<Page>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                   FORM 10-Q

<Table>
<C>        <S>
   /X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</Table>

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
                        COMMISSION FILE NUMBER 000-25193

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

                     CAPITAL CROSSING PREFERRED CORPORATION

             (Exact name of registrant as specified in its charter)

<Table>
<S>                                            <C>
             MASSACHUSETTS                                  04-3439366
       (State of incorporation)                 (IRS Employer Identification No.)

      101 SUMMER STREET, BOSTON,                              02110
             MASSACHUSETTS                                  (zip code)
    (Address of principal executive
               offices)
</Table>

       Registrant's telephone number, including area code: (617) 880-1000

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

    Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

    The number of shares outstanding of the registrant's sole class of common
stock was 100 shares, $.01 par value per share, as of August 10, 2001.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<Page>
                     CAPITAL CROSSING PREFERRED CORPORATION
                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                                     PAGE
                                                                                   --------
<S>                  <C>                                                           <C>
PART I--FINANCIAL INFORMATION

        Item 1.      Financial Statements:

                     a)  Balance Sheets..........................................      1

                     b)  Statements of Income....................................      2

                     c)  Statements of Changes in Stockholders' Equity...........      3

                     d)  Statements of Cash Flows................................      4

                     e)  Notes to Financial Statements...........................      5

        Item 2.      Management's Discussion and Analysis of Financial Condition
                       and Results of Operations.................................      7

                     Risk Factors and Other Factors Affecting Forward-Looking
                       Statements................................................     15

        Item 3.      Quantitative and Qualitative Disclosures about Market
                       Risk......................................................     24

PART II--OTHER INFORMATION

        Item 1.      Legal Proceedings...........................................     25

        Item 2.      Changes in Securities and Uses of Proceeds..................     25

        Item 4.      Submission of Matters to a Vote of Security Holders.........     25

        Item 6.      Exhibits and Reports on Form 8-K............................     25

                     Signatures..................................................     26
</Table>
<Page>
                                     PART I

ITEM 1. FINANCIAL STATEMENTS

                     CAPITAL CROSSING PREFERRED CORPORATION

                                 BALANCE SHEETS

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>
                                                               JUNE 30,     DECEMBER 31,
                                                                 2001           2000
                                                              -----------   ------------
                                                              (UNAUDITED)
<S>                                                           <C>           <C>
                                         ASSETS
Cash account with Capital Crossing Bank.....................   $     85       $     85
Interest-bearing deposits with Capital Crossing Bank........    105,319         55,227
                                                               --------       --------
    Total cash and cash equivalents.........................    105,404         55,312
Certificate of deposit......................................        100            100
Loans, net of deferred loan income..........................    153,021        178,373
  Less discount.............................................     (9,688)       (11,966)
  Less allowance for loan losses............................     (3,792)        (3,795)
                                                               --------       --------
    Loans, net..............................................    139,541        162,612
                                                               --------       --------
Accrued interest receivable.................................        894          1,159
Other assets................................................        649             --
                                                               --------       --------
                                                               $246,588       $219,183
                                                               ========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other liabilities......................   $    785       $    276
                                                               --------       --------
    Total liabilities.......................................        785            276
                                                               --------       --------
Stockholders' equity:
Preferred stock, Series A, 9.75% non-cumulative,
  exchangeable; $.01 par value; $10 liquidation value per
  share; 1,449,000 shares authorized, 1,416,130 shares
  issued and outstanding....................................         14             14
Preferred stock, Series B, 8% cumulative, non convertible;
  $.01 par value; $1,000 liquidation value per share plus
  accrued dividends; 1,000 shares authorized, 941 and 946
  shares issued and outstanding, respectively...............         --             --
Preferred stock, Series C, 10.25% non-cumulative,
  exchangeable; $.01 par value; $10 liquidation value per
  share; 1,840,000 shares authorized, issued and outstanding
  at June 30, 2001..........................................         18             --
Common stock, $.01 par value, 100 shares authorized, issued
  and outstanding...........................................         --             --
Additional paid-in capital..................................    235,689        218,893
Retained earnings...........................................     10,082             --
                                                               --------       --------
    Total stockholders' equity..............................    245,803        218,907
                                                               --------       --------
                                                               $246,588       $219,183
                                                               ========       ========
</Table>

                See accompanying notes to financial statements.

                                       1
<Page>
                     CAPITAL CROSSING PREFERRED CORPORATION

                              STATEMENTS OF INCOME

                                  (UNAUDITED)

<Table>
<Caption>
                                                         THREE MONTHS ENDED     SIX MONTHS ENDED
                                                              JUNE 30,              JUNE 30,
                                                         -------------------   -------------------
                                                           2001       2000       2001       2000
                                                         --------   --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                      <C>        <C>        <C>        <C>
Interest income:
  Interest and fees on loans...........................   $4,310     $5,359    $ 9,359     $8,823
  Interest on interest-bearing deposits................    1,011        469      1,830        787
                                                          ------     ------    -------     ------
    Total interest income..............................    5,321      5,828     11,189      9,610
                                                          ------     ------    -------     ------
Other income:
  Guarantee fee income.................................       20         --         40         --
                                                          ------     ------    -------     ------
Operating expenses:
  Loan servicing and advisory services.................      100        132        219        225
  Other real estate owned income.......................       --         --         --       (245)
  Other general and administrative.....................       19         27         37         99
                                                          ------     ------    -------     ------
    Total operating expenses...........................      119        159        256         79
                                                          ------     ------    -------     ------
    Net income.........................................    5,222      5,669     10,973      9,531
Preferred stock dividends..............................      527        366        891        731
                                                          ------     ------    -------     ------
Net income available to common stockholder.............   $4,695     $5,303    $10,082     $8,800
                                                          ======     ======    =======     ======
</Table>

                See accompanying notes to financial statements.

                                       2
<Page>
                     CAPITAL CROSSING PREFERRED CORPORATION
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                  (UNAUDITED)
<Table>
<Caption>
                                                                  SIX MONTHS ENDED JUNE 30, 2001
                                                ------------------------------------------------------------------
                                                                         PREFERRED STOCK        PREFERRED STOCK
                                                    COMMON STOCK             SERIES A               SERIES B
                                                --------------------   --------------------   --------------------
                                                 SHARES     AMOUNT      SHARES      AMOUNT     SHARES     AMOUNT
                                                --------   ---------   ---------   --------   --------   ---------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                             <C>        <C>         <C>         <C>        <C>        <C>
Balance at December 31, 2000..................    100      $     --    1,416,130     $14         946     $     --
Net income....................................     --            --           --      --          --           --
Issuance of preferred stock, Series C.........     --            --           --      --          --           --
Dividends on preferred stock, Series A........     --            --           --      --          --           --
Cumulative dividends on preferred stock,
  Series B....................................     --            --           --      --          --           --
Dividends on preferred stock, Series C........     --            --           --      --          --           --
Repurchase of preferred stock, Series B.......     --            --           --      --          (5)          --
                                                  ---      ---------   ---------     ---       -----     ---------
Balance at June 30, 2001......................    100      $     --    1,416,130     $14         941     $     --
                                                  ===      =========   =========     ===       =====     =========

<Caption>
                                                             SIX MONTHS ENDED JUNE 30, 2001
                                                --------------------------------------------------------
                                                   PREFERRED STOCK
                                                      SERIES C          ADDITIONAL
                                                ---------------------    PAID-IN     RETAINED    TOTAL
                                                 SHARES      AMOUNT      CAPITAL     EARNINGS    AMOUNT
                                                ---------   ---------   ----------   --------   --------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                             <C>         <C>         <C>          <C>        <C>
Balance at December 31, 2000..................         --   $     --     $218,893    $    --    $218,907
Net income....................................         --         --           --     10,973      10,973
Issuance of preferred stock, Series C.........  1,840,000         18       16,801         --      16,819
Dividends on preferred stock, Series A........         --         --           --       (690)       (690)
Cumulative dividends on preferred stock,
  Series B....................................         --         --           --        (38)        (38)
Dividends on preferred stock, Series C........         --         --           --       (163)       (163)
Repurchase of preferred stock, Series B.......         --         --           (5)        --          (5)
                                                ---------   ---------    --------    -------    --------
Balance at June 30, 2001......................  1,840,000   $     18     $235,689    $10,082    $245,803
                                                =========   =========    ========    =======    ========
</Table>
<Table>
<Caption>
                                                                  SIX MONTHS ENDED JUNE 30, 2000
                                                ------------------------------------------------------------------
                                                                         PREFERRED STOCK        PREFERRED STOCK
                                                    COMMON STOCK             SERIES A               SERIES B
                                                --------------------   --------------------   --------------------
                                                 SHARES     AMOUNT      SHARES      AMOUNT     SHARES     AMOUNT
                                                --------   ---------   ---------   --------   --------   ---------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                             <C>        <C>         <C>         <C>        <C>        <C>
Balance at December 31, 1999..................    100      $     --    1,416,130     $14       1,000     $     --
Net income....................................     --            --           --      --          --           --
Capital contribution from common
  stockholder.................................     --            --           --      --          --           --
Dividends on preferred stock, Series A........     --            --           --      --          --           --
Cumulative dividends on preferred stock,
  Series B....................................     --            --           --      --          --           --
Repurchase of preferred stock, Series B.......     --            --           --      --          (2)          --
                                                  ---      ---------   ---------     ---       -----     ---------
Balance at June 30, 2000......................    100      $     --    1,416,130     $14         998     $     --
                                                  ===      =========   =========     ===       =====     =========

<Caption>
                                                             SIX MONTHS ENDED JUNE 30, 2000
                                                --------------------------------------------------------
                                                   PREFERRED STOCK
                                                      SERIES C          ADDITIONAL
                                                ---------------------    PAID-IN     RETAINED    TOTAL
                                                 SHARES      AMOUNT      CAPITAL     EARNINGS    AMOUNT
                                                ---------   ---------   ----------   --------   --------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                             <C>         <C>         <C>          <C>        <C>
Balance at December 31, 1999..................         --   $     --      167,839    $   814    $168,667
Net income....................................         --         --           --      9,531       9,531
Capital contribution from common
  stockholder.................................         --         --       80,433         --      80,433
Dividends on preferred stock, Series A........         --         --           --       (691)       (691)
Cumulative dividends on preferred stock,
  Series B....................................         --         --           --        (40)        (40)
Repurchase of preferred stock, Series B.......         --         --           (2)        --          (2)
                                                ---------   ---------    --------    -------    --------
Balance at June 30, 2000......................         --   $     --     $248,270    $ 9,614    $257,898
                                                =========   =========    ========    =======    ========
</Table>

                                       3
<Page>
                     CAPITAL CROSSING PREFERRED CORPORATION

                            STATEMENTS OF CASH FLOWS

                                  (UNAUDITED)

<Table>
<Caption>
                                                              SIX MONTHS ENDED JUNE 30,
                                                              -------------------------
                                                                 2001          2000
                                                              -----------   -----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>           <C>
Cash flows from operating activities:
  Net income................................................   $ 10,973       $ 9,531
  Adjustments to reconcile net income to net cash from
    operating activities:
    Net gain on sale and disposition of other real estate
      owned.................................................         --          (245)
    Other, net..............................................        (38)         (409)
                                                               --------       -------
      Net cash from operating activities....................     10,935         8,877
                                                               --------       -------
Cash flows from investing activities:
  Amortization and payoffs on loans.........................     22,904        17,173
  Proceeds from sales of loans to Capital Crossing Bank.....        167            --
  Sales of other real estate owned..........................         --           679
                                                               --------       -------
      Net cash from investing activities....................     23,071        17,852
                                                               --------       -------
Cash flows from financing activities:
  Issuance of preferred stock, Series C.....................     16,819            --
  Repurchase of preferred stock, Series B...................         (5)           --
  Payment of preferred stock dividends......................       (728)         (731)
                                                               --------       -------
      Net cash from (used in) financing activities..........     16,086          (731)
                                                               --------       -------
Net change in cash and cash equivalents.....................     50,092        25,998
Cash and cash equivalents at beginning of period............     55,312        32,433
                                                               --------       -------
Cash and cash equivalents at end of period..................   $105,404       $58,431
                                                               ========       =======
Supplemental information:
  Dividends declared, not paid, on preferred stock, Series
    A.......................................................        115           115
  Cumulative dividends accrued, not paid on preferred stock,
    Series B................................................         20            20
  Dividends declared, not paid, on preferred stock, Series
    C.......................................................        163            --
  Capital contributions from common stockholder in the form
    of mortgage loans.......................................         --        80,433
</Table>

                See accompanying notes to financial statements.

                                       4
<Page>
                     CAPITAL CROSSING PREFERRED CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
            THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2001 AND 2000

NOTE 1.  BASIS OF PRESENTATION

    Capital Crossing Preferred Corporation ("Capital Crossing Preferred"),
formerly Atlantic Preferred Capital Corporation, is a Massachusetts corporation
organized on March 20, 1998, to acquire and hold real estate assets. Capital
Crossing Bank ("Capital Crossing" or the "Bank"), a federally insured
Massachusetts trust company, owns all of Capital Crossing Preferred's common
stock. The Bank is in compliance with its regulatory capital requirements at
June 30, 2001.

    On March 31, 1998, Capital Crossing Preferred was initially capitalized with
the issuance to the Bank of 100 shares of Capital Crossing Preferred's common
stock, $.01 par value, and 1,000 shares of Series B preferred stock, $.01 par
value, with the Bank transferring to Capital Crossing Preferred a portfolio of
loans at its estimated fair value of $140,740,000. Such loans were recorded in
the accompanying balance sheet at the Bank's historical cost, which approximated
their estimated fair values.

    The financial information as of June 30, 2001 and the results of operations
for the three and six months ended June 30, 2001 and 2000, changes in
stockholders' equity and cash flows for the six months ended June 30, 2001 and
2000 are unaudited; however, in the opinion of management, the financial
information reflects all adjustments (consisting solely of normal recurring
accruals) necessary for a fair presentation in accordance with generally
accepted accounting principles. Interim results are not necessarily indicative
of results to be expected for the entire year. These interim statements are
intended to be read in conjunction with the financial statements presented in
Capital Crossing Preferred's Annual Report on Form 10-K as of and for the year
ended December 31, 2000.

    In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material estimates
that are particularly susceptible to significant change in the near term relate
to the determination of the allowance for losses on loans, the allocation of
purchase discount between amortizing and non-amortizing portions, and the rate
at which discount is accreted into interest income.

NOTE 2.  ISSUANCE OF SERIES C PREFERRED STOCK

    On May 31, 2001, Capital Crossing Preferred completed its public offering of
1,840,000 (including 240,000 shares issued upon the exercise of the
underwriters' overallotment option) Series C preferred shares. The offering was
made pursuant to a Registration Statement on Form S-11, originally filed with
the Securities and Exchange Commission on March 14, 2001, as amended (Commission
File No. 333-57044), which was declared effective on May 24, 2001. The offering
commenced on May 25, 2001 and terminated shortly thereafter upon the sale into
the public market of all of the registered Series C preferred shares.

    The Series C preferred shares form a series of the preferred stock of
Capital Crossing Preferred. The Series C preferred shares are validly issued,
fully paid and non-assessable. The holders of the Series C preferred shares have
no preemptive rights with respect to any shares of our capital stock. The
Series C preferred shares are not subject to any sinking fund or other
obligation for their repurchase or retirement. The Series C preferred shares are
not convertible into any of our other securities. The Series C preferred shares
will be exchanged on a one hundred-for-one basis for preferred shares of the
Bank if directed by the FDIC under certain circumstances. The Series C preferred
shares rank senior to our common stock and Series B preferred stock and on
parity with our Series A preferred shares, as

                                       5
<Page>
to dividends and in liquidation. Upon our liquidation, any obligations to our
creditors at that time, including any amounts due or which may become due under
our guarantee of the Bank's obligations to the Federal Home Loan Bank of Boston,
would rank senior to the Series C preferred shares.

    Holders of Series C preferred shares are entitled to receive, if, when and
as declared by our Board of Directors out of assets legally available therefor,
monthly cash dividends at the rate of 10.25% per year of the liquidation
preference, equivalent to $1.025 per share per year. If declared, dividends on
the Series C preferred shares for each monthly period shall be payable on the
fifteenth day of the following month, commencing on July 15, 2001, to holders of
record on the last business day of the monthly dividend period. Monthly dividend
periods will commence on the first day of each month and on the date of original
issue for the initial dividend period. The amount of dividends, if declared,
payable for the initial period or any period shorter than a full dividend period
shall be computed on the basis of 30-day months, a 360-day year and the actual
number of days elapsed in the period. Dividends in each period will accrue from
the first day of such period, whether or not declared or paid for the prior
monthly period.

    The right of holders of Series C preferred shares to receive dividends is
non-cumulative. Accordingly, if the Board of Directors fails to declare a
dividend on the Series C preferred shares for a monthly dividend period, then
holders of the Series C preferred shares will have no right to receive the
amount of the undeclared dividend for that period, and we will have no
obligation to pay the undeclared dividend for that period, whether or not
dividends are declared and paid for any future period with respect to either the
Series C preferred shares, any other series of preferred stock or the common
stock. If less than full dividends are declared on the Series C preferred shares
by the Board of Directors for a monthly dividend period, the holders of the
Series C preferred shares will have no right to receive the amount of such
undeclared dividends for that period, and we will have no obligation to pay a
full dividend for that period, whether or not dividends are declared and paid
for any future period with respect to either the Series C preferred shares, any
other series of preferred stock or the common stock.

NOTE 3.  COMMITMENTS AND CONTINGENCIES

    Capital Crossing Preferred has guaranteed all of the obligations of the Bank
under advances the Bank may receive from time to time from the Federal Home Loan
Bank of Boston ("FHLBB"), and has agreed to pledge a significant amount of its
assets in connection with those advances. This guarantee would rank senior to
the preferred shares upon liquidation. Capital Crossing Preferred's obligations
under this agreement are limited by applicable laws pertaining to fraudulent
conveyance and fraudulent transfer. The assets pledged to the FHLBB will vary
from time to time, however the potential exists for Capital Crossing Preferred
to pledge all of its assets to the FHLBB to secure advances to the Bank. In
addition, the Bank has pledged to the FHLBB all of the shares of Capital
Crossing Preferred's capital stock it owns as collateral for its FHLBB
borrowings. Under the terms of the pledge, if the Bank becomes undercapitalized
the FHLBB may require the Bank to dissolve Capital Crossing Preferred such that
the assets of Capital Crossing Preferred are distributed to the Bank. In such
circumstance, holders of the Series A and Series C preferred stock would receive
their liquidation preference only to the extent there are available assets of
Capital Crossing Preferred following satisfaction of its outstanding
obligations, including its guarantee of the Bank's FHLBB borrowings. At
June 30, 2001, approximately $35.3 million or 14% of Capital Crossing
Preferred's assets had been pledged to and accepted by the FHLBB to secure
advances to the Bank. The Bank has also agreed that it will not request or
accept advances from the FHLBB in excess of Capital Crossing Preferred's total
stockholder's equity, less the stockholder's equity attributable to the
Series A and Series C preferred shares. As of June 30, 2001, this restriction
would limit the Bank's ability to receive advances in excess of approximately
$213.2 million. As of June 30, 2001, the Bank had $139.0 million in outstanding
FHLBB borrowings.

                                       6
<Page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

    Statements made or incorporated in this Quarterly Report on Form 10-Q
include a number of forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include, without limitation,
statements containing the words "anticipates," "believes," "estimates,"
"assumes", "expects," "intends," "future" and words of similar import which
express management's belief, expectations or intentions regarding the future
performance of Capital Crossing Preferred. These forward-looking statements are
made as of the date of this report and we do not undertake to update them at
anytime after the date hereof. Capital Crossing Preferred's actual results could
differ materially from those set forth in the forward-looking statements as a
result, among other factors, of changes in general, national or regional
economic conditions, changes in interest rates, changes in loan and lease
default and charge-off rates relating to a decline in the commercial real estate
market or otherwise, the possible exchange of the Series A or Series C preferred
shares for preferred shares of Capital Crossing at the direction of the FDIC if
Capital Crossing becomes or may in the near term become undercapitalized or is
placed in conservatorship or receivership, risks associated with mortgage loans
generally, and particularly the geographic concentration of Capital Crossing
Preferred's loan portfolio at June 30, 2001 in New England and California, and
the failure by Capital Crossing Preferred to maintain its status as a REIT for
federal income tax purposes, changes in the assumptions used in making such
forward-looking statements, and the factors discussed in the section entitled
"Risk Factors and Other Factors Affecting Forward-Looking Statements" of this
Form 10-Q.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 AND 2000

    Net income available to common stockholders decreased $608,000, or 11.5%, to
$4.7 million for the three months ended June 30, 2001 compared to $5.3 million
for the three months ended June 30, 2000. This decrease is primarily
attributable to a decrease in total interest income of $507,000, or 8.7%, to
$5.3 million for the three months ended June 30, 2001, compared to $5.8 million
for the three months ended June 30, 2000. Interest income from loans for the
three months ended June 30, 2001 decreased $1.0 million, or 19.6%, to
$4.3 million compared to $5.4 million for the three months ended June 30, 2000.

    The following table sets forth the yields on Capital Crossing Preferred's
earning assets for the periods indicated:

<Table>
<Caption>
                                                              THREE MONTHS ENDED JUNE 30,
                                            ---------------------------------------------------------------
                                                         2001                             2000
                                            ------------------------------   ------------------------------
                                            AVERAGE    INTEREST              AVERAGE    INTEREST
                                            BALANCE     INCOME     YIELD     BALANCE     INCOME     YIELD
                                            --------   --------   --------   --------   --------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>
Loans, net (1)............................  $144,263    $4,310     11.98%    $189,927    $5,359     11.35%
Interest-bearing deposits.................    87,153     1,011      4.65       49,665       469      3.80
                                            --------    ------     -----     --------    ------     -----
                                            $231,416    $5,321      9.22%    $239,592    $5,828      9.78%
                                            ========    ======     =====     ========    ======     =====
</Table>

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

(1) Non-performing loans are excluded from average balance calculations.

    The weighted average yield on interest-earning assets decreased to 9.22% for
the three months ended June 30, 2001 from 9.78% for the three months ended
June 30, 2000. The decrease in yield is due to the change in composition in
interest-earning assets for the three months ended June 30, 2001 as compared to
2000. For the three months ended June 30, 2001, there was a higher percentage of
interest-bearing deposits bearing an overall lower yield. During the three
months ended June 30, 2001

                                       7
<Page>
and 2000, the yield on the loan portfolio was 11.98% and 11.35%, respectively.
This increase is primarily a result of an increase in income recognized at the
time of individual loan payoffs. Average loans, net for the three months ended
June 30, 2001 totaled $144.3 million compared to $189.9 million for the three
months ended June 30, 2000. This decrease is due primarily to pay-offs on loans
during the period.

    Income on loans includes the portion of the purchase discount that is
accreted into income over the remaining lives of the related loans using the
interest method. Because the carrying value of the loan portfolio is net of
purchase discount, the related yield on this portfolio generally is higher than
the aggregate contractual rate paid on the loans. The total yield includes the
excess of a loan's expected discounted future cash flows over its net
investment, recognized using the interest method.

    When a loan is paid off, the excess of any cash received over the net
investment is recorded as interest income. In addition to the amount of purchase
discount that is recognized at that time, income may also include interest owed
by the borrower prior to Capital Crossing's acquisition of the loan, interest
collected if on non-accrual status and other loan fees ("other interest and fee
income"). The following table sets forth, for the periods indicated, the
components of interest and fees on loans and leases. We cannot assure you that
future interest income, including the yields and related level of such income,
or the relative portion attributable to loan pay-offs as compared to other
sources, will increase or remain the same in the future.

<Table>
<Caption>
                                                                     THREE MONTHS ENDED JUNE 30,
                                                              -----------------------------------------
                                                                     2001                  2000
                                                              -------------------   -------------------
                                                              INTEREST              INTEREST
                                                               INCOME     YIELD      INCOME     YIELD
                                                              --------   --------   --------   --------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                                           <C>        <C>        <C>        <C>
Regularly scheduled interest and accretion income...........   $3,648     10.14%     $4,887     10.35%
Interest and fee income recognized on loan pay-offs:
  Non-amortizing discount...................................      391      1.09         259      0.55
  Amortizing discount.......................................      199      0.55         213      0.45
  Other interest and fee income.............................       72      0.20          --        --
                                                               ------     -----      ------     -----
                                                                  662      1.84         472      1.00
                                                               ------     -----      ------     -----
                                                               $4,310     11.98%     $5,359     11.35%
                                                               ======     =====      ======     =====
</Table>

    The amount of loan payoffs and related income is influenced by several
factors, including the interest rate environment, the real estate market in
particular areas, the timing of transactions, and circumstances related to
individual borrowers and loans.

    The average balance of interest-bearing deposits at Capital Crossing
increased $37.5 million to $87.2 million for the three months ended June 30,
2001, compared to $49.7 million for 2000 as a result of cash accumulated from
loan pay-offs and proceeds received from the issuance of Series C preferred
stock. The yield on interest-bearing deposits increased in 2001 because the rate
paid by the Bank on the money market account held by Capital Crossing Preferred
increased in 2001 compared to 2000.

    Guarantee fee income for the three months ended June 30, 2001 increased
$20,000. Effective July 1, 2000, Capital Crossing Preferred entered into an
agreement to make certain assets available to be pledged in connection with
borrowings of Capital Crossing from the FHLBB. Capital Crossing Preferred
receives an annual fee of $80,000 from Capital Crossing under this agreement.

    Loan servicing and advisory services for the three months ended June 30,
2001 decreased $32,000 or 24.2%, to $100,000 compared to $132,000 for the three
months ended June 30, 2000. This decrease is due to the overall decrease in the
size of the loan portfolio.

                                       8
<Page>
    General and administrative expenses for the three months ended June 30, 2001
decreased $8,000, or 29.6%, to $19,000 compared to $27,000 for the three months
ended June 30, 2000. This decrease is due primarily to a decrease in
professional services, including consulting and legal services.

    Preferred stock dividends increased as a result of dividends on Series C
preferred stock issued on May 31, 2001.

    We intend to pay dividends on our preferred stock and common stock in
amounts necessary to continue to preserve our status as REIT under the Internal
Revenue Code.

SIX MONTHS ENDED JUNE 30, 2001 AND 2000

    Net income available to common stockholders increased $1.3 million, or
14.6%, to $10.1 million for the six months ended June 30, 2001 compared to
$8.8 million for the six months ended June 30, 2000. Total interest income
increased $1.6 million, or 16.4%, to $11.2 million for the six months ended
June 30, 2001, compared to $9.6 million for the six months ended June 30, 2000.
Interest income from loans for the six months ended June 30, 2001 increased
$536,000, or 6.08%, to $9.4 million compared to $8.8 million for the six months
ended June 30, 2000.

    The yields on Capital Crossing Preferred's earning assets are summarized as
follows:

<Table>
<Caption>
                                                              SIX MONTHS ENDED JUNE 30,
                                           ---------------------------------------------------------------
                                                        2001                             2000
                                           ------------------------------   ------------------------------
                                           AVERAGE    INTEREST              AVERAGE    INTEREST
                                           BALANCE     INCOME     YIELD     BALANCE     INCOME     YIELD
                                           --------   --------   --------   --------   --------   --------
                                                               (DOLLARS IN THOUSANDS)
<S>                                        <C>        <C>        <C>        <C>        <C>        <C>
Loans, net...............................  $150,873   $ 9,359     12.51%    $161,404    $8,823     10.99%
Interest-bearing deposits................    75,018     1,830      4.92       43,640       787      3.63
                                           --------   -------     -----     --------    ------     -----
                                           $225,891   $11,189      9.99%    $205,044    $9,610      9.43%
                                           ========   =======     =====     ========    ======     =====
</Table>

    The weighted average yield on interest-earning assets increased to 9.99% for
the six months ended June 30, 2001 from 9.43% for the six months ended June 30,
2000. For the six months ended June 30, 2001 and 2000, the yield on the loan
portfolio was 12.51% and 10.99%, respectively. This increase is primarily a
result of an increase in income recognized at the time individual loan pay-offs.
Average loans, net for the six months ended June 30, 2001 totaled
$150.9 million compared to $161.4 million for the six months ended June 30,
2000. This decrease is due primarily to pay-offs and amortization on loans
during the period.

    Income on loans includes the portion of the purchase discount that is
accreted into income over the remaining lives of the related loans using the
interest method. Because the carrying value of the loan portfolio is net of
purchase discount, the related yield on this portfolio generally is higher than
the aggregate contractual rate paid on the loans. The total yield includes the
excess of a loan's expected discounted future cash flows over its net
investment, recognized using the interest method.

    When a loan is paid off, the excess of any cash received over the net
investment is recorded as interest income. In addition to the amount of purchase
discount that is recognized at that time, income may also include interest owed
by the borrower prior to Capital Crossing's acquisition of the loan, interest
collected if on non-accrual status and other loan fees ("other interest and fee
income"). The following table sets forth, for the periods indicated, the
components of interest and fees on loans and leases. We can not assure you that
future interest income, including the yields and related level of such

                                       9
<Page>
income, or the relative portion attributable to loan pay-offs as compared to
other sources, will increase or remain the same in the future.

<Table>
<Caption>
                                                                      SIX MONTHS ENDED JUNE 30,
                                                              -----------------------------------------
                                                                     2001                  2000
                                                              -------------------   -------------------
                                                              INTEREST              INTEREST
                                                               INCOME     YIELD      INCOME     YIELD
                                                              --------   --------   --------   --------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                                           <C>        <C>        <C>        <C>
Regularly scheduled interest and accretion income...........   $7,774     10.39%     $8,308     10.35%
Interest and fee income recognized on loan pay-offs:
  Non-amortizing discount...................................      911      1.22         259      0.32
  Amortizing discount.......................................      437      0.58         241      0.30
  Other interest and fee income.............................      237      0.32          15      0.02
                                                               ------     -----      ------     -----
                                                                1,585      2.12         515      0.64
                                                               ------     -----      ------     -----
                                                               $9,359     12.51%     $8,823     10.99%
                                                               ======     =====      ======     =====
</Table>

    The amount of loan payoffs and related income is influenced by several
factors, including the interest rate environment, the real estate market in
particular areas, the timing of transactions, and circumstances related to
individual borrowers and loans.

    The average balance of interest-bearing deposits increased $31.4 million to
$75.0 million for the six months ended June 30, 2001, compared to $43.6 million
for 2000 as a result of cash accumulated from loan payments and the proceeds
from the issuance of Series C preferred stock. The yield on interest-bearing
deposits increased in 2001 because the rate paid by the Bank on the money market
account held by Capital Crossing Preferred increased in 2001 compared to 2000.

    Guarantee fee income for the six months ended June 30, 2001 increased
$40,000. Effective July 1, 2000, Capital Crossing Preferred entered into an
agreement to make certain assets available to be pledged in connection with
borrowings of Capital Crossing from the FHLBB. Capital Crossing Preferred
receives an annual fee of $80,000 from Capital Crossing under this agreement.

    Other real estate owned income of $245,000 for the six months ended
June 30, 2000, consisted of the gain on sale of one property.

    General and administrative expenses for the six months ended June 30, 2001
decreased $62,000, or 62.6%, to $37,000 compared to $99,000 for the six months
ended June 30, 2000. This decrease was due primarily to a decrease in
professional services, including consulting and legal services.

FINANCIAL CONDITION

INTEREST-BEARING DEPOSITS WITH CAPITAL CROSSING BANK

    Interest-bearing deposits consist of a money market account with a balance
of $87.8 million at June 30, 2001 and certificates of deposit which totaled
$17.5 million at June 30, 2001 and mature in August 2001. At December 31, 2000,
interest-bearing deposits consisted of a money market with a balance of
$37.7 million and certificates of deposit totaling $17.5 million. The increase
in the money market account is a result of cash accumulated from loan pay-offs
and proceeds received from the issuance of Series C preferred stock.

                                       10
<Page>
LOAN PORTFOLIO

    To date, all of Capital Crossing Preferred's loans have been acquired from
Capital Crossing. The following table sets forth information regarding the
composition of the loan portfolio at the dates indicated:

<Table>
<Caption>
                                                        JUNE 30,   DECEMBER 31,
                                                          2001         2000
                                                        --------   ------------
                                                            (IN THOUSANDS)
<S>                                                     <C>        <C>
Mortgage loans on real estate:
  Commercial..........................................  $ 86,381     $ 98,842
  Multi-family residential............................    60,836       72,520
  One-to-four family residential......................     5,340        6,268
  Land................................................       529          587
                                                        --------     --------
    Total.............................................   153,086      178,217
Secured commercial....................................        --          209
Other.................................................        --           29
                                                        --------     --------
    Total loan, gross.................................   153,086      178,455
Less discount:
  Non-amortizing discount (1).........................    (5,109)      (6,704)
  Amortizing discount.................................    (4,579)      (5,262)
  Allowance for loan losses...........................    (3,792)      (3,795)
  Net deferred loan fees..............................       (65)         (82)
                                                        --------     --------
    Loans, net........................................  $139,541     $162,612
                                                        ========     ========
</Table>

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

(1) Non-amortizing discount is an allocation of the total discount on purchased
    loans accounted for on the cost recovery method until it is determined that
    the amount and timing of collections are reasonably estimable and collection
    is probable.

    Capital Crossing Preferred intends that each loan acquired from Capital
Crossing in the future will be a whole loan, and will be originated or acquired
by Capital Crossing in the ordinary course of its business. Capital Crossing
Preferred also intends that all loans held by it will be serviced pursuant to
its master service agreement with Capital Crossing.

    At June 30, 2001, there were no non-performing loans. Non-performing loans,
net of discount, totaled $220,000 at December 31, 2000.

    The accrual of interest and accretion of discount are generally discontinued
when the collectibility of principal and interest is not probable or estimable.
Unpaid interest income previously accrued on such loans is reversed against
current period interest income. A loan is returned to accrual status when it is
brought current in accordance with management's anticipated cash flows at the
time of acquisition.

ALLOWANCE FOR LOAN LOSSES

    Capital Crossing Preferred maintains an allowance for loan losses that is
increased by provisions charged against earnings, by recoveries of amounts
previously charged-off and by allocations of discounts on purchased loans and is
reduced by charge-offs on loans. Loans are charged-off when they are deemed to
be uncollectible, or partially charged-off when a portion of a loan is deemed
uncollectible. Recoveries are generally recorded only when cash payments are
received. In general, the loan loss allowance policy requires the maintenance of
allowances sufficient to satisfy estimated probable losses arising from impaired
loans.

                                       11
<Page>
    Capital Crossing Preferred performs reviews of its loan portfolio to
identify loans for which specific allocations are considered prudent. Specific
allocations include the results of measuring impaired loans under Statement of
Financial Accounting Standards No. 114. General risk allocations are determined
by a formula whereby the loan portfolio is stratified by loan type and by
internal risk rating categories. Loss factors are then applied to each strata
based on various considerations including historic loss experience, delinquency
trends, current economic conditions, industry standards and regulatory
guidelines. An additional allowance is maintained based on a judgmental process
whereby management considers qualitative and quantitative assessments of other
factors including regional credit concentration, industry concentration,
individual borrower concentrations, results of regulatory examinations,
historical loss ranges, portfolio composition, economic conditions such as
interest rates and energy costs and other changes in the portfolio. The
allowance for loan losses is management's estimate of the probable loan losses
incurred as of the balance sheet date. Any remaining unallocated portion is
reviewed for adequacy in relation to the overall loan portfolio and in
recognition of estimates inherent in the calculation methodology. The allowance
for loan losses is management's estimate of the probable loan losses incurred as
of the balance sheet date and, as such, Capital Crossing Preferred cannot assure
you that management's estimates and the allowances for probable loan losses will
be proven correct in the future.

    Additional factors influencing the calculation of the allowance for loan
losses are particular concentrations within the portfolio, including the
geographic concentration of loans in California, which represented approximately
43.9% of the portfolio at June 30, 2001 and concentration of loans to individual
borrowers.

    Capital Crossing Preferred also considers historical losses in assessing the
adequacy of the allowance for loan losses. Due to the limited operating history
of the Capital Crossing Preferred, historical losses are not currently an
indicator of losses inherent in the portfolio. Management will continue to
monitor historical losses to assess the adequacy of the allowance for loan
losses.

    The following table sets forth an analysis of the allowance for loan losses
for the periods indicated:

<Table>
<Caption>
                                                          THREE MONTHS ENDED     SIX MONTHS ENDED
                                                               JUNE 30,              JUNE 30,
                                                          -------------------   -------------------
                                                            2001       2000       2001       2000
                                                          --------   --------   --------   --------
                                                                       (IN THOUSANDS)
<S>                                                       <C>        <C>        <C>        <C>
Balance at beginning of period..........................   $3,792     $2,855     $3,795     $2,855
Transfer from Capital Crossing with loans acquired......       --      1,215         --      1,215
Transfer to Capital Crossing with loans sold............       --         --         (3)        --
                                                           ------     ------     ------     ------
Balance at end of period................................   $3,792     $4,070     $3,792     $4,070
                                                           ======     ======     ======     ======
</Table>

    NON-AMORTIZING DISCOUNT.  At the time of acquisition, the excess of the
contractual loan balances over the amount of reasonably estimable and probable
future cash collections is recorded as non-amortizing discount. The
non-amortizing discount is not transferred to amortizing discount and accreted
into income until it is determined that the amount and timing of the cash flows
related to the non-amortizing discount are reasonably estimable and collection
is probable. Non-amortizing discount generally is reduced and offset against the
related principal balance when the amount at which a loan is resolved or
restructured is determined. There is no effect on the income statement as a
result of these reductions.

                                       12
<Page>
    The following table sets forth certain information relating to the activity
in the non-amortizing discount for the periods indicated:

<Table>
<Caption>
                                                          THREE MONTHS ENDED     SIX MONTHS ENDED
                                                               JUNE 30,              JUNE 30,
                                                          -------------------   -------------------
                                                            2001       2000       2001       2000
                                                          --------   --------   --------   --------
                                                                       (IN THOUSANDS)
<S>                                                       <C>        <C>        <C>        <C>
Balance at beginning of period..........................   $5,571     $7,316     $6,704     $7,318
Transfers to amortizing portion, net....................     (391)      (395)    (1,013)      (388)
Additions in connection with loans acquired.............       --      1,022         --      1,022
Net reductions related to resolutions and
  restructures..........................................      (71)        --       (398)        (9)
Non-amortizing discount relating to loans sold to
  Capital Crossing Bank.................................       --         --       (184)        --
                                                           ------     ------     ------     ------
Balance at end of period................................   $5,109     $7,943     $5,109     $7,943
                                                           ======     ======     ======     ======
</Table>

INTEREST RATE RISK

    Capital Crossing Preferred's income consists primarily of interest income on
mortgage assets. Capital Crossing Preferred does not intend to use any
derivative products to manage its interest rate risk. If there is a decline in
market interest rates, Capital Crossing Preferred may experience a reduction in
interest income on its mortgage loans and a corresponding decrease in funds
available to be distributed to its stockholders. The reduction in interest
income may result from downward adjustments of the indices upon which the
interest rates on loans are based and from prepayments of mortgage loans with
fixed interest rates, resulting in reinvestment of the proceeds in lower
yielding mortgage loans.

SIGNIFICANT CONCENTRATION OF CREDIT RISK

    Concentration of credit risk generally arises with respect to Capital
Crossing Preferred's loan portfolio when a significant number of borrowers
engage in similar business activities, or activities in the same geographical
region. Concentration of credit risk indicates the relative sensitivity of
Capital Crossing Preferred's performance to both positive and negative
developments affecting a particular industry or geographical region. Capital
Crossing Preferred's balance sheet exposure to geographic concentrations
directly affects the credit risk of the loans within its loan portfolio. At
June 30, 2001, 30.6% and 43.9%, respectively, of Capital Crossing Preferred's
total loan portfolio consisted of loans located in New England and California.
At December 31, 2000, 31.2% and 41.8%, respectively, of Capital Crossing
Preferred's total loan portfolio consisted of loans located in New England and
California. Consequently, the portfolio may experience a higher default rate,
than its current default rate, in the event of adverse economic, political or
business developments or natural hazards in New England or California that may
affect the ability of property owners to make payments of principal and interest
on the underlying mortgages.

LIQUIDITY RISK MANAGEMENT

    The objective of liquidity risk management is to ensure the availability of
sufficient cash flows to meet all of Capital Crossing Preferred's financial
commitments and to capitalize on opportunities for Capital Crossing Preferred's
business expansion. In managing liquidity risk, Capital Crossing Preferred takes
into account various legal limitations placed on REITs.

    Capital Crossing Preferred's principal liquidity needs are:

(1) to increase the current portfolio size through the acquisition of additional
    mortgage assets as mortgage assets currently in the loan portfolio mature,
    pay down or prepay, and

                                       13
<Page>
(2) to pay dividends on the Series A and Series C preferred shares and common
    shares.

    The acquisition of additional mortgage assets is intended to be funded
primarily through repayment of principal balances of mortgage assets by
individual borrowers. Capital Crossing Preferred does not have and does not
anticipate having any material capital expenditures. To the extent that the
Board of Directors determines that additional funding is required, Capital
Crossing Preferred may raise such funds through additional equity offerings,
debt financing or retention of cash flow (after consideration of provisions of
the Internal Revenue Code requiring the distribution by a REIT of at least 90%
of its REIT taxable income and taking into account taxes that would be imposed
on undistributed income), or a combination of these methods. Except for its
obligation to guarantee certain commitments of Capital Crossing, Capital
Crossing Preferred does not currently intend to incur any indebtedness. The
organizational documents of Capital Crossing Preferred limit the amount of
indebtedness, including intercompany advances made by Capital Crossing to
Capital Crossing Preferred, which it is permitted to incur without the approval
of the Series A and the Series C preferred stockholders to no more than 100% of
the total stockholders' equity of Capital Crossing Preferred.

                                       14
<Page>
RISK FACTORS AND OTHER FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

    This Form 10-Q contains statements that are "forward-looking statements."
Capital Crossing Preferred may also make forward-looking statements in other
documents it files with the SEC, in press releases and other written materials,
and in oral statements made by its officers, directors or employees. You can
identify forward-looking statements by the use of the words "believe," "expect,"
"anticipate," "intend," "estimate," "assume" and other similar expressions which
predict or indicate future events and trends and which do not relate to
historical matters. You should not rely on forward-looking statements, because
they involve known and unknown risks, uncertainties and other factors, some of
which are beyond the control of Capital Crossing Preferred. These risks,
uncertainties and other factors may cause the actual results, performance or
achievements of Capital Crossing Preferred to be materially different from the
anticipated future results, performance or achievements expressed or implied by
the forward-looking statements.

    Some of the factors that might cause these differences include those set
forth below. You should carefully review all of these factors, and you should be
aware that there may be other factors that could cause these differences. These
forward-looking statements were based on information, plans and estimates at the
date of this report, and Capital Crossing Preferred does not undertake to update
any forward-looking statements to reflect changes in underlying assumptions or
factors, new information, future events or other changes.

A DECLINE IN THE BANK'S CAPITAL LEVELS MAY RESULT IN THE SERIES A AND SERIES C
PREFERRED SHARES BEING SUBJECT TO AUTOMATIC EXCHANGE INTO PREFERRED SHARES OF
THE BANK

    The returns from an investment in the Series A or Series C preferred shares
will depend to a significant extent on the performance and capital of the Bank.
A significant decline in the performance and capital levels of the Bank or the
placement of the Bank into bankruptcy, reorganization, conservatorship or
receivership could result in the automatic exchange of the Series A and
Series C preferred shares for preferred shares of the Bank, which would
represent an investment in the Bank and not in us. Under these circumstances:

    - a holder of Series A or Series C preferred shares would be a preferred
      stockholder of the Bank at a time when the Bank's financial condition was
      deteriorating or when the Bank had been placed into bankruptcy,
      reorganization, conservatorship or receivership and, accordingly, it is
      unlikely that the Bank would be in a financial position to pay any
      dividends on the preferred shares of the Bank. An investment in the Bank
      is also subject to risks that are distinct from the risks associated with
      an investment in us. For example, an investment in the Bank would involve
      risks relating to the capital levels of, and other federal and state
      regulatory requirements applicable to, the Bank, and the performance of
      the Bank's overall loan portfolio and other business lines. The Bank also
      has significantly greater liabilities and significantly less stockholders'
      equity than we do;

    - if a liquidation of the Bank occurs, the claims of depositors and
      creditors of the Bank and of the FDIC would have priority over the claims
      of holders of the preferred shares of the Bank, and therefore, a holder of
      Series A and Series C preferred shares likely would receive substantially
      less than such holder would receive had the Series A and Series C
      preferred shares not been exchanged for preferred shares of the Bank; and

    - the exchange of the Series A or Series C preferred shares for preferred
      shares of the Bank would be a taxable event to a holder of Series A or
      Series C preferred shares under the Internal Revenue Code, and such holder
      would incur a gain or a loss, as the case may be, measured by the
      difference between such holder's basis in the Series A or Series C
      preferred shares and the fair market value of the Bank preferred shares
      received in the exchange.

                                       15
<Page>
BECAUSE OF OUR OBLIGATIONS TO CREDITORS, WE MAY NOT BE ABLE TO MAKE DIVIDEND OR
LIQUIDATION PAYMENTS TO HOLDERS OF THE SERIES A AND SERIES C PREFERRED SHARES

    The Series A and Series C preferred shares rank:

    - junior to our borrowings, including claims of the FHLBB for amounts due or
      which may become due under our guarantee of the Bank's obligations to the
      FHLBB, and any other obligations to our creditors upon our liquidation;
      and

    - senior to our common stock and our Series B preferred stock with regard to
      payment of dividends and amounts upon liquidation.

    If we incur significant indebtedness, we may not have sufficient funds to
make dividend or liquidation payments on the Series A or Series C preferred
shares. Upon our liquidation our obligations to our creditors would rank senior
to the Series A and Series C preferred shares. At June 30, 2001, we had
approximately $507,000 in accounts payable and other liabilities which, upon our
liquidation, would be required to be paid before any payments could be made to
holders of the Series A or Series C preferred shares. In addition, upon our
liquidation, dissolution or winding up, if we do not have sufficient funds to
pay the full liquidation amount to the holders of the Series A and Series C
preferred shares, such holders may receive less than the $10.00 per share
liquidation amount.

    The terms of the Series A and Series C preferred shares limit our ability to
incur debt in excess of 100% of our stockholders' equity without the approval of
the holders of all of the outstanding Series A and Series C preferred shares but
do not require that we obtain the approval of the holders of the Series A and
Series C preferred shares to issue additional series of preferred shares which
rank equal to the Series A and Series C preferred shares as to payment of
dividends or amount upon liquidation. As a result, subject to these limitations,
we may incur obligations which may further limit our ability to make dividend or
liquidation payments in the future.

BANK REGULATORS MAY LIMIT OUR ABILITY TO IMPLEMENT OUR BUSINESS PLAN AND MAY
RESTRICT OUR ABILITY TO PAY DIVIDENDS

    Because we are a subsidiary of the Bank, federal and state regulatory
authorities will have the right to examine us and our activities and under
certain circumstances, to impose restrictions on the Bank or us which could
impact our ability to conduct our business according to our business plan, which
could materially adversely affect our financial condition and results of
operations:

    - if the Bank's regulators determine that the Bank's relationship to us
      results in an unsafe and unsound banking practice, the regulators could
      restrict our ability to transfer assets, to make distributions to our
      stockholders, including dividends on our Series A and Series C preferred
      shares, or to redeem shares of Series A and Series C preferred stock or
      even require the Bank to sever its relationship with or divest its
      ownership interest in us. Such actions could potentially result in our
      failure to qualify as a REIT.

    - payment of dividends on the Series A and Series C preferred shares could
      also be subject to regulatory limitations if the Bank becomes
      undercapitalized. The Bank will be deemed undercapitalized if its total
      risk-based capital ratio is less than 8.0%, its Tier 1 risk-based capital
      ratio is less than 4.0% or its Tier 1 leverage ratio is less than 4.0%. At
      June 30, 2001, the Bank had a total risk-based capital ratio of 15.94%, a
      Tier 1 risk-based capital ratio of 14.68% and a Tier 1 leverage ratio of
      10.91%, which is sufficient for the Bank to be considered
      well-capitalized. As part of its common stock repurchase program, the Bank
      has agreed with the FDIC to maintain, for so long as the repurchase
      program continues, capital levels of one percent in excess of the
      regulatory minimums required to be categorized as well-capitalized. We
      cannot assure you that the Bank will be well-capitalized under applicable
      regulations as of any future date. For purposes of calculating these
      capital ratios as a percentage of the Bank's risk-weighted

                                       16
<Page>
      assets, as opposed to its total assets, the Bank's assets are assigned to
      risk categories based on the relative credit risk of the asset in
      question. These risk weights consist of 0% for assets deemed least risky
      such as cash, claims backed by the full faith and credit of the U.S.
      government, and balances due from Federal Reserve banks; 20% for assets
      deemed slightly more risky such as portions of obligations conditionally
      guaranteed by the U.S. government or federal funds sold; 50% for assets
      deemed still more risky such as government issued-revenue bonds,
      one-to-four family residential first mortgage loans and
      well-collateralized multi-family residential first mortgage loans; and
      100% for all other assets, including private sector loans such as
      commercial mortgage loans as well as bank-owned real estate.

    - while we believe that dividends on the Series A and Series C preferred
      shares should not be considered distributions by the Bank, the FDIC may
      not agree with this position. Under FDIC regulations on capital
      distributions, the ability of the Bank to make a capital distribution
      varies depending primarily on the Bank's earnings and regulatory capital
      levels. Capital distributions are defined to include payment of dividends,
      stock repurchases, cash-out mergers and other distributions charged
      against the capital accounts of an institution. The FDIC could limit or
      prohibit the payment of dividends on the Series A and Series C preferred
      shares if it determines that the payment of those dividends is a capital
      distribution by the Bank and that the Bank's earnings and regulatory
      capital levels are below specified levels.

WE DO NOT HAVE INSURANCE TO COVER OUR EXPOSURE TO BORROWER DEFAULTS AND
BANKRUPTCIES AND SPECIAL HAZARD LOSSES THAT ARE NOT COVERED BY OUR STANDARD
HAZARD INSURANCE POLICIES

    We do not generally obtain general credit enhancements such as mortgagor
bankruptcy insurance or obtain special hazard insurance for our mortgage assets,
other than standard hazard insurance, which will in each case only relate to
individual mortgage loans. Accordingly, we will be subject to risks of borrower
defaults and bankruptcies and special hazard losses, such as losses occurring
from floods, that are not covered by standard hazard insurance. In the event of
a default on any mortgage loan held by us resulting from declining property
values or worsening economic conditions, among other factors, we would bear the
risk of loss of principal to the extent of any deficiency between (1) the value
of the related mortgaged property, plus any payments from an insurer or
guarantor in the case of commercial mortgage loans, and (2) the amount owing on
the mortgage loan.

OUR RESULTS WILL BE AFFECTED BY FACTORS BEYOND OUR CONTROL

    Our mortgage loan portfolio is subject to local economic conditions which
could affect the value of the real estate assets underlying our loans and
therefore, our results of operations will be affected by various conditions in
the real estate market, all of which are beyond our control, such as:

    - local and other economic conditions affecting real estate values;

    - the continued financial stability of a borrower and the borrower's ability
      to make mortgage payments;

    - the ability of tenants to make lease payments;

    - the ability of a property to attract and retain tenants, which may in turn
      be affected by local conditions, such as oversupply of space or a
      reduction in demand for rental space in the area;

    - interest rate levels and the availability of credit to refinance mortgage
      loans at or prior to maturity; and

    - increased operating costs, including energy costs, real estate taxes and
      costs of compliance with environmental controls and regulations.

                                       17
<Page>
OUR LOANS ARE CONCENTRATED IN CALIFORNIA AND NEW ENGLAND AND ADVERSE CONDITIONS
IN THOSE MARKETS COULD ADVERSELY AFFECT OUR OPERATIONS

    Properties underlying our current mortgage assets are concentrated primarily
in California and New England. As of June 30, 2001, approximately 43.9% of our
mortgage assets were secured by properties located in California and 30.6% in
New England. Adverse economic, political or business developments or natural
hazards may affect these areas and the ability of property owners in these areas
to make payments of principal and interest on the underlying mortgages. If
either region experienced adverse economic, political or business conditions, we
would likely experience higher rates of loss and delinquency on our mortgage
loans than if our loans were more geographically diverse. Additionally,
California has recently experienced dramatic increases in energy prices and
periodic supply shortages. However, the vast majority of the properties
underlying our current mortgage assets in California are located in southern
California which continues to show signs of a strong economy despite the recent
energy problems and we do not believe these energy problems will materially
impact the portion of our mortgage assets secured by properties located in
California.

A SUBSTANTIAL MAJORITY OF OUR LOANS WERE ORIGINATED BY OTHER PARTIES WHOSE LEVEL
OF DUE DILIGENCE MAY BE DIFFERENT THAN THE BANK'S LEVEL OF DUE DILIGENCE

    At June 30, 2001, approximately 88.5% of our loan portfolio consisted of
loans originated by third parties that were purchased by the Bank and
subsequently acquired by us from the Bank. Because these loans were originated
by third parties, the Bank generally is not able to conduct the same level of
due diligence on these loans that it would have conducted had it originated
them. Generally, while the Bank conducts an acquisition review, it relies on the
underwriting standards of the parties originating the loans it acquires. The
standards of these loan originators may be substantially different than those of
the Bank. These differences may include less rigorous appraisal requirements and
debt service coverage ratios, and less rigorous analysis of property location
and environmental factors, building condition and age, tenant quality,
compliance with zoning regulations, any use restrictions, easements or right of
ways that may impact the value and the borrower's ability to manage the
property. Other disadvantages of purchased loans versus originated loans may
include the lack of current financial information, incomplete legal
documentation and outdated appraisals.

MORE THAN HALF OF OUR LOAN PORTFOLIO IS MADE UP OF COMMERCIAL MORTGAGE LOANS
WHICH ARE RISKIER THAN OTHER TYPES OF LOANS

    Commercial mortgage loans constituted approximately 56.4% of the loans in
our loan portfolio at June 30, 2001 and generally subject us to greater risks
than other types of loans. Our commercial mortgage loans, like most commercial
mortgage loans, generally lack standardized terms, tend to have shorter
maturities than residential mortgage loans and may not be fully amortizing,
meaning that they have a principal balance or "balloon" payment due on maturity.
The commercial real estate properties underlying our commercial mortgage loans
also tend to be unique and are more difficult to value than residential real
estate properties. They are also subject to relatively greater environmental
risks than other types of loans and to the corresponding burdens and costs of
compliance with environmental laws and regulations. Because of these risks
related to our commercial mortgage loans, we may experience higher rates of
default on our mortgage loans than we would if our loan portfolio was more
diversified and included a greater number of residential and other mortgage
loans.

WE MAY NOT BE ABLE TO PURCHASE LOANS AT THE SAME VOLUMES OR WITH THE SAME YIELDS
AS WE HAVE HISTORICALLY PURCHASED

    To date we have purchased all of the loans in our portfolio from the Bank.
Historically, the Bank has acquired such loans (1) from institutions which
sought to eliminate certain loans or categories of loans from their portfolios,
(2) from institutions participating in securitization programs, (3) from failed

                                       18
<Page>
or consolidating financial institutions and (4) from government agencies. Future
loan purchases will depend on the availability of pools of loans offered for
sale and the Bank's ability to submit successful bids or negotiate satisfactory
purchase prices. The acquisition of whole loans is highly competitive.
Consequently, we cannot assure you that the Bank will be able to purchase loans
at the same volumes or with the same yields as it has historically purchased.
This may interfere with our ability to maintain the requisite level of mortgage
assets to maintain our qualification as a REIT. If volumes of loans purchased
decline or the yields on these loans decline further, we would experience a
material adverse effect on our business, financial condition and results of
operations.

WE COULD BE HELD RESPONSIBLE FOR ENVIRONMENTAL LIABILITIES OF PROPERTIES WE
ACQUIRE THROUGH FORECLOSURE

    Approximately 56.4% of the loans in our portfolio at June 30, 2001 were
commercial mortgage loans, which generally are subject to relatively greater
environmental risks than other types of loans. If we are forced to foreclose on
a defaulted mortgage loan to recover our investment we may be subject to
environmental liabilities related to the underlying real property. Hazardous
substances or wastes, contaminants, pollutants or sources thereof may be
discovered on properties during our ownership or after a sale to a third party.
The amount of environmental liability could exceed the value of the real
property. There can be no assurance that we would not be fully liable for the
entire cost of any removal and clean-up on an acquired property, that the cost
of removal and clean-up would not exceed the value of the property or that we
could recoup any of the costs from any third party. In addition, we may find it
difficult or impossible to sell the property prior to or following any such
remediation.

TAX RISKS RELATED TO REITS

IF WE FAIL TO QUALIFY AS A REIT, WE WILL BE SUBJECT TO FEDERAL INCOME TAX AT
  REGULAR CORPORATE RATES

    If we fail to qualify as a REIT for any taxable year, we would be subject to
federal income tax, including any applicable alternative minimum tax, on our
taxable income at regular corporate rates. As a result, the amount available for
distribution to our stockholders, would be reduced for the year or years
involved. In addition, unless entitled to relief under statutory provisions, we
would be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification was lost. The failure to qualify
as a REIT would reduce our net earnings available for distribution to our
stockholders, because of the additional tax liability for the year or years
involved. Our failure to qualify as a REIT would not by itself give us the right
to redeem the Series A preferred shares or Series C preferred shares nor would
it give the holders of the Series A or Series C preferred shares the right to
have their shares redeemed. Although we currently intend to operate in a manner
designed to qualify as a REIT, future economic, market, legal, tax or other
considerations may cause us to determine that it is in our best interest and in
the best interest of holders of our common stock and preferred stock to revoke
our REIT election. The tax law prohibits us from electing treatment as a REIT
for the four taxable years following the year of any such revocation.

IF WE DO NOT DISTRIBUTE 90% OF OUR NET TAXABLE INCOME, WE MAY NOT QUALIFY AS A
  REIT

    In order to qualify as a REIT, we generally are required each year to
distribute to our stockholders at least 90% (95% for taxable years beginning
before January 1, 2001) of our net taxable income, excluding net capital gains.
We may retain the remainder of REIT taxable income or all or part of our net
capital gain, but will be subject to tax at regular corporate rates on such
income. In addition, we are subject to a 4% nondeductible excise tax on the
amount, if any, by which certain distributions considered as paid by us with
respect to any calendar year are less than the sum of (1) 85% of our ordinary
income for the calendar year, (2) 95% of our capital gains net income for the
calendar year and (3) 100% of any undistributed income from prior periods. Under
certain circumstances, federal or state regulatory authorities may restrict our
ability, as a subsidiary of the Bank, to make distributions to our stockholders
in an amount necessary to retain our REIT qualification. Such a restriction
could

                                       19
<Page>
result in us failing to qualify as a REIT. To the extent our REIT taxable income
may exceed the actual cash received for a particular period, we may not have
sufficient liquidity to make distributions necessary to retain our REIT
qualification.

    WE HAVE IMPOSED OWNERSHIP LIMITATIONS TO PROTECT OUR ABILITY TO QUALIFY AS A
REIT, HOWEVER, IF OWNERSHIP OF THE COMMON STOCK OF THE BANK BECOMES CONCENTRATED
IN A SMALL NUMBER OF INDIVIDUALS WE MAY FAIL TO QUALIFY AS A REIT

    To maintain our status as a REIT, not more than 50% in value of our
outstanding shares may be owned, directly or indirectly, by five or fewer
individuals, as defined in the Internal Revenue Code, or the Code, to include
certain entities, during the last half of each taxable year. We currently
satisfy this requirement because for this purpose our common stock held by the
Bank is treated as held by the Bank's stockholders. However, it is possible that
the ownership of the Bank might become sufficiently concentrated in the future
such that five or fewer individuals would be treated as having constructive
ownership of more than 50% of the value of our stock. We may have difficulty
monitoring the daily ownership and constructive ownership of our outstanding
shares and, therefore, we cannot assure you that we will continue to meet the
share ownership requirement. This risk may be increased in the future as the
Bank implements its common stock repurchase program because repurchases may
cause ownership in the Bank to become more concentrated. In addition, while the
fact that the Series A preferred shares and the Series C preferred shares may be
redeemed or exchanged will not affect our REIT status prior to any such
redemption or exchange, the redemption or exchange of all or a part of the
Series A and Series C preferred shares could adversely affect our ability to
satisfy the share ownership requirements in the future.

WE MAY REDEEM THE SERIES A AND SERIES C PREFERRED SHARES AT ANY TIME UPON THE
  OCCURRENCE OF A TAX EVENT

    At any time following the occurrence of certain changes in the tax laws or
regulations concerning REITs, we will have the right to redeem the Series A and
Series C preferred shares in whole, subject to the prior written approval of the
FDIC. We would have the right to redeem the Series A and Series C preferred
shares if we received an opinion of counsel to the effect that, as a result of
changes to the tax laws or regulations:

(1) dividends paid by us with respect to our capital stock are not fully
    deductible by us for income tax purposes; or

(2) we are otherwise unable to qualify as a REIT.

    The occurrence of such changes in the tax laws or regulations will not,
however, give the holders of the Series A or Series C preferred shares any right
to have their shares redeemed.

WE ARE DEPENDENT IN VIRTUALLY EVERY PHASE OF OUR OPERATIONS ON THE DILIGENCE AND
SKILL OF THE MANAGEMENT OF THE BANK

    The Bank, which holds all of our common stock, is involved in virtually
every aspect of our existence. We have five officers and no other employees and
do not have any independent corporate infrastructure. Under an advisory
agreement between us and the Bank, the Bank administers our day-to-day
activities, including monitoring of our credit quality and advising us with
respect to the acquisition, management, financing and disposition of mortgage
assets and our operations generally. Under a master service agreement between us
and the Bank, the Bank services our loan portfolio. The advisory agreement has
an initial term of five years with an automatic one-year renewal feature and the
master service agreement has a one year term with an automatic renewal feature.
Both the master service agreement and the advisory agreement are subject to
earlier termination upon provision of 30 days and 90 days notice, respectively.
The Bank may subcontract all or a portion of its obligations under the advisory
agreement to its affiliates or, with the approval of a majority of the Board of

                                       20
<Page>
Directors as well as a majority of the independent directors, subcontract its
obligations under the advisory agreement to unrelated third parties. The Bank
will not, in connection with the subcontracting of any of its obligations under
the advisory agreement, be discharged or relieved from its obligations under the
advisory agreement. The loss of the services of the Bank, or the inability of
the Bank to effectively provide such services whether as a result of the loss of
key members of the Bank's management, early termination of the agreements or
otherwise, and our inability to replace such services on favorable terms, or at
all, could adversely affect our ability to conduct our operations.

OUR RELATIONSHIP WITH THE BANK MAY CREATE CONFLICTS OF INTEREST

    The Bank and its affiliates may have interests which are not identical to
ours and therefore conflicts of interest have arisen and may arise in the future
with respect to transactions between us and the Bank such as:

    ACQUISITION OF MORTGAGE ASSETS.  We anticipate that we will from time to
time continue to purchase additional mortgage assets. We intend to acquire all
or substantially all of such mortgage assets from the Bank, on terms that are
comparable to those that could be obtained by us if such mortgage assets were
purchased from unrelated third parties. Neither we nor the Bank currently have
specific policies with respect to the purchase by us from the Bank of particular
loans or pools of loans, other than that such assets must be eligible to be held
by a REIT. Although these purchases are structured to take advantage of the
underwriting procedures of the Bank, and while we believe that any agreements
and transactions between us, on the one hand, and the Bank and/or its affiliates
on the other hand, are fair to all parties and consistent with market terms,
neither we nor the Bank have obtained any third-party valuation to confirm
whether we will be paying fiar market value for these loans, nor do we
anticipate doing so in the future. Additionally, through limiting our source of
purchased mortgage assets solely to those originated or purchased by the Bank,
our portfolio will generally reflect the nature, scope and risk of the Bank's
portfolio rather than a more diverse portfolio composed of mortgage loans also
purchased from other lenders.

    SERVICING OF OUR MORTGAGE ASSETS BY THE BANK.  Our loans are serviced by the
Bank pursuant to the terms of the master service agreement. The Bank in its role
as servicer under the terms of the master service agreement receives a fee equal
to 0.20% per annum, payable monthly, on the gross outstanding principal balances
of loans serviced. The master service agreement requires the Bank to service the
loan portfolio in a manner substantially the same as for similar work performed
by the Bank for transactions on its own behalf. This will become especially
important as the Bank services any loans which become classified or are placed
on non-performing status, or are renegotiated due to the financial deterioration
of the borrower. While we believe that the Bank will diligently pursue
collection of any non-performing loans, we cannot assure you that this will be
the case. Our ability to make timely payments of dividends will depend in part
upon the Bank's prompt collection efforts on our behalf.

    FUTURE DISPOSITIONS BY US OF MORTGAGE ASSETS TO THE BANK OR ITS
AFFILIATES.  The master service agreement provides that foreclosures and
dispositions of the mortgage assets are to be performed with a view toward
maximizing our recovery as owner of the mortgage assets, and the Bank shall
service the mortgage assets solely with a view toward our interests, and without
regard to the interests of the Bank or any of its affiliates. However, we cannot
assure you that any such agreement or transaction will be on terms as favorable
to us as would have been obtained from unaffiliated third parties. The Bank may
seek to exercise its influence over our affairs so as to cause the sale of the
mortgage assets owned by us and their replacement by lesser quality loans
purchased from the Bank or elsewhere which could adversely affect out business
and our ability to make timely payments of dividends.

    FUTURE MODIFICATIONS OF THE ADVISORY AGREEMENT OR MASTER SERVICE
AGREEMENT.  Should we seek to modify either the advisory agreement or the master
service agreement, we would rely upon our officers, all of whom are also
officers of the Bank, and/or our directors, half of whom are also officers of
the

                                       21
<Page>
Bank. Thus, our officers and/or directors would be responsible for taking
positions with respect to such agreements that, while in our best interests,
would not be in the best interests of the Bank. Although the termination,
modification or decision not to renew the advisory agreement and/or the master
service agreement requires the approval of a majority of our independent
directors, the Bank, as holder of all of our outstanding common stock, controls
the election of all our directors, including the independent directors. We
cannot assure you that such modifications will be on terms as favorable to us as
those that could have been obtained from unaffiliated third parties.

    THE TERMS OF OUR GUARANTEE OF OBLIGATIONS OF THE BANK.  We have guaranteed
all of the obligations of the Bank under advances the Bank may receive from time
to time from the Federal Home Loan Bank of Boston, and have agreed to pledge a
significant amount of our assets in connection with those advances. The assets
we pledge to the FHLBB will vary from time to time; however, the potential
exists for us to pledge all of our assets to the FHLBB to secure advances to the
Bank. In addition, the Bank has pledged to the FHLBB all of the shares of our
capital stock it owns as collateral for its FHLBB borrowings. Under the terms of
the pledge, if the Bank becomes undercapitalized the FHLBB may require the Bank
to dissolve Capital Crossing Preferred such that the assets of Capital Crossing
Preferred are distributed to the Bank. In this circumstance the holders of
Series A and Series C Preferred shares, would receive their liquidation
preference only to the extent there are available assets of Capital Crossing
Preferred following satisfaction of our outstanding obligations, including our
guarantee of the Bank's FHLBB borrowings. At June 30, 2001, approximately
$35.3 million, or 14%, of our assets have been pledged to and accepted by the
FHLBB to secure advances to the Bank. The Bank has also agreed that it will not
request or accept advances from the FHLBB in excess of Capital Crossing
Preferred's total stockholders equity, less the stockholders equity attributable
to the Series A and Series C preferred shares. As of June 30, 2001, this
restriction would limit the Bank's ability to receive advances in excess of
approximately $213.2 million. As of June 30, 2001, the Bank had $139.0 million
in outstanding FHLBB borrowings. The guarantee and pledge were approved by our
independent directors, subject to certain requirements and limitations,
including the requirement that the Bank pay us a guarantee fee. Any default by
the Bank on its obligations which would require us to satisfy our guarantee
could adversely affect out business and our ability to make timely payments of
dividends.

    THE MASTER LOAN PURCHASE AGREEMENT WAS NOT THE RESULT OF ARM'S-LENGTH
NEGOTIATIONS. We acquire loans pursuant to the master mortgage loan puchase
agreement between us and the Bank, at an amount equal to the Bank's net carrying
value for those mortgage assets. While we believe that the master mortgage loan
puchase agreement was fair to all parties and consistent with market terms, all
of our officers and half of our directors are also officers and/or directors of
the Bank and/or affiliates of the Bank. The Bank, as holder of all of our
outstanding common stock, controls the election of all our directors, including
the independent directors. We cannot assure you that the master mortgage loan
purchase agreement was entered into on terms as favorable to us as those that
could have been obtained from unaffiliated third parties.

NEITHER WE NOR THE BANK HAVE SPECIFIC POLICIES WITH RESPECT TO THE PURCHASE BY
US FROM THE BANK OF PARTICULAR LOANS OR POOLS OF LOANS

    The lack of specific policies with respect to the purchase by us of loans
from the Bank could result in our acquiring lower quality mortgage assets from
the Bank than if such policies were otherwise in place. Neither we nor the Bank
currently have specific policies with respect to the purchase by us from the
Bank of particular loans or pools of loans, other than that such assets must be
eligible to be held by a REIT. Our Board of Directors has adopted certain
policies to guide the acquisition and disposition of assets but these policies
may be revised from time to time at the discretion of the Board of Directors
without a vote of our stockholders. We intend to acquire all or substantially
all of the additional mortgage assets we may acquire in the future from the Bank
on terms that are comparable

                                       22
<Page>
to those that could be obtained by us if such mortgage assets were purchased
from unrelated third parties, but we cannot assure you that this will always be
the case.

OUR BOARD OF DIRECTORS HAS BROAD DISCRETION TO REVISE OUR STRATEGIES

    Our Board of Directors has established our investment and operating
strategies. These strategies may be revised from time to time at the discretion
of the Board of Directors without a vote of our stockholders. Changes in our
strategies could have a negative effect on our stockholders.

WE DO NOT OBTAIN THIRD-PARTY VALUATIONS AND THEREFORE WE MAY PAY MORE OR RECEIVE
LESS THAN FAIR MARKET VALUE FOR OUR MORTGAGE ASSETS

    To date, we have not obtained third-party valuations as part of our loan
acquisitions or dispositions and do not anticipate obtaining third-party
valuations for future acquisitions and dispositions of mortgage assets. We do
not intend to obtain third-party valuations even where we are acquiring mortgage
assets from, or disposing mortgage assets to, one of our affiliates, including
the Bank. Accordingly, we may pay our affiliates, including the Bank, more than
the fair market value of mortgage assets we acquire and we may receive less than
the fair market value of the mortgage assets we sell based on a third-party
valuation.

WE MAY PAY MORE THAN FAIR MARKET VALUE FOR MORTGAGES WE PURCHASE FROM THE BANK
BECAUSE WE DO NOT ENGAGE IN ARM'S-LENGTH NEGOTIATIONS WITH THE BANK

    We acquire mortgage assets from the Bank under a master mortgage loan
purchase agreement between us and the Bank, at an amount equal to the Bank's net
carrying value for those mortgages assets, regarding the consideration to be
paid. Because the Bank is an affiliate of ours, we do not engage in any arms
length negotiations. Accordingly, if the Bank's net carrying value exceeds the
fair market value of the mortgage assets, we would pay the Bank more than the
fair market value for those mortgage assets.

A DECLINE IN INTEREST RATES COULD REDUCE OUR EARNINGS AND AFFECT OUR ABILITY TO
PAY DIVIDENDS

    Our income consists primarily of interest earned on our mortgage assets and
short-term investments. A significant portion of our mortgage assets bear
interest at adjustable rates. If there is a decline in interest rates, then we
will experience a decrease in income available to be distributed to our
stockholders. If interest rates decline, we may also experience an increase in
prepayments on our mortgage assets and may find it difficult to purchase
additional mortgage assets bearing rates sufficient to support payment of
dividends on the Series A and Series C preferred shares. Because the dividend
rates on the Series A and Series C preferred shares are fixed, a significant
decline in interest rates could materially adversely affect our ability to pay
dividends on the Series A and Series C preferred shares.

                                       23
<Page>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Asset and liability management is concerned with the timing and magnitude of
the repricing of assets and liabilities. It is the objective of Capital Crossing
Preferred to attempt to control risks associated with interest rate movements.
Market risk is the risk of loss from adverse changes in market prices and
interest rates. Capital Crossing Preferred's market risk arises primarily from
interest rate risk inherent in holding loans. To that end, management actively
monitors and manages the interest rate risk exposure of Capital Crossing
Preferred.

    Capital Crossing Preferred's management reviews, among other things, the
sensitivity of Capital Crossing Preferred's assets to interest rate changes, the
book and market values of assets, purchase and sale activity, and anticipated
loan pay-offs. Capital Crossing's senior management also approves and
establishes pricing and funding decisions with respect to Capital Crossing
Preferred's overall asset and liability composition.

    Capital Crossing Preferred's methods for evaluating interest rate risk
include an analysis of its interest-earning assets maturing or repricing within
a given time period. Since Capital Crossing Preferred has no interest-bearing
liabilities, a period of rising interest rates would tend to result in an
increase in net interest income. A period of falling interest rates, would tend
to adversely affect net interest income.

    The following table sets forth Capital Crossing Preferred's interest-rate
sensitive assets categorized by repricing dates and weighted average rates at
June 30, 2001. For fixed rate instruments, the repricing date is the maturity
date. For adjustable-rate instruments, the repricing date is deemed to be the
earliest possible interest rate adjustment date. Assets that are subject to
immediate repricing are placed in the overnight column.

<Table>
<Caption>
                                                        WITHIN     ONE TO     TWO TO    THREE TO   FOUR TO      OVER
                                                         ONE        TWO       THREE       FOUR       FIVE       FIVE
                                           OVERNIGHT     YEAR      YEARS      YEARS      YEARS      YEARS      YEARS      TOTAL
                                           ---------   --------   --------   --------   --------   --------   --------   --------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                        <C>         <C>        <C>        <C>        <C>        <C>        <C>        <C>
RATE-SENSITIVE ASSETS:
Interest-bearing deposits................  $105,419    $     --   $    --     $   --     $   --     $   --     $   --    $105,419
Average interest rate....................      4.06%
Fixed-rate loans(1)......................        --      29,756     6,887      4,793      3,321      2,063      3,909      50,729
Average interest rate....................                  9.25%     8.81%      8.85%      8.89%      8.87%      8.58%
Adjustable-rate loans(1).................    22,149      71,908     5,244        386      2,605         --         --     102,292
Average interest rate....................      8.42%       8.19%    10.10%      8.36%      7.77%
                                           --------    --------   -------     ------     ------     ------     ------    --------
      Total rate-sensitive assets........  $127,568    $101,664   $12,131     $5,179     $5,926     $2,063     $3,909    $258,440
                                           ========    ========   =======     ======     ======     ======     ======    ========
</Table>

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

(1) Loans are presented at gross amounts before deducting discounts on purchased
    loans, the allowance for loan losses and net deferred loan income.

    Based on Capital Crossing Preferred's experience, management applies the
assumption that, on average, approximately 20% of the outstanding fixed and
adjustable rate loans will prepay annually. The above table does not include
loans which have been placed on non-accrual status.

    At June 30, 2001, the fair value of net loans was $144,517,000, as compared
to the net carrying value of net loans of $139,541,000. The fair value of
interest-bearing deposits approximates carrying value.

                                       24
<Page>
                                    PART II

ITEM 1. LEGAL PROCEEDINGS

    From time to time, Capital Crossing Preferred may be involved in routine
litigation incidental to its business, including a variety of legal proceedings
with borrowers, which would contribute to Capital Crossing Preferred's expenses,
including the costs of carrying non-performing assets. Capital Crossing
Preferred is not currently a party to any material proceedings.

ITEM 2. CHANGES IN SECURITIES AND USES OF PROCEEDS

    (a) Not applicable

    (b) Capital Crossing Preferred completed its public offering of 1,600,000
       Series C preferred shares on May 31, 2001and sold an additional 240,000
       Series C preferred shares in connection with the underwriters' exercise
       of their allotment option. The Series C preferred shares rank senior to
       the common stock and Series C preferred stock and on parity with its
       Series A preferred stock as to dividends and liquidation rights.

    (c) Not applicable.

    (d) Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER

    By written consent dated June 7, 2001, the sole common stockholder of
Capital Crossing Preferred (1) established the number of Directors at six
members and (2) elected the following individuals as its Directors: Nicholas W.
Lazares, Richard Wayne, John L. Champion, Jeffrey Ross, Michael J. Fox, M.D.,
and Anthony L. Rodes.

    By written consent dated May 25, 2001, the sole common stockholder of
Capital Crossing Preferred approved the amended and restated articles of
organization and other matters pertaining to the public offering.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a)

<Table>
<Caption>
EXHIBIT NO.                           DESCRIPTION
-----------   ------------------------------------------------------------
<S>           <C>
   3.1        Restated Articles of Organization of Capital Crossing
              Preferred Corporation (Incorporated by reference to
              Exhibit 3.2 of Capital Crossing Preferred Corporation's
              registration statement on Form S-11 (No. 333-57044, filed
              April 25, 2001, as amended.)
</Table>

    (b) None.

                                       25
<Page>
                                   SIGNATURES

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

                     CAPITAL CROSSING PREFERRED CORPORATION

<Table>
<S>                                                    <C>  <C>
                                                       OVERLAND EXPRESS, INC.

                                                       By:              /s/ RICHARD WAYNE
                                                            -----------------------------------------
                                                                          Richard Wayne
Date: August 10, 2001                                        PRESIDENT (PRINCIPAL EXECUTIVE OFFICER)

                                                       By:             /s/ JOHN L. CHAMPION
                                                            -----------------------------------------
                                                                         John L. Champion
Date: August 10, 2001                                        TREASURER (PRINCIPAL FINANCIAL OFFICER)
</Table>

                                       26