<PAGE>   1


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                            ----------------------
                                   FORM 10-K

/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 [FEE REQUIRED]

       For the Fiscal Year Ended December 31, 1995

                              OR

/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 [NO FEE REQUIRED]

     For the transition period from ____________ to____________________    

       Commission File Number 0-17137

                         D & N FINANCIAL CORPORATION
    ---------------------------------------------------------------------
           (Exact Name of Registrant as Specified in its Charter)


              Delaware                                38-2790646       
   -------------------------------             ------------------------
   (State or Other Jurisdiction of                (I.R.S. Employer
    Incorporation or Organization)              Identification Number)

      400 Quincy Street, Hancock, Michigan               49930   
   ------------------------------------------        ------------
    (Address of Principal Executive Offices)          (Zip Code)


       Registrant's telephone number, including area code (906) 482-2700
                                                          --------------

          Securities Registered Pursuant to Section 12(b) of the Act:
                                      None
                                      ----
          Securities Registered Pursuant to Section 12(g) of the Act:

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

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

    Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.  /X/

    As of March 15, 1996, there were issued and outstanding 6,829,068 shares of
the Registrant's Common Stock.

    The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the closing price of such stock at
March 15, 1996, was $84,388,000.  (The exclusion from such amount of the market
value of the shares owned by any person shall not be deemed an admission by the
Registrant that such person is an affiliate of the Registrant.)

                      DOCUMENTS INCORPORATED BY REFERENCE

    PARTS II and IV of Form 10-K - Annual Report to Stockholders for the Fiscal
Year Ended December 31, 1995.

    PART III of Form 10-K - Portions of the Proxy Statement for the Annual
Meeting of Stockholders to be held in 1996.


================================================================================

<PAGE>   2

                                     PART I

ITEM 1. BUSINESS

       D&N Financial Corporation ("D&N" or the "Company") is a financial
services holding company organized under the laws of the state of Delaware.
The Company's principal subsidiary is D&N Bank (the "Bank"), a federally
chartered stock savings bank headquartered in Hancock, Michigan.

       The Bank was founded in 1889 and operated as a state-chartered mutual
savings and loan association until February 1984, when it converted to a
federal charter.  In 1985, the Bank converted to a stock association, and in
1986, converted to a federal savings bank.  The Bank adopted a holding company
structure in July 1988.  With total assets of $1.19 billion at December 31,
1995, D&N is the largest financial institution headquartered in Michigan's
Upper Peninsula and the second largest savings institution headquartered in
Michigan.

       D&N's primary business consists of attracting deposits from the general
public and making real estate loans and consumer loans and other types of
investments.  The Company conducts its business through a network of 35
full-service community banking offices, including its main office in Hancock,
Michigan, seven savings agency offices which provide depository services and
three mortgage banking offices.  The Bank's deposits are insured up to the
maximum extent permitted by law by the Federal Deposit Insurance Corporation
("FDIC").  The Bank is a member of the Federal Home Loan Bank ("FHLB") of
Indianapolis, which is one of the 12 regional banks comprising the FHLB System.
The Bank is subject to supervision by the Office of Thrift Supervision,
Department of the Treasury ("OTS") and by the FDIC.

       In December 1993, the Company raised an additional $20.9 million of
capital in a shareholder rights offering and began to implement growth and
expansion strategies.  At December 31, 1995, the Bank was in compliance with
its regulatory capital requirements.

       The executive office of the Company is located at 400 Quincy Street,
Hancock, Michigan 49930, telephone (906) 482-2700.

       Like many savings institutions, the operations of the Company's
subsidiary are materially affected by general economic conditions, the monetary
and fiscal policies of the federal government and the policies of the various
regulatory authorities, including the OTS, the FDIC and the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board").  Its results of
operations are largely dependent upon its net interest income which is the
difference between the interest it receives on its loans and investment
securities, and the interest it pays on its liabilities.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Financial Condition - Asset/Liability Management."


                                     - 2 -

<PAGE>   3

LENDING ACTIVITIES

    GENERAL.  The Bank, like most other savings institutions, has traditionally
concentrated its lending activities on first mortgage conventional loans
secured by residential real estate and, to a lesser extent, consumer loans and
income producing property.  Approximately $395.1 million or 59% of the Bank's
total loans, excluding loans held for sale, secured by real estate as of
December 31, 1995, permit periodic interest rate adjustments.


    LOAN PORTFOLIO COMPOSITION.  The following table sets forth information
concerning the composition of D&N's loan portfolio in dollar amounts and
percentages, by type of loan.



<TABLE>                 
<CAPTION>               
                                                                           December 31                                              
                         -----------------------------------------------------------------------------------------------------------
                        
                                   1995                 1994                 1993                   1992                  1991      
                         -----------------------------------------------------------------------------------------------------------
                            Amount     Percent     Amount   Percent     Amount    Percent      Amount   Percent     Amount   Percent
                         -----------------------------------------------------------------------------------------------------------
                                                                      (Dollars in thousands)
<S>                       <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>      <C>         <C>
TYPE OF LOAN            
Real estate             
  One to four family    
    Permanent             $ 576,461    61.92%   $ 505,690    63.11%   $ 367,944    58.64%   $ 438,068    61.92%  $ 534,111    63.17%
    Construction             19,982     2.15        2,159     0.27        2,083     0.33        1,289     0.18       7,821     0.92
  Income producing      
    property            
    Permanent                89,176     9.58      115,162    14.37      131,372    20.93      173,122    24.47     217,129    25.68
    Construction             21,074     2.26       17,741     2.22       10,475     1.67          933     0.13       4,143     0.49
                          ---------   ------    ---------   ------    ---------   ------    ---------    -----   ---------   ------
                        
Total real estate       
  loans                     706,693    75.91      640,752    79.97      511,874    81.57      613,412    86.70     763,204    90.26
                        
Consumer loans          
    Automobile loans         81,885     8.79       46,711     5.83       34,220     5.45       32,494     4.59      29,328     3.47
    Home equity loans        60,003     6.44       39,939     4.98       23,058     3.67       18,702     2.64      18,976     2.24
    Home improvement         41,542     4.46       39,279     4.90       40,017     6.38       46,368     6.55      46,878     5.54
    Mobile home loans           417     0.04          619     0.08          776     0.12        1,170     0.17       1,505     0.18
    Unsecured                19,637     2.11       22,197     2.77       20,328     3.24        8,539     1.21       7,679     0.91
    Other                    35,913     3.86       22,120     2.76       16,130     2.57       12,084     1.71      12,082     1.43
                          ---------   ------    ---------   ------    ---------   ------    ---------    -----   ---------   ------
                        
Total consumer loans        239,397    25.70      170,865    21.32      134,529    21.43      119,357    16.87     116,448    13.77
                        
Commercial loans        
    Revolving business  
      loans                   1,119     0.12         --        --          --        --          --        --         --        --
    Term business loans       6,650     0.71        4,748     0.59         --        --          --        --         --        --  
                          ----------  -------   ---------   -------   ---------   -------    --------   -------  ---------   -------
                        
Total commercial loans        7,769     0.83        4,748     0.59         --        --          --        --         --        --  
                          ----------  -------   ---------   -------   ---------   -------    --------   -------  ---------   -------
                        
Loans receivable, gross     953,859   102.44      816,365   101.88      646,403   103.00      732,769   103.57     879,652   104.03
                        
Less:                   
  Discounts(premiums)   
    on loans purchased       (1,709)   (0.18)         999     0.12        2,896     0.46        5,448     0.77       8,385     0.99
  Allowance for losses        9,931     1.07        8,199     1.02       11,420     1.82       15,461     2.19      18,693     2.21
  Undisbursed portion of
    loan proceeds            13,198     1.42        4,213     0.53        2,750     0.44          404     0.06       1,434     0.17
  Deferred income             1,251     0.13        1,706     0.21        1,731     0.28        3,842     0.54       5,550     0.66
  Unearned income on    
   consumer loans              --        --          --        --             1      --            44     0.01          14      -- 
                          ---------   ------    ---------   ------    ---------   ------    ---------   ------   ---------   ------
                              2,671     2.44       15,117     1.88       18,798     3.00       25,199     3.57      34,076     4.03
                          ---------   ------    ---------   ------    ---------   ------    ---------   ------   ---------   ------
                        
Loans receivable, net     $ 931,188   100.00%   $ 801,248   100.00%   $ 627,605   100.00%   $ 707,570   100.00%  $ 845,576   100.00%
                          =========   =======   =========   =======   =========   =======   =========   =======  =========   =======
</TABLE>                
                        
                                     - 3 -

<PAGE>   4


    LOAN MATURITIES.  The following schedule illustrates the maturity
structure of the Company's loan portfolio at December 31, 1995.  Loans are
shown as maturing in the period in which payment is due.  This schedule does
not reflect the effects of possible prepayments or enforcements of due-on-sale
clauses.


<TABLE>
<CAPTION>
                                          Residential
                                              and               Real Estate
                    Commercial         Income Producing         Construction
                       Loans                Property                Loan              Consumer Loans                Total       
                ------------------    ------------------    -----------------      --------------------      -------------------
  Amounts
Due in Years              Weighted               Weighted              Weighted                Weighted                 Weighted
  Ending                   Average                Average               Average                 Average                  Average
December 31,      Amount    Rate        Amount     Rate       Amount      Rate        Amount     Rate           Amount     Rate 
-------------   --------- --------    ---------  --------   ---------   -------     ---------  --------       ---------  -------
                                                          (Dollars in thousands)
<S>              <C>        <C>       <C>           <C>      <C>            <C>       <C>           <C>       <C>            <C>
1996             $  2,356    9.77%     $ 12,880     9.55%    $  26,225       8.31%     $ 49,647      9.41%    $  91,108      9.12%
1997                1,094    9.47        26,296     8.88         8,832       9.80        43,073      9.39        79,295      9.27
1998                1,206    9.44         9,869     9.00         5,488      10.02        44,905      9.48        61,468      9.45
1999-2000           2,416    9.49        28,447     9.38           337       9.20        87,869      9.15       119,069      9.21
2001-2005             307    9.13        54,047     8.17          --          --         11,178     10.32        65,532      8.54
2006-2010             170    9.64        84,240     7.91          --          --          1,083     10.24        85,493      7.94
Thereafter            168    9.18       446,192     7.45          --          --             55     10.00       446,415      7.45
                 --------             ---------              ---------                ---------               ---------          

   Total         $  7,717    9.55%    $ 661,971     7.77%    $  40,882       8.87%    $ 237,810      9.37%    $ 948,380      8.23%
                 ========             =========              =========                =========                                   

Plus:
  Accrued interest receivable,
   net of reserve for uncollected
   interest                                                                                                       5,479
  Deferred income and premiums                                                                                      458

Less:
  Loans in process                                                                                               13,198
  Loss and valuation allowances                                                                                   9,931
                                                                                                              ---------
                                                                                                              $ 931,188
                                                                                                              =========
</TABLE>

      The total amount of loans, excluding loans held for sale, due after
December 31, 1996 which have fixed interest rates is $262.3 million, while the
amount of loans due after such date having floating or adjustable rates is
$573.3 million.

     LOAN ORIGINATIONS, PURCHASES AND SALES.  Federally chartered savings
institutions, like the Bank, have general authority to make real estate loans
throughout the United States.  D&N has originated residential mortgage loans
secured by property both within and outside the State of Michigan.  D&N has also
purchased residential mortgage loans secured by property located in various
states.  In addition, the Company has originated income producing property
loans secured by real estate located in the State of Michigan and has purchased
such loans secured by property located in Michigan and elsewhere.  Since 1990,
the Bank has chosen to focus the activities of its community banking offices on
loan originations in their market areas.  At December 31, 1995, 68% of D&N's
real estate loans receivable (excluding government agency insured or guaranteed
mortgage-backed and derivative products) were secured by real estate located in
Michigan.

     At December 31, 1995, 6% of D&N's real estate loans receivable (excluding
government agency insured or guaranteed mortgage-backed securities) was


                                     - 4 -

<PAGE>   5

secured by real estate located in California.  At December 31, 1995, $1.4
million, or 3.4%, of real estate loans located in California were
nonperforming.

     The following table presents information regarding the geographic location
of the properties securing D&N's residential mortgage and income producing
property loans at December 31, 1995.  See "- Classified Assets, Loan
Delinquencies and Defaults" for a discussion of other real estate owned.


<TABLE>
<CAPTION>
                                                        Outstanding
                                                        Balance at
                                                    December 31, 1995
                                                    -----------------
                                                      (In thousands)
<S>                                                     <C>
Michigan
  One- to four-family residential. . . . . .            $ 392,587
  Apartments . . . . . . . . . . . . . . . .               14,911
  Mini warehouse, storage. . . . . . . . . .                  573
  Mobile home parks. . . . . . . . . . . . .                2,780
  Motels/hotels. . . . . . . . . . . . . . .               13,680
  Shopping centers and retail. . . . . . . .               13,593
  Office buildings . . . . . . . . . . . . .                7,812
  Industrial . . . . . . . . . . . . . . . .                5,884
  Condominiums and land development. . . . .               17,078
  Other. . . . . . . . . . . . . . . . . . .                7,815
                                                       ----------
                                                          476,713
California
  One- to four-family residential. . . . . .               28,187
  Apartments . . . . . . . . . . . . . . . .                6,532
  Mobile home parks. . . . . . . . . . . . .                  203
  Shopping centers and retail. . . . . . . .                4,186
  Office buildings . . . . . . . . . . . . .                  766
  Industrial . . . . . . . . . . . . . . . .                  404
  Other. . . . . . . . . . . . . . . . . . .                  111
                                                       ----------
                                                           40,389
Massachusetts
  One- to four-family residential. . . . . .               28,132
                                                       ----------
                                                           28,132
New York
  One- to four-family residential. . . . . .                9,722
  Apartments . . . . . . . . . . . . . . . .                3,413
                                                       ----------
                                                           13,135
North Carolina
  One- to four-family residential. . . . . .                6,234
                                                       ----------
                                                            6,234
Texas
  One- to four-family residential. . . . . .               11,915
                                                       ----------
                                                           11,915
</TABLE>





                                     - 5 -

<PAGE>   6


<TABLE>
<CAPTION>
                                                         Outstanding
                                                         Balance at
                                                     December 31, 1995 
                                                     -------------------
                                                       (In thousands)
<S>                                                    <C>
Pennsylvania
  One- to four-family residential. . . . . .                8,168
  Apartments . . . . . . . . . . . . . . . .                  943
  Office buildings . . . . . . . . . . . . .                   37
  Industrial . . . . . . . . . . . . . . . .                  145
  Other. . . . . . . . . . . . . . . . . . .                  271
                                                       ----------
                                                            9,564
Florida
  One- to four-family residential. . . . . .                6,323
                                                       ----------
                                                            6,323
Other (31 states)
  One- to four-family residential. . . . . .               94,000
  Apartments . . . . . . . . . . . . . . . .                3,537
  Mobile home parks. . . . . . . . . . . . .                  798
  Motels/hotels. . . . . . . . . . . . . . .                  425
  Shopping centers and retail. . . . . . . .                2,444
  Office buildings . . . . . . . . . . . . .                   84
  Industrial . . . . . . . . . . . . . . . .                  151
  Other. . . . . . . . . . . . . . . . . . .                  884
                                                       ----------
                                                          102,323
Rated conventional residential
 participation certificates. . . . . . . . .                8,125
                                                       ----------
     Total . . . . . . . . . . . . . . . . .              702,853
Plus
  Accrued interest receivable, net of
    reserve for uncollected interest . . . .                3,840
Less
  Deferred income, discounts and
    premiums, net. . . . . . . . . . . . . .                 (325)
  Loans in process . . . . . . . . . . . . .               13,198
  Loss allowances. . . . . . . . . . . . . .                7,135
                                                       ----------
      Total. . . . . . . . . . . . . . . . .           $  686,685
                                                       ==========
</TABLE>


        Residential loan originations are attributable primarily to referrals
from real estate brokers and builders, as well as walk-in customers.
Construction loan originations have been obtained primarily by direct
solicitation of builders and continued business from builders who have
previously borrowed from the Company.  Income producing property loans have
been obtained from mortgage broker referrals, previous borrowers and direct
contacts with the Company.

        D&N has sold loans and loan participations in the secondary market,
generally without recourse.  Loans held for sale are recorded at the lower of
cost or market value.  At December 31, 1995, the Company had $21.6 million of
net loans held for sale consisting of 15- and 30-year fixed rate loans.

                                     - 6 -

<PAGE>   7

These sales have provided additional funds for loan originations and
investments and also generated income.  The Company generally continues, after
the sale, to service the loans and loan participations sold.  Loan sales are
made on a yield basis with a portion of the difference between the yield to the
purchaser and the amount paid by the borrower constituting servicing income to
D&N.  On occasion, the Bank also purchased mortgage loan servicing rights from
others in order to maintain its loan servicing portfolio economies of scale.
During 1994, the Company decided to sell the majority of its portfolio of
purchased mortgage loan servicing rights in order to reduce the Bank's interest
rate risk and balance sheet volatility.  The scale of loan servicing operations
has been reduced as the Company concentrates its loan servicing activities on
originated loans.  The weighted average servicing fee for loans serviced for
others was .33% at December 31, 1995.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Noninterest
Income."  At December 31, 1995, D&N serviced for others approximately $278
million in loans and loan participations.  See also Note A of Notes to
Consolidated Financial Statements "Summary of Significant Accounting Policies -
Mortgage Servicing Rights".

        The Company's investment in mortgage servicing rights (MSRs) totaled
$1.1 million at December 31, 1995.  The following table details the value of the
Company's investment in MSRs.


<TABLE>
<CAPTION>
                                           Year Ended December 31,   
                                      -------------------------------
                                        1995        1994        1993 
                                      -------      ------      ------
                                                (In thousands)
<S>                                    <C>         <C>        <C>
Balance at beginning of year           $   968     $ 9,870    $ 29,198
Additions:
  Capitalized servicing                    621        --          --
  Purchased servicing                     --          --            53
                                       -------     -------    --------
    Total                                  621        --            53
Reductions:
  Scheduled amortization                   169       1,315       4,326
  Additional amortization due to
    changes in prepayment assumptions       71         421         331
  Impairment                               234        --        14,628
  Sales                                   --         7,148        --
  Transfers to loan portfolio under
    recourse and other provisions            2          18          96
                                       -------    --------    --------
    Total                                  476       8,902      19,381
                                       -------    --------    --------
Balance at end of year                 $ 1,113    $    968    $  9,870
                                       =======    ========    ========

Fair market value at end of year       $ 1,161    $    912    $  9,795
                                       =======    ========    ========
</TABLE>





                                     - 7 -

<PAGE>   8

     The following table shows origination, purchase, sale and repayment
activities of D&N, including mortgage-backed securities, for the periods
indicated.



<TABLE>
<CAPTION>
                                                                Year Ended December 31                     
                                         -------------------------------------------------------------------
                                            1995          1994          1993           1992          1991  
                                         ---------     ---------     ----------     ---------     ----------
                                                                   (In thousands)
<S>                                        <C>           <C>           <C>           <C>           <C>   
ORIGINATIONS
 Real estate:
   One- to four-family residential. . .    $ 182,800     $  81,279     $ 147,246     $ 121,468     $ 280,425
   Income producing property. . . . . .       17,614        17,350        13,014         2,711         6,136
 Non-real estate:
   Consumer . . . . . . . . . . . . . .      195,109       132,824        95,036        85,215        66,892
   Commercial . . . . . . . . . . . . .        3,739         4,748           --           --            --  
                                           -----------------------------------------------------------------

     Total originations                      399,262       236,201       255,296       209,394       353,453

PURCHASES
 Real estate:
   One- to four-family residential . . .      99,917       183,110        65,333          --          57,751
   Income producing property . . . . . .        --           1,852          --            --            --
   Mortgage-backed securities. . . . . .        --          66,922       107,975        86,464          --  
                                           -----------------------------------------------------------------

     Total purchases. . . . . . . . .         99,917       251,884       173,308        86,464        57,751
                                           -----------------------------------------------------------------

     Total additions. . . . . . . . .        499,179       488,085       428,604       295,858       411,204

SALES
 Real estate:
   One- to four-family residential (1) .     107,080        45,287       106,167        40,610       340,522
   Mortgage-backed securities(2) . . . .       4,210        50,658       126,932       110,737       170,240
 Non-real estate:
   Consumer loans. . . . . . . . . . . .       2,976         2,894         2,229         2,934         2,536
                                           -----------------------------------------------------------------

     Total sales . . . . . . . . . . . .     114,266        98,839       235,328       154,281       513,298
 Principal repayments. . . . . . . . . .     285,009       234,852       307,541       395,345       311,494
                                           -----------------------------------------------------------------

     Total reductions. . . . . . . . . .     399,275       333,691       542,869       549,626       824,792
 Transfers to other real estate owned. .      (1,936)       (2,861)       (9,380)       (6,259)      (28,524)
 Increase (decrease) in other items, net       8,801         1,079       (19,622)        3,877        (3,701)
                                           -----------------------------------------------------------------

     Net increase (decrease) . . . . . .   $ 106,769     $ 152,612     $(143,267)    $(256,150)    $(445,813)
                                           =================================================================
</TABLE>


(1) Prior to 1993, consisted primarily of sales of loans originated by the
    Bank's mortgage banking subsidiary.
(2) Includes sales of mortgage derivative products which were carried at the
    lower of cost or market.


      Outstanding loan commitments of the Company at December 31, 1995 amounted
to $46.3 million for one- to four-family residential real estate loans and
$15.4 million for commercial real estate loans.  See "Regulation - Federal
Savings Association Regulation."

      RESIDENTIAL MORTGAGE LOANS.  The original contractual loan payment period
for residential loans originated by D&N normally ranges from 15 to 30 years.
Because borrowers may refinance or prepay their loans, however, such loans
often remain outstanding for a substantially shorter period of time.

      Prior to 1992, most of the Bank's residential mortgage loans were
originated by its mortgage banking subsidiary.  The mortgage banking

                                     - 8 -

<PAGE>   9

subsidiary originated loans in southeastern Michigan, Illinois, Arizona, Texas
and North Carolina.  The Bank now originates loans primarily in its Michigan
market area through its community banking and mortgage banking offices.
Substantially all of the residential loans being originated by the Bank are in
a form which permits their sale in the secondary market.

      The Bank's first mortgages customarily include "due-on-sale" clauses,
which are provisions giving the Bank the right to declare a loan immediately
due and payable in the event, among other things, that the borrower sells or
otherwise disposes of the real property subject to the mortgage and the loan is
not repaid.  In general, the Bank enforces due-on-sale clauses in its first
mortgages.

      In the case of conventional mortgage loans intended for sale, the
Company's policy is to lend a maximum of 95% of the appraised value of
single-family residences.  The Company generally does not lend more than 90% of
the appraised value of the property on those loans it intends to hold.  Private
mortgage insurance is required if the loan amount exceeds 80% of the appraised
value, in an amount sufficient to reduce the Bank's exposure to 75% or less of
the appraised value of the property.  Property securing real estate loans made
by the Bank is appraised by independent appraisers selected by the Bank and
whose appraisals are reviewed by D&N personnel or other independent appraisers.

      Loans up to the maximum limits for single family homes of the Federal
Home Loan Mortgage Corporation ("FHLMC") (currently $207,000) and the Federal
National Mortgage Association ("FNMA") (currently $203,150) may be approved by
qualified loan officers of the Bank.  The Bank's Residential Loan Committee has
single-family lending authority up to $500,000, if two members approve.  Loans
of $500,000 to $2 million must be approved by the Bank's Loan Committee
(comprised of Messrs.  Butvilas, Donnelly, Janson, Hofstad, West and Sliwinski).
Loans in excess of $2 million must be approved by the Board of Directors.

      Title, fire and casualty insurance as well as surveys are generally
required on all mortgage loans.

      D&N also offers a variety of ARM loans which offer adjustable rates of
interest, payments, loan balances or terms to maturity which vary according to
specified indices.  The Bank's ARMs generally have a loan term of 30 years with
rate adjustments every year or every three years during the term of the loan.
ARMs currently originated by the Bank contain a 2% limit as to the maximum
amount of change in the interest rate at any adjustment period and a 6% limit
over the life of the loan.  The Bank generally originates ARMs to hold in its
portfolio.  At December 31, 1995, residential ARMs totaled $314 million, or 56%
of the Bank's total residential one- to four-family mortgage loan portfolio.
Of this total ARM portfolio, $184 million or 59% were purchased from others.
Due to consumer demand, residential loans originated during 1995 were
predominately fixed rate loans.

      Despite the benefits of ARMs to the Bank's asset/liability management
program, such loans also pose potential additional risks, primarily because as

                                     - 9 -

<PAGE>   10

interest rates rise, the underlying payment by the borrower rises, increasing
the potential for default.  At the same time, marketability of the underlying
property may be adversely affected by higher interest rates.

      MORTGAGE-BACKED SECURITIES.  The Bank on occasion purchases
mortgage-backed securities to supplement residential loan production.  The
types of securities purchased are based upon the Bank's asset/liability
management strategy and balance sheet objectives.  No purchases were made
during 1995.

      The Bank has in the past invested in interest only strip securities (IOs)
and principal only strip securities (POs) as part of its asset/liability
management strategy.  At December 31, 1995, D&N had IOs with a book value and a
market value of $2.4 million, and had no POs at that date.  For a discussion of
the risks and performance characteristics of these securities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Noninterest Income," "- Asset/Liability Management" and Note D of
Notes to Consolidated Financial Statements.

      The following table sets forth information concerning the composition of
D&N's mortgage-backed securities portfolio in dollar amounts and percentages,
by type of security.  See also Note D of Notes to Consolidated Financial
Statements.





<TABLE>
<CAPTION>
                                                                               December 31                                         
                                     ----------------------------------------------------------------------------------------------
    Mortgage-Backed                        1995               1994                1993               1992               1991
      Securities                      Amount   Percent   Amount   Percent    Amount   Percent   Amount   Percent   Amount   Percent
 ----------------------              -----------------  -----------------   -----------------  -----------------  -----------------
                                                                          (Dollars in thousands)
<S>                                  <C>        <C>      <C>       <C>       <C>       <C>     <C>       <C>      <C>       <C>
TYPE OF SECURITY
   One- to four-family:
     Mortgage-backed securities. . . $120,993   97.99%   $143,298   97.72%   $161,957   96.59% $206,749   87.93%  $295,751   80.98%
     Interest only certificates. . .    2,456    1.99       3,886    2.65       4,321    2.58    27,075   11.51     48,741   13.34
     Principal only certificates         --       --         --       --         --       --       --       --      21,253    5.82
                                     -------   ------    --------  ------    --------  ------  --------  ------    -------- ------

   Mortgage-backed securities, gross  123,449   99.98     147,184  100.37     166,278   99.17   233,824   99.44    365,745  100.14

   Net (discounts) premiums                26    0.02        (538)  (0.37)      1,399    0.83     1,313    0.56       (505)  (0.14)
                                     --------  -------   --------  -------   --------  ------- --------  -------  --------  ------ 

   Mortgage-backed securities, net   $123,475  100.00%   $146,646  100.00%   $167,677  100.00% $235,137  100.00%  $365,240  100.00%
                                     ========  =======   ========  =======   ========  ======= ========  =======  ========  =======
</TABLE>



   INCOME PRODUCING PROPERTY LOANS.  The Company has historically originated
and purchased both permanent and, to a substantially lesser extent,
construction loans secured by income producing property and land development
loans.  Essentially all permanent income producing property loans originated by
the Company to date have been secured by real property located in Michigan.

   To a substantially lesser extent, the Company has also purchased income
producing property loans and participation interests in these loans outside of
Michigan.  These loans may be in the form of mortgage-backed securities, may
have fixed or variable interest rates and most have been outstanding for three

                                     - 10 -

<PAGE>   11

to twelve years.  At December 31, 1995, $27.7 million of D&N's portfolio of
income producing property loans were purchased loans.

      During 1990, the Company ceased all origination and purchase activity
involving income producing and land development loans.  Although the Company
was not originating new loans until 1993, it provided financing to facilitate
the sale of real estate it had acquired through foreclosure or in settlement of
loans.  Some of this property is in a distressed condition and difficult to
market.  To make a sale possible, the Company may be required to provide
financing at rates and terms which are not reflective of true market
conditions.  When this occurs, the company reduces the carrying value of the
below market loan by discounting the expected cash flows to a present value
using a market rate of interest.  Since 1993, the Company has resumed
originating income producing property loans secured by real estate but only in
its community banking market areas.

      The following table shows the composition of the Company's income
producing property and land development loans at December 31, 1995.  See
"Non-Performing Assets and Risk Elements."

<TABLE>
<CAPTION>
                                                                                          Amount Non-
                                                       Loans           Percentage        Performing or
                                                    Outstanding         of Total           of Concern 
                                                    -----------        ----------        -------------
                                                                 (Dollars in thousands)
<S>                                                <C>                  <C>             <C>
Apartments and multi-family residences             $  29,549             29.97 %        $    4,309

Other income producing property:
  Motels/hotels                                       14,207             14.41               4,598
  Offices                                              8,761              8.88                 590
  Mobile home parks                                    3,808              3.86                 120
  Shopping centers                                    20,378             20.67               2,439
  Industrial                                           6,632              6.72                --
  Other                                                5,795              5.88                 100
                                                   ---------          --------          ----------
    Total                                             89,130             90.39              12,156

Land development loans and other                      21,120             21.42                --  
                                                   ---------          --------          ----------

    Total                                            110,250            111.81          $   12,156
                                                                                        ==========

Allowance for losses                                  (6,115)            (6.20)
Loans in process, deferred income and
  other miscellaneous credits                         (5,533)            (5.61)
                                                   ---------          -------- 

    Total                                          $  98,602            100.00 %
                                                   =========          ========= 
</TABLE>

    CONSUMER LENDING.  Federal regulations permit federal savings institutions
to make secured and unsecured consumer loans, together with investments in
commercial paper and corporate debt securities, in an amount up to 35% of the
institution's assets.  In addition, a federal savings institution has lending
authority above the 35% category for certain consumer loans, such as home
equity loans, property improvement loans, mobile home loans and deposit account
secured loans.

    Consumer loans originated by the Company are offered at fixed and
adjustable rates of interest.  The underwriting standards employed by the
Company for consumer loans include a determination of the applicant's payment

                                     - 11 -

<PAGE>   12

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

    The Company has established programs to originate consumer loans including
automobile loans, home improvement loans, home equity loans, student loans
under various guaranteed student loan programs, loans to depositors secured by
pledges of their deposit accounts and unsecured loans.  Although consumer loans
involve a higher level of risk than one- to four-family residential mortgage
loans, they generally carry higher yields and have shorter terms to maturity.
The Company has increased its origination of consumer loans during the past
several years, and is continuing to emphasize these types of loans.  At
December 31, 1995, consumer loans totaled $239.4 million or 26% of the
Company's loan portfolio.

    During 1995, net consumer loan charge-offs were $642,000 compared to
$411,000 in 1994, $354,000 in 1993, $744,000 in 1992 and $1.4 million in 1991.

    Indirect loan originations totaled $65.5 million in 1995.  Indirect
receivables amounted to $69.8 million at December 31, 1995 and make up 29% of
the consumer loan portfolio.  Indirect loans are underwritten according to the
same guidelines as direct loans, and the maximum dollar exposure to any one
dealer is typically limited to $5 million.

    Home equity loans and home equity credit lines are extended at fixed or
variable rates of interest and normally do not exceed 75% of the property's
appraised value less the amount owing, if any, on a first mortgage.  Home
equity loans are repaid according to fixed monthly payments over a maximum term
of ten years.  Home equity credit lines require a monthly interest payment
based upon the outstanding balance.  A minimum monthly payment is required on
outstanding balances.  Home equity credit lines generally have five-year terms
at which time the Bank may require payment in full or renew the loan for
another five-year term.  Amounts repaid are available for subsequent borrowing,
subject to satisfactory loan performance.

    Home improvement loans are generally treated as home equity loans with a
first or second mortgage lien securing the loan.  A small number of home
improvement loans are written as unsecured loans.

    The Company has increased its emphasis in recent years on unsecured loans.
These loans are underwritten according to stricter guidelines than secured
loans, and loan officers have lower approval limits for unsecured loans than
for secured loans.

    D&N is subject to various state and federal limitations on the maximum
rates of interest it may charge on consumer and certain other loans.  These
limitations have not had a significant effect on D&N's consumer loan
activities.


                                     - 12 -

<PAGE>   13


LOANS TO ONE BORROWER

    Under federal law, the aggregate amount of loans that the Company is
permitted to make to any one borrower is generally limited to 15% of unimpaired
capital and surplus.  At December 31, 1995, the Company's loans to one borrower
limit was approximately $10.8 million.  See "Regulation - Federal Savings
Association Regulation".  At December 31, 1995, the Company had no loans in
excess of its lending limit to one borrower.

CLASSIFIED ASSETS, LOAN DELINQUENCIES AND DEFAULTS

    The Company's collection procedures provide that when a residential
mortgage loan is 15 days past due, the borrower is contacted by mail and
payment is requested.  For loans secured by income producing property, the
borrower is contacted by telephone when the loan is 15 days past due.  If the
delinquency continues, subsequent efforts by telephone and by mail are made to
contact the delinquent borrower.  In certain instances, the Company may modify
the loan or grant a limited moratorium on loan payments to enable the borrower
to reorganize his financial affairs.  If the loan continues in a delinquent
status for 90 days or more, the Company generally initiates foreclosure
proceedings.

    The process of non-judicial foreclosure in Michigan takes approximately six
weeks.  A sheriff's sale is then held at which the Bank normally bids for the
purchase of the property.  A conditional sheriff's deed is then awarded to the
higher bidder, usually the Bank, and the customer is given six months (or in
certain circumstances, one year) to redeem the conditional deed by repaying the
bid amount in full.  During this redemption period, the borrower may occupy and
use the property as he sees fit.  If he fails to redeem the sheriff's deed,
then the Company acquires clear title to the real estate and subsequently sells
it to recover its investment.  In most cases, it is not economical to obtain a
deficiency judgment against the borrower if the property is sold for less than
the unpaid balance of the loan.

    The following table sets forth information concerning delinquent mortgage
and other loans at December 31, 1995.  The amounts presented represent the
total remaining principal balances of the related loans (before reserves for
losses), rather than the actual payment amounts which are overdue.


<TABLE>
<CAPTION>
                                                             Real Estate                
                                              ------------------------------------------
                                                                       Income Producing
                            Commercial           Residential               Property              Consumer      
                        -------------------   ------------------   ---------------------    -------------------
                          Number    Amount     Number   Amount       Number     Amount      Number     Amount 
                         --------  --------   -------- --------     --------   --------    --------   --------
                                                        (Dollars in thousands)
<S>                         <C>    <C>         <C>    <C>               <C>    <C>            <C>     <C>
Loans delinquent for:
  30 - 59 days. . . .       --     $  --       104    $  3,959          1      $    708       456     $  2,358
  60 - 89 days. . . .       --        --        24         978          1            80       137          539
  90 days and over. .       --        --        71       4,108          3         5,945        74          446
                          -----    -------   -----    --------      -----      --------     -----     --------
     Total. . . . . .       --        --       199    $  9,045          5      $  6,733       667     $  3,343
                          =====    =======   =====    ========      =====      ========     =====     ========
</TABLE>




                                     - 13 -

<PAGE>   14

    Federal regulations provide for the classification of loans and other
assets such as debt and equity securities considered to be of lesser credit
quality as "substandard," "doubtful" or "loss" assets.  The regulation requires
insured institutions to classify their own assets and to establish prudent
general allowances for loan losses for assets classified "substandard" or
"doubtful."  For the portion of assets classified as "loss", an institution is
required to either establish specific allowances for loan losses for assets of
100% of the amount classified or charge off such amount.  Assets which do not
currently expose the insured institution to sufficient credit risk to warrant
classification in one of the aforementioned categories but possess potential
weaknesses are required to be designated "special mention" by management.  In
addition, the OTS may require the establishment of a general allowance for
losses based on assets classified as "substandard" and "doubtful" or based on
the general credit quality of the asset portfolio of an institution.  At
December 31, 1995, $12.2 million of the Company's assets were classified as
"substandard" while $11.9 million were classified as "special mention".  As of
such date $45,000 of such assets were classified as "doubtful" and none were
classified as "loss".  The Company's classification of assets is consistent with
OTS examination classifications.

    The largest item in classified assets is a commercial real estate loan
secured by a hotel in Michigan.  This asset has a total carrying value of $3.3
million at December 31, 1995.

    Hotels and motels account for $4.6 million of classified assets and
apartments account for $4.8 million.  The balance of classified assets consists
of loans and real estate owned of various income producing properties, land,
residential real estate and consumer loans.  Classified assets amounting to
$5.0 million, or 21% of total classified assets, are secured by real estate
located in the state of California.

NONPERFORMING ASSETS AND RISK ELEMENTS

    Nonperforming assets, including other real estate owned, decreased to $9.6
million at December 31, 1995 compared to $24.5 million at December 31, 1994.
The ratio of nonperforming assets to total assets was 0.81% at December 31,
1995 compared to 2.25% at December 31, 1994, as several nonperforming loans
were paid off or restored to accrual status and as the Company was able to sell
several repossessed properties during the year.  Allowances for losses
represented 105% of nonperforming assets at December 31, 1995.

    Loans are placed on nonaccrual status when the collection of principal
and/or interest becomes doubtful.  In addition, residential mortgage loans and
income producing property loans are placed on nonaccrual status when the loan
becomes 90 days or more contractually delinquent.  All consumer loans more than
90 days delinquent are charged against the consumer loan allowance for loan
losses.  Prior to 1992, the Company had accruing loans delinquent more than 90
days which were loans that were in the process of collection and that the
Company considered to be well secured.  For 1995, the Company would have
recorded interest income of $1.1 million if nonaccrual and restructured loans
had performed in accordance with their original terms.  The Company recognized
$344,000 of interest income on these loans in 1995.

                                     - 14 -

<PAGE>   15

    The following table sets forth the amounts and categories of risk elements
in the Company's loan portfolio:


<TABLE>
<CAPTION>
                                                                                December 31,                              
                                                        ---------------------------------------------------------------   
                                                           1995        1994          1993           1992         1991     
                                                        ----------------------------------------------------------------  
                                                                             (Dollars in thousands)                       
<S>                                                     <C>          <C>          <C>           <C>           <C>
Nonaccruing loans                                       $    8,172   $  17,995    $   30,079    $   44,537    $   51,953  
Accruing loans delinquent more than 90 days                   --          --            --            --           1,160  
Restructured loans                                            --          --             166           167         2,339  
                                                        ----------   ---------    ----------    ----------    ----------  
                                                                                                                          
   Total nonperforming loans                                 8,172      17,995        30,245        44,704        55,452  
Other real estate owned (OREO)                               1,452       6,520        13,312        11,186        11,499  
                                                        ----------   ---------    ----------    ----------    ----------  
                                                                                                                          
   Total nonperforming assets                           $    9,624   $  24,515    $   43,557    $   55,890    $   66,951  
                                                        ==========   =========    ==========    ==========    ==========  
Nonperforming loans as a percentage of total loans            0.87%       2.22%         4.73%         6.18%         6.42% 
                                                        ==========   =========    ==========    ==========    ==========  
Nonperforming assets as a percentage of total assets          0.81%       2.25%         4.18%         4.61%         4.41% 
                                                        ==========   =========    ==========    ==========    ==========  
Allowance for loan losses as a percentage of                                                                              
   nonperforming loans                                      121.53%      45.56%        37.76%        34.59%        33.71% 
                                                        ==========   =========    ==========    ==========    ==========  
Allowances for loan and OREO losses as a                                                                                  
   percentage of nonperforming assets                       104.57%      34.79%        27.71%        29.90%        28.67% 
                                                        ==========   =========    ==========    ==========    ==========  
</TABLE>

OTHER REAL ESTATE OWNED

    Other real estate owned, net of reserves, totaled $1.3 million at December
31, 1995, compared with $6.2 million at December 31, 1994.  Other real estate
owned consisted of single family homes, multi-family dwelling units and
commercial real estate.  At foreclosure, real estate is valued at the lower of
the loan balance or estimated fair value less disposal costs.  Any difference 
is charged to the allowance for loan losses.  The carrying value is 
subsequently adjusted to the extent it exceeds estimated fair value.

    The largest asset in other real estate owned is a 41-unit apartment
building located in California.  This asset has a carrying value of $486,000 at
December 31, 1995.


OTHER LOANS OF CONCERN

    In addition to nonperforming assets, the Company has other loans of concern
aggregating $14.5 million.  These are loans which are currently performing but
which demonstrate a specific weakness or weaknesses which, if not corrected,
could cause failure of the borrower and default.  These loans are closely
monitored by management, and as the weaknesses are corrected, may be
reclassified as acceptable loans.

    Included in other loans of concern at December 31, 1995, are five purchased
income producing property loans totaling $6.6 million that have all paid as
agreed but, for various reasons, indicate potential payment concerns.




                                     - 15 -

<PAGE>   16

ALLOWANCE FOR LOAN LOSSES

    Loss allowances are established at levels considered appropriate based on
management's judgment of potential losses in residential, income producing and
consumer loan portfolios.  The loan portfolios are reviewed at least quarterly
for changes in performance, collateral value and overall quality.  Allocated
allowances are established for problem loans with expected losses, and in
addition, allowances are established for unidentified potential losses.  
Regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses.  Such agencies may
require the Company to recognize additions to the allowance based upon their
judgment of the information available to them at the time of their examination.
A $2.4 million provision for potential loan losses was made in 1995, compared
to $100,000 in 1994 and none in 1993.  Management's judgment in determining the
level of the allowance for loan losses is influenced by several factors during
the quarterly reviews.  These factors include, but are not limited to, past
loan performance and loss experience, current economic and market conditions,
collateral location and market values, industry and geographic concentrations
and delinquency statistics and ratios.  Management also considers the different
levels of risk between income producing property loans, installment loans and
one-to four-family residential loans.  In addition, management considers the
level of nonperforming assets and classified assets, the level of lending
activity and the overall size of the loan portfolio.

    Income-producing property charge-offs were primarily due to writedowns of
loans to estimated fair value.  Installment loan charge-offs increased
somewhat, but charge-off ratios decreased as the installment loan portfolio
grew at a faster rate.  See "Lending Activities" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."





                                     - 16 -

<PAGE>   17

    The following table sets forth an analysis of the Bank's allowance for loan
losses:


<TABLE>
<CAPTION>
                                                    Year Ended December 31,            
                                      -------------------------------------------------
                                        1995      1994      1993      1992       1991  
                                      --------  --------  --------  --------   --------
                                                   (Dollars in thousands)
<S>                                   <C>       <C>       <C>        <C>        <C>
Balance at beginning of year . . .    $ 8,199   $11,420   $15,461    $18,693    $18,315
Charge-offs:
  Single family. . . . . . . . . .        169       110     1,111        311        117
  Income producing property. . . .      1,019     3,109     2,584      2,180      8,936
  Installment. . . . . . . . . . .        999       773       681      1,000      1,555
  Commercial . . . . . . . . . . .       --        --        --         --         --  
                                      -------   -------   -------    -------    -------
                                        2,187     3,992     4,376      3,491     10,608
Recoveries:
  Single family. . . . . . . . . .        917         9      --         --          280
  Income producing property. . . .        245       300         8          3        365
  Installment. . . . . . . . . . .        357       362       327        256        191
  Commercial . . . . . . . . . . .       --        --        --          --        --  
                                      -------   -------   -------    -------    -------
                                        1,519       671       335        259        836
                                      -------   -------   -------    -------    -------
Net charge-offs. . . . . . . . . .        668     3,321     4,041      3,232      9,772
Provision charged to operations         2,400       100      --         --       10,150
                                      -------   -------   -------    -------    -------
Balance at end of year . . . . . .    $ 9,931   $ 8,199   $11,420    $15,461    $18,693
                                      =======   =======   =======    =======    =======
Net charge-offs as a percentage
  of average loans . . . . . . . .       0.08%     0.44%     0.61%      0.44%      0.99%
                                      ========  ========  ========   ========   ========
Allowance for loan losses as a
  percentage of total loans. . . .       1.06%     1.01%     1.79%      2.14%      2.16%
                                      ========  ========  ========   ========   ========
</TABLE>




       The following table summarizes the allocation of the allowance for loan
losses by major categories at the dates indicated:



<TABLE>
<CAPTION>
                                                                         December 31,                                      
                               --------------------------------------------------------------------------------------------
                                    1995               1994                 1993               1992              1991       
                               ----------------   ---------------    ------------------  ----------------  ---------------- 
                                       Percent            Percent             Percent            Percent           Percent
                                       of Loans           of Loans            of Loans           of Loans          of Loans
                               Amount  to Total   Amount  to Total    Amount  to Total   Amount  to Total  Amount  to Total
                               ------  --------   ------ ---------    ------  --------  -------  --------  ------ ---------
                                                                   (Dollars in thousands)
<S>                            <C>        <C>     <C>        <C>      <C>        <C>     <C>        <C>    <C>        <C>
Single family . . . . . . .    $ 1,020     62%    $   663     62%     $   279     57%    $   230     60%   $   130     62%
Income producing property .      6,115     12       6,423     17        9,617     22      13,353     24     16,590     25
Commercial. . . . . . . . .        400      1        --       --         --       --        --       --       --       --
Installment . . . . . . . .      2,396     25       1,113     21        1,524     21       1,878     16      1,973     13
                               -------   ----     -------   ----      -------   ----     -------   ----    -------   ----
     Total. . . . . . . . .    $ 9,931    100%    $ 8,199    100%     $11,420    100%    $15,461    100%   $18,693    100%
                               =======   =====    =======   =====     =======   =====    =======   =====   =======   =====
</TABLE>


INVESTMENT ACTIVITIES

       Federal savings institutions have authority to invest in various types
of liquid assets, including U.S. Treasury obligations and securities of various
federal agencies, certificates of deposit at insured banks, bankers'
acceptances and federal funds.  Federal savings institutions are also permitted
to invest in any account at a federally insured institution.

                                     - 17 -

<PAGE>   18

       Federal savings institutions may also invest a portion of their assets
in certain commercial paper and corporate debt securities.  They are also
authorized to invest in mutual funds whose assets conform to the type of
investment that a federal savings institution is authorized to make directly.
There are various restrictions on the foregoing investments.  For example, the
commercial paper must be appropriately rated by at least two national
investment rating services and the corporate debt securities must be
appropriately rated in one of the two highest rating categories by at least one
such service.  In addition, the commercial paper must mature within nine months
of issuance.  Moreover, a federal savings institution's total investment in the
commercial paper and corporate debt securities of any one issuer may not exceed
the loans to one borrower limitation applicable to the savings institution,
except that a federal savings institution may invest up to 5% of its assets in
the shares of any appropriate mutual fund.  At December 31, 1995, the Bank was
in compliance with all such requirements.

       The Company has invested in various securities which are acquired in the
capital markets.  These investments consist of loans, mortgage-backed
securities, corporate debt securities and derivative mortgage instruments.
Investments were funded with advances from the FHLB and short-term borrowings,
primarily in the form of reverse repurchase agreements, and retail deposits.
Various combinations of techniques and instruments, including interest rate
exchange agreements, interest rate caps, interest rate floors, collateralized
mortgage obligation residuals, interest only stripped mortgage-backed
securities and principal only stripped mortgage-backed securities, have been
used in an attempt to provide adequate and relatively stable returns over a
variety of interest rate environments.  The investments and financings are
structured based upon forecasts of mortgage loan repayments for loans and
mortgage-backed securities.  If mortgage loan repayments differ significantly
from the level upon which the investment was made, the interest rate spread and
market value may be reduced.  This was a major negative factor in D&N's results
of operations in past years.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of these
investments and the risks associated therewith.

       As a member of the FHLB System, the Bank must maintain minimum levels of
liquid assets specified by federal regulations which vary from time to time.
See "Regulation -- Federal Home Loan Bank System."  Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to return on loans.

       Historically, the Bank has maintained liquid assets above the minimum
requirements imposed by federal regulations and at a level believed adequate to
meet requirements of normal daily activities, repayment of maturing debt and
potential deposit outflows.  Cash flow is regularly reviewed and updated to
maintain adequate liquidity.  For the month of December 1995, the Bank's
average liquidity ratio (liquid assets as a percentage of net withdrawable
deposits and current borrowings) was 8.3%, which was in excess of regulatory
requirements.




                                     - 18 -

<PAGE>   19


       The following table sets forth information concerning the Company's
investment securities at the dates indicated.  See also Note C of Notes to
Consolidated Financial Statements for additional information regarding the
contractual maturities and weighted average yields of the Company's investment
securities.

<TABLE>
<CAPTION>
                                                                       December 31,                          
                                           ------------------------------------------------------------------
                                                   1995                  1994                   1993        
                                           --------------------  --------------------   --------------------
                                             Book       Market     Book        Market     Book       Market
                                             Value      Value      Value       Value      Value      Value  
                                           ---------  ---------  ---------   --------   ---------  ---------
                                                                      (In thousands)
<S>                                         <C>        <C>       <C>         <C>         <C>        <C>
U.S. Treasury and government
  agencies and corporations . . . . . . .   $ 27,151   $ 27,288   $   --      $   --      $   --     $   --
U.S. Treasury available for sale. . . . .     40,655     40,899     61,979     61,536      74,939     74,885
Commercial paper available for sale . . .       --         --         --          --       19,972     19,971
Valuation allowance . . . . . . . . . . .        244       --    (     443)       --          (55)      --  
                                            --------   --------   --------    -------     -------   --------
                                              68,050     68,187     61,536     61,536      94,856     94,856
Investment in Federal Home Loan
  Bank stock. . . . . . . . . . . . . . .     19,745     19,745     19,745     19,745      19,745     19,745
Other equity securities . . . . . . . . .         29         29         30         30          54         54
                                            --------   --------   --------   --------    --------   --------
                                            $ 87,824   $ 87,961   $ 81,311   $ 81,311    $114,655   $114,655
                                            ========   ========   ========   ========    ========   ========
</TABLE>



       The book value and market value of investment securities at December 31,
1995, by maturity ranges, were as follows:

<TABLE>
<CAPTION>
                                                                         Weighted
                                                Book         Market      Average
                                                Value         Value       Yield  
                                              --------      --------    ---------
                                                     (Dollars in thousands)
<S>                                           <C>           <C>            <C>
U.S. Treasury and government agencies
  and corporate securities maturing:
   In one year or less:. . . . . . . . . . .  $ 67,806      $ 68,187       6.96%
Valuation allowance. . . . . . . . . . . . .       244          --          --  
                                              ---------    ---------      ------
                                                68,050        68,187       6.96
Equity securities. . . . . . . . . . . . . .    19,774        19,774       8.00
                                              --------      --------      -----
                                              $ 87,824      $ 87,961       7.20%
                                              ========      ========      ======
</TABLE>



SOURCES OF FUNDS

       GENERAL.  Deposits are an important source of the Company's funds for
use in lending and for other general business purposes.  In addition to
deposits, the Company derives funds from loan repayments, advances from the
FHLB of Indianapolis and other borrowings, and at times has derived funds from
reverse repurchase agreements and loan and securities sales.  Scheduled loan
repayments are a relatively stable source of funds, while loan prepayments and
deposit inflows and outflows are significantly influenced by general interest
rates and money market conditions.  Borrowings may be used to compensate for
reductions in normal sources of funds, such as deposit inflows at less than
projected levels or deposit outflows, or to support expanded activities.
Historically, the Company has borrowed primarily from the FHLB of Indianapolis,
through institutional reverse repurchase agreements and, to a lesser extent,
from other sources.


                                     - 19 -

<PAGE>   20

       DEPOSIT ACTIVITIES.  The Company attracts both short-term and long-term
deposits from the general public by offering a wide assortment of accounts and
rates.  In recent years, market conditions have required the Company to rely
increasingly on short-term accounts that are more responsive to market interest
rates.  The Company offers regular savings accounts, checking accounts, various
money market accounts, fixed interest rate certificates with varying
maturities, negotiated rate certificates of deposit of $100,000 or above
("Jumbo CDs") and individual retirement accounts.

       The composition of the Company's deposits at the end of recent periods
is set forth in Note H of Notes to Consolidated Financial Statements.  At
December 31, 1995, the Company had no brokered deposits.  See " -- Investment
Activities" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."  In addition, the Company believes that, based on
its experience over the past five years, its savings accounts are relatively
stable sources of deposits.

<TABLE>
<CAPTION>
                                                                 At December 31,                       
                                          -------------------------------------------------------------
                                                 1995                 1994                  1993       
                                          -------------------------------------------------------------
                                                    Percent               Percent              Percent
                                                      of                    of                    of
                                           Amount    Total      Amount     Total      Amount     Total 
                                          --------  -------    --------  --------    --------   -------
                                                             (Dollars in thousands)
<S>                                       <C>       <C>        <C>        <C>        <C>        <C>
Regular Accounts:
  Savings accounts, 2.25% - 5.07%. .      $145,241   16.36%    $125,399    15.99%    $135,286    16.67%
  Checking and NOW accounts,
    0.00% - 2.00%  . . . . . . . . .        91,621   10.32       91,484    11.67       92,124    11.35
  Money market accounts, variable. .        85,287    9.60       94,543    12.06      114,951    14.17
                                          --------  ------     --------   ------     --------   ------
    Total regular accounts . . . . .       322,149   36.28      311,426    39.72      342,361    42.19
Certificates:
  0.00 - 2.99% . . . . . . . . . . .         6,218    0.70       15,697     2.00       49,424     6.09
  3.00 - 4.99% . . . . . . . . . . .        66,471    7.49      239,459    30.54      276,388    34.06
  5.00 - 6.99% . . . . . . . . . . .       415,698   46.82      148,606    18.95       58,936     7.26
  7.00 - 8.99% . . . . . . . . . . .        59,592    6.71       50,509     6.44       61,858     7.62
  9.00 - 10.99%. . . . . . . . . . .        16,310    1.84       16,671     2.13       18,780     2.31
 11.00 - 12.99%. . . . . . . . . . .          --        --          450     0.06        1,741     0.22
                                          --------  ------     --------    -----     --------   ------
    Total certificates . . . . . . .       564,289   63.56      471,392    60.12      467,127    57.56
Accrued interest . . . . . . . . . .         1,431    0.16        1,257     0.16        2,022     0.25
                                          --------  ------     --------   ------     --------   ------
    Total deposits . . . . . . . . .      $887,869  100.00%    $784,075   100.00%    $811,510   100.00%
                                          ========  =======    ========   =======    ========   =======
</TABLE>



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




                                     - 20 -

<PAGE>   21

     The following table sets forth the deposit flows at D&N during the periods
indicated.


<TABLE>
<CAPTION>
                                                Year Ended December 31,          
                                     --------------------------------------------
                                          1995            1994           1993   
                                     ------------     -----------   ------------
                                                     (In thousands)
<S>                                  <C>              <C>           <C>
Opening balance . . . . .            $    784,075     $   811,510   $   881,424
Deposits. . . . . . . . .               1,925,415       1,676,642     1,653,439
Withdrawals . . . . . . .              (1,854,870)     (1,729,637)   (1,751,440)
Interest credited . . . .                  33,075          26,325        28,242
Change in accrued 
 interest . . . . . . . .                     174            (765)         (155)
                                     ------------     -----------   ----------- 
Ending balance . . .  . .            $    887,869     $   784,075   $   811,510
                                     ============     ===========   ===========
</TABLE>





     The following table sets forth the change in dollar amount of deposits in
the various types of deposit programs offered by the Bank for the periods
indicated.



<TABLE>
<CAPTION>
                                                 Year Ended December 31,          
                                      --------------------------------------------
                                          1995            1994           1993    
                                      ------------    ------------    -----------
                                                     (In thousands)
<S>                                  <C>              <C>           <C>
Savings accounts. . . . . . . . . .  $     19,842     $    (9,887)  $    10,633
Checking and NOW accounts . . . . .           137            (640)      (12,047)
Money market accounts . . . . . . .        (9,256)        (20,408)        1,825
Certificates with maturities:
   7 to 91 days . . . . . . . . . .        (1,929)         (1,996)        2,120
   92 days to 6 months. . . . . . .        12,027         (32,073)       81,202
   6 months to 1 year . . . . . . .        20,089         (11,279)      (43,876)
   1 year to 1 1/2 years. . . . . .        14,364           7,118       (70,432)
   1 1/2 years to 3 years . . . . .        35,309          43,146        (8,790)
   3 years to 10 years. . . . . . .         7,917          (2,742)      (22,744)
Other fixed rate certificates . . .          --              --          (3,695)
Negotiable rate certificates. . . .         5,120           2,091        (3,955)
                                     ------------     -----------   ----------- 
   Increase (decrease). . . . . . .       103,620         (26,670)      (69,759)
Change in accrued interest. . . . .           174            (765)         (155)
                                     ------------     -----------   ----------- 
   Total increase (decrease). . . .  $    103,794     $   (27,435)  $   (69,914)
                                     ============     ===========   =========== 
</TABLE>





                                     - 21 -

<PAGE>   22


       The following table shows rate and maturity information for the
Company's deposits as of December 31, 1995.

<TABLE>
<CAPTION>
                                                                Interest Rate Range  --  Certificates     
                                                            --------------------------------------------  
                                                              0.00       3.00       5.00      7.00      9.00
                                                   Percent      to        to         to        to        to
                                        Amount     of Total   2.99%      4.99%      6.99%     8.99%    10.99%
                                       --------------------  ------     ------     ------    ------    ------
                                                               (Dollars in thousands)
<S>                                    <C>         <C>       <C>       <C>       <C>        <C>        <C>


Savings accounts. . . . . . . . . .    $145,241     16.36%   $  --     $  --     $    --    $   --     $   --
Checking and NOW accounts . . . . .      91,621     10.32       --        --          --        --         --
Money market accounts . . . . . . .      85,287      9.60       --        --          --        --         -- 
                                       --------   -------    ------    ------    --------   -------    -------
                                        322,149     36.28       --        --          --        --         --
Certificate accounts
  maturing in quarter ending:
03/31/96. . . . . . . . . . . . . .     101,270     11.41      1,708     16,706    71,113       502     11,241
06/30/96. . . . . . . . . . . . . .      89,592     10.09      1,741     17,434    66,610     2,589      1,218
09/30/96. . . . . . . . . . . . . .      86,973      9.79        651     11,989    56,013    18,174        146
12/31/96. . . . . . . . . . . . . .      93,505     10.53      1,295      6,214    83,645     2,220        131
03/31/97. . . . . . . . . . . . . .      39,772      4.48        259      6,175    32,129     1,203          6
06/30/97. . . . . . . . . . . . . .      26,811      3.02        170      4,369    21,384       870         18
09/30/97. . . . . . . . . . . . . .      18,672      2.10       --        1,192    16,672       808        --
12/31/97. . . . . . . . . . . . . .      19,333      2.18         27        747    17,259     1,214         86
03/31/98. . . . . . . . . . . . . .      14,670      1.65       --          340     8,803     5,429         98
06/30/98. . . . . . . . . . . . . .      13,115      1.48        151        421     6,078     6,426         39
09/30/98. . . . . . . . . . . . . .      10,451      1.18       --          117     7,225     3,005        104
12/31/98. . . . . . . . . . . . . .      10,003      1.13         39         68     6,153     3,582        161
Maturity over 3 years . . . . . . .      40,122      4.52        177        699    22,614    13,570      3,062
                                       --------   -------    -------   --------  --------   -------    -------
    Total . . . . . . . . . . . . .    $564,289     63.56    $ 6,218   $ 66,471  $415,698   $59,592    $16,310
                                                             =======   ========  ========   =======    =======

Interest accrued. . . . . . . . . .       1,431      0.16
                                       --------   -------

    Total deposits. . . . . . . . .    $887,869    100.00%
                                       ========   ======= 
</TABLE>



       The following table shows the scheduled maturities of certificates of
deposit of $100,000 or greater as of December 31, 1995.




<TABLE>
<CAPTION>
                                                     December 31, 1995 
                                                   --------------------
                                                       (In thousands)
<S>                                                      <C>
Certificates with maturities:
   Three months or less. . . . . . . . . . .             $  11,380
   Over three through six months . . . . . .                 9,502
   Over six through twelve months . . . . .                 13,364
   Over twelve months. . . . . . . . . . . .                16,598
                                                         ---------
       Total. . . . . . . . .                            $  50,844
                                                         =========
</TABLE>



       BORROWINGS.  The FHLB of Indianapolis functions as a central reserve
bank, providing credit for savings institutions within its assigned region.  As
a member of the FHLB of Indianapolis, D&N is required to own capital stock in
the FHLB of Indianapolis and is authorized to apply for advances on the
security of such stock and certain of its residential mortgage loans and other
assets (principally, securities which are obligations of, or guaranteed by,


                                     - 22 -

<PAGE>   23

the United States) provided certain standards related to creditworthiness have
been met.  See "Regulation -- Federal Home Loan Bank System."  FHLB advances
are made pursuant to several different credit programs.  Each credit program
has its own interest rate and range of maturities.  The FHLB of Indianapolis
prescribes the acceptable uses to which the advances pursuant to each program
may be made as well as limitations on the size of advances.  Depending on the
program limitations, the amount of advances are generally based on the FHLB of
Indianapolis' assessment of the institution's creditworthiness.  The FHLB of
Indianapolis is required to review its credit limitations and standards at
least once every six months.

       The Company has entered into reverse repurchase agreements with major
investment bankers utilizing government securities or various mortgage
instruments as collateral.  These reverse repurchase agreements are generally
utilized in connection with the Company's investments.  See " -- Investment
Activities" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations".

       The following table sets forth the maximum month-end and average balance
of FHLB advances, securities sold under agreements to repurchase and other
borrowings as of the dates indicated.

<TABLE>
<CAPTION>
                                             Year Ended December 31,  
                                          ----------------------------
                                            1995      1994      1993  
                                          --------  --------  --------
                                                 (In thousands)
<S>                                       <C>       <C>       <C>
Maximum Balance:
   Advances from FHLB. . . . . . . .      $226,003  $186,003  $219,078
   Securities sold under
     agreements to repurchase. . . .        52,579    54,911     3,075
   Other borrowings. . . . . . . . .        12,278    17,087    24,060

Average Balance:
   Advances from FHLB. . . . . . . .       200,770   123,710   156,769
   Securities sold under
     agreements to repurchase. . . .        24,020    17,284        25
   Other borrowings. . . . . . . . .        11,426    14,309    20,801
</TABLE>



       The following table sets forth certain information as to the Bank's FHLB
advances, securities sold under agreements to repurchase and other borrowings
at the dates indicated.  See also Notes I and J of Notes to Consolidated
Financial Statements.


<TABLE>
<CAPTION>
                                                  At December 31,     
                                          ----------------------------
                                            1995      1994      1993  
                                          --------  --------  --------
                                                 (In thousands)
   <S>                                    <C>      <C>       <C>
   Advances from 6FHLB. . . . . . . .     $206,003  $186,003  $ 84,503
   Securities sold under agreements
    to repurchase. . . . . . . . . .          --      28,627      --
   Other borrowings. . . . . . . . .        10,229    12,227    17,010
                                          --------  --------  --------
     Total borrowings. . . . . . . .      $216,232  $226,857  $101,513
                                          ========  ========  ========
</TABLE>





                                     - 23 -

<PAGE>   24

<TABLE>
<CAPTION>
                                                 At December 31,      
                                          ----------------------------
                                            1995      1994      1993  
                                          --------  --------  --------
<S>                                         <C>      <C>       <C>
Weighted average interest
  rate of advances from FHLB . . . . .      5.82%     6.03%     3.42%
Weighted average interest rate
  of securities sold under agreements
  to repurchase. . . . . . . . . . . .       --       6.29       --
Weighted average interest
  rate of other borrowings . . . . . .      9.60     10.02     11.54
Weighted average interest
  rate of total borrowings . . . . . .      6.00      6.28      4.78
</TABLE>



       The following table sets forth the Bank's maturity and rate structure of
FHLB advances as of December 31, 1995.



<TABLE>
<CAPTION>
                                       Weighted
                                    Average Rate      Amount   
                                   -------------   ------------
                                      (Dollars in thousands)
<S>                                     <C>         <C>
Matures within:
   One year. . . . . . . . . . .        5.88%       $124,000 (1)
   Two years . . . . . . . . . .        5.79          71,000 (1)
   Three years . . . . . . . . .        5.47          10,000
   Four years. . . . . . . . . .         --             --
   Thereafter. . . . . . . . . .        4.00           1,003
                                       -----        --------
      Total FHLB advances. . . .        5.82%       $206,003
                                       =====        ========
</TABLE>


       (1) Includes variable rate advances which adjust quarterly.


SERVICE CORPORATION ACTIVITIES

       The Bank is permitted to invest an amount equal to 2% of its assets
(excluding those of its subsidiaries) in its service corporations.  Up to an
additional 1% of assets may be invested in service corporations provided that
such amount is used for certain types of community development projects.  In
addition, federal regulations permit institutions to make specified types of
loans to such subsidiaries (other than special-purpose finance subsidiaries) in
which the institution owns more than 10% of the stock, in an aggregate amount
not exceeding 50% of the institution's total capital as defined below.  As of
December 31, 1995, the Bank's investment in stock of and loans to its
subsidiaries (other than its special-purpose finance subsidiary) was in
compliance with the regulations and totaled $4.2 million.  A federal
institution may also invest up to 30% of its assets in special-purpose finance
subsidiaries established and operated in accordance with federal regulations.
The Bank's investment in its special purpose finance subsidiary, D&N Funding I
Corp., was in compliance with these regulations at December 31, 1995.  Federal
law imposes special capitalization requirements on savings institutions such as
the Bank which are engaged in activities through a subsidiary that are not
permissible for national banks.  See "Regulation -- Regulatory Capital
Requirements."  The following is a description of the Bank's service
corporations.

                                     - 24 -

<PAGE>   25

       D&N Enterprises, Inc. ("Enterprises") was formed in 1972 for the purpose
of developing real estate through joint venture arrangements.  At December 31,
1995, the Company had a $300,000 investment in Enterprises and loans totaling
approximately $1.3 million to the subsidiary.

       Enterprises entered into the Cumberland Joint Venture in February 1989
to acquire land (73 acres) and to develop the land into 168 residential
building sites in Rochester Hills, Michigan.  Enterprises sold this property in
two separate transactions in 1993 and 1994 and provided financing to the new
borrowers at market rates and terms.  The sales resulted in a total gain of
$662,000 recognized in 1994.

       Enterprises entered into the Northside Joint Venture in March 1989 to
acquire and develop commercial sites in Shelby Township, Michigan.  Enterprises
is in the process of marketing this property in its entirety.

       D&N Holdings, Inc. ("Holdings") was formed in 1985 and is involved in
the sale of mortgage life insurance through its investment in Minnesota Mutual
Life Insurance Company ("MIMLIC") and also offers insurance products and
annuity contracts through Quincy Insurance Agency, Inc., a subsidiary of
Holdings formed in 1995.  In Michigan, MIMLIC's mortgage life insurance policies
are marketed and sold primarily through Michigan savings institutions.  At
December 31, 1995, D&N's investment in Holdings totaled approximately $200,000.

       FINANCE SUBSIDIARY.  In 1986, D&N incorporated a special-purpose finance
subsidiary, D&N Funding I Corp.  ("Funding").  Funding was established solely
for the purpose of issuing collateralized mortgage obligations ("CMOs").  In
August 1986, Funding pledged $61.5 million in principal amount of FHLMC
participation certificates to collateralize the issuance and sale of the CMOs
from which D&N received $56.4 million in net proceeds.  The CMOs were sold
through a third party conduit and were secured by the pledge of the
participation certificates.  D&N reinvested the proceeds from the sale of the
CMOs in residential and commercial mortgage loans.

COMPETITION

       At December 31, 1995, the Bank ranked second among all savings
institutions headquartered in the State of Michigan with respect to total
assets and is the largest Michigan savings institution based outside the
Detroit Metropolitan area.  D&N is the largest financial institution based in
the Upper Peninsula of Michigan.

       D&N experiences substantial competition in attracting and retaining
deposits and in lending funds.  The primary factors in competing for deposits
are the ability to offer attractive rates, the availability of convenient
office locations and the range and quality of services offered.

       Direct competition for deposits comes from other savings institutions,
credit unions and commercial banks.  Additional significant competition for
deposits comes from money market mutual funds and corporate and government
securities.  The primary factors in competing for loans are interest rates,

                                     - 25 -

<PAGE>   26

loan origination fees and the range of services offered.  Competition for
origination of real estate loans and consumer loans normally comes from other
savings institutions, credit unions, commercial banks, mortgage bankers,
mortgage brokers and insurance companies.

       The deposit programs of savings institutions such as the Bank compete
with government securities, money market mutual funds and other investment
alternatives.  Legislative and regulatory action has increased competition
between savings institutions and other financial institutions, such as
commercial banks, by expanding the ranges of financial services that may be
offered by savings institutions such as interest bearing checking accounts,
trust services and consumer loan products, while reducing or eliminating the
difference between savings institutions and commercial banks with respect to
long-term lending authority, taxation and maximum rates of interest that may be
paid on savings deposits.


EMPLOYEES

       At December 31, 1995, the Company had 529 employees, including 98
part-time employees.  Management considers its relations with its employees to
be satisfactory.  The Company's employees are not represented by any collective
bargaining group.

       The Company currently maintains a comprehensive employee benefit program
providing, among other benefits, a qualified pension plan, including a 401(k)
plan with an Employee Stock Ownership Program, hospitalization and major
medical insurance, paid sick leave, long-term disability insurance and life
insurance.  The Company intends to terminate the pension plan and disburse all
of the assets in 1996.  In connection with acquisitions of four savings and
loan institutions in 1980, 1982, 1986 and 1988, employees of these institutions
were made eligible to participate in D&N's sponsored pension and other benefit
programs and were given full credit for all years of service under prior plans
of the acquired institutions.


EXECUTIVE OFFICERS

       The following information as to the business experience during the past
five years is supplied with respect to executive officers of the Company or its
wholly owned subsidiary, other than the Chief Executive Officer, who do not
serve on the Company's Board of Directors.  Executive officers are elected
annually to serve until their successors are elected or until they resign or
are removed by the Board of Directors.  There are no arrangements or
understandings between the persons named and any other person pursuant to which
such officers were elected.

       George J. Butvilas, age 50.  Joining D&N as President in May 1990, Mr.
Butvilas was named Chief Executive Officer of the Bank in 1991 and Chief
Executive Officer of the Corporation in 1992.  He brought with him over 16
years experience as a commercial and community banker.  Mr.  Butvilas was
formerly Executive Vice President and Director of Boulevard Bancorp, Inc. of 
Chicago, Illinois.

                                     - 26 -

<PAGE>   27

       Kenneth R. Janson, age 44, is Executive Vice President/Chief Financial
Officer and Treasurer of the Company and the Bank.  Prior to joining D&N in May
1988 as Vice President/Financial Analysis, he was affiliated with various
universities, the last six years as Associate Professor of Accounting at
Michigan Technological University.  Mr. Janson is responsible for directing the
Bank's accounting, investment and investor relations functions.

       Peter L. Lemmer, age 38, is Senior Vice President/General Counsel of the
Company and the Bank.  Prior to joining D&N in October 1990, he held various
positions involving legal services, the last five years as Senior Vice
President/Compliance and Vice President, Associate General Counsel/Compliance
Officer with Cal America Savings, later known as Columbus Savings, and American
Federal Bank, respectively.  Mr. Lemmer is responsible for the legal and
regulatory functions of the Bank.

       Alfred J. Sliwinski, age 49, is Executive Vice President/Community
Banking.  He has been employed by D&N in various branch operation capacities
since May 1977 and is presently responsible for the community banking, bank
operations and information systems functions of the Bank.

       Richard E. West, age 49, is Senior Vice President/Wholesale Lending.
Prior to joining D&N in January 1990, he was Servicing Manager for 20 years
with Rothschild Financial Corporation and Valley National Bank of Arizona.  Mr.
West is responsible for directing the loan servicing, residential lending and
consumer lending functions of the Bank.

       Linda K. Korpela, age 45, is Vice President/Corporate Secretary of the
Company and the Bank.  She has been with the Bank since 1969 and served as
Assistant Secretary of the Bank from 1978 to 1990.

       Donald W. Schulze, age 45, is Senior Vice President/Human Resources of
the Bank.  He has been with D&N in various capacities since 1986 and is
presently responsible for the training and development, facilities management
and human resources functions of the Bank.

       Frank R. Donnelly, age 55, is Senior Vice President/Commercial Lending
of the Bank.  He has been employed by the Bank in various capacities since 1965
and is presently responsible for the business lending and commercial real
estate lending functions of the Bank.

       Leonard M. Bolduc, age 57, is Senior Vice President/Retail Loan
Operations of the Bank, responsible for planning and directing the consumer
lending and consumer and residential loan servicing functions.  Prior to
joining D&N in May 1988, he was employed by Citicorp Acceptance Company for
three years, most recently as Regional Credit Center Manager.  Mr.  Bolduc was
also employed for 19 years in various capacities at ITT Consumer Financial
Corporation, his last position being Vice President/Division Director.

       John L. Blissett, age 42, is Senior Vice President/Controller of the
Bank.  He has been with D&N since 1983 and has served as Controller since that
time.  He is responsible for the accounting, financial and regulatory
reporting, financial analysis, tax and risk management functions of the Bank.

                                     - 27 -

<PAGE>   28

       Daniel D. Greenlee, age 43, is Senior Vice President/Portfolio Manager
and Assistant Treasurer of the Bank.  He has been with D&N in various
capacities since 1984 and is presently responsible for the cash management,
investment and secondary market functions of the Bank.





                                     - 28 -

<PAGE>   29


                                   REGULATION

GENERAL

       The Bank is a federally chartered savings bank, the deposits of which
are federally insured and backed by the full faith and credit of the United
States Government.  Accordingly, the Bank is subject to broad federal
regulation and oversight extending to all operations.  The Bank is a member of
FHLB of Indianapolis and is subject to certain limited regulation by the 
Federal Reserve Board.  As the savings and loan holding company of the Bank, 
the Company also is subject to federal regulation and oversight.  The purpose 
of the regulation of the Company and other holding companies is to protect 
subsidiary savings institutions.  The Bank is a member of the Savings 
Association Insurance Fund ("SAIF"), and the deposits of the Bank are insured 
by the FDIC.  As a result, the FDIC has certain regulatory and examination 
authority over the Bank.  Certain of these regulatory requirements and 
restrictions are discussed below or elsewhere in this document.

FEDERAL REGULATION

       The OTS has extensive authority over the operations of savings
institutions.  As part of this authority, the Bank is required to file periodic
reports with the OTS and is subject to periodic examinations by the OTS and the
FDIC.  The last regular OTS and FDIC examinations of the Bank were as of June
30, 1995.  Under agency scheduling guidelines, it is likely that another
examination will be initiated in the near future.  When these examinations are
conducted by the OTS and the FDIC, the examiners may require the Bank to
provide for higher general or specific loan loss reserves.

       The OTS has established a schedule for the assessment of fees upon all
savings institutions to fund the operations of the OTS.  The general
assessment, to be paid on a semi-annual basis, is based upon the savings
institution's total assets as reported in the institution's latest quarterly
thrift financial report.  The Bank's OTS assessment for the fiscal year ended
December 31, 1995, was $218,000.

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

       In addition, the investment, lending and branching authority of the Bank
is prescribed by federal laws and regulations, and it is prohibited from


                                     - 29 -

<PAGE>   30

engaging in any activities not permitted by such laws and regulations.  For
instance, no savings institution may invest in non-investment grade corporate
debt securities.  In addition, the permissible level of investment by federal
institutions in loans secured by non-residential real property may not exceed
400% of total capital, except with approval of the OTS.  Federal savings
institutions are also generally authorized to branch nationwide.  The Bank is
in compliance with the noted restrictions.

       The Bank's general permissible lending limit for loans-to-one-borrower
is equal to the greater of $500,000 or 15% of unimpaired capital and surplus
(except for loans fully secured by certain readily marketable collateral, in
which case this limit is increased to 25% of unimpaired capital and surplus).
At December 31, 1995, the Bank's lending limit under this restriction was $10.8
million.  The Bank is in compliance with the loans-to-one-borrower limitation.

       The OTS, as well as the other federal banking agencies, has adopted
safety and soundness standards on matters such as loan underwriting and
documentation, internal controls and audit systems, interest rate risk exposure
and compensation and other employee benefits.  Any institution which fails to
comply with these standards must submit a compliance plan.  A failure to submit
a plan or to comply with an approved plan will subject the institution to
further enforcement action.  The OTS and the other federal banking agencies
have also proposed additional guidelines on asset quality and earnings
standards.  No assurance can be given as to the final form of the proposed
regulations.

INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC

       The Bank is a member of the SAIF, which is administered by the FDIC.
Savings deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the United States
Government.  As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examinations of and to require reporting by FDIC-insured
institutions.  It also may prohibit any FDIC-insured institution from engaging
in any activity the FDIC determines by regulation or order to pose a serious
risk to the FDIC.  The FDIC also has the authority to initiate enforcement
actions against savings institutions, after giving the OTS an opportunity to
take such action, and may terminate the deposit insurance if it determines that
the institution has engaged or is engaging in unsafe or unsound practices, or
is in an unsafe or unsound condition.

       The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured institutions are placed into one of nine
categories and assessed insurance premiums based upon their level of capital
and supervisory evaluation.  Under the system, institutions classified as well
capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1 or
core capital to risk-weighted assets ("Tier 1 risk-based capital") of at least
6% and a risk-based capital ratio of at least 10%) and considered healthy pay
the lowest premium while institutions that are less than adequately capitalized
(i.e., core or Tier 1 risk-based capital ratios of less than 4% or a risk-based
capital ratio of less than 8%) and considered of substantial

                                     - 30 -

<PAGE>   31

supervisory concern pay the highest premium.  Risk classification of all
insured institutions will be made by the FDIC for each semi-annual assessment
period.  For 1995, the assessment schedule for Bank Insurance Fund ("BIF")
members and SAIF members ranged from .23% to .31% of deposits.

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

       As is the case with the SAIF, the FDIC is authorized to adjust the
insurance premium rates for banks that are insured by the BIF of the FDIC in
order to maintain the reserve ratio of the BIF at 1.25% of BIF insured
deposits.  As a result of the BIF reaching its statutory reserve ratio, the
FDIC revised the premium schedule for BIF insured institutions to provide a
range of .04% to 0.31% of deposits.  The revisions became effective in the
third quarter of 1995.  In addition, the BIF rates were further revised,
effective January 1996, to provide a range of 0% to .27% with a minimum annual
assessment of $2,000.  The SAIF rates, however, were not adjusted.  As a result
of these revisions, BIF members will generally pay lower premiums.

       Due to the shrinking deposit base for SAIF assessments and the
requirement that SAIF premiums be used to make the interest payments on bonds
issued by the Financing Corporation ("FICO") in order to finance the costs of
resolving thrift failures in the 1980s, the SAIF is not expected to attain the
designated reserve ratio until the year 2002.  As a result, SAIF insured
members will generally be subject to higher deposit insurance premiums than BIF
members until, all things being equal, the SAIF attains the required reserve
ratio.

       The effect of this disparity on the Bank and other SAIF members is
uncertain at this time.  It may have the effect of permitting BIF members to
offer loan and deposit products on more attractive terms than SAIF members due
to the cost savings achieved through lower deposit premiums, thereby placing
SAIF members at a competitive disadvantage.  In order to eliminate this
disparity a number of proposals to recapitalize the SAIF have been recently
considered by the United States Congress.  The plan under current consideration
provides for a one-time assessment, anticipated to range from .80% to .90%, to
be imposed on all deposits assessed at the SAIF rates as of March 31, 1995,
including those held by commercial banks, and for BIF deposit insurance
premiums to be used to pay the FICO bond interest on a pro rata basis together
with SAIF premiums.  The BIF and SAIF would be merged into one fund as soon as
practicable, but no later than January 1, 1998.  There can be no assurance that
any particular proposal will be enacted or that premiums for either BIF or SAIF
members will not be adjusted in the future by the FDIC or by legislative
action.



                                     - 31 -

<PAGE>   32


REGULATORY CAPITAL REQUIREMENTS

       Federally insured savings institutions, such as the Bank, are required
to maintain a minimum level of regulatory capital.  The OTS has established
capital standards, including a tangible capital requirement, a leverage ratio
(or core capital) requirement and a risk-based capital requirement applicable
to such savings institutions.  These capital requirements must be generally as
stringent as the comparable capital requirements for national banks.  The OTS
is also authorized to impose capital requirements in excess of these standards
on individual institutions on a case-by-case basis.

       The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation).  Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income.  In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights (PMSRs) must be deducted from tangible capital.  At December 31, 1995,
the Bank had $599,000 of unamortized PMSRs, $68,000 of which was required to be
deducted from tangible capital.

       The OTS regulations establish special capitalization requirements for
savings institutions that own subsidiaries.  Under these regulations certain
subsidiaries are consolidated for capital purposes and others are excluded from
assets and capital.  In determining compliance with the capital requirements,
all subsidiaries engaged solely in activities permissible for national banks or
engaged in certain other activities solely as agent for its customers are
"includable" subsidiaries that are consolidated for capital purposes in
proportion to the institution's level of ownership, including the assets of
includable subsidiaries in which the institution has a minority interest that
is not consolidated for GAAP purposes.  For excludable subsidiaries the debt
and equity investments in such subsidiaries are deducted from assets and
capital, with a transition period ending on July 1, 1996, for
investments made before April 12, 1989.  At December 31, 1995, the Bank had
approximately $1.7 million net investment in subsidiaries that will be excluded
from capital pursuant to this transition rule.

       At December 31, 1995, the Bank had tangible capital of $61.1 million, or
5.10% of adjusted total assets, which is approximately $43.1 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.

       The capital standards also require core capital equal to at least 3% of
adjusted total assets (as defined by regulation).  Core capital generally
consists of tangible capital plus certain intangible assets, including
supervisory goodwill (which was phased-out over a five-year period) and up to
25% of other intangibles which meet certain separate salability and market
valuation tests.  As a result of the prompt corrective action provisions of
FDICIA discussed below, however, a savings institution must maintain a core
capital ratio of at least 4% to be considered adequately capitalized unless its
supervisory condition is such to allow it to maintain a 3% ratio.

       At December 31, 1995, the Bank had core capital equal to $61.1 million,
or 5.10% of adjusted total assets, which is $25.1 million above the minimum
leverage ratio requirement of 3% as in effect on that date.

                                     - 32 -

<PAGE>   33

       The OTS risk-based requirement requires savings institutions to have
total capital of at least 8% of risk-weighted assets.  Total capital consists
of core capital, as defined above, and supplementary capital.  Supplementary
capital consists of certain permanent and maturing capital instruments that do
not qualify as core capital and general valuation loan and lease loss
allowances up to a maximum of 1.25% of risk-weighted assets.  Supplementary
capital may be used to satisfy the risk-based requirement only to the extent of
core capital.  The OTS is also authorized to require a savings institution to
maintain an additional amount of total capital to account for concentration of
credit risk and the risk of non-traditional activities.  At December 31, 1995,
the Bank had $9.0 million of general loss reserves which could be counted as
supplementary capital.

       Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital.  Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments.  The Bank had no such
exclusions from capital and assets at December 31, 1995.

       In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, will be multiplied by a risk weight, ranging
from 0% to 100%, based on the risk inherent in the type of asset.  For example,
the OTS has assigned a risk weight of 50% for prudently underwritten permanent
one- to four-family first lien mortgage loans not more than 90 days delinquent
and having a loan to value ratio of not more than 80% at origination unless
insured to such ratio by an insurer approved by FNMA or FHLMC.

       The OTS has adopted a final rule that requires every savings institution
with more than normal interest rate risk to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to
50% of its interest-rate risk exposure multiplied by the present value of its
assets.  This exposure is a measure of the potential decline in the net
portfolio value of a savings institution, greater than 2% of the present value
of its assets, based upon a hypothetical 200 basis point increase or decrease
in interest rates (whichever results in a greater decline).  Net portfolio
value is the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts.  The rule provides for a two quarter lag between
calculating interest rate risk and recognizing any deduction from capital.  The
rule will not become effective until the OTS evaluates the process by which
savings institutions may appeal an interest rate risk deduction determination.
The OTS is uncertain as to when this evaluation may be completed.  Any savings
institution with less than $300 million in assets and a total capital ratio in
excess of 12% is exempt from this requirement unless the OTS determines
otherwise.  The Bank does not expect the new rule to have a significant effect
on its calculation of total capital.

       On December 31, 1995, the Bank had total capital of $70.0 million
(including $61.0 million in core capital and $9.0 million in qualifying
supplementary capital) and risk-weighted assets of $715.9 million (including
$31.8 million in converted off-balance sheet assets); or total capital of

                                     - 33 -

<PAGE>   34

9.78% of risk-weighted assets.  This amount was $12.8 million above the 8%
requirement in effect on that date.

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

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

       Any savings institution that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the institution.  An institution that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less)
is subject to further mandatory restrictions on its activities in addition to
those applicable to significantly undercapitalized institutions.  In addition,
the OTS must appoint a receiver (or conservator with the concurrence of the
FDIC) for a savings institution, with certain limited exceptions, within 90
days after it becomes critically undercapitalized.  Any undercapitalized
institution is also subject to the general enforcement authority of the OTS and
the FDIC, including the appointment of conservator or a receiver.

       If the OTS determines that an institution is in an unsafe or unsound
condition or is engaged in an unsafe or unsound practice, it is authorized to
reclassify a well-capitalized institution as an adequately capitalized
institution and if the institution is adequately capitalized, to impose the
restrictions applicable to an undercapitalized institution.  If the institution
is undercapitalized, the OTS is authorized to impose the restrictions
applicable to a significantly undercapitalized institution.

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



                                     - 34 -

<PAGE>   35

LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS

       OTS regulations impose various restrictions on institutions with respect
to their ability to pay dividends or make other distributions of capital.  OTS
regulations prohibit an institution from declaring or paying any dividends or
from repurchasing any of its stock if, as a result, the regulatory capital of
the institution would be reduced below the amount required to be maintained for
the liquidation account established in connection with its mutual to stock
conversion.

       Generally, institutions such as the Bank, that before and after the
proposed distribution meet their capital requirements, may make capital
distributions during any calendar year equal to the greater of 100% of net
income for the year-to-date plus 50% of the amount by which the lesser of the
institution's tangible, core or risk-based capital exceeds its fully phased-in
capital requirement for such capital component, as measured at the beginning
of the calendar year, or 75% of its net income for the most recent four quarter
period.  However, an institution deemed to be in need of more than normal
supervision by the OTS may have its dividend authority restricted by the OTS.
The Bank may pay dividends in accordance with this general authority.

       Savings institutions that will meet their current minimum capital
requirement following a proposed capital distribution need only submit written
notice to the OTS 30 days prior to such distribution.  The OTS may object to
the distribution during the 30-day period based on safety and soundness
concerns.  See " -- Regulatory Capital Requirements."

       The OTS has proposed regulations that would revise the current capital
distribution restrictions.  Under the proposal, a savings institution may make
a capital distribution without notice to the OTS (unless it is a subsidiary of
a holding company) provided that it has a CAMEL 1 or 2 rating, is not of
supervisory concern and would remain adequately capitalized (as defined in the
OTS prompt corrective action regulation) following the proposed distribution.
Savings institutions that would remain adequately capitalized following the
proposed distribution but do not meet the other noted requirements must notify
the OTS 30 days prior to declaring a capital distribution.  The OTS stated it
will generally regard as permissible that amount of capital distributions that
do not exceed 50% of the institution's excess regulatory capital plus net
income to date during the calendar year.  A savings institution may not make a
capital distribution without prior approval of the OTS and the FDIC if it is
undercapitalized before, or as a result of, such a distribution.  As under the
current rule, the OTS may object to a capital distribution if it would
constitute an unsafe or unsound practice.  No assurance may be given as to
whether or in what form the regulations may be adopted.

LIQUIDITY

       All savings institutions, including the Bank, are required to maintain
an average daily balance of liquid assets equal to a certain percentage of
the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less.  The liquidity asset ratio requirement
may vary from time to time (between 4% and 10%) depending upon economic

                                     - 35 -

<PAGE>   36

conditions and savings flows of all savings institutions.  At the present time,
the minimum liquid asset ratio is 5%.

       In addition, short-term liquid assets (e.g., cash, certain time
deposits, certain bankers acceptances and short-term United States Treasury
obligations) currently must constitute at least 1% of the institution's
average daily balance of net withdrawable deposit accounts and current
borrowings.  Penalties may be imposed upon institutions for violations of
either liquid asset ratio requirement.  At December 31, 1995, the Bank was in
compliance with both requirements, with an overall liquid asset ratio of 8.3%
and a short-term liquid asset ratio of 7.5%.

ACCOUNTING

       An OTS policy statement applicable to all savings institutions
clarifies and reemphasizes that the investment activities of a savings
institution must be in compliance with approved and documented investment
policies and strategies, and must be accounted for in accordance with GAAP.
Under the policy statement, management must support its classification of
and accounting for loans and securities (i.e., whether held for investment,
available for sale or trading) with appropriate documentation.  The Bank is 
in compliance with these rules.

       The OTS has adopted an amendment to its accounting regulations,
which may be made more stringent than GAAP, to require that
transactions be reported in a manner that best reflects their underlying
economic substance and inherent risk and that financial reports must
incorporate any other accounting regulations or orders prescribed by the OTS.

QUALIFIED THRIFT LENDER TEST

       All savings institutions, including the Bank, are required to meet a
qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations.  This test requires a savings institution to have at least 65% of
its portfolio assets as defined by regulation in qualified thrift investments
on a monthly average for nine out of every 12 months on a rolling basis.  Such
assets primarily consist of residential housing related loans and investments.
At December 31, 1995, the Bank met the test and has always met the test since
its inception.

       Any savings institution that fails to meet the QTL test must convert
to a national bank charter, unless it requalifies as a QTL and thereafter
remains a QTL.  If the institution does not requalify and converts to a
national bank charter, it must remain SAIF-insured until the FDIC permits it
to transfer to the Bank Insurance Fund.  If an institution that fails the
test has not yet requalified and has not converted to a national bank, its new
investments and activities are limited to those permissible for both a savings
institution and a national bank, and it is limited to national bank branching
rights in its home state.  In addition, the institution is immediately
ineligible to receive any new FHLB borrowings and is subject to national
bank limits for payment of dividends.  If such institution has not
requalified or converted to a national bank within three years after the
failure, it must divest of all investments

                                     - 36 -

<PAGE>   37

and cease all activities not permissible for a national bank.  In addition,
it must repay promptly any outstanding FHLB borrowings, which may result in
prepayment penalties.  If any institution that fails the QTL test is
controlled by a holding company, then within one year after the failure,
the holding company must register as a bank holding company and become
subject to all restrictions on bank holding companies.  See " -- Holding
Company Regulation."

COMMUNITY REINVESTMENT ACT

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

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


TRANSACTIONS WITH AFFILIATES

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

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


                                     - 37 -

<PAGE>   38


HOLDING COMPANY REGULATION

       The Company is a unitary savings and loan holding company subject to
regulatory oversight by the OTS.  As such, the Company is required to
register and file reports with the OTS and is subject to regulation and
examination by the OTS.  In addition, the OTS has enforcement authority over
the Company and its non-savings institution subsidiaries which also permits
the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings institution.

       As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions.  If the Company acquires control of
another savings institution as a separate subsidiary, it would become a
multiple savings and loan holding company, and the activities of the
Company and any of its subsidiaries (other than the Bank or any other
SAIF-insured savings institution) would become subject to such restrictions
unless such other institutions each qualify as a QTL and were acquired in a
supervisory acquisition.

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

       The Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured institution.  Such acquisitions are
generally prohibited if they result in a multiple savings and loan holding
company controlling savings institutions in more than one state.  However,
such interstate acquisitions are permitted based on specific state
authorization or in a supervisory acquisition of a failing savings
institution.

FEDERAL SECURITIES LAW

       The stock of the Company is registered with the SEC under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act").  The
Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements of the SEC under the Exchange Act.

       Company stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of the Company may not be resold
without registration or unless sold in accordance with certain resale
restrictions.  If the Company meets specified current public information
requirements, each affiliate of the Company is able to sell in the public
market, without registration, a limited number of shares in any three-month
period.



                                     - 38 -

<PAGE>   39

FEDERAL RESERVE SYSTEM

       The Federal Reserve Board requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking
accounts).  At December 31, 1995, the Bank was in compliance with these reserve
requirements.  The balances maintained to meet the reserve requirements
imposed by the Federal Reserve Board may be used to satisfy liquidity
requirements that may be imposed by the OTS.  See "--Liquidity."

       Savings institutions are authorized to borrow from the Federal
Reserve Bank "discount window," but Federal Reserve Board regulations
require institutions to exhaust other reasonable alternative sources of
funds, including FHLB borrowings, before borrowing from the Federal Reserve
Bank.


FEDERAL HOME LOAN BANK SYSTEM

       The Bank is a member of the FHLB of Indianapolis, which is one of
12 regional FHLBs, that administer the home financing credit function of
savings institutions.  Each FHLB serves as a reserve or central bank for its
members within its assigned region.  It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System.  It
makes loans to members (i.e., advances) in accordance with policies and
procedures established by the board of directors of the FHLB.  These
policies and procedures are subject to the regulation and oversight of the
Federal Housing Finance Board.  All advances from the FHLB are required to
be fully secured by sufficient collateral as determined by the FHLB.  In
addition, all long-term advances are required to provide funds for residential
home financing.

       As a member, the Bank is required to purchase and maintain stock in the
FHLB of Indianapolis.  At December 31, 1995, the Bank had $19.7 million in
FHLB stock, which was in compliance with this requirement.  In past years,
the Bank has received substantial dividends on its FHLB stock.  Over the past
five calendar years such dividends have averaged 9.16% and were 7.88% for
calendar year 1995.

       Under federal law the FHLBs are required to provide funds for the
resolution of troubled savings institutions and to contribute to low- and
moderate priced housing programs through direct loans or interest
subsidies on advances targeted for community investment and low- and
moderate-income housing projects.  These contributions have affected adversely
the level of FHLB dividends paid and could continue to do so in the future.
These contributions could also have an adverse effect on the value of FHLB
stock in the future.  A reduction in value of the Bank's FHLB stock may
result in a corresponding reduction in the Bank's capital.

       For the year ended December 31, 1995, the dividends paid by the FHLB
of Indianapolis to the Bank totaled $1.6 million, which constitutes a $419,000
increase from the amount of dividends received in calendar year 1994.  The
$398,000 dividend received for the quarter ended December 31, 1995 reflects an
annualized rate of 8.00%.

                                     - 39 -

<PAGE>   40

FEDERAL AND STATE TAXATION

       D&N and its subsidiaries file a consolidated federal income tax return
on a calendar year basis using the accrual method of accounting.

       Savings institutions, such as the Bank, that meet certain definitional
tests relating to the composition of assets and other conditions prescribed by
the Internal Revenue Code of 1986, as amended (the "Code"), are permitted to
establish reserves for bad debts and to make annual additions thereto which
may, within specified formula limits, be taken as a deduction in computing
taxable income for federal income tax purposes.  The amount of the bad debt
reserve deduction for "nonqualifying loans" is computed under the experience
method.  The amount of the bad debt reserve deduction for "qualifying real
property loans" (generally loans secured by improved real estate) may be
computed under either the experience method or the percentage of taxable
income method (based on an annual election).

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

       The percentage of specially computed taxable income that is used
to compute a savings institution's bad debt reserve deduction under the
percentage of taxable income method (the "percentage bad debt deduction")
is 8%.  The percentage bad debt deduction thus computed is reduced by the
amount permitted as a deduction for non-qualifying loans under the experience
method.  The availability of the percentage of taxable income method permits
qualifying savings institutions to be taxed at a lower effective federal
income tax rate than that applicable to corporations generally (approximately
32.2% assuming the maximum percentage bad debt deduction).

       If an institution's specified assets (generally, loans secured by
residential real estate or deposits, educational loans, cash and certain
government obligations) constituted less than 60% of its total assets, the
institution was not eligible to compute its bad debt deduction under the
percentage of taxable income method.  At December 31, 1995, approximately 88%
of D&N's total assets were specified assets.  No representation can be made as
to whether D&N will meet the 60% test for subsequent taxable years.

       Under the experience method, the deductible annual addition is the
amount necessary to increase the balance of the reserve at the close of the
taxable year to the greater of (i) the amount which bears the same ratio to
loans outstanding at the close of the taxable year as the total net bad debts
sustained during the current and five preceding taxable years bear to the sum
of the loans outstanding at the close of those six years or (ii) the balance
in the reserve account at the close of the last taxable year prior to the
most recent adoption of the experience method or on December 31, 1987,
whichever is later (assuming that the loans outstanding have not declined
since then).

       Under the percentage of taxable income method, the percentage bad
debt deduction cannot exceed the amount necessary to increase the balance
in the reserve for "qualifying real property loans" to an amount equal to 6%
of such loans outstanding at the end of the taxable year or the greater of (i)
the

                                     - 40 -

<PAGE>   41

amount deductible under the experience method or (ii) the amount which
when added to the bad debt deduction for "nonqualifying loans" equals the
amount by which 12% of the amount comprising savings accounts at year-end
exceeds the sum of surplus, undivided profits and reserves at the beginning of
the year.  At December 31, 1995, the 6% and 12% limitations did not restrict
the percentage bad debt deduction available to D&N.  It is not expected
that these limitations would be a limiting factor in the foreseeable
future.

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

       To the extent earnings appropriated to a savings institution's bad
debt reserves for "qualifying real property loans" and deducted for federal
income tax purposes exceed the allowable amount of such reserves computed
under the experience method and to the extent of the institution's
supplemental reserves for losses on loans ("Excess"), such Excess may not,
without adverse tax consequences, be utilized for the payment of cash
dividends or other distributions to a shareholder (including distributions
on redemption, dissolution or liquidation) or for any other purpose (except
to absorb bad debt losses).  As of December 31, 1995, the Bank's Excess for
tax purposes totaled approximately $14.0 million.  If utilized other than to
absorb bad debt losses, the tax liability related to the Bank's Excess would
be approximately $4.9 million.

       Savings institutions, such as the Bank, that file federal income tax
returns as part of a consolidated group are required by applicable Treasury
regulations to reduce their taxable income for purposes of computing their
percentage bad debt deduction for losses attributable to activities of the
non-savings institution members of the consolidated group that are
functionally related to the activities of the savings institution member.

       D&N and its consolidated subsidiaries have been audited or their
books closed without audit by the IRS with respect to consolidated federal
income tax returns through December 31, 1993.  With respect to years
examined by the IRS, either all deficiencies have been satisfied or
sufficient reserves have been established to satisfy asserted deficiencies.
In the opinion of management, any examination of still open returns (including
returns of subsidiaries and predecessors of, or entities merged into, D&N)
would not result in a deficiency which could have a material adverse
effect on the financial condition of D&N and its consolidated subsidiaries.
See Note K of Notes to Consolidated Financial Statements.

                                     - 41 -

<PAGE>   42

       MICHIGAN TAXATION.  The State of Michigan imposes a tax on intangible
personal property in the amount of $.20 per $1,000 of deposits of a savings
bank or a savings and loan institution less deposits owed to the federal or
Michigan state governments, their agencies or certain other financial
institutions.  The Michigan intangibles tax is being phased out over four
years until the tax is fully repealed effective January 1, 1998.  The State of
Michigan also imposes a "Single Business Tax."  The Single Business Tax is a
value-added type of tax for the privilege of doing business in the
State of Michigan.  The major components of the Single Business Tax are
compensation, depreciation and federal taxable income, as increased by net
operating loss carryforwards, if any, utilized in arriving at federal taxable
income, and decreased by the cost of acquisition of tangible assets during
the year.  The tax rate is 2.30% of the Michigan adjusted tax base.

       DELAWARE TAXATION.  As a Delaware business corporation, the Company
is required to file annual returns with and pay annual fees to the State of
Delaware.  The Company is also subject to an annual franchise tax imposed by
the State of Delaware based on the number of authorized shares of the Company
stock.





                                     - 42 -

<PAGE>   43

ITEM 2. PROPERTIES

Offices

       The following table sets forth information with respect to D&N offices
as of December 31, 1995.

<TABLE>
<CAPTION>
                                              Owned           Lease               Date              Net
                                               or           Expiration         Acquired or          Book
     Office Locations                         Leased           Date            Constructed          Value   
----------------------------------------   ------------    -----------      -----------------  -------------
<S>                                          <C>           <C>                       <C>        <C>
Main Office:

400 Quincy Street
Hancock, Michigan. . . . . . . . .           Owned              --                   1972       $2,951,848

Branch Offices:

1000 S. Carpenter Street
Iron Mountain, Michigan. . . . . .           Owned              --                   1968          185,464

1930 U.S. 41, West
Marquette, Michigan. . . . . . . .           Owned              --                   1976        1,539,601

2325 Ludington Street
Escanaba, Michigan . . . . . . . .           Owned              --                   1975          320,146

501 Court Street
Sault Ste. Marie, Michigan . . . .           Owned              --                   1980          347,762

U.S. 41
Ishpeming, Michigan. . . . . . . .           Owned              --                   1978          201,620

1015 Tenth Street
Menominee, Michigan. . . . . . . .           Owned              --                   1976          199,836

100 S. Suffolk Street
Ironwood, Michigan . . . . . . . .           Owned              --                   1982          267,518

330 Fifth Street
Calumet, Michigan. . . . . . . . .           Owned              --                   1980           91,667

Festival Foods, 1810 W. Memorial
Houghton, Michigan . . . . . . . .           Leased        September 30, 1996        1986            5,096
                                                           No Options
Pat's Foods, 111 U.S. 41
L'Anse, Michigan . . . . . . . . .           Leased        December 31, 1997         1992            4,857
                                                           No Options
Pat's IGA, 1507 Cleveland Avenue
Marinette, Wisconsin . . . . . . .           Leased        June 30, 1998             1993           10,858
                                                           No Options
901 W. Sharon Avenue, Suite 100
Houghton, Michigan . . . . . . . .           Leased        May 25, 2000              1995          191,527
                                                           Two 5 Yr. Options
141 S. Main Street
Romeo, Michigan. . . . . . . . . .           Owned              --                   1974          339,693

1305 W. 14 Mile Road
Clawson, Michigan. . . . . . . . .           Leased        March 31, 1998            1995            3,319
                                                           One 3 Yr. Option
363 West Big Beaver, Suite 150
Troy, Michigan . . . . . . . . . .           Leased        July 31, 2002             1995          334,264
                                                           Two 3 Yr. Options
460 S. Saginaw Street
Flint, Michigan. . . . . . . . . .           Owned              --                   1924          863,083
</TABLE>


                                     - 43 -

<PAGE>   44


<TABLE>
<CAPTION>
                                             Owned           Lease               Date              Net
                                              or           Expiration         Acquired or          Book
  Office Locations                           Leased          Date            Constructed          Value  
-----------------------------------       -----------    -----------       ----------------    -----------
<S>                                          <C>           <C>                      <C>          <C>
300 Fenton Square
Fenton, Michigan . . . . . . . . .           Owned              --                  1984         194,247

2629 W. Pierson Road
Flint, Michigan. . . . . . . . . .           Leased        October 4, 2010          1995            --
                                                           No Options
3410 S. Dort Highway
Flint, Michigan. . . . . . . . . .           Leased        October 1, 1996          1961             224
                                                           Two 3 Yr. Options
G-4409 Miller Road
Flint, Michigan. . . . . . . . . .           Owned              --                  1975         431,321

1151 N. Ballenger Highway
Flint, Michigan. . . . . . . . . .           Leased        August 31, 1996          1975            --
                                                           No Options
4400 South Saginaw, Suite 1310
Flint, Michigan. . . . . . . . . .           Leased        February 28, 1999        1994          59,491
                                                           One 5 Yr. Option
12770 S. Saginaw Street
Grand Blanc, Michigan. . . . . . .           Owned              --                  1981         347,941

727 S. State Road
Davison, Michigan. . . . . . . . .           Owned              --                  1972         190,829

1559 E. Pierson Road
Flushing, Michigan . . . . . . . .           Owned              --                  1974         219,888

G-6120 Fenton Road
Flint, Michigan. . . . . . . . . .           Owned              --                  1979         155,867

3213 Genesee Road
Flint, Michigan. . . . . . . . . .           Owned              --                  1979         206,598

611 East Grand River
Howell, Michigan . . . . . . . . .           Leased        January 1, 2002          1967           9,690
                                                           Two 5 Yr. Options
9880 East Grand River
Brighton, Michigan . . . . . . . .           Leased        February 28, 1999        1988             802
                                                           Two 5 Yr. Options
419 South Lafayette
South Lyon, Michigan . . . . . . .           Leased        October 31, 2000         1990         331,903
                                                           One 10 Yr. Option
1075 East Main Street
Pinckney, Michigan . . . . . . . .           Owned              --                  1971         351,516

10590 Highland Road
Hartland, Michigan . . . . . . . .           Leased        August 1, 2000           1995          82,549
                                                           Two 5 Yr. Options
524 West Grand River
Fowlerville, Michigan. . . . . . .           Owned              --                  1974          61,825

5844 N. Sheldon Road
Canton, Michigan . . . . . . . . .           Leased        July 31, 1997            1995             835
                                                           One 3 Yr. Option
</TABLE>





                                     - 44 -

<PAGE>   45




<TABLE>
<CAPTION>
                                            Owned           Lease                Date             Net
                                              or         Expiration          Acquired or          Book
 Office Locations                           Leased          Date             Constructed          Value  
----------------------------------      -------------    ----------       -----------------    -----------
<S>                                          <C>           <C>                      <C>          <C>
Other Office Properties:

Troy Commercial Lending
363 W Big Beaver Road, Suite 150
Troy, Michigan . . . . . . . . . .           Leased        July 31, 2002            1995          32,032
                                                           Two 3 Yr. Options
Marquette Residential Lending
309 S. Front Street
Marquette, Michigan. . . . . . . .           Leased        October 31, 1997         1992           3,916
                                                           No Options
Mortgage Corp. Lending Office
3900 Sparks Drive SE, Suite 105
Grand Rapids, Michigan . . . . . .           Leased        February 28, 1998        1994            --
                                                           No Options
Mortgage Corp. Lending Office
2620 S. Cleveland Avenue, Suite 201
St. Joseph, Michigan . . . . . . .           Leased        October 31, 1996         1994            --
                                                           No Options
Mortgage Corp. Lending Office
7071 Orchard Lake Road, Suite 100
West Bloomfield, Michigan. . . . .           Leased        November 1, 1998         1995            --

435 Building
435 Mesnard Street
Hancock, Michigan. . . . . . . . .           Owned              --                  1974         305,610

424 Building
424 Hancock Street
Hancock, Michigan. . . . . . . . .           Owned              --                  1986         503,881
</TABLE>


     At December 31, 1995, the net book value of the land, buildings
and leasehold improvements owned by D&N was $11,349,000, and the net book
value of its office furniture, fixtures and equipment was $3,389,000.

     COMPUTER EQUIPMENT.  D&N processes all depositor and borrower
customer files and transactions through a third party data services provider
including general ledger accounting and information reporting.  The book value
of all computer equipment and software owned by the Company was $870,000 at
December 31, 1995.  The Company also leases an insignificant amount of data
processing hardware and software.

Item 3. Legal Proceedings

     The Company is not involved in any material pending legal
proceedings other than nonmaterial proceedings undertaken in the ordinary
course of its business.

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

     No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1995.



                                     - 45 -

<PAGE>   46



                                    PART II


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

     Page 45 of the attached 1995 Annual Report to Stockholders is herein
incorporated by reference.

Item 6. Selected Financial Data

     Page 1 of the attached 1995 Annual Report to Stockholders is herein
incorporated by reference.


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

     Pages 10 through 18 of the attached 1995 Annual Report to
Stockholders are herein incorporated by reference.


Item 8. Financial Statements Supplementary Data      

     Pages 19 through 41 of the attached 1995 Annual Report to
Stockholders are herein incorporated by reference.

Item 9. Changes in and Disagreements With Accountants on Accounting
        and Financial Disclosure                                  


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





                                     - 46 -

<PAGE>   47


                                  PART III


Item 10.  Directors and Executive Officers of the Registrant

     Information concerning Executive Officers of the Company is contained on
page 30 herein.  Information concerning Directors of the Company, is
incorporated herein by reference from the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held in 1996, except for
information contained under the heading "Compensation Committee Report" and
"Stockholder Return Performance Presentation."  A copy of this Proxy Statement
will be filed not later than 120 days after the close of the fiscal year.


Item 11.  Executive Compensation

     Information concerning executive compensation is incorporated herein by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held in 1996, except for information contained under the
heading "Compensation Committee Report" and "Stockholder Return Performance
Presentation."  A copy of this Proxy Statement will be filed not later than
120 days after the close of the fiscal year.



Item 12.  Security Ownership of Certain Beneficial Owners and Management

     Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held in
1996, except for information contained under the heading "Compensation
Committee Report" and "Stockholder Return Performance Presentation."  A copy
of this Proxy Statement will be filed not later than 120 days after the close
of the fiscal year.


Item 13.  Certain Relationships and Related Transactions

     Information concerning certain relationships and related transactions
is incorporated herein by reference from the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in 1996,
except for the information contained under the heading "Compensation
Committee Report" and "Stockholder Return Performance Presentation."  A copy
of this Proxy Statement will be filed not later than 120 days after the close
of the fiscal year.





                                     - 47 -

<PAGE>   48


                                    PART IV


Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K


     (a) (1) Financial Statements

     The following information appearing in the Registrant's Annual Report to
Stockholders for the year ended December 31, 1995, is incorporated by
reference in this Annual Report on Form 10-K as Exhibit 13.


<TABLE>
<CAPTION>
             Annual Report Section                  Pages in Annual Report
---------------------------------------            -----------------------
<S>                                                           <C>
Selected Financial Data                                         1

Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations                                               10 - 18

Consolidated Statements of Condition                            19

Consolidated Statements of Operations                         20 - 21

Consolidated Statements of
  Stockholders' Equity                                          21

Consolidated Statements of Cash Flows                           22

Notes to Consolidated Financial Statements                    23 - 40

Report of Independent Auditors                                  41
</TABLE>



     (a) (2) Financial Statement Schedules

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





                                     - 48 -

<PAGE>   49

(a) (3) Exhibits
<TABLE>
<CAPTION>
                                                                          Sequential
                                                      Reference to        Page Number
                                                      Prior Filing      Where Attached/
                                                      or Exhibit          Located in
Regulation                                              Number              This
S-K Exhibit                                            Attached           Form 10-K
  Number                     Document                   Hereto              Report    
-----------        -----------------------------    -------------       --------------
   <S>               <C>                              <C>              <C>
    3(i)             Articles of Incorporation          *              Not applicable

    3(ii)            By-Laws                            *              Not applicable

    4                Instruments defining the           *              Not applicable
                       rights of security holders,
                       including  debentures

    9                Voting Trust Agreement           None             Not applicable

   10                Material Contracts

                     1993 401(k) Plan & Trust           *              Not applicable
                       (1994 Amendment)

                     1984 Stock Option Plan             *              Not applicable
                       (1995 Amendment)

                     1994 Management Stock Incentive    *              Not applicable
                       Plan (1995 Amendment)

                     Employment Agreement of
                       G. Butvilas                      *              Not applicable

   11                Statement re:  computation       11               Page 52
                       of per share earnings

   12                Statement re:  computation       Not required     Not applicable
                       of ratios

   13                Annual Report to Security        13               Page 53
                       Holders

   16                Letter re: change in             None             Not applicable
                       Certifying Accountant

   18                Letter re:  change in            None             Not applicable
                       accounting principles

   21                Subsidiaries of Registrant       21               Page 100

   22                Published report regarding       None             Not applicable
                       matters submitted to vote
                       of security holders


   23                Consent of Experts and           23               Page 101
                       Counsel

   24                Power of Attorney                Not required     Not applicable

   27                Financial Data Schedule          27               Page 102

   28                Information from reports         None             Not applicable
                       furnished to state
                       insurance regulatory
                       authorities

   99                Additional exhibits              None             Not applicable
</TABLE>


                                     - 49 -

<PAGE>   50
---------------------

    *Filed as exhibits to the Registrant's registration statement on Form S-2
(File No.  33-69300) filed with the Commission on September 23, 1993 or as
part of reports filed for the purpose of updating such description.  All of
such previously filed documents are hereby incorporated herein by reference
in accordance with Item 601 of Regulation S-K.

    (b) Reports on Form 8-K

    Current Reports on Form 8-K were filed on December 28, 1995 and February
28, 1996 as part of a Registration Statement for the acquisition of Macomb
Federal Savings Bank.





                                     - 50 -

<PAGE>   51


                                   SIGNATURES

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

                                        D&N FINANCIAL CORPORATION


Date    March 25, 1996                  By:/s/  GEORGE J. BUTVILAS          
    ---------------------------            ---------------------------------
                                           GEORGE J. BUTVILAS
                                            (Duly Authorized Representative)


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


By:/s/  GEORGE J. BUTVILAS              By:/s/  KENNETH D. SEATON           
   ----------------------------            ---------------------------------
   GEORGE J. BUTVILAS                      KENNETH D. SEATON
   Director, President and                 Director, Chairman of the Board
     Chief Executive Officer
     (Principal Executive Officer)

Date    March 25, 1996                  Date    March 25, 1996             
    ---------------------------             -------------------------------


By:/s/  JOSEPH C. BROMLEY               By:/s/  SHARON A. REESE DALENBERG 
  -----------------------------            -------------------------------
   JOSEPH C. BROMLEY                       SHARON A. REESE DALENBERG
   Director                                Director

Date    March 25, 1996                  Date    March 25, 1996            
    ---------------------------             ------------------------------


By:/s/  RANDOLPH P. PIPER               By:/s/  THOMAS J. ST. DENNIS      
   ----------------------------            -------------------------------
   RANDOLPH P. PIPER                       THOMAS J. ST. DENNIS
   Director                                Director

Date    March 25, 1996                  Date    March 25, 1996            
    ---------------------------             ------------------------------


By:/s/  PETER VAN PELT                  By:/s/  B. THOMAS M. SMITH, JR.   
   ----------------------------            -------------------------------
   PETER VAN PELT                          B. THOMAS M. SMITH, JR.
   Director                                Director

Date    March 25, 1996                  Date    March 25, 1996            
    ---------------------------             ------------------------------


By: /s/ KENNETH R. JANSON      
   ----------------------------
    KENNETH R. JANSON
    Executive Vice President/
    Chief Financial Officer

Date    March 25, 1996         
    ---------------------------

<PAGE>   52



                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                          Sequential
                                                      Reference to        Page Number
                                                      Prior Filing      Where Attached/
                                                      or Exhibit          Located in
Regulation                                              Number              This
S-K Exhibit                                            Attached           Form 10-K
  Number                     Document                   Hereto              Report    
-----------        -----------------------------    -------------       --------------
   <S>               <C>                              <C>              <C>
    3(i)             Articles of Incorporation          *              Not applicable

    3(ii)            By-Laws                            *              Not applicable

    4                Instruments defining the           *              Not applicable
                       rights of security holders,
                       including  debentures

    9                Voting Trust Agreement           None             Not applicable

   10                Material Contracts

                     1993 401(k) Plan & Trust           *              Not applicable
                       (1994 Amendment)

                     1984 Stock Option Plan             *              Not applicable
                       (1995 Amendment)

                     1994 Management Stock Incentive    *              Not applicable
                       Plan (1995 Amendment)

                     Employment Agreement of
                       G. Butvilas                      *              Not applicable

   11                Statement re:  computation       11               Page 52
                       of per share earnings

   12                Statement re:  computation       Not required     Not applicable
                       of ratios

   13                Annual Report to Security        13               Page 53
                       Holders

   16                Letter re: change in             None             Not applicable
                       Certifying Accountant

   18                Letter re:  change in            None             Not applicable
                       accounting principles

   21                Subsidiaries of Registrant       21               Page 100

   22                Published report regarding       None             Not applicable
                       matters submitted to vote
                       of security holders


   23                Consent of Experts and           23               Page 101
                       Counsel

   24                Power of Attorney                Not required     Not applicable

   27                Financial Data Schedule          27               Page 102

   28                Information from reports         None             Not applicable
                       furnished to state
                       insurance regulatory
                       authorities

   99                Additional exhibits              None             Not applicable
</TABLE>

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

        *Filed as exhibits to the Registrant's registration statement on Form 
S-2 (File No. 33-69300) filed with the Commission on September 23, 1993 or as
part of reports filed for the purpose of updating such description.  All of
such previously filed documents are hereby incorporated herein by reference in
accordance with Item 601 of Regulation S-K.