 85 -- 1,280 -- -- --
8.00% to 8.99% -- -- 1 -- -- --

------- ------- ------- ------- ------ ----
$72,996 $14,754 $ 5,817 $ 1,797 $ 296 $ --
======= ======= ======= ======= ====== ====

23
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

Interest expense on deposits is summarized as follows:

Years Ended
June 30,
------------------------
1998 1997 1996
------- ------- ------
(In thousands)

Passbook $ 183 $ 205 $ 229
Certificates of deposit and money market demand 5,109 4,462 4,154
Certificates of deposit $100,000 or more 843 440 295
------ ------ ------
$6,135 $5,107 $4,678
====== ====== ======

24
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 8: FEDERAL HOME LOAN BANK ADVANCES

Advances consist of the following:

June 30,
-------------------
Maturity Interest 1998 1997
Date Rate ---- ----
---- ---- (In thousands)
07-18-97 5.610% $ -- $ 2,000
11-07-97 5.660% -- 12,000
12-19-97 5.730% -- 8,000
02-09-98 5.170% -- 7,000
05-18-98 5.640% -- 5,000
05-26-98 5.590% -- 14,000
07-02-98 5.516% 8,000 4,000
01-15-99 5.680% 8,000 --
03-19-99 5.660% -- 5,000
03-19-99 5.618% 5,000 --
05-28-99 5.606% 15,000 --
06-25-99 5.606% 12,000 --
06-26-99 5.640% -- 12,000
09-13-99 5.780% -- 15,000
11-07-00 5.460% 7,000
04-23-02 5.650% -- 15,000
------- --------
Total short-term advances 55,000 99,000
------- --------
11-18-08 6.17% 626 664
11-24-08 6.30% 1,284 1,362
11-28-08 6.28% 1,247 1,329
12-05-08 6.24% 214 229
12-30-08 6.19% 269 286
------- --------
Total long-term advances 3,640 3,870
------- --------
Total advances $58,640 $102,870
======= ========

See Notes 2, 3, and 4 of the financial statements for collateral securing this
indebtedness.

Advances at June 30, 1998, have maturity dates as follows:

06-30-99 $ 48,247 $ 48,230
06-30-00 265 21,247
06-30-01 7,284 15,265
06-30-02 303 283
06-30-03 325 15,304
Thereafter 2,216 2,541
-------- --------
$ 58,640 $102,870
======== ========

The maximum amount of Federal Home Loan Bank advances outstanding at any
month end during the years ended June 30, 1998 and 1997 was $89,852,000 and
$113,016,000 respectively.

Advances maturing January 15, 1999 and November 7, 2000, and all long-term
advances are fixed rates. The remaining advance rates adjust monthly.

25
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 9: OFFICER, DIRECTOR AND EMPLOYEE PLANS

Stock Option Plans
- ------------------
The Company adopted an incentive stock option plan for the benefit of the
officers and employees of the Company and its affiliates and a director's
stock option plan for the benefit of outside directors of the Company. The
number of shares of common stock authorized under the Employees' Plan is
103,674. For the year ended June 30, 1993, 103,674 options were granted at
$10.00 per share. No options were granted subsequently. Options granted under
the Incentive Plan become exercisable in seven annual installments with the
first installment exercisable on the date of grant, June 24, 1993. The term of
the options issued under the Employees' Plan expires ten years from the date
of grant, or within one year from the date of death, disability or retirement
of the optionee.

The number of shares of common stock authorized under the Directors' Plan
is 68,826. For the year ended June 30, 1993, stock options to purchase
58,993 shares were granted at a price of $10.00 per share and are exercisable
immediately. During the year ended June 30, 1998, stock options to purchase
9,828 shares were granted at a price of $23.50 per share and are exercisable
immediately. The term of the options issued under the Director's Plan expires
ten years from the date of grant, or three years from the date of death,
disability or retirement of the optionee.

The company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for the stock
option plans. If the methodology prescribed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
no. 123) had been applied, compensation cost would have been determined based
on the fair market value at the grant date for awards under those plans. The
pro forma effect of applying SFAS No. 123 is as follows for the applicable
income statement components:

As Pro Forma Under
Reported Effect SFAS No. 123
---------- -------- ------------
Compensation and benefits $1,099,000 $56,000 $1,155,000
========== ======= ==========
Income before income taxes 2,963,000 $56,000 $2,907,000
Income tax expense 1,079,000 21,000 1,058,000
---------- ------- ----------
Net Income $1,884,000 $35,000 1,849,000
========== ======= ==========
Earning Per Share-basic $ 1.52 $ .03 $ 1.49
========== ======= ==========
Earning Per Share-diluted $ 1.44 $ .03 $ 1.41
========== ======= ==========

The weighted-average grant-date fair value of the options granted during the
year ended June 30, 1998 was $56,000. The fair value of options granted was
determined using the Black-Scholes option-pricing model. Significant
assumptions used were- risk-free interest rate of 6.15%; expected life of 5.9
years; expected volatility of 15%; and expected dividends of $.40 per share. A
summary of the status of the company's two fixed stock option plans as of June
30, 1996, 1997, and 1998 and changes during the years ending in those dates is
presented below:

1996 1997 1998
---------------- --------------- ----------------
Weighted- Weighted- Weighted-
Aver- Aver- Aver-
age age age
Exer- Exer- Exer-
cise cise cise
Fixed Options Shares Price Shares Price Shares Price
- ------------- ------- ----- ------- ----- ------- ------
Outstanding at beginning
of year 149,556 $ 10 149,556 $ 10 139,723 $ 10.00
Granted -- -- 9,828 23.50
Exercised -- -- (27,100) 10.00
Retired -- (9,833) 10 (44,226) 10.00
------- ------- ------- ------
Outstanding at end of year 149,556 10 139,723 10 78,225 11.70
======= ======= ====== =====
Options Exercisable at
year end 129,181 129,348 77,845
Weighted-average fair
value of options
granted during the year $ N/A $ N/A $56,000

26
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

The following table summarizes the information about fixed stock options
outstanding at June 30, 1998:
<PAGE>
<TABLE>

Options Outstanding Options Exercisable
- --------------------------------------------------------------------- ------------------------------
Weighted-
Average Weighted-
Remaining Weighted Number Average
Outstanding Contractual Average Exercisable Exercise
Exercise Price At June 30, 1998 Life Exercise Price At June 30, 1998 Price
- -------------- ---------------- ---- -------------- ---------------- -----
<S> <C> <C> <C> <C> <C>
$10.00 68,397 5.0 Years $10.00 68,017 $10.00
$23.50 9,828 5.0Years $23.50 9,828 $23.50

</TABLE>
<PAGE>
NOTE 9: OFFICER, DIRECTOR AND EMPLOYEE PLANS (Continued)

Employee Stock Ownership Plan

The ESOP covers substantially all employees with more than one year of
employment and who have attained the age of 21. The ESOP borrowed $685,000
from the Company and purchased 68,500 common shares. The loan is payable over
a period of 10 years with an interest rate of 4 percent. The Association makes
scheduled discretionary cash contributions to the ESOP sufficient to service
the amount borrowed.

Shares are released for allocation to participants based upon the ratio of
the current year's debt service to the sum of total principal and interest
payments over the life of the loan. Released shares are allocated among ESOP
participants on the basis of compensation in the year of allocation. Dividends
paid on allocated and unallocated shares are added to participant accounts.

The Company accounts for its ESOP in accordance with Statement of Position
93-6. Accordingly, the debt of the ESOP is recorded as debt and shares pledged
as collateral are reported as unearned ESOP shares, a reduction of
stockholder's equity. As shares are released from collateral, the Association
records compensation expense in an amount equal to the fair value of the
shares, and the shares become outstanding for earnings-per-share (EPS)
computations. Compensation expense is also recognized for Company dividends on
unallocated shares paid or added to participant accounts. ESOP compensation
expense was $257,000, $240,000 and $275,000 for the years ended June 30, 1998,
1997 and 1996 respectively.

The ESOP shares as of June 30, 1998 were as follows:

Allocated shares 41,514
Shares released for allocation 4,690
Unreleased shares 24,513
--------
Total ESOP shares 70,717
Fair value of unreleased shares --------
at June 30, 1998 $607,000
========

Association Recognition and Retention Plan
- ------------------------------------------
The Company formed an Association Recognition and Retention Plan ("RRP"),
which was authorized to acquire 4% of the shares of common stock. The total
shares authorized were awarded to directors and to employees in key management
positions in order to provide them with a proprietary interest in the Company
in a manner designed to encourage such employees to remain with the Company.

The Association contributed funds to the RRP plan to enable it to acquire
the shares of common stock required to fund the RRP (69,000 shares). For the
year ended June 30, 1993, there were 64,308 shares awarded. Awards under the
RRP Plan become vested at a rate of 25% per year.

The $690,000 contributed to the RRP was amortized to compensation expense as
the plan participants become vested in those shares. For the years ended June
30, 1997 and 1996, the Association recognized compensation expense of $37,000,
and $87,000 respectively for the RRP plan. The unamortized cost, which is
comparable to deferred compensation, is reflected as a reduction of
stockholders' equity. During the year ended June 30, 1998, there were 4,692
shares awarded to directors which resulted in an additional $135,000 of
compensation expense.

Outside Directors' Retirement Plan
- ----------------------------------
Under this plan an outside director who has served as a director for at
least 15 years at the time of retirement will be eligible to receive a benefit
equal to 50% of the annual directors fee for five years. In addition, a
director's heirs are eligible to receive 1/2 of the benefit due to the
director.

The Outside Directors' Retirement Plan is unfunded. All benefits will be
payable from the Association's current assets. The Association estimated the
future cost of the Outside Directors Retirement Plan and accrues current
compensation expense. The Association estimated the cost based on an assumed
retirement age of 75 and an assumption that all directors would have at least
15 years service at the time of retirement. The estimated cost is being
amortized into compensation expense over a 14 year period. This is the
estimated average number of years to retirement plus the five year benefit
period for the existing board members. This amortization resulted in expense
of approximately $8,000 for the years ended June 30, 1998, 1997, and 1996.

27
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 10: INCOME TAXES

As discussed in Note 1, the Company uses the liability method of accounting
for income taxes. Under this method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying statutory tax
rates applicable to future years to differences between the financial
statement carrying amounts and tax basis of existing assets and liabilities.

A deferred tax asset is to be recognized for the bad debt reserve
established for financial reporting purposes and requires a deferred tax
liability to be recorded for increases in the tax bad debt reserve since
January 1, 1988, the effective date of certain changes made by the Tax Reform
Act of 1986 to the calculation of savings institutions' bad debt deduction.

Accordingly, retained earnings at June 30, 1998, include approximately
$4,714,000 for which no deferred federal income tax liability has been
recognized.

The Company and the Association file consolidated federal income tax returns
on a fiscal year ended June 30 basis. In accordance with the Tax Sharing
Agreement, the Association agrees to remit its pro rata share of the total
consolidated tax liability, calculated as if it were filing a separate return
for the year, to the Company on a quarterly basis. There were no significant
intercompany tax receivable/payable balances at June 30, 1998.

Income tax expense for the periods then ended is summarized as follows:

June 30,
------------------------
1998 1997 1996
------- ------- ------
(In thousands)
Federal:
Current $ 941 $ 763 $ 744
Deferred 12 109 59
State:
Current 131 111 91
Deferred (5) 3 4
------ ---- ----
$1,079 $986 $898
====== ==== ====

Total income tax expense differed from the amounts computed by applying the
U.S. Federal income tax rates of 34 percent to income before income taxes as a
result of the following:
June 30,
------------------------
1998 1997 1996
------- ------- ------
(In thousands)

Expected income tax expense at federal tax rate $1,007 $825 $779
State income tax, net of federal tax benefit 83 75 63
Nondeductible loan loss provision 20 32 --
Compensation expense for employee stock plans -- 41 48
Other (31) 13 8
------ ---- ----
Total income tax expense $1,079 $986 $898
====== ==== ====

28
<PAGE>
<PAGE>
June 30, 1998, 1997, and 1996

NOTE 10: INCOME TAXES (Continued)

Temporary differences between the financial statement carrying amounts and
tax basis of assets and liabilities that give rise to significant portions of
the deferred tax liability relate to the following:

1998 1997
---- ----
(In thousands)

Income tax basis of FHLB stock versus carrying value $ 77 $ 139
Deferred loan fees 13 11
Unrealized gain on investments 504 427
----- -----
Gross deferred tax liabilities 594 577
----- -----
SFAS 106 deferred tax asset (Note 9) (19) (16)
RRP expense deferred for tax (60) (66)
State deferred tax benefit for bad debts (48) (44)
----- -----
Gross deferred tax assets (127) (126)
----- -----
Net deferred tax liability (asset) 467 451
----- -----
Federal tax payable 15 74
State tax payable 59 65
----- -----
Net current tax liability 74 139
----- -----
Total income tax liability $ 541 $ 590
===== =====

Deferred tax expense (benefit) results from temporary differences between
the financial statement carrying amounts and tax basis of existing assets and
liabilities. The sources and tax effects of these temporary differences are as
follows:

June 30,
-------------------------
1998 1997 1996
------- ------- ------
(In thousands)

FHLB stock dividends $ (62) $ -- $ 28
Deferred loan fees 2 1 (2)
Tax bad debt reserve -- -- (5)
Post retirement benefits - SFAS 106 (3) (3) (3)
State bad debt (9) (14) (7)
RRP expense deferred for tax 6 48 26
Tax benefit of RRP plan 73 73 19
------- ------ -----
Total deferred tax expense $ 7 $ 112 $ 63
======= ====== =====

29
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 11: REGULATORY MATTERS

The Association is subject to various regulatory capital requirements
administered by its primary federal regulator, the Office of Thrift
Supervision (OTS). Failure to meet the minimum regulatory capital requirements
can initiate certain mandatory, and possible additional discretionary actions
by regulators, that if undertaken, could have a direct material affect on the
Association and the consolidated financial statements. Under the regulatory
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Association must meet specific capital guidelines involving
quantitative measures of the Association's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Association's capital amounts and classification under the prompt
corrective action guidelines are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios of: total
risk-based capital and Tier I capital to risk-weighted assets (as defined in
the regulations), and Tier I capital to adjusted total assets (as defined),
and tangible capital to adjusted total assets (as defined). As discussed in
greater detail below, as of June 30, 1998, the Association does meet all of
the capital adequacy requirements to which it is subject.

As of June 30, 1998, the most recent notification from the OTS, the
Association was categorized as well-capitalized under the regulatory framework
for prompt corrective action. To be categorized as well-capitalized, the
Association must maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage ratios as disclosed in the table below. There are no
conditions or events since the most recent notification that management
believes have changed the Association's prompt corrective action category.

For Capital Adequacy
Purposes and to be Well-
Capitalized under the Prompt
Corrective Action Provision
Minimum For
Capital
Adequacy
Actual Purposes
---------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(dollars
in
thousands)
As of June 30, 1998
Total Risk-Based Capital
(to Risk-Weighted Assets) $27,406 32.1% $8,549 10.0% $6,840 8.0%
Tier I Capital (to
Risk-Weighted Assets) $26,716 31.2% $5,130 6.0% $3,420 4.0%
Tier I Capital (to
Adjusted Total Assets) $26,716 13.2% $12,148 6.0% $8,099 4.0%
Tangible Capital (to
Adjusted Total Assets) $26,716 13.2% $10,124 5.0% -- --

As of June 30, 1997
Total Risk-Based Capital
(to Risk-Weighted Assets) $26,824 31.7% $ 8,456 10.0% $6,765 8.0%
Tier I Capital (to
Risk-Weighted Assets) $26,194 31.0% $ 5,074 6.0% $3,383 4.0%
Tier I Capital (to
Adjusted Total Assets) $26,194 11.2% $14,044 6.0% $9,363 4.0%
Tangible Capital (to
Adjusted Total Assets) $26,194 11.2% $11,703 5.0% -- --

30
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 12: OTHER NON-INTEREST INCOME AND EXPENSE

Other non-interest income and expense amounts are summarized as follows:

June 30,
-------------------------
1998 1997 1996
------- ------- ------
(In thousands)
Other non-interest income:
Gain on sale of investments and loans $ 34 $ -- $ --
Loan late charges 3 4 4
Other 7 6 17
------ ----- -----
$ 44 $ 10 $ 21
====== ===== =====
Other non-interest expense:
Advertising and promotion $ 47 $ 40 $ 8
Data processing 70 56 52
Professional fees 51 59 39
Printing, postage and supplies 26 27 28
Telephone 20 12 9
Foreclosed real estate expenses -- -- 5
Other 87 81 63
------ ----- -----
$ 301 $ 275 $ 204
====== ===== =====

NOTE 13: COMMITMENTS AND CONTINGENCIES

Loan Commitments

The Association had outstanding firm commitments to originate or purchase
loans as follows:

June 30, 1998 June 30, 1997
----------------------- -----------------------
Fixed- Variable- Fixed- Variable-
Rate Rate Total Rate Rate Total
---- ---- ----- ---- ---- -----
(In thousands)

First-mortgage loans $1,388 $8,153 $9,541 $ 355 $7,593 $7,948
====== ====== ====== ====== ====== ======

The Association is, from time to time, a party to certain lawsuits arising in
the ordinary course of its business. The Association believes that none of
these lawsuits would, if adversely determined, have a material adverse effect
on its financial condition or results of operations.

31
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 14: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Association is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit.
Those instruments involve, to varying degrees, elements of credit risk in
excess of the amount recognized in the statement of financial position. The
contract of those instruments reflect the extent of the Association's
involvement in particular classes of financial instruments.

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

Contract Amount
---------------
June 30,
-------
1998 1997
---- ----
(In thousands)

Financial instruments,
the contract amounts
of which represent
credit risk:
Commitments to
extend credit $9,541 $7,948
====== ======

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some commitments can expire without
being drawn upon the total commitment amounts do not necessarily represent
future cash requirements. The Association evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if it
is deemed necessary by the Association upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include residential and income-producing commercial properties. The loan
commitments at June 30, 1998, were at fixed rates of 7.9% to 8.5% for 15 to 30
years on $1,388,000 and variable rates of 7.0% to 8.2% on $8,153,000.

The Association maintains cash accounts at the Federal Home Loan Bank and
two local banks. Balances reflected on the local banks' statements exceed the
$100,000 insurance limit by varying amounts on a daily basis. The Association
controls this risk by monitoring the financial condition of the local banks.
The Federal Home Loan Bank is an instrumentality of the U.S. Government.

NOTE 15: SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

Most of the Association's business activity is with customers located within
the State of Missouri. As of June 30, 1998 and 1997, the Association's loans
receivable included approximately $119.1 million and $91.2 million ,
respectively of loans originated or purchased in the Columbia, Missouri area.
A substantial part of these loans are on 1 to 4 family residences. Included is
approximately $9.4 million and $8.9 million of commercial loans, respectively.

NOTE 16: RELATED PARTY TRANSACTIONS

Certain directors and executive officers of the Company or its subsidiary
were loan customers. A summary of aggregate related party loan activity, for
loans aggregating $60,000 or more to any one related party is as follows:

June 30,
---------------------
1998 1997
---- ----

Beginning balance $ 261,000 $258,000
New loans 10,000 15,000
Repayments 17,000 12,000
--------- --------

Ending balance $254,000 $261,000

32
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 17: CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

The following condensed statement of financial condition, as of June 30,
1998 and 1997 and condensed statements of earnings and cash flows for the
years then ended for MBLA Financial Corporation should be read in conjunction
with the consolidated financial statements and the notes thereto.

June 30,
1998 1997
---- ----
(In thousands)
ASSETS
Cash on hand and noninterest earning deposits $ -- $ 1
Interest-earning deposits in other institutions 473 1,600
Investment in subsidiary 27,575 26,921
ESOP loan receivable 188 282
------- -------
Total assets $28,236 $28,804
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Income taxes payable $ (4) $ (4)
Dividends payable 374 260
Accrued expenses 25 12
------- -------
Total liabilities 395 268
------- -------
STOCKHOLDERS' EQUITY
Common stock 17 17
Additional paid in capital 17,526 16,944
Retained earnings 19,022 18,535
Less:
Treasury stock (9,395) (7,347)
Unrealized gain (loss) on securities, net of taxes 859 727
ESOP obligation (188) (282)
RRP incentive plan -- (58)
------- -------
Total Stockholders' Equity 27,841 28,536
------- -------
Total liabilities and stockholders' equity $28,236 $28,804
======= =======

33
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 17: CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)

Statement of Income
Years Ended June 30,
1998 1997
---- ----
(In thousands)
Interest income:
Investment securities $ -- $ 39
Other interest-earning assets 41 20
ESOP loan 10 14
------- ------
51 73
Income from investment in subsidiary 1,945 1,471
Noninterest expense:
Other (122) (101)
------- ------
Income before income taxes 1,874 1,443
Income tax (expense) recovery 10 (2)
------- ------
Net income $ 1,884 $1,441
======= ======

Statement of Cash Flows

Years Ended June 30,
1998 1997
---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 1,884 $1,441
Equity in earnings of subsidiary (45) 229
Adjustments to reconcile net earnings to net
cash provided by operating activities:
(Increase) decrease in interest receivable (1) (1)
Decrease in dividend receivable -- 1,200
Decrease in income tax payable -- 2
Increase (decrease) in other liabilities 126 (11)
------- ------
Net cash provided (used) by operating
activities 1,964 2,860
------- ------
Cash flows from investing activities:
Proceeds from maturities of investment
securities and certificates of deposit 1,174 927
Purchase of investment securities and
certificates of deposit (1,174) (927)
(Increase) decrease in loans receivable ESOP 94 108
------- ------
Net cash provided (used) in investing
activities 94 108
------- ------
Cash flows from financing activities:
Proceeds from issuance of common stock 271 --
Stock options retired (779) (58)
Purchase of treasury stock (2,048) (1,423)
Dividends paid (631) (528)
Net cash provided (used) by financing ------- ------
activities (3,187) (2,009)
------- ------
Increase (decrease) in cash and cash
equivalents (1,129) 959
Cash and cash equivalents at beginning of period 1,601 642
------- ------
Cash and cash equivalents at end of period $ 472 $1,601
======= ======
Dividends paid by subsidiary to parent $ 1,900 $1,180
======= ======
34
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 18: FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and fair values of the
company's financial instruments at June 30, 1998 and 1997. FASB Statement No.
107, Disclosures About Fair Value of Financial Instruments, defines the fair
value of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale.

June 30, 1998
----------------------
Carrying Fair
Amount Value
------ -----
(In thousands)
Nontrading instruments:
Cash and cash
equivalents $ 3,635 $ 3,635
Investment securities
and mortgage-backed
securities $ 57,996 $ 57,996
Loans, net $ 136,647 $ 136,925
Accrued interest
receivable $ 1,162 $ 1,162
FHLB stock $ 3,134 $ 3,134
Deposit liabilities $(115,330) $(115,635)
Debt-FHLB advances $ (58,640) $ (58,541)
Other liabilities $ (1,417) $ (1,417)

June 30, 1997
----------------------
Carrying Fair
Amount Value
------ -----
(In thousands)
Nontrading instruments:
Cash and cash
equivalents $ 4,714 $ 4,714
Investment securities
and mortgage-backed
securities $ 96,014 $ 96,014
Loans, net $ 126,448 $ 127,436
Accrued interest
receivable $ 1,595 $ 1,595
FHLB stock $ 5,652 $ 5,652
Deposit liabilities $(101,959) $(102,171)
Debt-FHLB advances $(102,870) $(102,735)
Other liabilities $ (1,458) $ (1,458)

The carrying amounts in the tables are included in the statement of
financial position under the indicated captions, except for advances from
borrowers for taxes and insurance, income taxes payable and accrued expenses
and other liabilities which have been combined into other liabilities.

Estimation of Fair Values
- -------------------------
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments.

Short-term financial instruments are valued at their carrying amounts
included in the statement of financial position, which are reasonable
estimates of fair value due to the relatively short period to maturity of the
instruments. This approach applies to cash and cash equivalents, accrued
receivables, and certain other liabilities.

Loans are valued on the basis of estimated future receipts of principal and
interest, discounted at various rates and reduced by the loan loss allowance.
Future cash flows of loans are estimated based on their maturities and
weighted average rates and are discounted at current rates offered for similar
loan terms to new borrowers.

Investment securities are valued at quoted market prices if available. For
unquoted securities, the reported fair value is estimated by the Company on
the basis of financial and other information.

Fair value of demand deposits and deposits with no defined maturity is taken
to be the amount payable on demand at the reporting date. The fair value of
fixed-maturity deposits is estimated using rates currently offered for
deposits of similar remaining maturities. The intangible value of long-term
relationships with depositors is not taken into account in estimating the fair
values disclosed.

Rates currently available to the Company for Federal Home Loan Bank advances
with similar terms and remaining maturities are used to estimate the fair
value of existing borrowings as the present value of expected cash flows.
Advances which have maturities within one year or rates which adjust monthly
are valued at the carrying amount.

NOTE 19: MARKET RISK DISCLOSURES

The Association's net portfolio values would change as market interests
change. Based on the office of Thrift Supervisor's Interest Rate Risk Exposure
Report as of June 30, 1998, a 200 basis point increase in market interest
rates would cause a $4.19 million, or 15.36 percent, decline in the market
value of its portfolio assets.

NOTE 20: YEAR 2000

The Association has been in contact with their data processing service
provider. Their tentative Year 2000 testing schedule begins in September 1998
and continues through January 1999. As of this date, the Association expects a
cost of no more than $25,000 to be Year 2000 compliant.

The Association has contacted software vendors and does not foresee any
major capital expenditures. In-house testing of major software packages the
Association utilizes (as well as Association hardware) have been initiated and
expected to be completed by March 31, 1999. The Association should have all
testing completed by June 30, 1999.

35
<PAGE>
<PAGE>
June 30, 1998, 1997 and 1996

NOTE 21: RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 130 "Reporting Comprehensive Income," will be adopted July 1, 1998.
This statement provides accounting and reporting standards to report a measure
of all changes in equity of an enterprise that results from recognized
transactions and economic events of the period. The major component of
comprehensive income for the Company will be unrealized gains and losses on
certain investments in debt and equity securities.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment,
(b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999.

Management believes adoption of SFAS Nos. 130 and 133 does not have a
material effect on the financial position or results of operations, nor will
adoption require additional capital resources.

The foregoing does not constitute a comprehensive summary of all material
changes or developments affecting the manner in which the Association keeps
its books and records and performs its financial accounting responsibilities.
It is intended only as a summary of some of the recent pronouncements made by
the FASB which are of particular interest to financial institutions.

36
<PAGE>
<PAGE>

[LOCKRIDGE, CONSTANT & CONRAD, LLC LETTERHEAD]

INDEPENDENT AUDITORS' REPORT
----------------------------

The Board of Directors
MBLA Financial Corporation
Macon, Missouri

We have audited the accompanying consolidated statements of financial
condition of MBLA Financial Corporation and Subsidiary as of June 30, 1998 and
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended June 30,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position of
MBLA Financial Corporation and Subsidiary as of June 30, 1998 and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended June 30, 1998, in conformity with generally
accepted accounting principles.

/s/ Lockridge, Constant & Conrad, LLC

August 4, 1998
Chillicothe, Missouri

37
<PAGE>
<PAGE>
General Information for Stockholders
MBLA FINANCIAL CORPORATION

101 Vine Street 801 North Morley
Macon, Missouri 63552 Moberly, Missouri 65270
Telephone: (660) 385-2122 Telephone: (660) 263-6231

Annual Meeting

The Annual Meeting of MBLA Financial Corporation Stockholders will be held
at the office of Macon Building & Loan Association, 101 Vine Street, Macon,
Missouri, on Tuesday, October 27, 1998 at 4:30 p.m. A formal notice of the
Meeting, together with a proxy statement and a proxy form, will be mailed to
shareholders.

Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572
(800) 456-0596

General Counsel
Hadley Grimm
105 N. Rollins Suite C
Macon, MO 63552
(660) 385-2115

Shareholder and General Inquiries
Clyde D. Smith
Vice President and
Chief Financial Officer
101 Vine Street
Macon, MO 63552
(660) 385-2122

Stock Listing
MBLA Financial Corporation stock is traded on the over-the-counter market
under the NASDAQ symbol of MBLF and can be found listed in the following
newspapers under the noted abbreviations:

Wall Street Journal: MBLA USA Today: MBLA

The following table sets forth market price information for the common stock
of the Company for the periods indicated and dividend payments for each
semi-annual period as indicated. There is no assurance that the Company will
continue to pay dividends due to future changes in economic conditions and
future interest rates.

Quarter Ended High Low Dividends
------------- ---- --- ---------
September 30, 1996 $23.25 $21.25 N/A
December 30, 1996 $22.25 $19.00 $ .20
March 31, 1997 $20.625 $19.25 N/A
June 30, 1997 $25.25 $19.875 $ .20
September 30, 1997 $27.25 $23.25 N/A
December 30, 1997 $30.50 $25.25 $ .20
March 30, 1998 $30.625 $27.25 N/A
June 30, 1998 $27.125 $23.00 $ .30

Annual and Other Reports
Additional copies of this Annual Report to Shareholders, and copies of the
Company's most recent Form 10-KSB may be obtained without charge from the
Company.

38
<PAGE>
<PAGE>
MBLA FINANCIAL
CORPORATION
101 Vine Street
Macon, MO 63552

<PAGE>
<PAGE>
Exhibit 21.0
Proxy Statement for 1998 Annual Meeting

<PAGE>
<PAGE>
- ------------------------------------------------------------------------------
MBLA Financial Corporation
101 Vine Street
Macon, Missouri 63552
(660) 385-2122
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On October 27, 1998
- ------------------------------------------------------------------------------

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of MBLA Financial Corporation (the "Company") will be held on
October 27, 1998, at 4:30 p.m. Central Time, at the Macon Building and Loan
Association, 101 Vine Street, Macon, Missouri.

The Meeting is for the purpose of considering and voting upon the
following matters:

1. The election of two directors each for terms of three years;
2. The ratification of Lockridge, Constant and Conrad as independent
auditors of the Company for the fiscal year ending June 30, 1999;
and
3. Such other matters as may properly come before the meeting or any
adjournment thereof.

The Board of Directors has established September 18, 1998, as the record
date for the determination of stockholders entitled to notice of and to vote
at the Meeting and at any adjournments thereof. Only record holders of the
Common Stock of the Company as of the close of business on that date will be
entitled to vote at the Meeting or any adjournments thereof. In the event
there are not sufficient votes for a quorum or to approve or ratify any of the
foregoing proposals at the time of the Meeting, the Meeting may be adjourned
in order to permit further solicitation of proxies by the Company.

EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE, AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE
MEETING MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT
BEFORE THE MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR
RECORD HOLDER TO VOTE IN PERSON AT THE MEETING.

By Order of the Board of Directors

/s/ Clyde D. Smith

Clyde D. Smith
Secretary
Macon, Missouri
September 25, 1998
- ------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
- ------------------------------------------------------------------------------
<PAGE>
<PAGE>
PROXY STATEMENT

MBLA FINANCIAL CORPORATION

ANNUAL MEETING OF STOCKHOLDERS

OCTOBER 27, 1998

<PAGE>
<PAGE>
- ------------------------------------------------------------------------------
MBLA FINANCIAL CORPORATION
101 VINE STREET
MACON, MISSOURI 63552
(660) 385-2122
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 27, 1998
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
GENERAL
- ------------------------------------------------------------------------------

This proxy statement is being furnished to stockholders of MBLA Financial
Corporation ("MBLA" or the "Company") in connection with the solicitation by
the Board of Directors of the Company (the "Board" or the "Board of
Directors") of proxies to be used at the Annual Meeting of Stockholders (the
"Meeting") to be held on October 27, 1998, at 4:30 p.m. Central Time, at the
Company's offices at 101 Vine Street, Macon, Missouri 63552 and at any
adjournments thereof. The 1998 Annual Report to Stockholders, including the
consolidated financial statements for the fiscal year ended June 30, 1998
accompanies this proxy statement, which is first being mailed to stockholders
of record on or about September 25, 1998.

Regardless of the number of shares of common stock owned, it is important
that a majority of the shares outstanding be represented in person or by proxy
at the Meeting to ensure the presence of a quorum for the transaction of
business. Stockholders are requested to vote by completing the enclosed proxy
card and returning it signed and dated in the enclosed postage-paid envelope.
Stockholders are urged to indicate their vote in the spaces provided on the
proxy card. Proxies solicited by the Board of Directors of MBLA will be voted
in accordance with the directions given therein. Where no instructions are
indicated, signed proxies will be voted FOR the specific proposals presented
in this proxy statement.

Other than the matters listed in the accompanying Notice of Annual
Meeting of Stockholders, the Board of Directors knows of no matters that will
be presented for consideration at the Meeting. Execution of a proxy, however,
confers on the designated proxy holders the discretionary authority to vote
the shares in accordance with their best judgement on such other business, if
any, that may properly come before the Meeting or any adjournments thereof.

- ------------------------------------------------------------------------------
VOTING AND REVOCABILITY OF PROXIES
- ------------------------------------------------------------------------------

A proxy may be revoked at any time prior to its exercise by the filing of
a written notice of revocation with the Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Meeting and voting in person. However, if you are a stockholder
whose shares are not registered in your own name, you will need appropriate
documentation from your stockholder of record to vote in person at the
Meeting.

The cost of solicitation of proxies on behalf of management will be borne
by the Company. In addition to the solicitation of proxies by mail, Registrar
and Transfer Co. will assist the Company in soliciting proxies for the Meeting
and will be paid a fee of $1,000 plus out-of-pocket expenses. Proxies may
also be solicited personally or by telephone or telecopier by directors,
officers, and regular employees of the Company and Macon Building and Loan
Association, F.A. (the "Association"), without additional compensation
therefor. The Company will also request persons, firms, and corporations
holding shares in their names, or in the name of their nominees, which are
beneficially owned by others, to send proxy material to and obtain proxies
from such beneficial owners, and will reimburse such holders for their
reasonable expenses in doing so.

1
<PAGE>
<PAGE>
- ------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- ------------------------------------------------------------------------------

The securities which may be voted at the Meeting consist of shares of
common stock of the Company (the "Common Stock"), with each share entitling
the holder thereof to one vote on each matter to be considered at the Meeting,
except as described below. The Company's Certificate of Incorporation
prohibits cumulative voting for the election of directors.

The close of business on September 18, 1998 has been fixed by the Board
of Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of, and to vote at, the Meeting and
any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 1,247,021 shares.

As provided in the Company's Certificate of Incorporation, record holders
of Common Stock who beneficially own in excess of 10% of the outstanding
shares of Common Stock (the "Limit") are not entitled to any vote in respect
of the shares held in excess of the Limit. A person or entity is deemed to
beneficially own shares owned by an affiliate of, as well as persons acting in
concert with, such person or entity. The Company's Certificate of
Incorporation authorizes the Board of Directors (i) to make all determinations
necessary to implement and apply the Limit, including determining whether
persons or entities are acting in concert, and (ii) to demand that any person
who is reasonably believed to beneficially own stock in excess of the Limit to
supply information to the Company to enable the Board to implement and apply
the Limit.

The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote at the
meeting (after subtracting any shares in excess of the Limit pursuant to the
Company's Certificate of Incorporation) is necessary to constitute a quorum at
the Meeting. In the event there are insufficient votes for a quorum or to
approve or ratify any proposal at the time of the Meeting, the Meeting may be
adjourned in order to permit the further solicitation of proxies.

As to the election of directors, the proxy card being provided by the
Board of Directors enables a shareholder of record to vote "FOR" the election
of the nominees proposed by the Board, or to "WITHHOLD AUTHORITY" to vote for
one or more of the nominees being proposed. Under Delaware law and the
Company's Bylaws, directors are elected by a plurality of votes cast without
regard to either (i) broker non-votes or (ii) proxies as to which authority to
vote for one or more of the nominees being proposed is withheld. The proposal
for the ratification of Lockridge, Constant and Conrad as independent
accountants for the Company for the fiscal year ending June 30, 1999 requires
the affirmative vote of a majority of the votes cast on such proposal without
regard to broker non-votes and abstentions.

If a shareholder is a participant in the Association's Employee Stock
Ownership Plan ("ESOP"), the proxy card represents a voting instruction to the
trustees of the ESOP as to the number of shares in the participant's plan
account. Each participant in the ESOP may direct the trustees as to the
manner in which shares of Common Stock allocated to the participant's plan
account are to be voted. Unallocated shares of Common Stock held by the ESOP
and allocates shares for which no voting instructions are received will be
voted by the trustees in the same proportion as shares for which the trustees
have received voting instructions.

Proxies solicited hereby will be returned to the Board and will be
tabulated by personnel appointed by the Board and Boatmen's Trust employees.

The Securities Exchange Act of 1934 ("Exchange Act") requires that any
person who acquires the beneficial ownership of more than 5% of the Common
Stock of the Company notify the Securities and Exchange Commission ("SEC") and
the Company. Based upon such reports provided to the Company, the following
table sets forth, as of the Record Date, certain information as to those
persons who were beneficial owners of more than 5% of the outstanding shares
of Common Stock.

2
<PAGE>
<PAGE>

Percent
Name and Address of Number of Shares and Nature of Common Stock
Beneficial Owner of Beneficial Ownership Outstanding
- ------------------- --------------------------- ---------------

Mary Kathryn Drake 156,250 (1) 11.79%
2104 Dornoch
League City, Texas

John T. Neer 81,303 6.07%
405 North Wentz
Macon, Missouri

- ------------------
(1) As reported in a Schedule 13D, dated August 11, 1994, filed with the SEC.

- ------------------------------------------------------------------------------
FILING OF BENEFICIAL OWNERSHIP REPORTS
- ------------------------------------------------------------------------------

The Common Stock is registered pursuant to Section 12(g) of the Exchange
Act. The officers and directors of the Company and beneficial owners of
greater than 10% of the Common Stock ("10% beneficial owners") are required to
file reports on Forms 3, 4, and 5 with the SEC disclosing changes in
beneficial ownership of the Common Stock. Based on the Company's review of
such ownership reports, no officer, director, or 10% beneficial owner of the
Company failed to file such ownership reports on a timely basis for the fiscal
year ending June 30, 1998. In addition, the Company is not aware of any
additional 13D filings or filings of Forms 3, 4 or 5 by Mary Kathryn Drake.

- ------------------------------------------------------------------------------
PROPOSAL 1. ELECTION OF DIRECTORS
- ------------------------------------------------------------------------------

Pursuant to the Company's Bylaws, the number of directors of the Company
is set at seven (7) unless otherwise designated by the Board. Each of the
seven members of the Board of Directors of the Company also presently serves
as a director of the Association and its wholly owned subsidiary, MBL
Financial Services ("MBL"). Directors are elected for staggered terms of
three years each, with a term of office of only one of the three classes of
directors expiring each year. Directors serve until their successors are
elected and qualified.

The two nominees for 3-year terms to expire in 2001 proposed for election
at the Meeting are Messrs. Miller and Wilhite. All nominees named are
presently directors of the Company. No person being nominated as a director
is being proposed for election pursuant to any agreement or understanding
between such person and the Company.

In the event that any such nominee is unable to serve or declines to
serve for any reason, it is intended that proxies will be voted for the
election of the balance of those nominees named and for such other persons as
may be designated by the present Board of Directors. The Board of Directors
has no reason to believe that any of the persons named will be unable or
unwilling to serve. Unless authority to vote for the directors is withheld,
it is intended that the shares represented by the enclosed proxy card, if
executed and returned, will be voted FOR the election of all nominees proposed
by the Board of Directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
NOMINEES NAMED IN THIS PROXY STATEMENT.

3
<PAGE>
<PAGE>
The following table sets forth, as of the Record Date, the names of the
nominees and continuing directors including their ages, a brief description of
their recent business experience, including present occupations and
employment, certain directorships held by each, the year in which each became
a director, the year in which their term as director of the Company expires,
and the amount of Common Stock and the percent thereof beneficially owned by
each and all directors and executive officers as a group.

Name and Principal Expira- Shares of Owner-
Occupation at Present tion of Common Stock ship As
and for the Past Director Term as Beneficially a Percent
Five Years Age(1) Since Director Owned(2)(3) of Class
- --------------------- ------ -------- -------- ------------- --------

Nominees
- --------

Robert M. Wilhite 60 1973 1998 41,356(2)(3)(4) 3.12
Dentist

Richard C. Miller, Jr. 61 1974 1998 41,796(2)(3)(4) 3.15
Owner, Miller Rexall
Drug Store

Continuing Directors
- --------------------

Charles L. Hutton 80 1964 1999 46,599(2)(3)(4) 3.51
Chairman of the Board of the
Company and the Association

Truman L. Gehringer 75 1966 1999 4,931(4) .37
Former Vice President of the
Company and the Association

John T. Neer 49 1985 1999 81,303(4)(6) 6.13
President and Chief
Executive Officer of the
Company and the Association

Arnold L. Walter 73 1978 2000 41,766(2)(4)(5) 3.15
Owner, Walter's Service
Garage

Carl B. Barrows 78 1973 2000 25,346(3)(4) 1.91
Vice Chairman of the Board
of the Company and the
Association

Stock Beneficial Ownership 364,203(7)(8) 27.48
of all Directors and
executive officers as a
group (11 persons) and
unallocated ESOP stock
voted by the ESOP trustee

- --------------------
(1) As of June 30, 1998.
(2) Each person or relative of such person whose shares are included herein,
exercises sole (or shared with spouse, relative, or affiliate) voting or
dispositive power as to the shares reported.
(3) Includes 9,833 shares subject to options at $10.00 per share that may be
acquired by each director under the MBLA Financial Corporation 1993
Stock Option Plan for Outside Directors (the "Directors' Option Plan").
(4) Includes 1,404 shares subject to options at $23.50 per share that may be
acquired by each director under the MBLA Financial Corporation Stock
Option Plan.
(5) Includes 5,000 shares subject to options at $10.00 per share that may be
acquired by each director under the MBLA Financial Corporation 1993
Stock Option Plan for Outside Directors (the "Directors' Option Plan").

4
<PAGE>
<PAGE>
(footnotes from previous page)
- ------------------------------

(6) Includes 13,779 shares with respect to which shares may be acquired
through the exercise of stock options under the MBLA Financial
Corporation 1993 Stock Option Plan "Incentive Option Plan" at $10.00 per
share.

(7) Mr. Hutton serves as trustee of the Employee Stock Ownership Plan
("ESOP") which holds 70,816 shares of common stock for the benefit of
Association employees. Such stock will be allocated to ESOP
participants as the ESOP debt is repaid over the next 2 year period. As
of the Record Date, 51,994 shares have been allocated to ESOP
participants for which such participants may direct the ESOP trustee as
to voting. The remaining 18,822 unallocated shares, and allocated
shares for which no timely voting direction is received by the ESOP
Trustee, will be voted by the trustee in accordance with the
instructions received on allocated shares, subject to the trustee's
fiduciary duty under the Employee Retirement Income Security Act of
1974, as amended. Mr. Hutton disclaims beneficial ownership of all
shares held by the ESOP.

Nominations for Directors

Only persons who are nominated in accordance with the procedures set
forth in the Company's Bylaws shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Company
may be made at a meeting of stockholders at which directors are to be elected
only (i) by or at the direction of the Board of Directors (ii) by any
stockholder of the Company entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in Section 6(c)
of the Bylaws. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made by timely notice in writing to the
Secretary of the Company. To be timely, a stockholder's notice shall be
delivered or mailed to and received at the principal executive offices of the
Company not less than ninety (90) days prior to the date of the meeting;
provided, however, that in the event that less than one hundred (100) days
notice or prior disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made.

Such stockholder's notice shall set forth (i) as to each person whom such
stockholder proposes to nominate for election or re-election as a director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required
pursuant to the Exchange Act (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); and (ii) as to the stockholder giving the notice, (x) the name and
address, as they appear on the Company's books, of such stockholder and (y)
the class and number of shares of the Company's capital stock that are
beneficially owned by such stockholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Company that information
required to be set forth in a stockholder's notice of nomination which
pertains to the nominee.

The officer of the Company or other person presiding at the meeting
shall, if the facts so warrant, determine that a nomination was not made in
accordance with the provisions of the Bylaws and, if such person shall so
determine, such person shall so declare to the meeting and the defective
nomination shall be disregarded.

Meetings of the Board and Committees of the Board

The Board of Directors conducts its business through meetings of the
Board and through activities of its committees. The Board of Directors meets
as needed. During fiscal 1998, the Board of Directors of the Company held
seven meetings. All of the directors of the Company attended at least 75% in
the aggregate of the total number of the Company's board meetings held and
committee meetings on which such director served during fiscal 1998. The
Board of Directors of the Company maintains committees, the nature and
composition of which are described below.

5
<PAGE>
<PAGE>
The Audit Committee of the Company consists of Lester Hutton, Ben
Barrows, Richard Miller, Robert Wilhite and Clyde Smith. This committee meets
quarterly and engages an independent audit firm, approves internal audit
schedules, and reviews internal audit reports. The audit committee met four
times in fiscal 1998.

The Company's Nominating Committee for the 1998 Annual Meeting consists
of Messrs. Hutton, Gehringer, Neer and Wilhite. The Committee considers and
recommends the nominees for director to stand for election at the Company's
Annual Meeting of stockholders. The Nominating Committee met one time in
fiscal 1998.

Directors' Compensation

Directors' Fees. Directors of the Company do not receive any fees or
retainer for serving on the Company's Board. All directors of the Association
receive a fee of $800 for each meeting held. Members of the Association's
Executive Committee, Audit Committee, and Investment Committee receive $25 per
meeting for serving on these Committees. Directors receive no additional fees
as directors of the service corporation.

Directors' Consultation and Retirement Plan. The purpose of the Plan is
to provide retirement benefits to Directors of Macon Building and Loan
Association (the "Association") who have provided expertise in enabling the
Association to experience successful growth and development, so as to ensure
that the Association will have their continued services to assist the
Association in the conduct of its affairs.

Within thirty (30) days of a Participant's Termination Date, a
Participant who has agreed to provide Consulting Services shall be designated
a Consulting Director, and such Consulting Director shall be paid the portion
of an annual Retirement Benefit based on years of service, in equal monthly
installments for the number of months equal to the lesser of (1) the number
months such Participant has agreed to provide Consulting Services as a
Consulting Director, or (2) five (5) years. At the expiration of the period
for which the Participant is entitled to benefits under this paragraph, his or
her status as a Consulting Director shall cease.

Other. CORPORATION COMPENSATION PLAN. The purpose of the Plan is to
provide compensation to directors, officers and employees of the Corporation.
Each director, officer and employee of the Corporation, or its subsidiary,
shall be compensated for contributions to the Corporation. Such level of
compensation shall be determined based upon the number of options awarded
under the Corporation's Stock Options Plan.

The Plan shall provide that upon the payment of a cash dividend on the
Common Stock, the participant, whether or not such options are still held by
the participant, shall receive payment of cash in an amount equivalent to the
cash dividend when paid to stockholders of record on record date as
compensation under the Plan. In addition, it should be understood that these
and all future options granted shall be considered in determination of such
compensation rights under the Plan.

Although it is anticipated that such compensation payable to such Plan
participants shall be paid each time that a cash dividend is paid on the
Common Stock, the Board reserves the right to amend, modify, suspend, or
cancel this Plan at any time without prior notice to any participants to the
Plan.

6
<PAGE>
<PAGE>
Executive Compensation

Summary Compensation Table. The following table shows, for the fiscal
years ended June 30, 1998, 1997 and 1996, the cash compensation paid by the
Association, as well as certain other compensation paid or accrued for those
years, to the Chief Executive Officer of the Company and the Association. No
other executive officer of the Company or the Association received salary and
bonus in excess of $100,000 in fiscal 1998.

Annual Compensation Long
- -------------------------------------------------------- Term
Compen-
sation
------
Awards
------
Other All
Annual Other Number
Name and Compen- Compen- of
Principal Salary Bonus sation sation Options
Position Year ($)(1) ($) ($)(2) ($)(3) (4)
- -------- ---- ------ --- ------ ------ ---

John T. Neer 1998 $129,600 $ --- --- $30,000 1,404
President, Chief 1997 $127,200 $ --- --- $30,000
Executive Officer, 1996 $127,200 $ --- --- $30,000
and Director
- ----------------------
(1) Includes fees as director of the Association.
(2) Does not include perquisites for the fiscal years ended June 30, 1998,
1997 and 1996 which did not exceed the lesser of $50,000.
(3) Includes 3,000 and 3,000 shares of common stock allocated under the ESOP
during the fiscal year ended June 30, 1998 and 1997 respectively. As of
June 30, 1998, the value of such shares was $70,500.
(4) Subject to option price of $23.50 per share.

Employment Agreement. The Association and the Company have entered into
an employment agreement with Mr. John T. Neer. The employment agreement
provides for a three-year term. Commencing on the first anniversary date and
continuing each anniversary date thereafter, the agreement may be extended for
an additional year so that the remaining term shall be three years if the
Board of Directors, after conducting performance evaluations, votes to extend
the agreement. The agreement provides that the base salary for Mr. Neer is
$120,000. In addition to the base salary, the agreement provides for, among
other things, disability pay, participation in stock benefit plans, and other
fringe benefits. The agreement provides for termination by the Association
for cause at any time. In the event the Association chooses to terminate Mr.
Neer's employment for reasons other than for cause or in the event of Mr.
Neer's resignation upon (i) the failure to re-elect or nominate Mr. Neer to
his current offices or board membership, (ii) a material change in the
executive's functions, duties, or responsibilities, or relocation of his
principal place of employment, (iii) a liquidation, dissolution,
consolidation, reorganization, or merger in which the Association is not the
resulting entity, or (iv) a breach of the agreement by the Association if
termination, voluntary or involuntary, occurs following a hostile change in
control of the Association, Mr. Neer or, in the event of death, his
beneficiary, would be entitled to a severance payment equal to three times his
average annual compensation over the past three years of employment with the
Association. Assuming that a change in control had occurred during fiscal
year 1998, Mr. Neer would have been entitled to a severance payment of
approximately $360,000. The Association would also continue the executive's
life, health, accident, and disability coverage for the remaining unexpired
term of the agreement. A hostile change in control is defined to mean a
change in control of which the Board of Directors of the Association has not
approved or recommended to shareholders. A change in control is generally
defined to mean the acquisition by a person or group of persons having
beneficial ownership of 20% or more of the Association's or Company's Common
Stock during the term of the agreement or a tender offer for 20% of the Common
Stock or exchange offer, merger, or other form of business combination, sale
of assets, or an election of directors which result in a change of a majority
of the Board of Directors.

Payments under the employment agreement in the event of a change in
control may constitute an excess parachute payment under Section 280G of the
Code resulting in the imposition of an excise tax on the recipient and denial
of a deduction to the Association for all amounts in excess of the executive's
average annual compensation for the five tax years preceding the change in
control. The agreement provides that benefits payable to the executive under
a change in control will be reduced to an amount that would not constitute an
excess parachute payment (as

7
<PAGE>
<PAGE>
that term is defined in Section 280G of the Code) if the reduced amount is
greater than the non-reduced amount less payments of any excise tax.

Salary Continuation Agreement. February 19, 1998, the Association
approved a salary continuation agreement with Mr. John T. Neer to encourage
his retention and to provide him with an additional source of retirement
income. The agreement provides that, upon his termination of employment with
the Association, Mr. Neer will receive 10 annual payments equal to 41.5
percent of his average base salary during the three most recently completed
calendar years preceding his termination date. The Association has purchased
an insurance policy with Mr. Neer as insured to provide an informal source of
funding for the Association's obligations under the agreement. For the fiscal
year ended June 30, 1998, the Association accrued compensation expense of
$920.00 with respect to these obligations.

Stock Option Plan. The following table provides certain information with
respect to the number of shares of Common Stock represented by outstanding
stock options held by John T. Neer as of June 30, 1998 under the Company's
Incentive Stock Option Plan. Also reported are the value for "in-the-money"
options which represent the positive spread between the exercise price of any
such existing stock options and the year-end price of the Common Stock.

Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year End Options/SAR Values

Number of Value of
Shares Unexercised Unexercised
Acquired Options/ In-the-money
on SARs Options/SARs
Exer- Value at Fiscal at Fiscal Year
Name cise(#) Realized Year End(#) End($)(1)(2)
- ---- ------- -------- ----------- ------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
------------- -------------
John T. Neer 25,000 $612,500 13,404/375 $175,404/$5,437.50

- -----------------
(1) The exercise price of the option is $10.00 on shares as of June 30, 1998,
the closing price of the Common Stock, as reported on the Nasdaq National
Market, was $24.50.
(2) The exercise price on 1,404 shares is $23.50.

Compliance with Section 16(a) of the Exchange Act. Section 16(a) of the
Exchange Act requires the Company's executive officers, directors and persons
who own more than 10% of any registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
SEC. Executive officers, directors and greater than 10% stockholders are
required by regulation to furnish the Company with copies of all Section 16(a)
forms they file.

Based solely on its review of the copies of such forms it has received
and written representations provided to the Company by the above referenced
persons, the Company believes that, during the fiscal year ended June 30,
1998, all filing requirements applicable to its reporting officers, directors
and greater than 10% stockholders were properly and timely complied with,
except that John T. Neer inadvertently failed to report timely the cashless
exercise of shares on December 11, 1997, on January 15, 1998 and May 4, 1998;
Clyde Smith inadvertently failed to report timely the cashless exercise of
shares on December 11, 1997, January 15, 1998 and on May 4, 1998; and Arnold
Walter inadvertently failed to report timely the cashless exercise of shares
on January 7, 1998.

8
<PAGE>
<PAGE>
- ------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------------------------------------------------------------------------------

The Association had no "interlocking" relationships existing on or after
July 1, 1994 in which (i) any executive officer is a member of the
Association's Board of Directors, or where (ii) any executive officer is a
member of the compensation committee of another entity, one of whose executive
officers is a member of the Association's Board of Directors. The
Association, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors, and employees. The
loans have been made in the ordinary course of business and on substantially
the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with the Association's other
customers, and do not involve more than the normal risk of collectibility, nor
present other unfavorable features. All loans by the Association to its
directors and executive officers are subject to OTS regulations restricting
loans and other transactions with affiliated persons of the Association. The
Association's affiliates must qualify for loans on terms and conditions
comparable to those for similar transactions with non-affiliates.
Furthermore, loans to an affiliate must be approved in advance by a
disinterested majority of the Board of Directors or be within other guidelines
established as a result of OTS regulations. At June 30, 1998, the aggregate
amount of loans outstanding to officers and directors of the Association was
approximately $535,000.

- ------------------------------------------------------------------------------
PROPOSAL 2. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------

The Company's independent auditors for the fiscal year ended June 30,
1998 were Lockridge, Constant and Conrad. The Company's Board of Directors
has reappointed Lockridge, Constant and Conrad to continue as independent
auditors for the Association and the Company for the year ending June 30,
1999, subject to ratification of such appointment by the stockholders.

Representatives of Lockridge, Constant and Conrad will be present at the
Meeting. They will be given an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
stockholders present at the Meeting.

Unless marked to the contrary, the shares represented by the enclosed
Proxy, if executed and returned, will be voted for ratification of the
appointment of Lockridge, Constant and Conrad as the independent auditors of
the Association and the Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF LOCKRIDGE, CONSTANT AND CONRAD AS THE INDEPENDENT AUDITORS OF
THE ASSOCIATION AND THE COMPANY.

- ------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- ------------------------------------------------------------------------------

To be considered for inclusion in the proxy statement and proxy relating
to the Annual Meeting of Stockholders to be held in 1999, a stockholder
proposal must be received by the Secretary of the Company at the address set
forth on the first page of this Proxy Statement, not later than June 1, 1999.
Any such proposal will be subject to the proxy solicitation rules of the
Exchange Act and the procedures contained in the Company's Bylaws.
<PAGE>
9
<PAGE>
<PAGE>
- ------------------------------------------------------------------------------
OTHER MATTERS
- ------------------------------------------------------------------------------

The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the accompanying Notice
of Annual Meeting of Stockholders. If, however, other matters are properly
brought before the Meeting, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgement.

Whether or not you intend to be present at the Meeting, you are urged to
return your proxy promptly. If you are present at the Meeting and wish to
vote your shares in person, your proxy may be revoked by voting at the
Meeting.

A copy of the Form 10-KSB (without exhibits) for the fiscal year ended
June 30, 1998, as filed with the Securities and Exchange Commission, will be
furnished without charge to stockholders of record upon written request to
MBLA Financial Corporation, Mr. John T. Neer, President, 101 Vine Street,
Macon, Missouri 63552.

By Order of the Board of Directors

/s/ Clyde D. Smith

Clyde D. Smith
Secretary

10
<PAGE>
<PAGE>
Macon, Missouri
September 25, 1998

YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

<PAGE>
<PAGE>
Exhibit 24.0
Consent of Lockridge, Constant and Conrad

<PAGE>
<PAGE>
P.O. Box 500
448 Washington
Chillicothe, MO 64601
(660) 646-6911
LOCKRIDGE, CONSTANT & CONRAD, LLC Fax: 646-6840
Certified Public Accountants -----------------------
813 Main
Trenton, MO 64683
(660) 359-2263
Fax: 359-3839

Board of Directors
MBLA Financial Corporation
Macon, Mo.

We consent to the incorporation by reference in this annual report (Form 10-
KSB) of MBLA Financial Corporation of our report dated August 4, 1998,
included in the 1998 Annual Report to Shareholders of MBLA Financial
Corporation.

/s/ Lockridge, Constants & Conrad, LLC

September 15, 1998
Chillicothe, Missouri

<PAGE>

<ARTICLE> 9
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 580
<INT-BEARING-DEPOSITS> 3055
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57996
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 137337
<ALLOWANCE> 690
<TOTAL-ASSETS> 203228
<DEPOSITS> 115330
<SHORT-TERM> 58640
<LIABILITIES-OTHER> 1417
<LONG-TERM> 0
0
0
<COMMON> 17
<OTHER-SE> 27824
<TOTAL-LIABILITIES-AND-EQUITY> 203228
<INTEREST-LOAN> 9619
<INTEREST-INVEST> 5328
<INTEREST-OTHER> 331
<INTEREST-TOTAL> 15278
<INTEREST-DEPOSIT> 6135
<INTEREST-EXPENSE> 10688
<INTEREST-INCOME-NET> 4590
<LOAN-LOSSES> 60
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<EXPENSE-OTHER> 1611
<INCOME-PRETAX> 2963
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1884
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.44
<YIELD-ACTUAL> 7.21
<LOANS-NON> 887
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 630
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 690
<ALLOWANCE-DOMESTIC> 690
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0

</TABLE>