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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-KSB




| |     |                                                 
| | --- | ------------------------------------------------
| | [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934




| |  |                                            
| |  | -------------------------------------------
| |  | For the Fiscal Year Ended December 31, 2001

OR



| |      |                                                     
| | ---- | ----------------------------------------------------
| | [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number 333-30779

BIG LAKE FINANCIAL CORPORATION

(Exact Name of registrant as specified in its
charter)


|                                                       |  |                    
|------------------------------------------------------ |  | -------------------
|                                                      
|                                                      
|                                                      
|                                                      
|Florida                                                |  | 59-2613321         
|(State or other jurisdiction                           |  | (I.R.S. Employer   
|of incorporation or organization)                      |  | Identification No.)
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|1409 South Parrott Avenue, Okeechobee,
        Florida |  | 34974              
|(Address of principal executive offices)               |  | (Zip Code)         

Registrants telephone number, including area
code:  (863) 467-4663

Securities registered pursuant to Section 12(b) of the
Act:  None



Common Stock, par value $0.01 per share

(Title of Class)


Check whether the issuer has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past 12 months (or for such
shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing
requirements for the past
90 days.   YES x  NO o

Check if disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of
issuers knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this
Form 10-KSB. x

The issuers revenues for its most recent fiscal year were
$14,916,000.

The aggregate market value of the Common Stock of the issuer
held by non-affiliates of the issuer (314,961 shares) on
February 28, 2002, was approximately $8,503,947. As of such
date, no organized trading market existed for the Common Stock
of the issuer. The aggregate market value was computed by
reference the last sale of the Common Stock of the issuer at
$27.00 per share on December 5, 2001. For the purposes of
this response, directors, officers and holders of 5% or more of
the issuers Common Stock are considered the affiliates of
the issuer at that date.

As of February 28, 2002, there were issued and outstanding
543,889 shares of the issuers Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of
Shareholders to be held on March 21, 2002 to be filed with
the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days of the issuers
fiscal year end are incorporated into Part III,
Items 10 through 13 of this Annual Report on
Form 10-KSB.









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TABLE OF CONTENTS

|     |  |  |  | 
|---- |  |  |  | 
|Page

|        |  |                                                                                               |  |   
|------- |  | --------------------------------------------------------------------------------------------- |  | --
|PART I  |  | 1                                                                                            
|       
|Item 1. |  | Business                                                                                      |  | 1 
|        |  | General                                                                                       |  | 1 
|        |  | Lending Activities                                                                            |  | 2 
|        |  | Deposit Activities                                                                            |  | 3 
|        |  | Investments                                                                                   |  | 4 
|        |  | Correspondent Banking                                                                         |  | 4 
|        |  | Data Processing                                                                               |  | 5 
|        |  | Effect of Governmental Policies                                                               |  | 5 
|        |  | Interest and Usury                                                                            |  | 5 
|        |  | Supervision and Regulation                                                                    |  | 5 
|        |  | Competition                                                                                   |  | 12
|        |  | Employees                                                                                     |  | 13
|        |  | Statistical Profile and Other Financial Data                                                  |  | 13
|       
|Item 2. |  | Properties                                                                                    |  | 13
|       
|Item 3. |  | Legal Proceedings                                                                             |  | 14
|       
|Item 4. |  | Submission of Matters to a Vote of Security
        Holders                                   |  | 14
|       
|PART II |  | 14                                                                                           
|       
|Item 5. |  | Market for the Registrants Common Equity
        and Related Stockholder Matters             |  | 14
|        |  | Dividends                                                                                     |  | 14
|       
|Item 6. |  | Managements Discussion and Analysis of
        Financial Condition and Results of Operations |  | 16
|        |  | General                                                                                       |  | 17
|        |  | Liquidity and Capital Resources                                                               |  | 17
|        |  | Results of Operations                                                                         |  | 18
|        |  | Comparison of Years Ended December 31, 2001 and
        2000                                  |  | 21
|        |  | Asset/Liability Management                                                                    |  | 23
|        |  | Financial Condition                                                                           |  | 26
|        |  | Other Borrowings                                                                              |  | 38
|        |  | Impact of Inflation and Changing Prices                                                       |  | 38
|        |  | Future Accounting Requirements                                                                |  | 38
|       
|Item 7. |  | Financial Statements                                                                          |  | 38



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|                                     |                                                                                                                         |  |  |  |  |  |  | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                              
|                                     | Item 1. Business                                                                                                       
|                                     | Item 2. Properties                                                                                                     
|                                     | Item 3. Legal Proceedings                                                                                              
|                                     | Item 4. Submission of Matters to a Vote of Security Holders                                                            
|PART II                             
|                                     | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters                                      
|                                     | Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations                          
|                                     | Item 7. Financial Statements                                                                                           
|                                     | Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                           
|PART III                            
|                                     | Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
|SECTION 16(a) REPORTING REQUIREMENTS
|                                     | Item 10. Executive Compensation                                                                                        
|                                     | Item 11. Security Ownership of Certain Beneficial Owners and Management                                                
|                                     | Item 12. Certain Relationships and Related Transactions                                                                
|                                     | Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                              
|SIGNATURES                          
|EXHIBIT INDEX                       
|Big Lake 2001 Annual Report         
|Subsidiaries of the Registrant      
|Stevens, Powell Consent             



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PART I




Item 1. Business

General

Big Lake Financial Corporation (BLF) was incorporated under the laws of
the State of Florida on August 8, 1985. BLF is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended (the BHC Act)
and owns all of the voting shares of Big Lake National Bank.

The Board of Governors of the Federal Reserve System (the Federal
Reserve) has approved BLFs election to become a financial holding company.
BLF thus has expanded financial affiliation opportunities as long as Big Lake
National Bank remains a well-capitalized and well-managed depository
institution, and has at least a satisfactory rating under the Community
Reinvestment Act of 1997 (the CRA). As of December 31, 2001, Big Lake
National Bank met all three criteria for BLFs continued qualification as a
financial holding company.

Once a bank holding company has filed a declaration of its intent to be a
financial holding company, as long as there is no action by the Federal Reserve
giving notice that it is not eligible, the company may proceed to engage in the
activities and enter into the affiliations allowed under an expanded authority
conferred by law. The holding company does not need prior approval from the
Federal Reserve to engage in activities that the law identifies as financial in
nature, or that the Federal Reserve has determined to be financial in nature by
order or regulation. The law retains the basic structure of the BHC Act.
Thus, a bank holding company that is not eligible for the expanded powers of a
financial holding company is subject to the provisions of the BHC Act, which
limits the activities that are authorized and defined as closely related to
banking activities. The law also addresses the consequences of when a
financial holding company that has exercised the expanded authority fails to
maintain its eligibility to be a financial holding company. The Federal
Reserve may impose such limitations on the conduct or activities of a
noncompliant financial holding company or any affiliate of that company as the
Board determines to be appropriate under the circumstances and consistent with
the purposes of law.

BLF has no significant operations other than owning the stock of Big Lake
National Bank. Big Lake National Bank is a national banking association and is
the only source of revenue for BLF.

BLF provides a range of consumer and commercial banking services to
individuals, businesses and industries. The basic services offered by BLF
include: demand interest-bearing and noninterest-bearing accounts, sweep
investment accounts, money market deposit accounts, NOW accounts, time
deposits, safe deposit services, credit cards, cash management, direct
deposits, notary services, money orders, night depository, travelers checks,
cashiers checks, domestic collections, savings bonds, bank drafts, automated
teller services, drive-in tellers, and banking by mail. In addition, BLF makes
secured and unsecured commercial and real estate

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loans and issues stand-by letters of credit. BLF provides automated teller
machine (ATM) cards, as a part of the STAR ATM Network, thereby permitting
customers to utilize the convenience of larger ATM networks. In addition to
the STAR ATM Network, the Bank also provides the Presto and Cirrus systems for
ATM use. BLF offers Visa Debit Cards as a convenient way for its clients to
have access to their funds. In addition to the foregoing services, the offices
of BLF provide customers with extended banking hours. BLF does not have trust
powers and, accordingly, no trust services are provided.

The revenues of BLF are primarily derived from interest on, and fees
received in connection with, real estate and other loans, and from interest and
dividends from investment and mortgage-backed securities, and short-term
investments. The principal sources of funds for BLFs lending activities are
its deposits, repayment of loans, and the sale and maturity of investment
securities. The principal expenses of BLF are the interest paid on deposits,
and operating and general administrative expenses.

As is the case with banking institutions generally, BLFs operations are
materially and significantly influenced by general economic conditions and by
related monetary and fiscal policies of financial institution regulatory
agencies, including the Federal Reserve and the Office of the Comptroller of
the Currency (OCC). Deposit flows and costs of funds are influenced by
interest rates on competing investments and general market rates of interest.
Lending activities are affected by the demand for financing of real estate and
other types of loans, which in turn is affected by the interest rates at which
such financing may be offered and other factors affecting local demand and
availability of funds. BLF faces strong competition in the attraction of
deposits (its primary source of lendable funds) and in the origination of
loans. SeeCompetition.

Lending Activities

BLF offers a range of lending services, including real estate, consumer
and commercial loans, to individuals and small businesses and other
organizations that are located in, or conduct a substantial portion of their
business in, BLFs market area. BLFs consolidated total loans at December 31,
2001 were $134.8 million, or 70.5% of total BLF consolidated assets. The
interest rates charged on loans vary with the degree of risk, maturity, and
amount of the loan, and are further subject to competitive pressures, money
market rates, availability of funds, and government regulations. BLF has no
foreign loans or loans for highly leveraged transactions.

BLFs loans are concentrated in three major areas: commercial loans, real
estate loans, and consumer loans. A majority of BLFs loans are made on a
secured basis. As of December 31, 2001, approximately 84.3% of BLFs
consolidated loan portfolio consisted of loans secured by mortgages on real
estate, of which approximately 65.0% is secured by 1-4 family residential
properties.

BLFs commercial loan portfolio includes loans to individuals and
small-to-medium-sized businesses located primarily in Okeechobee, Highlands,
Hardee, DeSoto, Glades, and Hendry counties for working capital, equipment
purchases, and various other business purposes. A majority of commercial loans
are secured by real estate, equipment, or similar assets, but these

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loans may also be made on an unsecured basis. Commercial loans may be made at
variable or fixed rates of interest. Commercial lines of credit are typically
granted on a one-year basis, with loan covenants and monetary thresholds.
Other commercial loans with terms or amortization schedules of longer than one
year will normally carry interest rates which vary with the prime lending rate
and will become payable in full and are generally refinanced in three to five
years. Commercial and agricultural loans not secured by real estate amounted to
approximately 7.3% of BLFs total loan portfolio as of December 31, 2001.

BLFs real estate loans are secured by mortgages and consist primarily of
loans to individuals and businesses for the purchase, improvement of or
investment in real estate and for the construction of single-family residential
units or the development of single-family residential building lots. These
real estate loans may be made at fixed or variable interest rates. BLF
generally does not make fixed-rate commercial real estate loans for terms
exceeding three years. Loans in excess of three years are generally adjustable.
BLFs residential real estate loans generally are repayable in monthly
installments based on up to a 30-year amortization schedule with variable
interest rates.

BLFs consumer loan portfolio consists primarily of loans to individuals
for various consumer purposes, but includes some business purpose loans which
are payable on an installment basis. The majority of these loans are for terms
of less than five years and are secured by liens on various personal assets of
the borrowers, but consumer loans may also be made on an unsecured basis.
Consumer loans are made at fixed and variable interest rates, and are often
based on up to a five-year amortization schedule.

For additional information regarding BLFs loan portfolio, see
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Financial Condition.

Loan originations are derived from a number of sources. Loan originations
can be attributed to direct solicitation by BLFs loan officers, existing
customers and borrowers, advertising, walk-in customers and, in some instances,
referrals from brokers.

Certain credit risks are inherent in making loans. These include
prepayment risks, risks resulting from uncertainties in the future value of
collateral, risks resulting from changes in economic and industry conditions,
and risks inherent in dealing with individual borrowers. In particular, longer
maturities increase the risk that economic conditions will change and adversely
affect collectibility. BLF attempts to minimize credit losses through various
means. In particular, on larger credits, BLF generally relies on the cash flow
of a debtor as the source of repayment and secondarily on the value of the
underlying collateral. In addition, BLF attempts to utilize shorter loan terms
in order to reduce the risk of a decline in the value of such collateral.

Deposit Activities

Deposits are the major source of BLFs funds for lending and other
investment activities. BLF considers the majority of its regular savings,
demand, NOW and money market deposit accounts to be core deposits. These
accounts comprised approximately 57.9% of BLFs

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consolidated total deposits at December 31, 2001. Approximately 42.1% of BLFs
consolidated deposits at December 31, 2001 were certificates of deposit.
Generally, BLF attempts to maintain the rates paid on its deposits at a
competitive level. Time deposits of $100,000 and over made up approximately
10.5% of BLFs consolidated total deposits at December 31, 2001. The majority
of the deposits of BLF are generated from Okeechobee, DeSoto, Glades, Hardee,
Highlands, and Hendry counties. BLF does not currently accept brokered
deposits. For additional information regarding BLFs deposit accounts, see
Managements Discussion and Analysis of Financial Condition, Results of
Operations  Financial Condition  Deposit Activities.

Investments

BLF invests a portion of its assets in U.S. Treasury and U.S. Government
agency obligations, certificates of deposit, collateralized mortgage
obligations (CMOs), and federal funds sold. BLFs investments are managed
in relation to loan demand and deposit growth, and are generally used to
provide for the investment of excess funds at minimal risks while providing
liquidity to fund increases in loan demand or to offset fluctuations in
deposits.

With respect to BLFs investment portfolio, BLFs total portfolio may be
invested in U.S. Treasury and general obligations of its agencies because such
securities generally represent a minimal investment risk. Occasionally, BLF
purchases certificates of deposits of national and state banks. These
investments may exceed $100,000 in any one institution (the limit of FDIC
insurance for deposit accounts). CMOs are secured with Federal National
Mortgage Association (FNMA) mortgage-backed securities and generally have a
shorter life than the stated maturity. Federal funds sold is the excess cash
BLF has available over and above daily cash needs. This money is invested on
an overnight basis with approved correspondent banks.

BLF monitors changes in financial markets. In addition to investments for
its portfolio, BLF monitors its daily cash position to ensure that all
available funds earn interest at the earliest possible date. A portion of the
investment account is designated as secondary reserves and invested in liquid
securities that can be readily converted to cash with minimum risk of market
loss. These investments usually consist of U.S. Treasury obligations, U.S.
government agencies and federal funds. The remainder of the investment account
may be placed in investment securities of different type and longer maturity.
Daily surplus funds are sold in the federal funds market for one business day.
BLF attempts to stagger the maturities of its securities so as to produce a
steady cash flow in the event BLF needs cash, or economic conditions change to
a more favorable rate environment.

Correspondent Banking

Correspondent banking involves one bank providing services to another
bank, which cannot provide that service for itself from an economic or
practical standpoint. BLF is required to purchase correspondent services
offered by larger banks, including check collections, purchase of federal
funds, security safekeeping, investment services, coin and currency supplies,
overline and liquidity loan participations and sales of loans to or
participation with correspondent banks.

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BLF sells loan participations to correspondent banks with respect to loans
which exceed BLFs lending limit. Management of BLF has established
correspondent relationships with Independent Bankers Bank of Florida and
Compass Bank. BLF pays for such services.

Data Processing

BLF is now outsourcing its item and data processing services. This
includes a full range of data processing and item processing services, such as
an automated general ledger, deposit accounting, and commercial, mortgage and
installment lending data processing.

Effect of Governmental Policies

The earnings and business of BLF are and will be affected by the policies
of various regulatory authorities of the United States, especially the Federal
Reserve. The Federal Reserve, among other things, regulates the supply of
credit and deals with general economic conditions within the United States.
The instruments of monetary policy employed by the Federal Reserve for these
purposes influence in various ways the overall level of investments, loans,
other extensions of credit and deposits, and the interest rates paid on
liabilities and received on assets.

Interest and Usury

BLF is subject to numerous state and federal statutes that affect the
interest rates that may be charged on loans. These laws do not, under present
market conditions, deter BLF from continuing the process of originating loans.

Supervision and Regulation

Banks and their holding companies, and many of their affiliates, are
extensively regulated under both federal and state law. The following is a
brief summary of certain statutes, rules, and regulations affecting BLF and Big
Lake National Bank. This summary is qualified in its entirety by reference to
the particular statutory and regulatory provisions referred to below and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the business of BLF and Big Lake National Bank. Supervision,
regulation, and examination of banks by regulatory agencies are intended
primarily for the protection of depositors, rather than shareholders.

Bank Holding Company Regulation. BLF is a bank holding company,
registered with the Federal Reserve under the BHC Act. As such, BLF is subject
to the supervision, examination and reporting requirements of the BHC Act and
the regulations of the Federal Reserve. The BHC Act requires that a bank
holding company obtain the prior approval of the Federal Reserve before (i)
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any bank, (ii) taking any action that causes a bank to become a
subsidiary of the bank holding company, or (iii) merging or consolidating with
any other bank holding company.

The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to

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monopolize or attempt to monopolize the business of banking in any section of
the United States, or the effect of which may be substantially to lessen
competition or to tend to create a monopoly in any section of the country, or
that in any other manner would be in restraint of trade, unless the
anticompetitive effects of the proposed transaction are clearly outweighed by
the public interest in meeting the convenience and needs of the community to be
served. The Federal Reserve is also required to consider the financial and
managerial resources and future prospects of the bank holding companies and
banks concerned and the convenience, and needs of the community to be served.
Consideration of financial resources generally focuses on capital adequacy and
consideration of convenience and needs issues includes the parties performance
under the CRA, both of which are discussed below.

Banks are subject to the provisions of the CRA. Under the terms of the
CRA, the appropriate federal bank regulatory agency is required, in connection
with its examination of a bank, to assess such banks record in meeting the
credit needs of the community served by that bank, including low- and
moderate-income neighborhoods. The regulatory agencys assessment of the
banks record is made available to the public. Further, such assessment is
required of any bank which has applied to:



| |  | charter a national bank,                                                                                                  
|- |  | --------------------------------------------------------------------------------------------------------------------------
| 
| |  | obtain deposit insurance coverage for a newly chartered institution,                                                      
| 
| |  | establish a new branch office that will accept deposits,                                                                  
| 
| |  | relocate an office, or                                                                                                    
| 
| |  | merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution

In the case of a bank holding company applying for approval to acquire a
bank or other bank holding company, the Federal Reserve will assess the record
of each subsidiary bank of the applicant bank holding company, and such records
may be the basis for denying the application.

Except as authorized by the Gramm-Leach-Bliley Act of 1999, the BHC Act
generally prohibits a bank holding company from engaging in activities other
than banking, or managing or controlling banks or other permissible
subsidiaries, and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity can reasonably be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices. For example, factoring accounts receivable,
acquiring or servicing loans, leasing personal property, conducting securities
brokerage activities, performing certain data processing services, acting as
agent or broker in selling credit life insurance and certain other types of
insurance in connection with credit transactions, and certain insurance
underwriting activities have all been determined by regulations of the Federal
Reserve to be permissible activities of bank holding

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companies. Despite prior approval, the Federal Reserve has the power to order
a holding company or its subsidiaries to terminate any activity or terminate
its ownership or control of any subsidiary, when it has reasonable cause to
believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company.

Gramm-Leach-Bliley Act. Enacted in 1999, the Gramm-Leach-Bliley Act was
enacted, which reforms and modernizes certain areas of financial services
regulation. The law permits the creation of financial services holding
companies that can offer a full range of financial products under a regulatory
structure based on the principle of functional regulation. The legislation
eliminates the legal barriers to affiliations among banks and securities firms,
insurance companies, and other financial services companies. The law also
provides financial organizations with the opportunity to structure these new
financial affiliations through a holding company structure or a financial
subsidiary. The law reserves the role of the Federal Reserve as the supervisor
for bank holding companies. At the same time, the law also provides a system
of functional regulation which is designed to utilize the various existing
federal and state regulatory bodies. The law also sets up a process for
coordination between the Federal Reserve and the Secretary of the Treasury
regarding the approval of new financial activities for both bank holding
companies and national bank financial subsidiaries.

The law also includes a minimum federal standard of financial privacy.
Financial institutions are required to have written privacy policies that must
be disclosed to customers. The disclosure of a financial institutions privacy
policy must take place at the time a customer relationship is established and
not less than annually during the continuation of the relationship. The act
also provides for the functional regulation of bank securities activities. The
law repeals the exemption that banks were afforded from the definition of
broker, and replaces it with a set of limited exemptions that allow the
continuation of some historical activities performed by banks. In addition,
the act amends the securities laws to include banks within the general
definition of dealer. Regarding new bank products, the law provides a
procedure for handling products sold by banks that have securities elements.
In the area of CRA activities, the law generally requires that financial
institutions address the credit needs of low-to-moderate income individuals and
neighborhoods in the communities in which they operate. Bank regulators are
required to take the CRA ratings of a bank or of the bank subsidiaries of a
holding company into account when acting upon certain branch and bank merger
and acquisition applications filed by the institution. Under the law,
financial holding companies and banks that desire to engage in new financial
activities are required to have satisfactory or better CRA ratings when they
commence the new activity.

Bank Regulation. Big Lake National Bank is chartered under the national
banking laws and its deposits are insured by the FDIC to the extent provided by
law. Big Lake National Bank is subject to comprehensive regulation,
examination and supervision by the OCC and to other laws and regulations
applicable to banks. Such regulations include limitations on loans to a single
borrower and to its directors, officers and employees; restrictions on the
opening and closing of branch offices; the maintenance of required capital and
liquidity ratios; the granting of credit under equal and fair conditions; and
the disclosure of the costs and terms of such credit. Big Lake National Bank is
examined periodically by the OCC, to whom it submits periodic

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reports regarding its financial condition and other matters. The OCC has a
broad range of powers to enforce regulations under its jurisdiction, and to
take discretionary actions determined to be for the protection and safety and
soundness of banks, including the institution of cease and desist orders and
the removal of directors and officers. The OCC also has the authority to
approve or disapprove mergers, consolidations, and similar corporate actions.

There are various statutory limitations on the ability of BLF to pay
dividends. The OCC also has the general authority to limit the dividend
payment by banks if such payment may be deemed to constitute an unsafe and
unsound practice. For information on the restrictions on the right of Big Lake
National Bank to pay dividends to BLF, seePart II  Item 5 Market for the
Registrants Common Equity and Related Stockholder Matters.

Under federal law, federally insured banks are subject, with certain
exceptions, to certain restrictions on any extension of credit to their parent
holding companies or other affiliates, on investment in the stock or other
securities of affiliates, and on the taking of such stock or securities as
collateral from any borrower. In addition, banks are prohibited from engaging
in certain tie-in arrangements in connection with any extension of credit or
the providing of any property or service.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA) imposed major regulatory reforms, stronger capital standards for
savings and loan associations and stronger civil and criminal enforcement
provisions. FIRREA also provides that a depository institution insured by the
FDIC can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with:



| |  | the default of a commonly controlled FDIC insured depository institution; or                               
|- |  | -----------------------------------------------------------------------------------------------------------
| 
| |  | any assistance provided by the FDIC to a commonly controlled FDIC insured institution in danger of default.

The FDIC Improvement Act of 1993 (FDICIA) made a number of reforms
addressing the safety and soundness of deposit insurance funds, supervision,
accounting, and prompt regulatory action, and also implemented other regulatory
improvements. Annual full-scope, on-site examinations are required of all
insured depository institutions. The cost for conducting an examination of an
institution may be assessed to that institution, with special consideration
given to affiliates and any penalties imposed for failure to provide
information requested. Insured state banks also are precluded from engaging as
principal in any type of activity that is impermissible for a national bank,
including activities relating to insurance and equity investments. The Act
also recodified current law restricting extensions of credit to insiders under
the Federal Reserve Act.

Also important in terms of its effect on banks has been the deregulation
of interest rates paid by banks on deposits and the types of deposit accounts
that may be offered by banks. Most regulatory limits on permissible deposit
interest rates and minimum deposit amounts expired several years ago. The
effect of the deregulation of deposit interest rates generally has been to
increase the costs of funds to banks and to make their costs of funds more
sensitive to

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fluctuations in money market rates. A result of the pressure on banks
interest margins due to deregulation has been a trend toward expansion of
services offered by banks and an increase in the emphasis placed on fee or
noninterest income.

The Federal Reserve and bank regulatory agencies require bank holding
companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance sheet exposures, adjusted for
risk weights ranging from 0% to 100%. Under the risk-based standard, capital is
classified into two tiers. Tier 1 capital consists of common shareholders
equity, excluding the unrealized gain (loss) on available-for-sale securities,
minus certain intangible assets. Tier 2 capital consists of the general
allowance for credit losses except for certain limitations. An institutions
qualifying capital base for purposes of its risk-based capital ratio consists
of the sum of its Tier 1 and Tier 2 capital. The regulatory minimum
requirements are 4% for Tier 1 and 8% for total risk-based capital. At
December 31, 2001, Big Lake National Banks Tier 1 and total risk-based capital
ratios were 11.20% and 12.45%, respectively, and BLFs Tier 1 and total
risk-based capital ratios were 11.86% and 13.11%, respectively.

Financial holding companies and banks are also required to maintain
capital at a minimum level based on total assets, which is known as the
leverage ratio. The minimum requirement for the leverage ratio is 3%, but all
but the highest rated institutions are required to maintain ratios 100 to 200
basis points above the minimum. At December 31, 2001, BLFs and Big Lake
National Banks leverage ratios were 6.57% and 6.98%, respectively.

FDICIA contains prompt corrective action provisions pursuant to which
banks are to be classified into one of five categories based upon capital
adequacy, ranging from well capitalized to critically undercapitalized and
which require (subject to certain exceptions) the appropriate federal banking
agency to take prompt corrective action with respect to an institution which
becomes significantly undercapitalized or critically undercapitalized.

The OCC has issued regulations to implement the prompt corrective action
provisions of FDICIA. In general, the regulations define the five capital
categories as follows:



| |  | an institution is well capitalized if it has a total risk-based
capital ratio of 10% or greater, has a Tier 1 risk-based capital ratio
of 6% or greater, has a leverage ratio of 5% or greater and is not
subject to any written capital order or directive to meet and maintain
a specific capital level for any capital measures;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | an institution is adequately capitalized if it has a total
risk-based capital ratio of 8% or greater, has a Tier 1 risk-based
capital ratio of 4% or greater, and has a leverage ratio of 4% or
greater;                                                                                                                           
| 
| |  | an institution is undercapitalized if it has a total risk-based
capital ratio of less than 8%, has a Tier 1 risk-based capital ratio
that is less than 4% or has a leverage ratio that is less than 4%;                                                                                                                            

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| |  | an institution is significantly undercapitalized if it has a total
risk-based capital ratio that is less than 6%, a Tier 1 risk-based
capital ratio that is less than 3% or a leverage ratio that is less
than 3%; and
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | an institution is critically undercapitalized if its tangible
equity is equal to or less than 2% of its total assets.                                                                                               

The OCC also, after an opportunity for a hearing, has authority to
downgrade an institution from well capitalized to adequately capitalized or
to subject an adequately capitalized or undercapitalized institution to the
supervisory actions applicable to the next lower category, for supervisory
concerns.

Generally, FDICIA requires that an undercapitalized institution must
submit an acceptable capital restoration plan to the appropriate federal
banking agency within 45 days after the institution becomes undercapitalized
and the agency must take action on the plan within 60 days. The appropriate
federal banking agency may not accept a capital restoration plan unless, among
other requirements, each company having control of the institution has
guaranteed that the institution will comply with the plan until the institution
has been adequately capitalized on average during each of the three consecutive
calendar quarters and has provided adequate assurances of performance. The
aggregate liability under this provision of all companies having control of an
institution is limited to the lesser of:



| |  | 5% of the institutions total assets at the time the institution becomes
undercapitalized or                                                                                                                                                       
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the amount which is necessary, or would have been necessary, to bring the
institution into compliance with all capital standards applicable to the
institution as of the time the institution fails to comply with the plan
filed pursuant to FDICIA.

An undercapitalized institution may not acquire an interest in any
company or any other insured depository institution, establish or acquire
additional branch offices or engage in any new business unless the appropriate
federal banking agency has accepted its capital restoration plan, the
institution is implementing the plan, and the agency determines that the
proposed action is consistent with and will further the achievement of the
plan, or the appropriate Federal banking agency determines the proposed action
will further the purpose of the prompt corrective action sections of FDICIA.

If an institution is critically undercapitalized, it must comply with
the restrictions described above. In addition, the appropriate Federal banking
agency is authorized to restrict the activities of any critically
undercapitalized institution and to prohibit such an institution, without the
appropriate Federal banking agencys prior written approval, from:



| |  | entering into any material transaction other than in the usual course of business;                            
|- |  | --------------------------------------------------------------------------------------------------------------
| 
| |  | engaging in any covered transaction with affiliates (as defined in Section 23A(b) of the Federal Reserve Act);

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| |  | paying excessive compensation or bonuses; and                                                                                                                                                                                                                  
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | paying interest on new or renewed liabilities at a rate that would increase the institutions weighted average costs of
funds to a level significantly exceeding the prevailing rates of interest on insured deposits in the institutions normal
market areas.

The prompt corrective action provisions of FDICIA also provide that in
general no institution may make a capital distribution if it would cause the
institution to become undercapitalized. Capital distributions include cash
(but not stock) dividends, stock purchases, redemptions, and other
distributions of capital to the owners of an institution.

Additionally, FDICIA requires, among other things, that:



| |  | only a well capitalized depository institution may accept brokered
deposits without prior regulatory approval and                                                                                                        
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the appropriate federal banking agency annually examine all insured
depository institutions, with some exceptions for small, well
capitalized institutions and state-chartered institutions examined by
state regulators.

FDICIA also contains a number of consumer banking provisions, including
disclosure requirements and substantive contractual limitations with respect to
deposit accounts.

As of December 31, 2001, BLF and Big Lake National Bank met the capital
requirements of a well capitalized institution.

Enforcement Powers. Congress has provided the federal bank regulatory
agencies with an array of powers to enforce laws, rules, regulations and
orders. Among other things, the agencies may require that institutions cease
and desist from certain activities, may preclude persons from participating in
the affairs of insured depository institutions, may suspend or remove deposit
insurance, and may impose civil money penalties against institution-affiliated
parties for certain violations.

Maximum Legal Interest Rates. Like the laws of many states, Florida law
contains provisions on interest rates that may be charged by banks and other
lenders on certain types of loans. Numerous exceptions exist to the general
interest limitations imposed by Florida law. The relative importance of these
interest limitation laws to the financial operations of Big Lake National Bank
will vary from time to time, depending on a number of factors, including
conditions in the money markets, the costs and availability of funds, and
prevailing interest rates.

Bank Branching. Banks in Florida are permitted to branch state wide.
Such branch banking, however, is subject to prior approval by the OCC. Any
such approval would take into consideration several factors, including the
banks level of capital, the prospects and economics of the proposed branch
office, and other conditions deemed relevant by the OCC for purposes of
determining whether approval should be granted to open a branch office.

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Change of Control. Federal law restricts the amount of voting stock of a
bank holding company and a bank that a person may acquire without the prior
approval of banking regulators. The overall effect of such laws is to make it
more difficult to acquire a bank holding company and a bank by tender offer or
similar means than it might be to acquire control of another type of
corporation. Consequently, shareholders of BLF may be less likely to benefit
from the rapid increases in stock prices that may result from tender offers or
similar efforts to acquire control of other companies. Federal law also
imposes restrictions on acquisitions of stock in a bank holding company and a
state bank. Under the federal Change in Bank Control Act and the regulations
thereunder, a person or group must give advance notice to the Federal Reserve
before acquiring control of any bank holding company and the OCC before
acquiring control of any national bank (such as Big Lake National Bank). Upon
receipt of such notice, the Federal Reserve or the OCC may approve or
disapprove the acquisition. The Change in Bank Control Act creates a
rebuttable presumption of control if a member or group acquires a certain
percentage or more of a bank holding companys or banks voting stock, or if
one or more other control factors set forth in the Act are present.

Interstate Banking. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1996, provides for nationwide interstate banking and
branching. Under the law, interstate acquisitions of banks or bank holding
companies in any state by bank holding companies in any other state is
permissible. Interstate branching and consolidation of existing bank
subsidiaries in different states is permissible. Florida has a law that allows
out-of-state bank holding companies (located in states that allow Florida bank
holding companies to acquire banks and bank holding companies in that state) to
acquire Florida banks and Florida bank holding companies. The law essentially
provides for out-of-state entry by acquisition only (and not by interstate
branching) and requires the acquired Florida bank to have been in existence for
at least three years.

Effect of Governmental Policies. The earnings and businesses of BLF and
Big Lake National Bank are affected by the policies of various regulatory
authorities of the United States, especially the Federal Reserve. The Federal
Reserve, among other things, regulates the supply of credit and deals with
general economic conditions within the United States. The instruments of
monetary policy employed by the Federal Reserve for those purposes influence in
various ways the overall level of investments, loans, other extensions of
credit, and deposits, and the interest rates paid on liabilities and received
on assets.

Competition

BLF encounters strong competition both in making loans and in attracting
deposits. The deregulation of the banking industry and the widespread
enactment of state laws which permit multi-bank holding companies as well as an
increasing level of interstate banking have created a highly competitive
environment for commercial banking. In one or more aspects of its business,
BLF competes with other commercial banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies, brokerage and
investment banking companies, and other financial intermediaries. Most of
these competitors, some of which are affiliated with bank holding companies,
have substantially greater resources and lending limits, and may offer certain
services that BLF does not currently provide. In addition, many of BLFs
non-bank competitors are not subject to the same extensive federal regulations
that govern bank

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holding companies and federally insured banks. Recent federal and state
legislation has heightened the competitive environment in which financial
institutions must conduct their business, and the potential for competition
among financial institutions of all types has increased significantly.

To compete, BLF relies upon specialized services, responsive handling of
customer needs, and personal contacts by its officers, directors, and staff.
Large multi-branch banking competitors tend to compete primarily by rate and
the number and location of branches while smaller, independent financial
institutions tend to compete primarily by rate and personal service.

Employees

As of December 31, 2001, BLF and Big Lake National Bank collectively had
95 full-time employees (including executive officers). The employees are not
represented by a collective bargaining unit. BLF and Big Lake National Bank
consider relations with employees to be good.

Statistical Profile and Other Financial Data

Reference is hereby made to the statistical and financial data contained
in the section captioned Managements Discussion and Analysis of Financial
Condition and Results of Operations, for statistical and financial data
providing a review of BLFs business activities.




Item 2.  Properties

The main office of BLF and Big Lake National Bank is located at 1409 S.
Parrott Avenue, Okeechobee, Florida 34974, in a two-story building of
approximately 8,010 square feet, which is owned by BLF. Big Lake National Bank
also has a branch located at 199 N. U.S. Highway 27, Lake Placid, Florida
33852, in a one-story building of approximately 2,000 square feet, which is
owned by Big Lake National Bank; a branch at 300 South Berner Road, Clewiston,
Florida 33440, in a one-story building of approximately 5,700 square feet,
which is owned by Big Lake National Bank; a branch at 6th Street and Highway
27, Moore Haven, Florida 33471, in a one-story building of approximately 2,800
square feet, which is leased by Big Lake National Bank (under a lease which,
with renewal options, expires in 2002); a branch at 17 N. Lee Street, LaBelle,
Florida 33935, in a one-story building of approximately 1,960 square feet,
which is owned by Big Lake National Bank; a branch in a one-story building of
approximately 1,491 square feet located at 1601 East Oak Street, Arcadia,
Florida 34266, which is owned by Big Lake National Bank; a branch at 202 North
6th Avenue, Wauchula, Florida 33874 in a one-story building of approximately
6,878 square feet, which is leased by Big Lake National Bank (under a lease
which, with renewal options, expires in 2013); and a branch located at 3180
Highway 441 S.E., Okeechobee, Florida 34974, which is leased by Big Lake
National Bank (under a lease which, with renewal options, expires in 2014).
Big Lake National Bank also has an operations center at 1801 Highway 441 S.E.,
Okeechobee, Florida 34974. This facility is a one-story building of
approximately 3,600 square feet, which is owned by Big Lake National Bank. Big
Lake National Bank operates a human resource and training facility at 107 S.W
17th Street Suite

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B, Okeechobee, Florida 34974. This facility is leased by Big Lake National Bank
(under a lease which, with renewal options, expires in 2002).




Item 3.  Legal Proceedings

BLF and Big Lake National Bank are periodically parties to or otherwise
involved in legal proceedings arising in the normal course of business, such as
claims to enforce liens, claims involving the making and servicing of real
property loans, and other issues incident to their respective businesses.
Management does not believe that there is any pending or threatened proceeding
against BLF or Big Lake National Bank which, if determined adversely, would have
a material adverse effect on BLFs consolidated financial position.




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

No matters were submitted to a vote of BLF security holders during the
fourth quarter of the year ended December 31, 2001.




PART II




Item 5.  Market for the Registrants Common Equity and Related Stockholder Matters

The shares of BLF Common Stock are not actively traded, and such
trading activity, as it occurs, takes place in privately negotiated
transactions. There is no established public trading market for the shares of
BLF Common Stock. Management of BLF is aware of certain transactions in its
shares that have occurred since January 1, 2000, although the trading prices of
all stock transactions are not known. The following sets forth the high and low
trading prices for certain trades of BLF Common Stock that occurred in
transactions known to BLF management in the respective periods during 2000 and
2001:

|            |  |      |       |      |  |        |       |      |  |     |        |        |  |   |       |  |  |   |       |  |  |  |       | 
|----------- |  | ---- | ----- | ---- |  | ------ | ----- | ---- |  | --- | ------ | ------ |  | - | ----- |  |  | - | ----- |  |  |  | ----- | 
|            |  | 2001 |       | 2000
|            |  |      |       |     
|            |  | High |       | Low  |  | Shares |       | High |  | Low |        | Shares
|            |  |      |       |      |  |        |       |      |  |     |        |       
|1st Quarter |  | $    | 30.00 |      |  | $      | 25.00 |      |  |     | 14,015 |        |  | $ | 25.86 |  |  | $ | 25.00 |  |  |  | 6,646 | 
|2nd Quarter |  | $    | 30.50 |      |  | $      | 20.00 |      |  |     | 11,799 |        |  | $ | 30.00 |  |  | $ | 28.00 |  |  |  | 7,560 | 
|3rd Quarter |  | $    | 31.00 |      |  | $      | 28.00 |      |  |     | 2,258  |        |  | $ | 27.00 |  |  | $ | 25.00 |  |  |  | 2,301 | 
|4th Quarter |  | $    | 27.00 |      |  | $      | 27.00 |      |  |     | 345    |        |  | $ | 31.00 |  |  | $ | 26.00 |  |  |  | 921   | 

BLF had approximately 555 shareholders of record as of December 31,
2001.

Dividends

BLF has not paid any cash dividends in the past. BLF intends that, for
the foreseeable future, it will retain earnings to finance continued growth
rather than pay cash dividends on BLF Common Stock. If at any time BLFs Board
determines to pay dividends on the BLF Common Stock, the timing and the extent
to which dividends are paid by BLF will be determined by such Board in light of
then-existing circumstances, including BLFs rate of growth, profitability,
financial condition, existing and anticipated capital requirements, the amount
of funds legally

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available for the payment of cash dividends, regulatory
constraints and such other factors as the Board determines relevant. The source
of funds for payment of dividends by BLF will be dividends received from Big
Lake National Bank. Payments by Big Lake National Bank to BLF are limited by law
and regulations of the bank regulatory authorities. There are various statutory
and contractual limitations on the ability of Big Lake National Bank to pay
dividends to BLF. The OCC also has the general authority to limit the dividends
paid by national banks if such payment may be deemed to constitute an unsafe and
unsound practice. As a national bank, Big Lake National Bank may not pay
dividends from their paid-in surplus. All dividends must be paid out of
undivided profits then on hand, after deducting expenses, including reserves for
losses and bad debts. In addition, a national bank is prohibited from declaring
a dividend on its shares of common stock until its surplus equals its stated
capital, unless there has been transferred to surplus no less than one/tenth of
the banks net profits of the preceding two consecutive half-year periods (in
the case of an annual dividend). The approval of the OCC is required if the
total of all dividends declared by a national bank in any calendar year exceeds
the total of its net profits for that year combined with its retained net
profits for the preceding two years, less any required transfers to surplus.

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

Managements discussion and analysis of earnings and related financial
data are presented herein to assist investors in understanding the financial
condition of BLF at, and results of operations of BLF for the years ended,
December 31, 1997 through 2001. This discussion should be read in conjunction
with the consolidated financial statements and related footnotes of BLF
presented elsewhere herein.

(Dollars in thousands except per share data)

|                                                                                |                             |   |                                       |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |       | 
|------------------------------------------------------------------------------- | --------------------------- | - | ------------------------------------- | ----- | ---- | - | ------- | ----- | ---- | - | ------- | ----- |  | - | ------- | ----- |  | - | ------- | ----- | 
|                                                                                |                             |   | At or For the Year Ended December 31,
|                                                                                |                             |   |                                      
|                                                                                |                             |   | 2001                                  |       | 2000 |   | 1999    |       | 1998 |   | 1997   
|                                                                                |                             |   |                                       |       |      |   |         |       |      |   |        
|Interest income                                                                 |                             | $ | 13,312                                |       |      | $ | 12,814  |       |      | $ | 10,867  |       |  | $ | 9,094   |       |  | $ | 5,491   |      
|Interest expense                                                                |                             |   | 5,060                                 |       |      |   | 5,620   |       |      |   | 4,343   |       |  |   | 3,464   |       |  |   | 2,204   |      
|                                                                                |                             |   |                                       |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Net interest income before provision
for credit losses                          |                             |   | 8,252                                 |       |      |   | 7,194   |       |      |   | 6,524   |       |  |   | 5,630   |       |  |   | 3,287   |      
|Provision for credit losses                                                     |                             |   | 440                                   |       |      |   | 330     |       |      |   | 220     |       |  |   | 144     |       |  |   | 280     |      
|                                                                                |                             |   |                                       |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Net interest income after provision for
credit losses                           |                             |   | 7,812                                 |       |      |   | 6,864   |       |      |   | 6,304   |       |  |   | 5,486   |       |  |   | 3,007   |      
|Noninterest income                                                              |                             |   | 1,604                                 |       |      |   | 1,522   |       |      |   | 1,590   |       |  |   | 1,205   |       |  |   | 814     |      
|Noninterest expenses                                                            |                             |   | 6,940                                 |       |      |   | 6,595   |       |      |   | 6,357   |       |  |   | 5,043   |       |  |   | 2,847   |      
|                                                                                |                             |   |                                       |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Earnings before income taxes                                                    |                             |   | 2,476                                 |       |      |   | 1,791   |       |      |   | 1,537   |       |  |   | 1,648   |       |  |   | 974     |      
|Provision for income taxes                                                      |                             |   | 889                                   |       |      |   | 628     |       |      |   | 553     |       |  |   | 574     |       |  |   | 316     |      
|                                                                                |                             |   |                                       |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Net earnings                                                                    |                             | $ | 1,587                                 |       |      | $ | 1,163   |       |      | $ | 984     |       |  | $ | 1,074   |       |  | $ | 658     |      
|                                                                                |                             |   |                                       |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Per share data (1):                                                             |                             |   |                                       |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|                                                                                | Earnings per share          |   | $                                     | 2.93  |      |   | $       | 2.17  |      |   | $       | 1.85  |  |   | $       | 2.04  |  |   | $       | 1.77  | 
|                                                                                | Cash dividends declared     |   | $                                     |      |      |   | $       |      |      |   | $       |      |  |   | $       |      |  |   | $       |      | 
|                                                                                | Book value at end of period |   | $                                     | 27.13 |      |   | $       | 23.52 |      |   | $       | 19.67 |  |   | $       | 20.05 |  |   | $       | 18.01 | 
|Common shares outstanding at end of period (1)                                  |                             |   | 543,889                               |       |      |   | 537,114 |       |      |   | 518,112 |       |  |   | 517,319 |       |  |   | 517,187 |      
|Weighted average common shares outstanding
during period (1)                    |                             |   | 541,731                               |       |      |   | 536,694 |       |      |   | 530,566 |       |  |   | 526,014 |       |  |   | 371,392 |      
|Total assets at end of period                                                   |                             | $ | 191,286                               |       |      | $ | 183,154 |       |      | $ | 161,915 |       |  | $ | 150,442 |       |  | $ | 111,682 |      
|Cash and cash equivalents                                                       |                             | $ | 19,711                                |       |      | $ | 8,077   |       |      | $ | 9,521   |       |  | $ | 7,776   |       |  | $ | 9,788   |      
|Investment securities                                                           |                             | $ | 30,630                                |       |      | $ | 56,877  |       |      | $ | 56,110  |       |  | $ | 59,560  |       |  | $ | 22,759  |      
|Loans, net                                                                      |                             | $ | 133,140                               |       |      | $ | 110,261 |       |      | $ | 87,134  |       |  | $ | 75,103  |       |  | $ | 73,972  |      
|Deposits                                                                        |                             | $ | 173,303                               |       |      | $ | 158,260 |       |      | $ | 148,453 |       |  | $ | 138,608 |       |  | $ | 101,332 |      
|Other borrowings                                                                |                             | $ | 1,827                                 |       |      | $ | 10,813  |       |      | $ | 2,157   |       |  | $ | 500     |       |  | $ |        |      
|Stockholders equity                                                            |                             | $ | 14,753                                |       |      | $ | 12,633  |       |      | $ | 10,187  |       |  | $ | 10,370  |       |  | $ | 9,313   |      
|Total loans before allowance for credit losses                                  |                             | $ | 134,847                               |       |      | $ | 111,615 |       |      | $ | 88,348  |       |  | $ | 76,380  |       |  | $ | 75,155  |      
|Allowance for credit losses                                                     |                             | $ | 1,707                                 |       |      | $ | 1,354   |       |      | $ | 1,214   |       |  | $ | 1,277   |       |  | $ | 1,183   |      
|Nonperforming loans                                                             |                             | $ | 483                                   |       |      | $ | 329     |       |      | $ | 353     |       |  | $ | 1,049   |       |  | $ | 1,536   |      
|Nonperforming loans and other assets                                            |                             | $ | 512                                   |       |      | $ | 529     |       |      | $ | 660     |       |  | $ | 1,221   |       |  | $ | 1,797   |      
|Allowance for credit losses as a percentage
of period-end total loans           |                             |   | 1.27                                  | %     |      |   | 1.21    | %     |      |   | 1.37    | %     |  |   | 1.67    | %     |  |   | 1.57    | %    
|Allowance for credit losses as a percentage
of nonperforming loans              |                             |   | 353.42                                | %     |      |   | 411.55  | %     |      |   | 343.91  | %     |  |   | 121.73  | %     |  |   | 77.02   | %    
|Total nonperforming loans as a percentage
of total loans                        |                             |   | .36                                   | %     |      |   | 0.29    | %     |      |   | 0.40    | %     |  |   | 1.37    | %     |  |   | 2.04    | %    
|Total nonperforming loans as a percentage
of total assets                       |                             |   | .25                                   | %     |      |   | 0.18    | %     |      |   | 0.22    | %     |  |   | 0.70    | %     |  |   | 1.37    | %    
|Total nonperforming loans and real estate
owned as a percentage of total assets |                             |   | .27                                   | %     |      |   | 0.29    | %     |      |   | 0.41    | %     |  |   | 0.81    | %     |  |   | 1.61    | %    



---

|(1) |  | Adjusted for the stock dividends in shares of BLF Common Stock.
|--- |  | ---------------------------------------------------------------

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General

BLFs principal asset is its ownership of Big Lake National Bank.
Accordingly, BLFs results of operations are primarily dependent upon the
results of operations of Big Lake National Bank. BLF conducts commercial
banking business consisting of attracting deposits from the general public and
applying those funds to the origination of commercial, consumer and real estate
loans (including commercial loans collateralized by real estate). BLFs
profitability depends primarily on net interest income, which is the difference
between interest income generated from interest-earning assets (i.e., loans and
investments) less the interest expense incurred on interest-bearing liabilities
(i.e., customer deposits and borrowed funds). Net interest income is affected
by the relative amounts of interest-earning assets and interest-bearing
liabilities, and the interest rate earned and paid on these balances. Net
interest income is dependent upon BLFs interest-rate spread that is the
difference between the average yield earned on its interest-earning assets and
the average rate paid on its interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The interest
rate spread is impacted by interest rates, deposit flows, and loan demand.
Additionally, and to a lesser extent, BLFs profitability is affected by such
factors as the level of noninterest income and expenses, the provision for
credit losses, and the effective tax rate. Noninterest income consists
primarily of service fees on deposit accounts. Noninterest expense consists of
compensation and employee benefits, occupancy and equipment expenses, deposit
insurance premiums paid to the FDIC, and other operating expenses.

Liquidity and Capital Resources

A national bank is required to maintain a liquidity reserve of at least 3%
of its net transaction deposit accounts in excess of $41.3 million. Where net
transaction deposit accounts exceed $41.3 million, the reserve requirements are
$1,239,000 plus 10% of the amount over $41.3 million. The liquidity reserve
may consist of cash on hand, cash on demand deposit with other correspondent
banks, and other investments and short-term marketable securities as determined
by the rules of the OCC, such as federal funds sold and United States
securities or securities guaranteed by the United States. As of December 31,
2001 and 2000, Big Lake National Bank had liquidity ratios of 28.6% and 18.5%,
respectively.

BLFs principal sources of funds are those generated by Big Lake National
Bank, including net increases in deposits, principal and interest payments on
loans, and proceeds from sales and maturities of investment securities.

BLF uses its capital resources principally to fund existing and continuing
loan commitments and to purchase investment securities. At December 31, 2001
and 2000, BLF had commitments to originate loans totaling $13.4 million and
$9.5 million, respectively, and had issued but unused letters of credit of
$98,000 and $69,000, respectively. In addition, scheduled maturities of
certificates of deposit during the 12 months following December 31, 2001 and
2000 totaled $60.2 million and $53.1 million, respectively. Management
believes that BLF has adequate resources to fund all its commitments, that
substantially all of its existing commitments will be funded within 12 months
and, if so desired, that BLF can adjust the rates and terms on

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certificates of deposit and other deposit accounts to retain deposits in a
changing interest rate environment.

In accordance with risk capital guidelines issued by the OCC and Federal
Reserve, Big Lake National Bank and BLF are required to maintain a minimum
standard of total capital to risk-weighted assets of 8.0%. Additionally,
regulatory agencies require banks and holding companies to maintain a minimum
leverage-capital ratio of Tier 1 capital (as defined) to average assets. The
leverage-capital ratio ranges from 3.0% to 5.0% based on the banks and bank
holding companys rating under the regulatory rating system.

The following table summarizes the regulatory capital levels and ratios
for Big Lake National Bank and BLF:

|                     |                                                  |  |               |       |              |  |             |       |            |  |  |      |  
|-------------------- | ------------------------------------------------ |  | ------------- | ----- | ------------ |  | ----------- | ----- | ---------- |  |  | ---- | -
|                     |                                                  |  | Actual Ratios |       | ActualRatios |  |             |       |           
|                     |                                                  |  |               |       |              |  |             |       |           
|                     |                                                  |  | Big Lake      |       |              |  |             |       |            |  | 
|                     |                                                  |  | National      |       |              |  |             |       | Regulatory
|                     |                                                  |  | Bank          |       | BLF          |  | Requirement
|                     |                                                  |  |               |       |              |  |            
|At December 31,
2001 |                                                  |  |               |       |              |  |             |       |            |  |  |     
|                     | Total risk-based capital to risk-weighted assets |  |               | 12.45 | %            |  |             | 13.11 | %          |  |  | 8.00 | %
|                     | Tier I capital to risk-weighted assets           |  |               | 11.20 | %            |  |             | 11.86 | %          |  |  | 4.00 | %
|                     | Tier I capital to average assets                 |  |               | 6.57  | %            |  |             | 6.98  | %          |  |  | 4.00 | %

Results of Operations

Net interest income before provision for credit losses, which constitutes
the principal source of income for BLF, represents the difference between
interest income on interest-earning assets and interest expense on
interest-bearing liabilities. The principal interest-earning assets are
investment securities and loans made to businesses and individuals.
Interest-bearing liabilities primarily consist of time deposits,
interest-bearing checking accounts (NOW accounts), retail savings deposits
and money market accounts. Funds attracted by these interest-bearing
liabilities are invested in interest-earning assets. Accordingly, net interest
income depends upon the volume of average interest-earning assets and average
interest-bearing liabilities and the interest rates earned or paid on them.

Net interest income before provision for credit losses was $8,252,000 for
BLF for the year ended December 31, 2001, compared with $7,194,000 for the year
ended December 31, 2000. This improvement in net interest income was a result
of a higher volume of net interest-earning assets and a decrease in the cost of
funds that outpaced the decline in yield on earning assets.

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The following table shows selected ratios for the periods ended or at the
dates indicated:

|                                                 |  |                     |       |      |  |  |       |  
|------------------------------------------------ |  | ------------------- | ----- | ---- |  |  | ----- | -
|                                                 |  | For the Years Ended
|                                                 |  | December 31,       
|                                                 |  |                    
|                                                 |  | 2001                |       | 2000
|                                                 |  |                     |       |     
|Average equity as a percentage of average assets |  |                     | 7.66  | %    |  |  | 6.50  | %
|Equity to total assets at end of period          |  |                     | 7.71  | %    |  |  | 6.90  | %
|Return on average assets                         |  |                     | 0.85  | %    |  |  | 0.66  | %
|Return on average equity                         |  |                     | 11.05 | %    |  |  | 10.17 | %
|Noninterest expense to average assets            |  |                     | 3.70  | %    |  |  | 3.75  | %

The rates and yields at the dates indicated were as follows:

|                                 |  |                                   |      |      |  |  |      |  
|-------------------------------- |  | --------------------------------- | ---- | ---- |  |  | ---- | -
|                                 |  | Weighted Average Yield or Rate at
|                                 |  | December 31,                     
|                                 |  |                                  
|                                 |  | 2001                              |      | 2000
|                                 |  |                                   |      |     
|Loans                            |  |                                   | 8.22 | %    |  |  | 9.41 | %
|Investment securities            |  |                                   | 6.13 | %    |  |  | 5.72 | %
|Other interest-earning assets    |  |                                   | 5.64 | %    |  |  | 5.77 | %
|All interest-earning assets      |  |                                   | 7.71 | %    |  |  | 8.05 | %
|Money market deposits            |  |                                   | 2.47 | %    |  |  | 2.19 | %
|NOW accounts                     |  |                                   | 2.58 | %    |  |  | 3.79 | %
|Savings deposits                 |  |                                   | 1.86 | %    |  |  | 2.21 | %
|Certificates of deposit          |  |                                   | 4.94 | %    |  |  | 5.40 | %
|All interest-bearing liabilities |  |                                   | 3.79 | %    |  |  | 4.50 | %
|Interest-rate spread             |  |                                   | 3.92 | %    |  |  | 3.55 | %

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The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of BLF
from interest-earning assets and the resultant average yield; (ii) the total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest-rate
spread; and (v) net interest margin. Average balances were based on average
daily balances.

|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |      |      |  
|-------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------ | ------ | ------------------------ | ------- | --------- | ----- | -------- | ------ | ------- | ---- | --------- | ---- | ------ | ------ | -------- | ------- | ------- | ----- | ----- | ------ |  | ---- | ---- | ---- | -
|                                                                                 |                                           |                                            |        | Years Ended December 31,
|                                                                                 |                                           |                                            |        |                         
|                                                                                 |                                           |                                            |        | 2001                     |         | 2000     
|                                                                                 |                                           |                                            |        |                          |         |          
|                                                                                 |                                           |                                            |        |                          |         |           |       | Interest |        | Average |      |           |      |        |        | Interest |         | Average
|                                                                                 |                                           |                                            |        | Average                  |         | and       |       | Yield/   |        | Average |      | and       |      | Yield/
|                                                                                 |                                           |                                            |        | Balance                  |         | Dividends |       | Rate     |        | Balance |      | Dividends |      | Rate  
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |       
|                                                                                 |                                           |                                            |        | (Dollars in thousands)  
|Interest-earning assets:                                                         |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|                                                                                 | Loans(1)                                  |                                            | $      | 132,536                  |         |           | $     | 10,901   |        |         |      | 8.22      | %    |        | $      | 100,255  |         |         | $     | 9,435 |        |  |      | 9.41 | %   
|                                                                                 | Investment and
mortgage-backed securities |                                            |        | 29,990                   |         |           |       | 1,837    |        |         |      | 6.13      | %    |        |        | 58,154   |         |         |       | 3,329 |        |  |      | 5.72 | %   
|                                                                                 | Other interest-earning assets(2)          |                                            |        | 10,179                   |         |           |       | 574      |        |         |      | 5.64      | %    |        |        | 867      |         |         |       | 50    |        |  |      | 5.77 | %   
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|                                                                                 |                                           | Total interest-earning assets              |        |                          | 172,705 |           |       |          | 13,312 |         |      |           | 7.71 | %      |        |          | 159,276 |         |       |       | 12,814 |  |      |      | 8.05 | %
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|Noninterest-earning assets                                                       |                                           |                                            | 14,895 |                          |         |           |       |          |        |         |      |           |      |        | 16,619 |          |         |         |       |       |        |  |      |     
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|                                                                                 |                                           | Total assets                               |        | $                        | 187,600 |           |       |          |        |         |      |           |      |        |        | $        | 175,895 |         |       |       |        |  |      |      |      |  
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|Interest-bearing liabilities:                                                    |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|                                                                                 | Demand, money market and
NOW deposits     |                                            | $      | 43,540                   |         |           | $     | 1,111    |        |         |      | 2.55      | %    |        | $      | 37,577   |         |         | $     | 1,327 |        |  |      | 3.53 | %   
|                                                                                 | Savings                                   |                                            |        | 15,899                   |         |           |       | 295      |        |         |      | 1.86      | %    |        |        | 16,234   |         |         |       | 359   |        |  |      | 2.21 | %   
|                                                                                 | Certificates of deposit                   |                                            |        | 71,677                   |         |           |       | 3,539    |        |         |      | 4.94      | %    |        |        | 65,400   |         |         |       | 3,531 |        |  |      | 5.40 | %   
|                                                                                 | Other                                     |                                            |        | 2,218                    |         |           |       | 115      |        |         |      | 5.18.     | %    |        |        | 5,775    |         |         |       | 403   |        |  |      | 6.98 | %   
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|                                                                                 |                                           | Total interest-bearing
liabilities         |        |                          | 133,334 |           |       |          | 5,060  |         |      |           | 3.79 | %      |        |          | 124,986 |         |       |       | 5,620  |  |      |      | 4.50 | %
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|Noninterest-bearing liabilities                                                  |                                           |                                            | 39,701 |                          |         |           |       |          |        |         |      |           |      |        | 39,476 |          |         |         |       |       |        |  |      |     
|Stockholders equity                                                             |                                           |                                            | 14,365 |                          |         |           |       |          |        |         |      |           |      |        | 11,433 |          |         |         |       |       |        |  |      |     
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|                                                                                 |                                           | Total liabilities and
stockholders equity |        | $                        | 187,600 |           |       |          |        |         |      |           |      |        |        | $        | 175,895 |         |       |       |        |  |      |      |      |  
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|Net interest income before provision
for credit losses                           |                                           |                                            |        |                          |         | $         | 8,252 |          |        |         |      |           |      |        |        |          |         | $       | 7,194 |       |        |  |      |     
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|Interest-rate spread(3)                                                          |                                           |                                            |        |                          |         |           |       |          |        |         | 3.92 | %         |      |        |        |          |         |         |       |       |        |  | 3.55 | %   
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|Net interest margin(4)                                                           |                                           |                                            |        |                          |         |           |       |          |        |         | 4.78 | %         |      |        |        |          |         |         |       |       |        |  | 4.52 | %   
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     
|Ratio of average interest-earning assets
to average interest-bearing liabilities |                                           |                                            | 129.53 | %                        |         |           |       |          |        |         |      |           |      |        | 127.44 | %        |         |         |       |       |        |  |      |     
|                                                                                 |                                           |                                            |        |                          |         |           |       |          |        |         |      |           |      |        |        |          |         |         |       |       |        |  |      |     



---

|(1) |  | Includes nonaccrual loans.                                                                                                                               
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes interest-bearing deposits due from other banks and federal funds
sold.                                                                          
|   
|(3) |  | Interest-rate spread represents the difference between the average yield
on interest-earning assets and the average cost of interest-bearing
liabilities.
|   
|(4) |  | Net interest margin is net interest income divided by average
interest-earning assets.                                                                   

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The following table sets forth certain information regarding changes in
interest income and interest expense of BLF for the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in interest rate
(change in rate multiplied by prior volume), (2) changes in the volume (change
in volume multiplied by prior rate) and (3) changes in rate-volume (change in
rate multiplied by change in volume):

|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |        |      |  
|------------------------------------------------------ | ----------------------------------------- | ---------------------------------- | ---- | -------------------------- | ---- | - |  |  |  | ------ | ----- | ------ | ----- | ----- | ---- | ----- | ---- | - | ----- | ------ | ---- | -
|                                                       |                                           |                                    |      | Year Ended December 31,   
|                                                       |                                           |                                    |      | 2001 vs. 2000             
|                                                       |                                           |                                    |      | Increase (Decrease) Due to
|                                                       |                                           |                                    |      |                           
|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      | Rate/ |      |   |       |       
|                                                       |                                           |                                    |      | Rate                       |      |   |  |  |  | Volume |       | Volume |       | Total
|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |      
|                                                       |                                           |                                    |      | (Dollars in
thousands)    
|Interest-earning assets:                               |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |       
|                                                       | Loans                                     |                                    | $    | (1,189                     | )    |   |  |  |  |        | $     | 3,038  |       |       | $    | (383  | )    |   | $     | 1,466  |     
|                                                       | Investment and mortgage-backed securities |                                    |      | 233                        |      |   |  |  |  |        |       | (1,612 | )     |       |      | (113  | )    |   |       | (1,492 | )   
|                                                       | Other interest-earning assets             |                                    |      | (1                         | )    |   |  |  |  |        |       | 537    |       |       |      | (12   | )    |   |       | 524    |     
|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |       
|                                                       |                                           | Total interest-earning assets      |      |                            | (957 | ) |  |  |  |        |       |        | 1,963 |       |      |       | (508 | ) |       |        | 498  |  
|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |       
|Interest-bearing liabilities:                          |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |       
|                                                       | Demand, money market and NOW deposits     |                                    |      | (368                       | )    |   |  |  |  |        |       | 211    |       |       |      | (59   | )    |   |       | (216   | )   
|                                                       | Savings                                   |                                    |      | (58                        | )    |   |  |  |  |        |       | (7     | )     |       |      | 1     |      |   |       | (64    | )   
|                                                       | Certificates of deposit                   |                                    |      | (302                       | )    |   |  |  |  |        |       | 339    |       |       |      | (29   | )    |   |       | 8      |     
|                                                       | Other                                     |                                    |      | (104                       | )    |   |  |  |  |        |       | (248   | )     |       |      | 64    |      |   |       | (288   | )   
|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |       
|                                                       |                                           | Total interest-bearing liabilities |      |                            | (832 | ) |  |  |  |        |       |        | 295   |       |      |       | (23  | ) |       |        | (560 | )
|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |       
|Net interest income before provision for credit losses |                                           | $                                  | (125 | )                          |      |   |  |  |  | $      | 1,668 |        |       | $     | (485 | )     |      | $ | 1,058 |       
|                                                       |                                           |                                    |      |                            |      |   |  |  |  |        |       |        |       |       |      |       |      |   |       |       

Comparison of Years Ended December 31, 2001 and 2000

General

Net earnings for the year ended December 31, 2001, were $1,587,000, or
$2.93 per share, compared to net earnings of $1,163,000, or $2.17 per share,
for the year ended December 31, 2000. Net earnings for 2001 versus 2000
increased $424,000, or 36.5%. Increases in the level of loan fee income in
2001 versus 2000, an improved net interest margin of 26 basis points and the
reduction of other operating expenses contributed to increased earnings in 2001
over 2000.

Interest Income and Expense

Interest income increased by $498,000 from $12,814,000 for the year ended
December 31, 2000, to $13,312,000 for the year ended December 31, 2001.
Interest and fee income on loans increased $1,466,000 due to an increase in the
average loan portfolio balance from $100.3 million for the year ended December
31, 2000, to $132.5 million for the year ended 2001.

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Interest on investment securities decreased $1,492,000 due to maturities
and calls on investment securities during 2001. There was an increase in the
average yield earned from 2000, of 5.72% to 6.13% in 2001. Interest on other
interest-earning assets increased $524,000 consistent with an increase from
$867,000 in other interest-earning assets in 2000 to $10.2 million in 2001. The
decrease in the average balance of investment securities and increase in the
average balance of other interest-earning assets is attributable to the
magnitude of called agency securities related to decreasing rates in the market
and reinvestment in Fed Funds Sold.

Interest expense decreased to $5,060,000 for the year ended December 31,
2001, from $5,620,000 for the year ended December 31, 2000. Interest expense
on deposit accounts decreased due to a decrease in the average rates paid on
interest-bearing liabilities of 71 basis points. Average noninterest-bearing
deposits increased 16.2% while average interest-bearing deposits increased
7.6%. This remixing of deposit growth has contributed to the overall decline
in interest expense. Additionally, average rates paid on deposits decreased
due to the downturn in the economy, which prompted a falling rate environment.
The Federal Reserve Bank decreased short-term interest rates 11 times during
the year 25 basis points or more each time.

Provision for Credit Losses

The provision for credit losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by BLF, the
amounts of nonperforming loans, general economic conditions, particularly as
they relate to BLFs market area, and other factors related to the
collectibility of BLFs loan portfolio. For 2001, BLF recorded provisions for
credit losses totaling $440,000 to strengthen its allowance for credit losses
to consider recent economic trends and the growth in the loan portfolio.

Other Income

Total noninterest income increased in 2001 versus 2000 by $82,000.
Increases in other nondeposit related fees, primarily improved ATM fees, were
offset, in part, by lower (due to higher compensating balances) deposit related
fees.

Other Expense

Total noninterest expense increased in 2001 versus 2000 by $345,000 to
$6,940,000 for the year ended December 31, 2001, from $6,595,000 for the year
ended December 31, 2000, primarily due to increases in compensation and
employee benefits of $168,000, occupancy expenses of bank premises and fixed
assets of $51,000, and other operating expenses of $126,000. The largest
categories of noninterest expense contributing to the overall growth of Big
Lake National Bank were increases in salary and insurance benefits, utility
costs, real estate and property taxes, ATM expense and postage. These expenses
have grown in relation to the growth of Big Lake National Bank since 2000 and
the completed conversion of Big Lake National Bank data and item processing
systems during the third quarter of 2001. Additionally, Big Lake

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National Bank continues to introduce new products and services which elevate
the cost of noninterest expense and have offsetting fee income in noninterest
income.

Asset/Liability Management

A principal objective of BLFs asset/liability management strategy is to
minimize its exposure to changes in interest rates by matching the maturity and
repricing horizons of interest-earning assets and interest-bearing liabilities.
This strategy is overseen in part through the direction of an Asset and
Liability Committee (the ALCO Committee) which establishes policies and
monitors results to control interest rate sensitivity.

Management evaluates interest rate risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to maintain interest rate risk within
target levels for the appropriate level of risk which are determined by the
ALCO Committee. The ALCO Committee uses internally generated reports to
measure the Banks interest rate sensitivity. From these reports, the ALCO
Committee can estimate the net income effect of various interest rate
scenarios.

As a part of BLFs interest rate risk management policy, the ALCO
Committee examines the extent to which its assets and liabilities are interest
rate sensitive and monitors the banks interest rate sensitivity gap. An
asset or liability is considered to be interest rate sensitive if it will
reprice or mature within the time period analyzed, usually one year or less.
The interest rate sensitivity gap is the difference between interest-earning
assets and interest-bearing liabilities scheduled to mature or reprice within
such time period. A gap is considered positive when the amount of interest
rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds interest rate sensitive assets. During a period
of rising interest rates, a negative gap would tend to adversely affect net
interest income, while a positive gap would tend to result in an increase in
net interest income. During a period of falling interest rates, a negative gap
would tend to result in an increase in net interest income, while a positive
gap would tend to adversely affect net interest income. If the repricing of
the banks assets and liabilities were equally flexible and moved concurrently,
the impact of any increase or decrease in interest rates on net interest income
would be minimal.

A simple interest rate gap analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or period
of repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition,
certain assets, such as adjustable rate mortgage loans, have features
(generally referred to as interest rate caps) which limit changes in interest
rates on a short-term

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basis and over the life of the asset. In the event of a change in interest
rates, prepayment (on loans) and early withdrawal (of deposit accounts) levels
also could deviate significantly from those assumed in calculating the interest
rate gap. The ability of many borrowers to service their debts also may
decrease in the event of an interest rate increase.

Managements strategy is to maintain a balanced interest rate risk
position to protect its net interest margin from market fluctuations. To this
end, the ALCO Committee reviews, on a monthly basis, the maturity and repricing
of assets and liabilities. BLFs cumulative one-year gap at December 31, 2001,
was a negative 15% of assets and is within the usual gap range. Management
believes this range is adequate and requires no special measures.

Principal among BLFs asset/liability management strategies has been the
emphasis on managing its interest rate sensitive liabilities in a manner
designed to attempt to reduce BLFs exposure during periods of fluctuating
interest rates. Management believes that the type and amount of BLFs interest
rate sensitive liabilities may reduce the potential impact that a rise in
interest rates might have on BLFs net interest income. BLF seeks to maintain a
core deposit base by providing quality services to its customers without
significantly increasing its cost of funds or operating expenses. BLFs
demand, money market, and NOW deposit accounts approximated 48.5% and 49.4% of
total deposits at December 31, 2001 and 2000, respectively. These accounts bore
a weighted average cost of deposits of 1.43% and 1.84% during the years ended
December 31, 2001 and 2000, respectively. Management anticipates that these
accounts will continue to comprise a significant portion of BLFs total deposit
base. BLF also maintains a portfolio of liquid assets in order to reduce its
overall exposure to changes in market interest rates. At December 31, 2001 and
2000, approximately 10.9% and 7.3%, respectively, of BLFs total assets
consisted of cash and due from banks, federal funds sold, and short-term
investment securities. In addition, at December 31, 2001 and 2000, Big Lake
National Banks liquidity ratio was approximately 28.7% and 18.5%,
respectively. BLF also maintains a floor, or minimum rate, on certain of its
floating or prime based loans. These floors allow BLF to continue to earn a
higher rate when the floating rate falls below the established floor rate.

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The following table sets forth certain information relating to BLFs
interest-earning assets and interest-bearing liabilities at December 31, 2001,
that are estimated to mature or are scheduled to reprice within the period
shown:

|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |         | 
|---------------------------------------- | -------------------------------------------- | - | ---------------------- | ------ | ------- | - | --------- | ------ | ------- | - | ------ | ------ |  | - | ------ | ------ |  | - | ------- | ------- | 
|                                         |                                              |   | Under                  |        | 3 to 12 |   |           |        |         |   | Over   |        |  |   |       
|                                         |                                              |   | 3 Months               |        | Months  |   | 1-5 Years |        | 5 Years |   | Totals
|                                         |                                              |   |                        |        |         |   |           |        |         |   |       
|                                         |                                              |   | (Dollars in thousands)
|Federal funds sold                       |                                              | $ | 8,454                  |        |         | $ |          |        |         | $ |       |        |  | $ |       |        |  | $ | 8,454   |        
|Loans (1)                                |                                              |   | 24,494                 |        |         |   | 59,349    |        |         |   | 46,707 |        |  |   | 4,297  |        |  |   | 134,847 |        
|Securities (2)                           |                                              |   |                       |        |         |   | 1,052     |        |         |   | 22,995 |        |  |   | 6,583  |        |  |   | 30,630  |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|                                         | Total rate-sensitive assets (earning assets) |   | $                      | 32,948 |         |   | $         | 60,401 |         |   | $      | 69,702 |  |   | $      | 10,880 |  |   | $       | 173,931 | 
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|Money market and NOW deposits (2)        |                                              | $ | 43,088                 |        |         | $ |          |        |         | $ |       |        |  | $ |       |        |  | $ | 43,088  |        
|Savings deposits (2)                     |                                              |   | 16,360                 |        |         |   |          |        |         |   |       |        |  |   |       |        |  |   | 16,360  |        
|Certificates of deposit (2)              |                                              |   | 27,318                 |        |         |   | 33,447    |        |         |   | 12,207 |        |  |   |       |        |  |   | 72,972  |        
|Other borrowings and fed funds purchased |                                              |   | 1,827                  |        |         |   |          |        |         |   |       |        |  |   |       |        |  |   | 1,827   |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|Total rate-sensitive liabilities         |                                              | $ | 88,593                 |        |         | $ | 33,447    |        |         | $ | 12,207 |        |  | $ |       |        |  | $ | 134,247 |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|Gap (repricing differences)              |                                              | $ | (55,645                | )      |         | $ | 26,954    |        |         | $ | 57,495 |        |  | $ | 10,880 |        |  | $ | 39,684  |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|Cumulative Gap                           |                                              | $ | (55,645                | )      |         | $ | (28,691   | )      |         | $ | 28,804 |        |  | $ | 39,684 |        |  |   |         |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|Cumulative GAP/total assets              |                                              |   | (29.09                 | )%     |         |   | (15.00    | )%     |         |   | 15.06  | %      |  |   | 20.75  | %      |  |   |         |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|Cumulative GAP/total earning assets      |                                              |   | (31.99                 | )%     |         |   | (16.50    | )%     |         |   | 16.56  | %      |  |   | 22.82  | %      |  |   |         |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        
|Total Assets                             |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  | $ | 191,286 |        
|                                         |                                              |   |                        |        |         |   |           |        |         |   |        |        |  |   |        |        |  |   |         |        



---

|(1) |  | In preparing the table above, adjustable-rate loans were included in the
period in which the interest rates are next scheduled to adjust rather
than in the period in which the loans mature. Fixed-rate loans were
scheduled according to their contractual maturities.             
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Excludes noninterest-bearing deposit accounts. Money market, NOW, and
savings deposits were regarded as maturing immediately. All other time
deposits were scheduled through the maturity dates. Investments were
scheduled based on their remaining maturity or repricing frequency.

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Financial Condition

Lending Activities

A significant source of income for BLF is the interest earned on loans.
At December 31, 2001, BLFs total assets were $191.3 million and its net loans
were $133.1 million or 69.6% of total assets. At December 31, 2000, BLFs
total assets were $183.2 million and its net loans were $110.3 million or 60.2%
of total assets. The increase in the percentage of net loans to total assets
is a result of increased new loan production less loan repayments for a net of
$22.9 million, or 11.97% of total assets.

Big Lake National Banks primary market area consists of Okeechobee,
Clewiston, Moore Haven, LaBelle, Arcadia, Wauchula, and Lake Placid, Florida.
This regions economy is primarily dependent upon agriculture, light industry,
and tourism. Okeechobee is located on the northern end of Lake Okeechobee in
South Central Florida and is the seat of government for Okeechobee County.
Okeechobee County has a diverse group of employers. Lake Okeechobee, located
in the southern portion of the County, is a 750 square mile lake bordered by
four other counties. The lake serves as a tourist attraction. Big Lake
National Banks primary market area also includes Lake Placid, Florida, which
is located approximately 70 miles east of Fort Myers in Highlands County.
Agriculture is the main income producing industry around the city. The area
also supports the citrus and cattle industries. In the early 1980s, Hendry
County was essentially a rural community, dependent on several seasonal or
cyclical industries. As the Fort Myers and West Palm Beach business markets
have experienced expansion over the past ten years, Hendry Countys location
between these two metropolitan areas has afforded relocation and business
opportunities for industries desiring a proximate location to two of Floridas
major growth regions.

There is no assurance that the Banks market area will continue to
experience economic growth. Adverse conditions in any one or more of the
industries operating in such markets or slow-down in general economic
conditions could have an adverse effect on BLF.

Lending activities are conducted pursuant to a written policy which has
been adopted by BLF. Each loan officer has defined lending authority beyond
which loans, depending upon their type and size, must be reviewed and approved
by a loan committee comprised of certain directors of Big Lake National Bank.

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The following table sets forth information concerning BLFs loan portfolio
by type of loan at the dates indicated:

|                               |                                 |                             |         |                        |       |       |      |        |   |       |        |         |       |      |      |       |   | 
|------------------------------ | ------------------------------- | --------------------------- | ------- | ---------------------- | ----- | ----- | ---- | ------ | - | ----- | ------ | ------- | ----- | ---- | ---- | ----- | - | 
|                               |                                 |                             |         | At December 31,       
|                               |                                 |                             |         |                       
|                               |                                 |                             |         | 2001                   |       | 2000 
|                               |                                 |                             |         |                        |       |      
|                               |                                 |                             |         |                        |       |       |      | % of   |   |       |        |         |       | % of
|                               |                                 |                             |         | Amount                 |       | Total |      | Amount |   | Total
|                               |                                 |                             |         |                        |       |       |      |        |   |      
|                               |                                 |                             |         | (Dollars in thousands)
|Real estate secured loans      |                                 | $                           | 113,617 |                        |       |       | 84.2 | %      |   | $     | 92,227 |         |       |      | 82.5 | %    
|Consumer and credit card loans |                                 |                             | 10,413  |                        |       |       | 7.7  |        |   |       | 10,024 |         |       |      | 9.0  |      
|Commercial and all other loans |                                 |                             | 10,871  |                        |       |       | 8.1  |        |   |       | 9,559  |         |       |      | 8.5  |      
|                               |                                 |                             |         |                        |       |       |      |        |   |       |        |         |       |      |      |      
|                               | Total loans                     |                             |         | 134,901                |       |       |      | 100.0  | % |       |        | 111,810 |       |      |      | 100.0 | %
|                               |                                 |                             |         |                        |       |       |      |        |   |       |        |         |       |      |      |      
|Less:                          |                                 |                             |         |                        |       |       |      |        |   |       |        |         |       |      |      |      
|                               | Deferred loan and unearned fees |                             |         | 54                     |       |       |      |        |   |       |        | 195     |       |      |      |       |  
|                               |                                 | Allowance for credit losses |         |                        | 1,707 |       |      |        |   |       |        |         | 1,354 |      |      |       |   | 
|                               |                                 |                             |         |                        |       |       |      |        |   |       |        |         |       |      |      |      
|                               | Loans, net                      |                             | $       | 133,140                |       |       |      |        |   |       | $      | 100,261 |       |      |      |       |  
|                               |                                 |                             |         |                        |       |       |      |        |   |       |        |         |       |      |      |      

The following table reflects the contractual principal repayments by
period of BLFs loan portfolio at December 31, 2001 based on BLFs internal
loan classifications (excluding nonaccrual loans):

|                                     |                                        |   |                        |  |           |   |         |  |       |   |        |  |  |   |         |         | 
|------------------------------------ | -------------------------------------- | - | ---------------------- |  | --------- | - | ------- |  | ----- | - | ------ |  |  | - | ------- | ------- | 
|                                     |                                        |   | 1 Year                 |  | 1 Through |   | After   |  |       |   |       
|                                     |                                        |   | or Less                |  | 5 Years   |   | 5 Years |  | Total
|                                     |                                        |   |                        |  |           |   |         |  |      
|                                     |                                        |   | (Dollars in thousands)
|Mortgage loan systems                |                                        | $ | 16,451                 |  |           | $ | 30,300  |  |       | $ | 66,439 |  |  | $ | 113,190 |        
|Installment loan system              |                                        |   | 1,631                  |  |           |   | 8,508   |  |       |   | 255    |  |  |   | 10,394  |        
|Commercial loan system               |                                        |   | 4,682                  |  |           |   | 4,864   |  |       |   | 1,300  |  |  |   | 10,846  |        
|                                     |                                        |   |                        |  |           |   |         |  |       |   |        |  |  |   |         |        
|Total loans                          |                                        | $ | 22,764                 |  |           | $ | 43,672  |  |       | $ | 67,994 |  |  | $ | 134,430 |        
|                                     |                                        |   |                        |  |           |   |         |  |       |   |        |  |  |   |         |        
|Loans with maturities over one year: |                                        |   |                        |  |           |   |         |  |       |   |        |  |  |   |         |        
|                                     | Fixed rate                             |   |                        |  |           |   |         |  |       |   |        |  |  |   | $       | 40,847  | 
|                                     | Variable rate                          |   |                        |  |           |   |         |  |       |   |        |  |  |   |         | 70,819  | 
|                                     |                                        |   |                        |  |           |   |         |  |       |   |        |  |  |   |         |        
|                                     | Total maturities greater than one year |   |                        |  |           |   |         |  |       |   |        |  |  |   | $       | 111,666 | 
|                                     |                                        |   |                        |  |           |   |         |  |       |   |        |  |  |   |         |        

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The following table sets forth total loans originated and repaid during
the periods indicated based on BLFs internal loan classifications:

|              |                         |                        |   |                        |        |      |   |         |        | 
|------------- | ----------------------- | ---------------------- | - | ---------------------- | ------ | ---- | - | ------- | ------ | 
|              |                         |                        |   | Year Ended            
|              |                         |                        |   | December 31,          
|              |                         |                        |   |                       
|              |                         |                        |   | 2001                   |        | 2000
|              |                         |                        |   |                        |        |     
|              |                         |                        |   | (Dollars in thousands)
|Originations: |                         |                        |   |                        |        |      |   |        
|              | Mortgage loan systems   |                        | $ | 35,520                 |        |      | $ | 18,268  |       
|              | Installment loan system |                        |   | 8,564                  |        |      |   | 7,817   |       
|              | Commercial loan system  |                        |   | 5,327                  |        |      |   | 19,756  |       
|              |                         |                        |   |                        |        |      |   |        
|              |                         | Total loans originated |   |                        | 49,411 |      |   |         | 45,841 | 
|              | Principal reductions    |                        |   | (26,532                | )      |      |   | (22,679 | )     
|              |                         |                        |   |                        |        |      |   |        
|              | Increase in total loans |                        | $ | 22,879                 |        |      | $ | 23,162  |       
|              |                         |                        |   |                        |        |      |   |        

Asset Quality

Management seeks to maintain a high quality of assets through conservative
underwriting and sound lending practices. The majority of the loans in BLFs
loan portfolio are collateralized by residential and commercial real estate
mortgages. As of December 31, 2001 and 2000, approximately 84.2% and 82.5%,
respectively, of the total loan portfolio was collateralized by real estate of
which 25.8% and 28.5% was secured by commercial real estate as of December 31,
2001 and 2000, respectively. The level of delinquent loans and real estate
owned also is relevant to the credit quality of a loan portfolio. As of
December 31, 2001, total nonperforming assets were $512,000 or 0.27% of total
assets, compared to $529,000 or 0.29% of total assets at December 31, 2000.

In an effort to maintain the quality of the loan portfolio, management
seeks to minimize higher risk types of lending. In view of the relative
significance of real estate related loans, a downturn in the value of the real
estate could have an adverse impact on BLFs profitability. However, as part of
its loan portfolio management strategy, BLF generally limits its loans to a
maximum of 80% of the value of the underlying real estate as determined by
appraisal. In addition, knowledgeable members of management make physical
inspections of properties being considered for mortgage loans.

Commercial loans also entail risks since repayment is usually dependent
upon the successful operation of the commercial enterprise. They also are
subject to adverse conditions in the economy. Commercial loans are generally
riskier than mortgage loans because they are typically underwritten on the
basis of the ability to repay from the cash flow of a business rather than on
the ability of the borrower or guarantor to repay. Further, the collateral
underlying a commercial loan may depreciate over time, cannot be appraised with
as much precision as real estate, and may fluctuate in value based on the
success of the business.

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The repayment of consumer installment loans and other loans to individuals
is closely linked to the economic conditions of the communities in which BLF
operates (seeManagements Discussion and Analysis of Financial Condition and
Results of Operations  Financial Condition  Lending Activities). For the
most part, these local economies enjoy diverse labor forces. The majority of
these consumer installment loans are secured by collateral which is intended to
limit, to a degree, any loss BLF would suffer upon default.

Loan concentrations are defined as amounts loaned to a number of borrowers
engaged in similar activities which would cause them to be similarly impacted
by economic or other conditions. BLF, on a routine basis, monitors these
concentrations in order to consider adjustments in its lending practices to
reflect economic conditions, loan to deposit ratios, and industry trends.
Concentrations of loans in the following categories constituted the total loan
portfolio as of December 31, 2001:

|                               |  |  |       |  
|------------------------------ |  |  | ----- | -
|Real estate secured loans      |  |  | 84.2  | %
|Consumer and credit card loans |  |  | 7.7   |  
|Commercial and all other loans |  |  | 8.1   |  
|                               |  |  |       |  
|                               |  |  | 100.0 | %
|                               |  |  |       |  

The Loan Committee of the Board of Directors of Big Lake National Bank
concentrates its efforts and resources, and that of its senior management and
lending officers, on loan review and underwriting procedures. Internal
controls include ongoing reviews of loans made to monitor documentation and the
existence and valuations of collateral. In addition, management of BLF has
established a review process with the objective of identifying, evaluating, and
initiating necessary corrective action for marginal loans. The goal of the
loan review process is to address classified and nonperforming loans as early
as possible.

Classification of Assets

Generally, interest on loans accrues and is credited to income based upon
the principal balance outstanding. It is managements policy to discontinue
the accrual of interest income and classify a loan as nonaccrual when principal
or interest is past due 90 days or more and the loan is not adequately
collateralized, or when in the opinion of management, principal or interest is
not likely to be paid in accordance with the terms of the obligation. Consumer
installment loans are generally charged-off after 90 days of delinquency unless
adequately collateralized and in the process of collection. Loans are not
returned to accrual status until principal and interest payments are brought
current and future payments appear reasonably certain. Interest accrued and
unpaid at the time a loan is placed on nonaccrual status is charged against
interest income. Subsequent payments received are applied to the outstanding
principal balance.

Real estate acquired by BLF as a result of foreclosure or by deed in lieu
of foreclosure is classified as other real estate owned (OREO). OREO
properties are recorded at the lower of cost or fair value less estimated
selling costs, and the estimated loss, if any, is charged to the allowance for
credit losses at the time it is transferred to OREO. Further allowances for
losses in OREO are recorded at the time management believes additional
deterioration in value has occurred.

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Management has adopted Statement of Financial Accounting Standards No. 114
(SFAS No. 114), Accounting by Creditors for Impairment of a Loan, which
considers a loan to be impaired if it is probable that BLF will be unable to
collect all amounts due under the contractual terms of the loan agreement. If
a loan is considered impaired, its value generally should be measured based on
the present value of expected cash flows discounted at the loans effective
interest rate. As a practical expedient, however, the loans value may be
based on:



| |  | the loans market price; or                                                                                                                        
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the fair value of the loans collateral, less discounted estimated
costs to sell, if the collateral is expected to be the sole source of
repayment.

If the value of the loan is less than the recorded investment in the loan,
a loss should be recognized by recording a valuation allowance and a
corresponding increase to the provision for credit losses charged to operating
expenses.

Situations may occur where:



| |  | BLF receives physical possession of a debtors assets regardless of
whether formal foreclosure proceedings have been initiated or
completed; or
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the debtor has effectively surrendered control of the underlying
collateral in contemplation of foreclosure.                                   

These situations are referred to as in-substance foreclosures. SFAS No.
114 recognizes the practical problems of accounting for the operation of an
asset the creditor does not possess, and states that a loan for which
foreclosure is probable should continue to be accounted for as a loan.

At December 31, 2001 and 2000, loans considered by management to be
impaired or in nonaccrual status totaled $471,000 and $329,000, respectively.

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The following tables sets forth certain information on nonaccrual loans
and other real estate owned, the ratio of such loans and other real estate
owned to total assets as of the dates indicated, and certain other related
information (as classified for regulatory reporting purposes):

|                                                                                |                                                                    |                                             |     |                        |     |      |     |     |     | 
|------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------- | --- | ---------------------- | --- | ---- | --- | --- | --- | 
|                                                                                |                                                                    |                                             |     | At December 31,       
|                                                                                |                                                                    |                                             |     |                       
|                                                                                |                                                                    |                                             |     | 2001                   |     | 2000
|                                                                                |                                                                    |                                             |     |                        |     |     
|                                                                                |                                                                    |                                             |     | (Dollars in thousands)
|Nonaccrual loans:                                                               |                                                                    |                                             |     |                        |     |      |     |    
|                                                                                | Real estate                                                        |                                             | $   | 427                    |     |      | $   | 250 |    
|                                                                                | Installment loans                                                  |                                             |     | 19                     |     |      |     | 23  |    
|                                                                                | Commercial and all other loans                                     |                                             |     | 25                     |     |      |     | 56  |    
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|                                                                                |                                                                    | Total nonaccrual loans                      |     |                        | 471 |      |     |     | 329 | 
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|Accruing loans over 90 days delinquent                                         
|                                                                                | Real estate loans                                                  |                                             |     | 12                     |     |      |     |    |    
|                                                                                | Installment loans                                                  |                                             |     |                       |     |      |     |    |    
|                                                                                | Commercial and all other loans                                     |                                             |     |                       |     |      |     |    |    
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|                                                                                |                                                                    | Total accrual loans over 90 days delinquent |     |                        | 12  |      |     |     |    | 
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|Troubled debt restructurings not included above                                 |                                                                    |                                             |    |                        |     |      |    |    
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|                                                                                |                                                                    | Total nonperforming loans                   |     |                        | 483 |      |     |     | 329 | 
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|Other real estate owned:                                                        |                                                                    |                                             |     |                        |     |      |     |    
|                                                                                | Real estate acquired by foreclosure or
deed in lieu of foreclosure |                                             |     | 29                     |     |      |     | 200 |    
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|                                                                                | Total nonperforming loans and other real
estate owned              |                                             | $   | 512                    |     |      | $   | 529 |    
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|Total nonperforming loans as a percentage
of total loans                        |                                                                    |                                             | .36 | %                      |     |      | .29 | %  
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|Total nonperforming loans as a percentage
of total assets                       |                                                                    |                                             | .25 | %                      |     |      | .18 | %  
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    
|Total nonperforming loans and real estate
owned as a percentage of total assets |                                                                    |                                             | .27 | %                      |     |      | .29 | %  
|                                                                                |                                                                    |                                             |     |                        |     |      |     |    

Allowance for Credit Losses

In originating loans, BLF recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a collateralized loan, the quality of the
collateral for the loan as well as general economic conditions. It is
managements policy to attempt to maintain an adequate allowance for credit
losses based on, among other things, BLFs historical loan loss experience,
evaluation of economic conditions and regular reviews of any delinquencies and
loan portfolio quality. Specific allowances are provided for individual loans
when ultimate collection is considered questionable by management after
reviewing the current status of loans that are contractually past due and
considering the net realizable value of the collateral for the loan.
Management recognizes the greater inherent risks in connection with

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commercial and consumer lending. SeeManagements Discussion and
Analysis of Financial Condition and Results of Operations  Provision
for Credit Losses.

Management continues to actively monitor BLFs asset quality
and to charge-off loans against the allowance for credit losses when
appropriate or to provide specific loss allowances when necessary.
Although management believes it uses the best information available
to make determinations with respect to the allowance for credit
losses, future adjustments may be necessary if economic conditions
differ from the economic conditions in the assumptions used in
making the initial determinations. Management considers several
factors in determining the reserves, including the favorable charge
off history, the relatively low level of nonperforming assets, and
the value of the underlying collateral. Furthermore, nonperforming
loans at December 31, 2001, declined to .27% of total loans,
compared to .29% at December 31, 2000. During 2001, BLFs allowance
increased $353,000, or 26.1%, and totaled $1,707,000 at December 31,
2001. While BLF experienced a reduction in loans charged off, lower
nonperforming assets, and higher recoveries in 2001 as compared to
2000, BLFs additional reserves were made to cover the loan growth
of approximately 21% in the same period. Management believes that
the allowance for credit losses was adequate at December 31, 2001.

BLF reports charge-offs and recoveries following regulatory
classification guidelines. The following table sets forth
information with respect to activity in BLFs allowance for credit
losses during the periods indicated:

|                                                                                          |                                |   |                        |     |      |   |        |     | 
|----------------------------------------------------------------------------------------- | ------------------------------ | - | ---------------------- | --- | ---- | - | ------ | --- | 
|                                                                                          |                                |   | At December 31,       
|                                                                                          |                                |   |                       
|                                                                                          |                                |   | 2001                   |     | 2000
|                                                                                          |                                |   |                        |     |     
|                                                                                          |                                |   | (Dollars in thousands)
|Allowance at beginning of period                                                          |                                | $ | 1,354                  |     |      | $ | 1,214  |    
|                                                                                          |                                |   |                        |     |      |   |        |    
|Charge-offs:                                                                              |                                |   |                        |     |      |   |        |    
|                                                                                          | Real estate loans              |   |                        | 28  |      |   |        | 33  | 
|                                                                                          | Installment loans              |   |                        | 79  |      |   |        | 63  | 
|                                                                                          | Commercial and all other loans |   |                        | 23  |      |   |        | 139 | 
|                                                                                          |                                |   |                        |     |      |   |        |    
|                                                                                          | Total charge-offs              |   |                        | 130 |      |   |        | 235 | 
|                                                                                          |                                |   |                        |     |      |   |        |    
|Recoveries:                                                                               |                                |   |                        |     |      |   |        |    
|                                                                                          | Real estate loans              |   |                        | 10  |      |   |        | 2   | 
|                                                                                          | Installment loans              |   |                        | 22  |      |   |        | 18  | 
|                                                                                          | Commercial and all other loan  |   |                        | 11  |      |   |        | 25  | 
|                                                                                          |                                |   |                        |     |      |   |        |    
|                                                                                          | Total recoveries               |   |                        | 43  |      |   |        | 45  | 
|                                                                                          |                                |   |                        |     |      |   |        |    
|Provision for credit losses charged to operations                                         |                                |   | 440                    |     |      |   | 330    |    
|                                                                                          |                                |   |                        |     |      |   |        |    
|Allowance at end of period                                                                |                                | $ | 1,707                  |     |      | $ | 1,354  |    
|                                                                                          |                                |   |                        |     |      |   |        |    
|Ratio of net charge-offs during the period
to average loans outstanding during the period |                                |   | 0.10                   | %   |      |   | 0.19   | %  
|                                                                                          |                                |   |                        |     |      |   |        |    
|Allowance for credit losses as a percentage
of total period-end loans                     |                                |   | 1.27                   | %   |      |   | 1.21   | %  
|                                                                                          |                                |   |                        |     |      |   |        |    
|Allowance for credit losses as a percentage
of nonperforming loans                        |                                |   | 353.42                 | %   |      |   | 411.55 | %  
|                                                                                          |                                |   |                        |     |      |   |        |    

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BLF classifies its loan portfolio for internal purposes as
mortgage loans, installment loans and commercial loans. BLF
prepares its quarterly computation of allowance for losses in this
manner. The following table presents information regarding the
BLFs total allowance for losses as well as the allocation of such
amounts to the various categories of loans (dollars in thousands)

|                                  |                                                 |   |                 |     |       |  |          |      |       |   |       |     |          |  |       |      |  
|--------------------------------- | ----------------------------------------------- | - | --------------- | --- | ----- |  | -------- | ---- | ----- | - | ----- | --- | -------- |  | ----- | ---- | -
|                                  |                                                 |   | At December 31,
|                                  |                                                 |   |                
|                                  |                                                 |   | 2001            |     | 2000 
|                                  |                                                 |   |                 |     |      
|                                  |                                                 |   |                 |     |       |  | % of     |      |       |   |       |     | % of    
|                                  |                                                 |   |                 |     |       |  | Loans to |      |       |   |       |     | Loans to
|                                  |                                                 |   |                 |     |       |  | Total    |      |       |   |       |     | Total   
|                                  |                                                 |   | Amount          |     | Loans |  | Amount   |      | Loans
|                                  |                                                 |   |                 |     |       |  |          |      |      
|                                  | Mortgage loan                                   |   | $               | 720 |       |  |          | 51.1 | %     |   | $     | 479 |          |  |       | 45.5 | %
|                                  | Installment loan                                |   |                 | 477 |       |  |          | 8.6  |       |   |       | 455 |          |  |       | 8.9  |  
|                                  | Commercial loan (including real estate secured) |   |                 | 510 |       |  |          | 40.3 |       |   |       | 420 |          |  |       | 45.6 |  
|                                  |                                                 |   |                 |     |       |  |          |      |       |   |       |     |          |  |       |     
|Total allowance for credit losses |                                                 | $ | 1,707           |     |       |  | 100.0    | %    |       | $ | 1,354 |     |          |  | 100.0 | %   
|                                  |                                                 |   |                 |     |       |  |          |      |       |   |       |     |          |  |       |     

The allowance for credit losses represented 1.27% of the total
loans outstanding as of December 31, 2001, compared with 1.21% of
the total loans outstanding as of December 31, 2000, which reflects
the growth in the loan portfolio and the reduction in nonperforming
loans.

Investment Securities

BLFs investment securities portfolio at December 31, 2001,
primarily consisted of United States Government agency obligations.
The following table sets forth the amortized cost of the BLFs
investment portfolio at the dates indicated:

|                       |                                          |                                                |   |                        |        |      |   |        |        | 
|---------------------- | ---------------------------------------- | ---------------------------------------------- | - | ---------------------- | ------ | ---- | - | ------ | ------ | 
|                       |                                          |                                                |   | At December 31,       
|                       |                                          |                                                |   |                       
|                       |                                          |                                                |   | 2001                   |        | 2000
|                       |                                          |                                                |   |                        |        |     
|                       |                                          |                                                |   | (Dollars in thousands)
|Investment securities: |                                          |                                                |   |                        |        |      |   |       
|Available-for-sale:    |                                          |                                                |   |                        |        |      |   |       
|                       | U.S. Government agency obligations       |                                                | $ | 27,360                 |        |      | $ | 55,544 |       
|                       | Other securities                         |                                                |   | 118                    |        |      |   | 118    |       
|                       |                                          |                                                |   |                        |        |      |   |       
|                       |                                          | Total available-for-sale                       |   |                        | 27,478 |      |   |        | 55,662 | 
|Held-to-maturity:      |                                          |                                                |   |                        |        |      |   |       
|                       | Obligations of states and municipalities |                                                |   | 2,900                  |        |      |   | 1,523  |       
|                       |                                          |                                                |   |                        |        |      |   |       
|                       |                                          | Total investment securities, at amortized cost |   | $                      | 30,378 |      |   | $      | 57,185 | 
|                       |                                          |                                                |   |                        |        |      |   |       

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The following table sets forth, by maturity distribution, certain
information pertaining to the investment securities portfolio:



|                   |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                  |  |      |      |   |   |       |       |  |  |      |      |  
|------------------ | ---------------------------------------- | ----- | - | ---------------------- | ----- | ------------- |  | ------------ | ---- | ------- | - | -------------- | ------ | ---------------- |  | ---- | ---- | - | - | ----- | ----- |  |  | ---- | ---- | -
|                   |                                          |       |   |                        |       |               |  |              |      |         |   | After One Year |        | After Five Years
|                   |                                          |       |   | One Year or Less       |       | to Five Years |  | to Ten Years
|                   |                                          |       |   |                        |       |               |  |             
|                   |                                          |       |   | Carrying               |       | Average       |  | Carrying     |      | Average |   | Carrying       |        | Average         
|                   |                                          |       |   | Value                  |       | Yield         |  | Value        |      | Yield   |   | Value          |        | Yield           
|                   |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                 
|                   |                                          |       |   | (Dollars in thousands)
|December 31, 2001: |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                  |  |      |      |   |   |       |       |  |  |     
|                   | U.S. Government and
agency securities    |       | $ | 1,079                  |       |               |  | 5.23         | %    |         | $ | 22,945         |        |                  |  | 4.74 | %    |   | $ | 3,588 |       |  |  | 4.93 | %   
|                   | Obligations of states
and municipalities |       |   |                       |       |               |  | 0.00         | %    |         |   | 50             |        |                  |  | 4.80 | %    |   |   | 203   |       |  |  | 4.00 | %   
|                   | Other securities                         |       |   |                       |       |               |  | 0.00         | %    |         |   |               |        |                  |  | 0.00 | %    |   |   |      |       |  |  | 0.00 | %   
|                   |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                  |  |      |      |   |   |       |       |  |  |     
|                   |                                          | Total |   | $                      | 1,079 |               |  |              | 5.23 | %       |   | $              | 22,995 |                  |  |      | 4.74 | % |   | $     | 3,791 |  |  |      | 4.86 | %
|                   |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                  |  |      |      |   |   |       |       |  |  |     
|December 31, 2000: |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                  |  |      |      |   |   |       |       |  |  |     
|                   | U.S. Government and
agency securities    |       | $ | 5,034                  |       |               |  | 5.43         | %    |         | $ | 49,163         |        |                  |  | 5.85 | %    |   | $ | 1,039 |       |  |  | 5.75 | %   
|                   | Obligations of states
and municipalities |       |   | 250                    |       |               |  | 6.06         | %    |         |   | 50             |        |                  |  | 4.80 | %    |   |   |      |       |  |  | 0.00 | %   
|                   | Other securities                         |       |   |                       |       |               |  | 0.00         | %    |         |   |               |        |                  |  | 0.00 | %    |   |   |      |       |  |  | 0.00 | %   
|                   |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                  |  |      |      |   |   |       |       |  |  |     
|                   |                                          | Total |   | $                      | 5,284 |               |  |              | 5.47 | %       |   | $              | 49,213 |                  |  |      | 5.84 | % |   | $     | 1,039 |  |  |      | 5.75 | %
|                   |                                          |       |   |                        |       |               |  |              |      |         |   |                |        |                  |  |      |      |   |   |       |       |  |  |     

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                   |                                          |       |   |                        |       |         |  |          |      |         |   |        |        |  |  |      |      |  
|------------------ | ---------------------------------------- | ----- | - | ---------------------- | ----- | ------- |  | -------- | ---- | ------- | - | ------ | ------ |  |  | ---- | ---- | -
|                   |                                          |       |   | After Ten Years        |       | Total   |  |          |      |        
|                   |                                          |       |   |                        |       |         |  |          |      |        
|                   |                                          |       |   | Carrying               |       | Average |  | Carrying |      | Average
|                   |                                          |       |   | Value                  |       | Yield   |  | Value    |      | Yield  
|                   |                                          |       |   |                        |       |         |  |          |      |        
|                   |                                          |       |   | (Dollars in thousands)
|December 31, 2001: |                                          |       |   |                        |       |         |  |          |      |         |   |        |        |  |  |     
|                   | U.S. Government and
agency securities    |       | $ |                       |       |         |  | 0.00     | %    |         | $ | 27,612 |        |  |  | 4.78 | %   
|                   | Obligations of states
and municipalities |       |   | 2,647                  |       |         |  | 4.54     | %    |         |   | 2,900  |        |  |  | 4.52 | %   
|                   | Other securities                         |       |   | 118                    |       |         |  | 6.00     | %    |         |   | 118    |        |  |  | 6.00 | %   
|                   |                                          |       |   |                        |       |         |  |          |      |         |   |        |        |  |  |     
|                   |                                          | Total |   | $                      | 2,765 |         |  |          | 4.60 | %       |   | $      | 30,630 |  |  |      | 4.76 | %
|                   |                                          |       |   |                        |       |         |  |          |      |         |   |        |        |  |  |     
|December 31, 2000: |                                          |       |   |                        |       |         |  |          |      |         |   |        |        |  |  |     
|                   | U.S. Government and
agency securities    |       | $ |                       |       |         |  | 0.00     | %    |         | $ | 55,236 |        |  |  | 5.81 | %   
|                   | Obligations of states
and municipalities |       |   | 1,223                  |       |         |  | 4.82     | %    |         |   | 1,523  |        |  |  | 4.99 | %   
|                   | Other securities                         |       |   | 118                    |       |         |  | 6.00     | %    |         |   | 118    |        |  |  | 6.00 | %   
|                   |                                          |       |   |                        |       |         |  |          |      |         |   |        |        |  |  |     
|                   |                                          | Total |   | $                      | 1,341 |         |  |          | 4.92 | %       |   | $      | 56,877 |  |  |      | 5.78 | %
|                   |                                          |       |   |                        |       |         |  |          |      |         |   |        |        |  |  |     

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Deposit Activities

Deposits are the major source of BLFs funds for lending and other
investment purposes. Deposits are attracted principally from within BLFs
primary market area through the offering of a broad variety of deposit
instruments including checking accounts, money market accounts, regular savings
accounts, term certificate accounts (including jumbo certificates in
denominations of $100,000 or more) and retirement savings plans.

Maturity terms, service fees and withdrawal penalties are established by
BLF on a periodic basis. The determination of rates and terms is predicated on
funds acquisition and liquidity requirements, rates paid by competitors, growth
goals and federal regulations.

FDIC regulations limit the ability of certain insured depository
institutions to accept, renew, or rollover deposits by offering rates of
interest which are significantly higher than the prevailing rates of interest
on deposits offered by other insured depository institutions having the same
type of charter in such depository institutions normal market area. Under
these regulations, well capitalized depository institutions may accept,
renew, or rollover deposits at such rates without restriction, adequately
capitalized depository institutions may accept, renew or rollover deposits at
such rates with a waiver from the FDIC (subject to certain restrictions on
payments of rates), and undercapitalized depository institutions may not
accept, renew or rollover deposits at such rates. The regulations contemplate
that the definitions of well capitalized, adequately capitalized and
undercapitalized will be the same as the definitions adopted by the agencies
to implement the prompt corrective action provisions of applicable law. See
Business  Supervision and Regulation  Capital Requirements. As of December
31, 2001, Big Lake National Bank met the definition of a well capitalized
depository institution.

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The following table shows the distribution of, and certain other
information relating to, BLFs deposit accounts by type:

|                         |                                   |   |                        |         |         |  |        |       |         |   |        |         |      |  |      |       |  
|------------------------ | --------------------------------- | - | ---------------------- | ------- | ------- |  | ------ | ----- | ------- | - | ------ | ------- | ---- |  | ---- | ----- | -
|                         |                                   |   | At December 31,       
|                         |                                   |   |                       
|                         |                                   |   | 2001                   |         | 2000   
|                         |                                   |   |                        |         |        
|                         |                                   |   |                        |         |         |  | % of   |       |         |   |        |         | % of
|                         |                                   |   | Amount                 |         | Deposit |  | Amount |       | Deposit
|                         |                                   |   |                        |         |         |  |        |       |        
|                         |                                   |   | (Dollars in thousands)
|Demand deposits          |                                   | $ | 40,883                 |         |         |  | 23.6   | %     |         | $ | 35,188 |         |      |  | 22.2 | %    
|NOW deposits             |                                   |   | 31,580                 |         |         |  | 18.2   |       |         |   | 36,906 |         |      |  | 23.3 |      
|Money market deposits    |                                   |   | 11,508                 |         |         |  | 6.6    |       |         |   | 6,114  |         |      |  | 3.9  |      
|Savings deposits         |                                   |   | 16,360                 |         |         |  | 9.5    |       |         |   | 15,521 |         |      |  | 9.8  |      
|                         |                                   |   |                        |         |         |  |        |       |         |   |        |         |      |  |      |      
|                         | Subtotal                          |   |                        | 100,331 |         |  |        | 57.9  |         |   |        | 93,729  |      |  |      | 59.2  |  
|                         |                                   |   |                        |         |         |  |        |       |         |   |        |         |      |  |      |      
|Certificates of deposit: |                                   |   |                        |         |         |  |        |       |         |   |        |         |      |  |      |      
|                         | Under 4.00%                       |   |                        | 36,484  |         |  |        | 21.1  |         |   |        | 422     |      |  |      | 0.3   |  
|                         | 4.00%-4.99%                       |   |                        | 11,205  |         |  |        | 6.5   |         |   |        | 6,898   |      |  |      | 4.4   |  
|                         | 5.00%-5.99%                       |   |                        | 19,043  |         |  |        | 11.0  |         |   |        | 24,360  |      |  |      | 15.4  |  
|                         | 6.00%-6.99%                       |   |                        | 6,229   |         |  |        | 3.5   |         |   |        | 32,793  |      |  |      | 20.7  |  
|                         | 7.00% and over                    |   |                        | 11      |         |  |        | 0.0   |         |   |        | 58      |      |  |      | 0.0   |  
|                         |                                   |   |                        |         |         |  |        |       |         |   |        |         |      |  |      |      
|                         | Total certificates of deposit (1) |   |                        | 72,972  |         |  |        | 42.1  |         |   |        | 64,531  |      |  |      | 40.8  |  
|                         |                                   |   |                        |         |         |  |        |       |         |   |        |         |      |  |      |      
|                         | Total deposits                    |   | $                      | 173,303 |         |  |        | 100.0 | %       |   | $      | 158,260 |      |  |      | 100.0 | %
|                         |                                   |   |                        |         |         |  |        |       |         |   |        |         |      |  |      |      



---

|(1) |  | Includes individual retirement accounts (IRAs) totaling $6,441 and
$4,111 at December 31, 2001 and 2000, respectively, all of which are in
the form of certificates of deposit.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following tables show the average amount outstanding and the average
rate paid on each of the following deposit account categories during the
periods indicated:

|                             |                |   |                         |         |         |  |         |      |         |   |        |         |  |  |      |      |  
|---------------------------- | -------------- | - | ----------------------- | ------- | ------- |  | ------- | ---- | ------- | - | ------ | ------- |  |  | ---- | ---- | -
|                             |                |   | Year Ended December 31,
|                             |                |   |                        
|                             |                |   | 2001                    |         | 2000   
|                             |                |   |                         |         |        
|                             |                |   | Average                 |         | Average |  | Average |      | Average
|                             |                |   | Balance                 |         | Rate    |  | Balance |      | Rate   
|                             |                |   |                         |         |         |  |         |      |        
|                             |                |   | (Dollars in thousands) 
|Demand, money market
and NOW |                | $ | 77,461                  |         |         |  | 1.43    | %    |         | $ | 72,142 |         |  |  | 1.84 | %   
|Savings deposits             |                |   | 15,899                  |         |         |  | 1.86    | %    |         |   | 16,234 |         |  |  | 2.21 | %   
|Certificates of deposit      |                |   | 71,677                  |         |         |  | 4.94    | %    |         |   | 65,400 |         |  |  | 5.40 | %   
|                             |                |   |                         |         |         |  |         |      |         |   |        |         |  |  |      |     
|                             | Total deposits |   | $                       | 165,037 |         |  |         | 3.07 | %       |   | $      | 153,776 |  |  |      | 3.39 | %
|                             |                |   |                         |         |         |  |         |      |         |   |        |         |  |  |      |     

BLF does not have a concentration of deposits from any one source, the
loss of which would have a material adverse effect on BLF. Management believes
that substantially all of BLFs depositors are residents in its primary market
areas. BLF currently does not accept brokered deposits. As shown in the
tables below, a significant amount of BLFs certificates of deposit will mature
during the year ending December 31, 2002. The high volume of maturities during
this period is primarily due to customer demand for certificates of deposit
having original maturities of 12 months or less. Based upon current and
anticipated levels of interest rates and past practice, BLF management
anticipates that substantially all of BLFs certificates of deposit maturing
during this time period will be renewed or replaced by certificates of deposit
issued to

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other customers at competitive market rates, which may be higher or lower than
the rates currently being paid. Consequently, BLF management does not believe
that the maturity of BLFs certificates of deposit during the year ending
December 31, 2002, will have a material adverse effect on BLFs liquidity.
However, if BLF is required to pay substantially higher rates to obtain the
renewal of these or other certificates of deposit or alternative sources of
funds, the higher net interest expense could have a material adverse effect on
BLFs net income.

The following tables present by various interest rate categories the
amounts of certificates of deposit at December 31, 2001 which mature during the
periods indicated:

|                      |                               |   |                        |        |             |   |           |        |         |   |       |       |  |   |       |       |  |   |        |        | 
|--------------------- | ----------------------------- | - | ---------------------- | ------ | ----------- | - | --------- | ------ | ------- | - | ----- | ----- |  | - | ----- | ----- |  | - | ------ | ------ | 
|                      |                               |   | Due                    |        | Due         |   | Due       |        | Due     |   |       |       | 
|                      |                               |   | Under Three            |        | 3 Months to |   | 1 Year to |        | Over    |   |       |       | 
|                      |                               |   | Months                 |        | 12 Months   |   | 3 Years   |        | 3 Years |   | Total
|                      |                               |   |                        |        |             |   |           |        |         |   |      
|                      |                               |   | (Dollars in thousands)
|At December 31, 2001: |                               |   |                        |        |             |   |           |        |         |   |       |       |  |   |       |       |  |   |        |       
|Under 4.00%           |                               | $ | 11,919                 |        |             | $ | 22,152    |        |         | $ | 1,741 |       |  | $ | 672   |       |  | $ | 36,484 |       
|4.00% - 4.99%         |                               |   | 2,843                  |        |             |   | 5,154     |        |         |   | 2,104 |       |  |   | 1,104 |       |  |   | 11,205 |       
|5.00% - 5.99%         |                               |   | 10,553                 |        |             |   | 2,280     |        |         |   | 5,224 |       |  |   | 986   |       |  |   | 19,043 |       
|6.00% - 6.99%         |                               |   | 2,007                  |        |             |   | 2,487     |        |         |   | 850   |       |  |   | 885   |       |  |   | 6,229  |       
|7.00% and over        |                               |   |                       |        |             |   | 11        |        |         |   |      |       |  |   |      |       |  |   | 11     |       
|                      |                               |   |                        |        |             |   |           |        |         |   |       |       |  |   |       |       |  |   |        |       
|                      | Total certificates of deposit |   | $                      | 27,322 |             |   | $         | 32,084 |         |   | $     | 9,919 |  |   | $     | 3,647 |  |   | $      | 72,972 | 
|                      |                               |   |                        |        |             |   |           |        |         |   |       |       |  |   |       |       |  |   |        |       

Jumbo certificates ($100,000 and over) mature as follows:

|                                      |  |                        |        |      |  |   |        | 
|------------------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | 
|                                      |  | At December 31,       
|                                      |  |                       
|                                      |  | 2001                   |        | 2000
|                                      |  |                        |        |     
|                                      |  | (Dollars in thousands)
|Due in three months or less           |  | $                      | 8,319  |      |  | $ | 3,513  | 
|Due from three months to one year     |  |                        | 8,173  |      |  |   | 7,872  | 
|Due from twelve months to three years |  |                        | 1,418  |      |  |   | 1,055  | 
|Due over three years                  |  |                        | 201    |      |  |   |       | 
|                                      |  |                        |        |      |  |   |        | 
|                                      |  | $                      | 18,111 |      |  | $ | 12,440 | 
|                                      |  |                        |        |      |  |   |        | 

The following table sets forth the net deposit flows of BLF during the periods indicated:

|                                      |                      |   |                        |        |      |   |       |       | 
|------------------------------------- | -------------------- | - | ---------------------- | ------ | ---- | - | ----- | ----- | 
|                                      |                      |   | At December 31,       
|                                      |                      |   |                       
|                                      |                      |   | 2001                   |        | 2000
|                                      |                      |   |                        |        |     
|                                      |                      |   | (Dollars in thousands)
|Net increase before interest credited |                      | $ | 9,980                  |        |      | $ | 4,827 |      
|Net interest credited and paid        |                      |   | 5,063                  |        |      |   | 4,980 |      
|                                      |                      |   |                        |        |      |   |       |      
|                                      | Net deposit increase |   | $                      | 15,043 |      |   | $     | 9,807 | 
|                                      |                      |   |                        |        |      |   |       |      

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Other Borrowings

During 2000, BLF sold securities under agreements to repurchase with a par
value of $7,935,000 and a fair value of $7,666,000 to secure overnight
borrowings totaling $7,516,000 at December 31, 2000. The interest rate on this
overnight borrowing was 6.91%. All securities sold under agreements to
repurchase were repaid in 2001.

BLF has noncontractual (or guidance) agreements with Independent Bankers
Bank of Florida and Compass Bank to borrow up to $2,000,000 and $500,000,
respectively. BLF had no borrowings from federal funds purchased at December
31, 2001.

Impact of Inflation and Changing Prices

The financial statements and related financial data concerning BLF
presented in this Proxy Statement 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 BLF 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, changes in interest rates have a more
significant impact on the performance of a financial institution than do the
effects of changes in the general rate of inflation and changes in prices.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services.

Future Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. This Statement is effective for
financial statements issued for fiscal years beginning after June 15, 2002.
Management does not believe that the effect of this new standard will have a
material impact on BLFs financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets.SFAS No. 144 provides one
accounting model, based on the framework established by SFAS No. 121, for
long-lived assets to be disposed of by sale and addresses significant
implementation issues. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The effect of this adoption on BLFs financial
statements, if any, has not been determined




Item 7.  Financial Statements

The financial statements of BLF as of and for the years ended December 31,
2001 and 2000 are set forth in this Form 10-KSB as Exhibit 13.1.

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

Not applicable.




PART III




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

The information contained under the sections captioned Directors and
Executive Officers under Election of Directors in the registrants
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
March 21, 2002, to be filed with the SEC pursuant to Regulation 14A within 120
days of the registrants fiscal year end (the Proxy Statement), is
incorporated herein by reference.




SECTION 16(a) REPORTING REQUIREMENTS

Under Section 16(a) of the Securities Exchange Act of 1934, directors and
executive officers of BLF, and persons who beneficially own more than 10% of
BLF Common Stock, are required to make certain filings on a timely basis with
the Securities and Exchange Commission. Reporting persons are required by SEC
regulations to furnish the BLF with copies of all Section 16(a) forms filed by
them. Based on its review of the copies of Section 16(a) forms received by it,
and on written representations from reporting persons concerning the necessity
of filing a Form 5  Annual Statement of Changes in Beneficial Ownership, BLF
believes that, during 2001, all filing requirements applicable to reporting
persons were met.




Item 10.  Executive Compensation

The information contained in the sections captioned Information About the
Board of Directors and Its Committees, and Executive Compensation and
Benefits under Election of Directors in the Proxy Statement, is incorporated
herein by reference.




Item 11.  Security Ownership of Certain Beneficial Owners and Management

Information contained in the sections captioned Directors and
Management and Principal Stock Ownership under Election of Directors, in
the Proxy Statement, is incorporated herein by reference.




Item 12.  Certain Relationships and Related Transactions

The information contained in the section entitled Certain Transactions
under Election of Directors in the Proxy Statement is incorporated herein by
reference.

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##### Table of Contents






Item 13.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

|    |  |                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The following documents are filed as part of this report:                                                                                        
|   
|1.  |  | Financial Statements                                                                                                                             
|   
|    |  | Independent Auditors Report                                                                                                                     
|    |  | Consolidated Statements of Financial Condition as of December 31,
2001 and 2000                                                                  
|    |  | Consolidated Statements of Operations and Comprehensive Income for
the years ended December 31, 2001 and 2000                                    
|    |  | Consolidated Statements of Cash Flows for the years ended December
31, 2001 and 2000                                                             
|    |  | Consolidated Statements of Changes in Stockholders Equity for the
years ended                                                                   
|    |  | December 31, 2001 and 2000
Notes to Consolidated Financial Statements                                                                            
|   
|2.  |  | Financial Statement Schedules                                                                                                                    
|   
|    |  | All schedules have been omitted as the required information is
either inapplicable or included in the Notes to Consolidated
Financial Statements.
|   
|3.  |  | Exhibits                                                                                                                                         



|     |  |   |  |                                                                                                                                                                                                              
|---- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | - |  | Restated Articles of Incorporation of Big Lake Financial
Corporation (Incorporated by reference to Exhibit 3.1 to
BLFs Registration Statement No. 333-30779 (the
Registration Statement))                 
|    
|3.2  |  | - |  | Bylaws of Big Lake Financial Corporation (Incorporated by
reference to Exhibit 3.2 to the Registration Statement)                                                                                            
|    
|4.1  |  | - |  | Specimen Stock Certificate of Big Lake Financial Corporation
(Incorporated by reference to Exhibit 4.1 to the
Registration Statement)                                                                        
|    
|10.1 |  | - |  | Big Lake Financial Corporation 1987 Stock Option Plan and
amendment thereto (Incorporated by reference to Exhibit 10.1
to the Registration Statement) *                                                      
|    
|10.2 |  | - |  | Lease dated December 11, 1989 between AAA Warehouse, Inc.
and Clewiston National Bank and Amendment thereto dated
November 28, 1995 (Incorporated by reference to Exhibit 10.2
to the Registration Statement)

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|     |  |   |  |                                                                                                                                                                                                                                 
|---- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.3 |  | - |  | Lease dated April 1, 1981 between Earl R. Gamer and
Clewiston National Bank and Modification and Lease Extension
Agreement thereto dated April 1, 1996 (Incorporated by
reference to Exhibit 10.3 to the Registration Statement)
|    
|10.4 |  | - |  | Employment agreement dated July 15, 1998
between Big Lake National Bank, Big Lake Financial
Corporation, and Joe G. Mullins (Incorporated by reference to
Exhibit to Form 10-KSB for the year ended December 31, 1999)*         
|    
|10.5 |  | - |  | Lease dated April 8, 1999 between Phillip Y. Berger and Big
Lake National Bank (Incorporated by reference to Exhibit
10.5 to Registration Statement)                                                                            
|    
|10.6 |  | - |  | Lease dated July 1, 1998 between First Union National Bank
and Albritton and See Properties and Modification and Lease
Assignment and Assumption Agreement (Incorporated by
reference to Exhibit 10.6 to Registration Statement)
|    
|13.1 |  | - |  | Big Lake Financial Corporation 2001 Annual Report                                                                                                                                                                               
|    
|21.1 |  | - |  | List of Subsidiaries of Big Lake Financial Corporation                                                                                                                                                                          
|    
|23.1 |  | - |  | Consent of Stevens, Powell & Company, P.A.                                                                                                                                                                                      



|* |  | Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit.
|- |  | --------------------------------------------------------------------------------------------------------

|    |  |                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------
|(b) |  | Reports on Form 8-K                                                                                    
|    |  | No current reports on Form 8-K were filed by BLF during the last
fiscal quarter covered by this report.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be duly signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Okeechobee, State of Florida, on the 20th day of February, 2002.

| |  |  |                                                
| |  |  | -----------------------------------------------
| |  |  | BIG LAKE FINANCIAL CORPORATION                 
|
| |  | 
|
| |  |  | -s- Edwin E. Walpole, III                      
|
| |  |  | Chairman, President and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on February 20, 2002.

|          |  |                          |  |                                                                          
|--------- |  | ------------------------ |  | -------------------------------------------------------------------------
|Signature |  |                          |  | Title                                                                    
|          |  |                          |  |                                                                          
|-s-       |  | Edwin E. Walpole, III    |  | Chairman of the Board, President and Chief Executive Officer and Director
|         
|          |  | Edwin E. Walpole, III   
|         
|-s-       |  | Anita DeWitt             |  | Treasurer (Principal Financial Officer and Principal Accounting Officer) 
|         
|          |  | Anita DeWitt            
|         
|-s-       |  | Joe G. Mullins           |  | Executive Vice President and Chief Administrative Officer and Director   
|         
|          |  | Joe G. Mullins          
|         
|-s-       |  | John W. Abney, Sr.       |  | Director                                                                 
|         
|          |  | John W. Abney, Sr.      
|         
|-s-       |  | Mary Beth Cooper         |  | Director                                                                 
|         
|          |  | Mary Beth Cooper        
|         
|-s-       |  | H. Gilbert Culbreth, Jr. |  | Director                                                                 
|         
|          |  | H. Gilbert Culbreth, Jr.
|         
|-s-       |  | Bobby H. Tucker          |  | Director                                                                 
|         
|          |  | Bobby H. Tucker         
|         
|-s-       |  | John B. Boy              |  | Director                                                                 
|         
|          |  | John B. Boy             
|         
|-s-       |  | Thomas A. Smith          |  | Director                                                                 
|         
|          |  | Thomas A. Smith         
|         
|-s-       |  | Curtis S. Fry            |  | Director                                                                 
|         
|          |  | Curtis S. Fry           
|         
|-s-       |  | Robert Coker             |  | Director                                                                 
|         
|          |  | Robert Coker            

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Big Lake Financial Corporation
Form 10-KSB
For Fiscal Year Ending December 31, 2001




EXHIBIT INDEX

|        |  |                                                   |  |      |  | 
|------- |  | ------------------------------------------------- |  | ---- |  | 
|Exhibit |  |                                                   |  | Page
|No.     |  | Exhibit                                           |  | No. 
|        |  |                                                   |  |     
|13.1    |  | Big Lake Financial Corporation 2001 Annual Report
|21.1    |  | Subsidiaries of the Registrant                   
|23.1    |  | Consent of Stevens, Powell & Company, P.A.       

43