U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

       [X]    Annual  Report  Pursuant to Section 13 or 15(d) of the  Securities
              Exchange Act of 1934
                      For the year ended December 31, 1999;

                                      OR

       [ ]    Transition   Report  Pursuant  to  Section  13  or  15(d)  of  the
              Securities Exchange Act of 1934
             For the Transition Period from __________ to __________

                       Commission File Number: 811-3787

                     BANDO McGLOCKLIN CAPITAL CORPORATION
            (Exact name of registrant as specified in its charter)


                  Wisconsin                                    39-1364345
    (State or other jurisdiction of incorporation)         (I.R.S. Employer
                                                          Identification No.)

            W239 N1700 Busse Road
             Waukesha, Wisconsin                              53188-1160
    (Address of principal executive offices)                  (Zip Code)

      Registrant's telephone number, including area code: (262) 523-4300

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

         Securities registered pursuant to Section 12(g) of the Act:

          Title of Class                            Title of Class
Common Stock, 6-2/3 cents Par Value       Preferred Stock, 6-2/3 cents Par Value

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

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

      The aggregate market value of voting and non-voting  common equity held by
non-affiliates of the registrant at March 15, 2000 was $26,221,803.

       The number of shares of common  stock  outstanding  at March 15, 2000 was
3,910,289.

                     DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Bando  McGlocklin  Capital  Corporation  Proxy Statement for the
2000  Annual  Meeting  of  Shareholders  (to be filed  with the  Securities  and
Exchange  Commission  under  Regulation 14A within 120 days after the end of the
Registrant's  year, and upon such filing,  to be  incorporated by reference into
Part III).

<PAGE>

                      BANDO McGLOCKLIN CAPITAL CORPORATION

                     Index to Annual Report on Form 10-K
                     For the Year Ended December 31, 1999


PART  I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2

      Item 1.  Description of Business  . . . . . . . . . . . . . . . . . .   2

      Item 2.  Properties . . . . . . . . . . . . . . . . . . . . . . . . .   7

      Item 3.  Legal Proceedings  . . . . . . . . . . . . . . . . . . . . .   7

      Item 4.  Submission of Matters to a Vote of Security Holders. . . . .   7

PART  II  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7

      Item 5.  Market for Common Equity and Related Stockholder Matters . .   7

      Item 6.  Selected Financial Data (In thousands, except
                per share data) . . . . . . . . . . . . . . . . . . . . . .   8

      Item 7.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations (for the years
                ended December 31,  1999,  1998 and  1997)  . . . . . . . .   9

      Item 7A. Quantitative and Qualitative  Disclosures  About
                Market Risk . . . . . . . . . . . . . . . . . . . . . . . .  17

      Item 8.  Financial Statement and Supplementary  Data. . . . . . . . .  19

PART III  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  54

      Item 9.  Changes in and Disagreements with Accountants on
                 Accounting and Financial  Disclosure . . . . . . . . . . .  54

      Item 10.  Directors and Executive Officers of the  Registrant . . . .  54

      Item 11.  Executive  Compensation . . . . . . . . . . . . . . . . . .  54

      Item 12.  Security Ownership of Certain Beneficial Owners and
                  Management  . . . . . . . . . . . . . . . . . . . . . . .  54

      Item 13.  Certain Relationships and Related  Transactions . . . . . .  54

      Item 14.  Exhibits, Financial Statement Schedules, and Reports on
                  Form 8-K  . . . . . . . . . . . . . . . . . . . . . . . .  55

                                      (i)
<PAGE>

                                     Part I

Item 1.       Description of Business

                                  Introduction

            Bando   McGlocklin   Capital   Corporation   (the   "Company")   was
incorporated  in  February,  1980 to provide  long-term  secured  loans to small
businesses.  At present  the  Company  consists of two  business  segments,  the
Financial Service Business and the Consumer Products Business.

            The Financial  Service  Business segment consists of the Company and
the wholly-owned  subsidiary Bando McGlocklin Small Business Lending Corporation
(BMSBLC).  Both the Company and BMSBLC are operated as a real estate  investment
trust ("REIT") pursuant to the provisions of Section 856 of the Internal Revenue
Code of 1986, as amended.  The principal business of the segment is making loans
and leasing  buildings to small  businesses.  The segment also  participates  in
loans with third party loan originators.

            The  Consumer  Products  Business  segment  consists of a 99% equity
interest in Lee Middleton Original Dolls, Inc.  ("Middleton Doll"),  represented
by 100% of the outstanding  non-voting common stock of Lee Middleton,  and a 51%
interest  in  License  Products,  Inc.  ("License  Products"),  which is held by
Middleton Doll.  Middleton Doll is a manufacturer of vinyl collectible dolls and
a distributor of vinyl play dolls and resin figures.  License Products  designs,
develops  and  markets a line of quality,  proprietary  time  pieces.  George R.
Schonath,  President and Chief Operating Officer, owns 100% of the voting common
stock of Middleton  Doll,  representing  1% of its total equity.  As a REIT, the
Company is  prohibited  from owning more than 10% of the voting  common stock of
any corporation that is not a REIT.

            On  September  3, 1997,  the Company  capitalized  InvestorsBancorp,
Inc.,  a  bank  holding  company,   for  approximately  $6.2  million  and  then
distributed  all of the  outstanding  shares of  InvestorsBancorp,  Inc.  to the
Company's  shareholders.  The Company and InvestorsBancorp,  Inc., together with
its wholly-owned  subsidiary,  InvestorsBank (the "Bank"),  share common offices
and personnel. Expenses are shared between the two entities in accordance with a
Management  Services  and  Allocation  of Expenses  Agreement  (the  "Management
Agreement").  See "Management's  Discussion and Analysis of Financial  Condition
and Results of Operation - Liquidity and Capital Resources".


                         Financial Services Business

            Loans

            The Company,  through its Financial Services  Business,  (i) manages
its loan  portfolio  comprised  primarily  of loans to small  business  entities
secured by first or second mortgages,  (ii) purchases loan  participations  from
banks,  including the Bank, and (iii) owns industrial and commercial real estate
for lease to small businesses.


                                       2
<PAGE>

            Until the  distribution of the shares of  InvestorsBancorp,  Inc. in
September, 1997, the Company had engaged in the business of originating loans to
small businesses.  Concurrent with such  distribution,  the Company and the Bank
agreed in the  Management  Agreement  that the Company  would not  originate any
loans  unless  agreed to by the Bank in  writing,  unless  the loans are made to
current  Company  customers  or unless the loans are outside the Bank's  lending
limitations.  Thus,  except  for the making of loans to  Company  customers  who
desire to increase their loan amounts with the Company and for loans outside the
Bank's lending limitations, the Company does not solicit any loans.

            The  Company's  loan  portfolio is managed by the Bank for an annual
fee,  payable  monthly,  equal to 25 basis points of the total dollar  amount of
loans  under  management  and 6% of the rents from leased  properties.  Overhead
expenses  and rent  are also  shared  by the  Bank and the  Company,  as well as
certain  expenses  of  employees  providing  accounting,  reporting  and related
services to the Company.

            The Company's  loan  portfolio is primarily  comprised of long-term,
variable rate, secured loans to small business entities. The loans are primarily
secured by first  mortgages on real estate,  although  some loans are secured by
second mortgages.  Approximately 88% of the Company's loans by dollar volume are
loans to borrowers  located in the State of Wisconsin.  Substantially all of the
Company's loan portfolio is held by BMSBLC.

            The  Company's   borrowers   include   manufacturers,   wholesalers,
retailers,  professionals and service  providers.  The Company funds its lending
operations  through  its  equity  capital,  bank and  institutional  borrowings,
commercial paper sales and the sale of loan participations.

            Real Estate

            On July 14, 1998,  BMSBLC  completed an acquisition of approximately
$19.6 million of leased  properties and other assets from Bando  McGlocklin Real
Estate Investment  Corporation  ("BMREIC"),  an independently  owned real estate
investment trust. The leased portfolio,  which had a cost of approximately $18.3
million, consisted of 18 owner-occupied properties in the greater Milwaukee area
that were leased to a variety of manufacturing and service businesses.

            At December 31, 1999 the Company  owned  eighteen  buildings and had
construction  in  progress  on two  additional  buildings.  During  the year the
Company sold eight  properties and purchased seven new  properties.  The Company
has entered into  long-term  lease  agreements for all  properties.  The Company
anticipates that it will continue to construct or purchase additional industrial
or commercial properties to lease.

            The Company  anticipates that most of its rental  properties will be
for industrial real estate,  but also anticipates that it may also own and lease
commercial real estate  properties,  such as office buildings and retail stores.
The Company expects that  substantially all of its properties will be located in
Wisconsin.



                                       3
<PAGE>

            Competition

            The Company, in managing its loan portfolio, competes primarily with
commercial  banks  and  commercial  finance   companies,   many  of  which  have
substantially  more assets and capital than the Company.  Banks,  in particular,
have been  active  in  seeking  to  refinance  outstanding  loans.  The  Company
believes,  however,  that it is able to compete effectively to maintain its loan
portfolio because of its smaller size and more flexible structure.

            In owning and leasing real estate,  the Company  competes  primarily
with other REITs and other  investors such as insurance  companies and a variety
of investment vehicles which seek to own and lease real estate. In addition, the
Company competes with banks and other financial institutions, which seek to lend
money to  potential  tenants of the  Company  which  would  allow the  potential
tenants to construct and own the building  rather than lease a building owned by
the Company.

            Employees

            On December 31, 1999,  the Company  employed  only its President and
Senior Vice President. All other duties are performed by Bank employees pursuant
to the Management Agreement.

                          Consumer Products Business

            Lee Middleton Original Dolls, Inc.

            Lee Middleton Original Dolls,  Inc.,  located in Belpre,  Ohio, is a
99% owned  subsidiary of the Company,  with the President of the Company  owning
the remaining 1%.  Middleton Doll is a manufacturer of vinyl  collectible  dolls
and a distributor of vinyl play dolls and resin  figures.  Middleton Doll uses a
multi-step  process to manufacture  its vinyl dolls that includes (1) rotational
molding to create body parts for dolls,  (2)  painting,  eyeing and wigging each
doll, and (3) dressing the dolls in custom designed clothes.

            Although  it has two  retail  locations,  Middleton  Doll  does  not
primarily  sell directly to the retail  market.  The core of its business is the
distribution  of its  collectible  doll  lines  through a network  of over 2,000
independent,  specialty retail stores. Additional distribution has been acquired
through national retailers such as JCPenney,  Toys-R-Us,  Spiegel,  FAO Schwartz
and others. In 2000 a new play doll line targeted at a competitive price for the
toy market and imported from China will increase  distribution  to more national
retailers  such as K-B Toys,  Arnes,  Bradlees  and  Boscov's.  In  addition  to
traditional retail outlets, Middleton's products are sold on TV through the Home
Shopping Network and on the Internet through electronic retailers such as eToys,
iDolls, Internet Shopping Network and others.

            Middleton  Doll sells its  products  throughout  the United  States.
Distribution  is also slowly  expanding  into  Canada,  Japan and other  foreign
markets.  Competition is with various other doll  manufacturers  including Madam
Alexander, Ashton-Drake and Corolle.



                                       4
<PAGE>

Middleton  Doll's  strategy for future growth is to expand its product lines and
to increase distribution into the mass market.

            During 1999 Middleton Doll  purchased  approximately  84% of its raw
materials  from a single  supplier in Hong Kong.  As of December 31, 1999,  this
supplier  had an  additional  commitment  for $1.7  million  of  inventory  from
Middleton Doll.  Effective  January 1, 2000 Middleton Doll acquired a 51% equity
ownership position in a new Hong Kong corporation, Middleton (HK) Limited, which
will supply Middleton Doll with raw materials and finished goods from Asia after
the  completion  of the earlier  commitment.  The owner of the  remaining 49% is
affiliated with the former supplier used by Middleton Doll.

            In  February,  2000  Middleton  Doll  announced  it  will  move  its
warehouse and distribution center from Belpre, Ohio to Columbus,  Ohio to better
serve its major customers.  The new  distribution  center will be operational by
the end of June, 2000.


            License Products, Inc.

            License  Products  is  a  51%  owned  subsidiary  of  BMCC.  License
Products, located in New Berlin, Wisconsin, designs, develops and markets a line
of quality, proprietary time pieces. The products of the Company are distributed
nationwide through major retail account channels.

            Employees

            The Consumer Products Business employs approximately 160 persons.

            Seasonality

            The  Consumer  Products  Business  tends  to be  seasonal  with  the
strongest months being September, October and November.

            Large Customers

            One  customer,  JCPenney,  accounted  for  approximately  13% of the
Consumer Products Business' total revenues for 1999.

            Backlog

            The backlog of the  Consumer  Products  Business  was  approximately
$370,000 as of December 31, 1999, all of which should be filled during 2000.


                                       5
<PAGE>

                     Revenues of Principal Product Groups

            The following table sets forth (in millions of dollars), for each of
the last three years,  revenues  attributable to the Company's principal product
groups:

                          12/31/1999 12/31/1998  12/31/1997
                          ---------  ---------   ---------
Revenues
   Loan Portfolio           $ 8,552   $ 10,698    $ 11,021
   Real Estate Portfolio      3,490      1,184           -
   Dolls                     21,140     17,807      17,673
   Time Pieces                2,326      1,939       1,328
   Other                        439        447         962
                           ---------  ---------   ---------
      Total                $ 35,947   $ 32,075    $ 30,984
                           =========  =========   =========


                             Segment Information

            Financial information  concerning the Company's business segments is
incorporated by reference from the consolidated financial statements on pages 21
to 28 herein.

                              Executive Officers

            George R. Schonath, 59, has served as Chief Executive Officer of the
Company  since 1983 and as President  since July,  1997.  Mr.  Schonath has also
served as President and Chief Executive  Officer of  InvestorsBancorp,  Inc. and
the Bank since they were  established in 1997.  Until July, 1997, he served as a
director (since 1980) and Chairman of the Board (since 1983) of the Company.

            Jon  McGlocklin,  56, has served as a Senior Vice  President  of the
Company  since  July,  1997.  Mr.  McGlocklin  has also  served as  Senior  Vice
President and Secretary of  InvestorsBancorp,  Inc. and Senior Vice President of
the Bank since they were established in 1997. He has also served as President of
Healy  Manufacturing,  Inc., Menomonee Falls,  Wisconsin,  since 1997, and as an
announcer for the Milwaukee  Bucks, an NBA basketball  team,  since 1976.  Until
July,  1997, he served as a director (since 1980) and President  (since 1991) of
the Company.

            Susan J. Hauke,  34, has been the Company's Vice President  Finance,
Secretary  and  Treasurer  since 1997.  In 1997,  Ms.  Hauke was also  appointed
Controller, Vice President - Finance and Secretary of InvestorsBancorp, Inc. and
Controller,  Vice President-Finance,  and Treasurer of the Bank. From 1991 until
1997, Ms. Hauke served as Controller for the Company and was a senior accountant
at PricewaterhouseCoopers LLP before joining the Company.

            Scott J.  Russell,  40, has been a Senior  Vice  President  of the
Company  since 1997 and  InvestorsBancorp,  Inc.  since  February,  1998 and a
Senior Vice  President and Lending  Officer of the Bank since 1997.  From 1994
until 1997,  Mr.  Russell  served as a Vice President of the Company and was a
corporate banker with the Bank of Tokyo, Chicago,  Illinois,  prior to joining
the Company.



                                       6
<PAGE>

Item 2.           Properties

            BMCC owns an  approximately  16,000  square foot building and leases
approximately 11,200 square feet of the building.  The Bank leases approximately
4,750 square feet under a ten year lease and approximately  6,450 square feet is
leased to two other lessees under a one year lease. The monthly rent received is
variable based upon LIBOR interest rates.

            Middleton  Doll owns an  approximately  51,000  square foot building
that  serves as its  headquarters  and  manufacturing  facility  located at 1301
Washington  Boulevard,  Belpre,  Ohio. The one-story  building  contains retail,
office  and  warehouse   space.   During  1997   Middleton  Doll  increased  the
manufacturing  facility by 15,000 square feet to its existing size. During 1999,
an additional leased retail outlet store was opened in West Virginia. Until June
30, 2000 Middleton Doll will continue to lease warehouse space of  approximately
40,000  square  feet in Belpre,  Ohio.  A new 44,100  square  foot  facility  in
Columbus,  Ohio will be leased  beginning in June of 2000 which will be used for
distribution and to store raw materials and finished goods.

            License  Products  leases  approximately  9,500  square  feet  in  a
multi-tenant building located at 16200 West Rogers Drive, New Berlin,  Wisconsin
at a monthly rental rate of $3,680 with the lease term being month-to-month.

Item 3.           Legal Proceedings

            As of the date of this  filing,  neither  the Company nor any of its
subsidiaries is a party to any legal proceedings,  the adverse outcome of which,
in management's  opinion,  would have a material effect on the Company's results
of operations or financial position.

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

            No matters were  submitted to a vote of security  holders during the
quarter ended December 31, 1999.


                                   Part II

Item 5.           Market for Common Equity and Related Shareholder Matters

            The common stock of the Company is traded on the Nasdaq Stock Market
under the symbol BMCC.  The table below  represents the high and low sales price
for the  Company's  common  stock as reported on the Nasdaq Stock Market and the
cash dividends paid per share for 1999 and 1998:



                                       7
<PAGE>

                                       Common Stock               Cash Dividends
                                   High            Low              Per Share
      1999
First Quarter                    $ 13.000         $ 9.000              0 $0.18
Second Quarter                   $ 13.500         $ 9.500              0 $0.18
Third Quarter                    $ 12.875         $ 8.000              0 $0.18
Fourth Quarter                   $ 10.438         $ 7.273              3 $0.18
     1998
First Quarter                    $ 11.875         $ 9.625              5 $0.18
Second Quarter                   $ 13.000         $ 9.750              0 $0.18
Third Quarter                    $ 12.250         $ 8.500              0 $0.18
Fourth Quarter                   $ 11.500         $ 8.000              0 $0.18


            As of March 16, 2000, there were approximately 1,150 shareholders of
record of the Company's common stock.


Item 6.   Selected Financial Data (In thousands, except per share data)

            The  following  table  sets  forth  certain  Selected   Consolidated
Financial Data for the periods and as of the dates indicated:

<TABLE>
<CAPTION>
                                           For the years ended              Six months         For the years ended
(In thousands, except per                      December 31,                    ended                 June 30,
share data)                            1999        1998         1997         12/31/1996         1996          1995

<S>                                  <C>          <C>         <C>              <C>            <C>            <C>
Total revenues                       $35,947      $32,075     $30,984          $ 10,940       $10,617        $11,738
Net income available to
   common shareholders                 5,476        3,770       3,506             1,142         3,130          3,208
Total assets                         156,066      154,424     140,337            79,519        85,379 (1)     91,033 (1)
Long-term debt                        48,005       62,506      75,273            12,045        23,604 (1)     26,953 (1)
Total liabilities                    125,633      125,639     111,002            46,370        50,285 (1)     52,823 (1)
Redeemable preferred stock            16,908       16,908      16,908            16,908        16,908 (1)     16,908 (1)
Diluted earnings per share            $ 1.50       $ 1.02      $ 0.95            $ 0.31        $ 0.82         $ 0.81
Cash dividends declared per
   common share                       $ 0.84       $ 0.65      $ 0.61           $ 0.995        $ 0.96         $ 1.00

(1)   Unaudited

</TABLE>




                                       8
<PAGE>

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

General

            Amounts presented as of December 31, 1999, 1998 and 1997 include the
consolidation  of two segments.  The financial  services  segment includes Bando
McGlocklin  Capital  Corporation  ("BMCC" or the "Company") and Bando McGlocklin
Small Business Lending  Corporation  ("BMSBLC"),  a 100% owned subsidiary of the
Company.  The consumer  products segment includes Lee Middleton  Original Dolls,
Inc.  ("Middleton  Doll"),  a 99% owned  subsidiary  of the  Company and License
Products,  Inc. ("License Products"),  a 51% owned subsidiary of the Company. In
June of 1996  Bando  McGlocklin  Investment  Corporation  ("BMIC")  owned 51% of
Middleton  Doll.  On  January  6,  1997,  a 1%  interest  was sold to  George R.
Schonath,  President and Chief Executive  Officer of the Company.  Then on April
30,  1998,  the Company  acquired  the  remaining  49%. On May 28, 1999 BMIC was
merged into Middleton Doll.

Results of Operations

For the years ended December 31, 1999 and December 31, 1998

            The Company's total net income available for common shareholders for
the year  ended  December  31,  1999  equaled  $5.48  million or $1.50 per share
(diluted) as compared to $3.77 million or $1.02 per share (diluted) for the year
ended December 31, 1998, a 45% increase.


Consumer Products

            Net income from  consumer  products  after income taxes and minority
interest  for the year ended  December  31, 1999 was $3.69  million  compared to
$2.08 million for the year ended December 31, 1998, a 77% increase.

            Net sales from  consumer  products  for the year ended  December 31,
1999  increased 19% to $23.47  million  compared to $19.75  million for the year
ended  December 31, 1998.  This was due to increased  sales of $3.33  million at
Middleton Doll and $0.39 million at License  Products.  Cost of sales  increased
20% to $12.54  million for the year ended  December 31, 1999  compared to $10.45
million  for the year ended  December  31,  1998 as a result of the  increase in
sales.  Middleton  Doll's cost of sales  increased to $10.91  million from $8.72
million, a 25% increase. License Products' cost of sales decreased to $1.63 from
$1.73 million, a 6% decrease. In total, gross profit margin remained the same at
47% for both years.  Middleton  Doll's gross profit margin decreased from 51% to
48% while License Products'  increased from 11% to 30% during 1999. The decrease
in gross profit margin at Middleton Doll was due to increased sales made to high
volume retailers which are sold at slightly lower margins.

            Total  operating  expenses of consumer  products  for the year ended
December  31, 1999 were $6.27  million  compared  to $5.59  million for the year
ended December 31, 1998, a


                                       9
<PAGE>

12%  increase.  Sales and  marketing  expense  increased  14% to $3.67  million.
Middleton Doll's expense  increased $0.80 million due to hiring additional sales
personnel and due to an increase in advertising  for new high volume  retailers.
License  Products'  sales and marketing  expense  decreased  $0.33 million.  New
product  development  increased  $0.14  million at Middleton  Doll and decreased
$0.07  million at License  Products.  General and  administrative  expenses were
$1.99 million for the year ended December 31, 1999 compared to $1.84 million for
the year ended  December  31,  1998.  General  and  administrative  expenses  of
Middleton Doll increased $0.37 million due to additional staffing  requirements,
related benefit costs and legal expenses.  License Products'  operating expenses
decreased $0.22 million as a result of a cost cutting program.

            Other  expense  increased  $0.08  million when  compared to the same
period a year ago due to an increase in interest expense.  The minority interest
in earnings of subsidiaries  decreased the  consolidated  net income of consumer
products by $0.02 million for the year ended December 31, 1999 compared to $0.22
million for the year ended  December 31,  1998.  This  difference  is due to the
ownership  of 99% of the  stock of  Middleton  Doll as of April  30,  1998.  The
consumer products'  consolidated net income was reduced by income tax expense of
$0.95 million and $1.49 million for the years ended  December 31, 1999 and 1998,
respectively.  The income tax expense is attributable  only to Middleton  Doll's
income since License  Products has a net operating loss  carryforward  to offset
its current net income. Middleton Doll's tax expense is calculated on net income
before the elimination of  intercompany  expenses which were $1.64 million as of
December 31, 1999.


Financial Services

            Net income from  financial  services for the year ended December 31,
1999 was $3.23 million compared to $3.06 million for the year ended December 31,
1998, a 6% increase.

            Total  revenues were $12.40  million for the year ended December 31,
1999  compared to $12.21  million for the year ended  December  31,  1998,  a 2%
increase.  Interest on loans  decreased  20% to $8.55 million for the year ended
December  31, 1999  compared to $10.70  million for the year ended  December 31,
1998.  Average loans under management  decreased $16 million from a year ago due
to normal market competition and an unanticipated sale of a customer's business.
In addition  the average  prime rate was 8.00% for the year ended  December  31,
1999 compared to 8.36% for the year ended December 31, 1998.

            Rental income  increased  $1.54 million or 130% to $2.73 million for
the year ended  December 31, 1999 due to an increase in ownership of  commercial
rental properties. At December 31, 1999 the Company had $24.07 million in leased
properties  compared to $22.0  million at December 31, 1998.  Most of the rental
properties were not purchased by the Company until July of 1998. During 1999 the
Company sold eight leased  properties which resulted in a gain of $0.76 million.
There were no sales of leased  properties  during 1998.  Other income  increased
$0.03 million to $0.36  million for the year ended  December 31, 1999 from $0.33
million for the year ended  December 31, 1998.  Prepayment  penalties  increased
$0.13 million which offset the decrease of $0.10 million of other income items.



                                       10
<PAGE>

            Interest  expense  decreased to $6.97 million from $7.67 million for
the year ended  December 31, 1999 as compared  with the year ended  December 31,
1998 due to lower  rates for the  Company's  cost of  funds.  The  average  debt
balance for the year ended in 1999 decreased  $0.99 million when compared to the
year ended in 1998.

            Operating expenses increased 49% to $2.21 million for the year ended
December  31, 1999  compared to $1.48  million for the year ended  December  31,
1998.  During 1998 the Company reversed $0.46 million of loan loss reserve which
was offset  against 1998 operating  expenses.  The remainder of the increase was
mainly due to the increase in depreciation on leased  properties which increased
$0.29 million.

            The Company and its qualified REIT subsidiary,  BMSBLC, qualify as a
real estate investment trust under the Internal Revenue Code. Accordingly,  they
are  not  subject  to  income  tax on  taxable  income  that is  distributed  to
shareholders.  Tax basis income for  Financial  Services  (before the  preferred
stock  dividend)  was $5.09  million or $1.39 per share  (diluted)  for the year
ended  December  31,  1999.  Book  income for  Financial  Services  (before  the
preferred  stock dividend) was $3.23 million or $0.88 per share (diluted) due to
the elimination of intercompany  revenue and expenses from the consumer products
segment and normal book/tax  adjustments.  For the year ended December 31, 1998,
tax basis income for Financial  Services  (before the preferred  stock dividend)
was $3.74 million or $1.01 per share  (diluted) and its book income  (before the
preferred  stock dividend) was $3.06 million or $0.83 per share (diluted) due to
the elimination of intercompany  revenue and expenses from the consumer products
segment and normal book/tax adjustments.


For the twelve months ended December 31, 1998 and 1997

            The Company's total net income available for common shareholders for
the year  ended  December  31,  1998  equaled  $3.77  million or $1.02 per share
(diluted) as compared to $3.51 million or $0.95 per share (diluted) for the year
ended December 31, 1997, a 7% increase.

Consumer Products

            Net income from  consumer  products  after income taxes and minority
interest  for the year ended  December  31, 1998 was $2.08  million  compared to
$1.32 million for the year ended December 31, 1997, a 58% increase.  As of April
30, 1998,  Bando McGlocklin  Investment  Corporation  ("BMIC"),  which was a 99%
owned  subsidiary  until its merger with  Middleton  Doll in 1999,  owned 99% of
Middleton  Doll as compared  with 51%  ownership in the year ended  December 31,
1997.

            Net sales from  consumer  products  for the year ended  December 31,
1998 increased 4% to $19.75 million compared to $19.0 million for the year ended
December 31, 1997. This was due to increased sales of $0.14 million at Middleton
Doll and $0.61 million at License Products.  Sales of License Products increased
46% during 1998 when  compared  to 1997.  Cost of sales  increased  1% to $10.45
million for the year ended  December 31, 1998 compared to $10.38 million for the
year ended December 31, 1997 due to the increased sales volume. Middleton Doll's
cost of sales  decreased to $8.72  million from $9.48  million,  an 8%


                                       11
<PAGE>

decrease.  License Products' cost of sales increased to $1.73 million from $0.90
million, a 92% increase. In total, gross profit margin increased slightly to 47%
from 45% when  comparing  the year  ended  December  31,  1998 to the year ended
December 31, 1997.  Middleton  Doll's gross profit margin  increased from 46% to
51% while License  Products gross profit margin decreased from 32% to 11% during
the comparative periods.

            Total  operating  expenses of consumer  products  for the year ended
December  31, 1998 were $5.59  million  compared  to $4.74  million for the year
ended December 31, 1997, an 18% increase.  Sales and marketing expense increased
$0.86 million, a 37% increase. Of this increase,  $0.63 million was attributable
to  Middleton  Doll  due  to  the  expansion  of  trade  shows,  including  more
advertising,  additional  personnel  and  leased  space  per  show,  along  with
promotions such as point of sale displays. License Products' sales and marketing
expense was up $0.23 million because of its efforts to increase sales of its new
product line through  printed  materials and due to the opening of a showroom in
Chicago.  New product  development  expense increased $0.06 million at Middleton
Doll because of two new artists that were  introduced late in 1997 and increased
$0.04 million at License  Products as a result of the new product line.  General
and  administrative  expenses  decreased  $0.11 million to $1.84 million for the
year ended  December  31,  1998  compared  to $1.95  million  for the year ended
December 31, 1997.  Middleton Doll's expense decreased $0.19 million due to some
non-recurring  expenses that  occurred in 1997.  License  Products'  general and
administrative  expense  increased  $0.3 million  during 1998 and BMIC's expense
increased $0.05 million as a result of amortization of goodwill  associated with
the  acquisition  of the minority  interest in Middleton Doll and an increase in
other miscellaneous expenses.

            The consumer  products'  consolidated  net income was reduced by the
minority interest ownership in the net earnings of Middleton Doll for the period
prior to April 30,  1998.  The  minority  interest in  earnings of  subsidiaries
equaled  $0.22  million for the year ended  December 31, 1998  compared to $1.08
million for the year ended  December 31, 1997. The 80% decrease is the result of
BMIC  owning  99% of the  stock of  Middleton  Doll as of April  30,  1998.  The
consumer products' consolidated net income was reduced by a provision for income
taxes of $1.49  million and $1.54  million for the year ended  December 31, 1998
and 1997, respectively.

Financial Services

            Net income from  financial  services for the year ended December 31,
1998 was $3.06 million compared to $3.47 million for the year ended December 31,
1997, a 12% decrease.

            Total  revenues were $12.21  million for the year ended December 31,
1998  compared to $11.92  million for the year ended  December  31,  1997,  a 2%
increase. Interest on loans and rental income increased 8% to $11.88 million for
the year ended December 31, 1998 from $11.02 million for the year ended December
31,  1997.  Rental  income  for the year was  $1.18  million  as a result of the
acquisition of $19 million of leased  properties from BMREIC.  Interest on loans
decreased  3% as a result of the  decrease  in loans due to the  acquisition  of
BMREIC.  Prior to the  acquisition,  the  Company  had  $11.1  million  in loans
outstanding  with BMREIC.  The average  loans under  management  decreased  $3.6
million or 3% during 1998.



                                       12
<PAGE>

            Other income decreased $0.57 million. Of this amount,  $0.50 million
was the result of receiving  proceeds of an executive's  life  insurance  policy
where BMCC was the  beneficiary  in the second quarter of 1997. The remainder of
the decrease is comprised of fees related to the sale of  residential  mortgages
which are now being originated in InvestorsBank and a reduction in miscellaneous
loan fees stemming from competitive market conditions.

            Interest  expense  increased to $7.67 million from $5.65 million for
the year ended  December 31, 1998 as compared  with the year ended  December 31,
1997. Interest expense increased  approximately $0.81 million as a result of the
purchase of $19.6  million of assets from  BMREIC,  net of the $13.8  million in
liabilities  assumed and other new assets.  Those additional  assets were funded
with new debt.  Average debt on the balance sheet increased $38.7 million during
the year ended December 31, 1998 as compared to the year ended December 31, 1997
as a result of BMSBLC  repurchasing  loans that had been previously  sold. Since
December  31, 1997 debt  increased  $13.2  million.  During 1998 the Company had
borrowed $5.0 million in new debt to lend to Middleton  Doll for the  repurchase
of the 49% minority  interest and licensing  agreement.  This new debt increased
interest expense by $0.28 million during the year.  Interest  expense,  which is
offset by swap income,  increased by $0.93 million  because of a decline in swap
income due to investment swaps maturing.

            Operating expenses decreased 47% to $1.48 million for the year ended
December  31, 1998  compared to $2.79  million for the year ended  December  31,
1997. All employees of the Company  terminated their employment with the Company
on September 8, 1997 to become employees of InvestorsBank (the "Bank"), a wholly
owned  subsidiary  of  InvestorsBancorp,  Inc.,  except  for  certain  executive
officers who are employees of both the Company and the Bank. The Company and the
Bank entered into a Management  Services and  Allocation  of Operating  Expenses
Agreement (the "Agreement") which has reduced the level of operating expenses in
the Company by $1.01  million.  Other  operating  expenses were reduced by $0.40
million as a result of  non-recurring  professional  fees that were  incurred in
1997 due to the  restructuring.  The Company  reversed $0.26 million of its loan
loss reserve due to the good  condition of its loan portfolio as of December 31,
1998.  These  reductions were partially offset by an increase in depreciation of
$0.21  million  attributable  to the  merger  with  BMREIC  and other new leased
properties.  In addition,  the expense resulting from the change in appreciation
on investment  swaps  decreased  $0.25  million for the year ended  December 31,
1998.  There were no new  investment  swaps  entered  into during the year ended
December 31, 1998.  Disclosures  regarding the Company's swap  transactions  are
incorporated  by reference from Note 13 of the financial  statements on pages 39
and 40, herein.

            The  financial  services  segment is comprised of two entities  that
intend to qualify as a real estate  investment trust ("REIT") under the Internal
Revenue Code. Under REIT status,  the Company,  together with its qualified REIT
subsidiary,  BMSBLC,  will continue to not be subject to income taxes on taxable
income  which  is  distributed  to  shareholders.  Taxable  income  (before  the
preferred  stock  dividend)  was $3.74  million  or $1.01 per share for the year
ended  December 31, 1998 which differs from book earnings  (before the preferred
stock  dividend)  of $3.06  million  or $0.83 per share due to the impact of the
elimination  of  intercompany  revenue and expenses  from the consumer  products
segment and normal book/tax  adjustments.  For the year ended December 31, 1997,
the taxable  income (before the preferred  stock  dividend) was



                                       13
<PAGE>

$3.52 million or $0.95 per share which  differs from book  earnings  (before the
preferred  stock dividend) of $3.47 million or $0.94 per share due to the impact
of the  elimination  of  intercompany  revenue and  expenses  from the  consumer
products segment and normal book/tax adjustments.


Liquidity and Capital

Consumer Products

            Total assets of consumer products were $15.58 million as of December
31, 1999 and $14.55 million as of December 31, 1997, a 7% increase.

            Cash  decreased  to $0.53  million at December 31, 1999 from $2.21
million at December 31, 1998.

            Accounts  receivable,  net  of the  allowance,  increased  to  $2.95
million at December 31, 1999 from $2.18 million at December 31, 1998. A decrease
of $0.10 million is  attributable  to License  Products and an increase of $0.87
million to Middleton  Doll's  receivables.  Both  companies  have seasonal sales
which  result in higher  receivable  balances  at the end of the year.  However,
License Products improved its collection process during 1999 which resulted in a
lower accounts receivable balance as of December 31, 1999.

            Inventory  was $4.78  million at December 31, 1999 compared to $3.26
million at December 31, 1998. Middleton Doll's inventory increased $1.44 million
due to new  product  lines  and  License  Products'  inventory  increased  $0.08
million.

            Fixed assets,  net of accumulated  depreciation,  increased by $0.23
million as of December 31, 1999 compared to December 31, 1998.  Other assets and
prepaid expenses increased $0.21 million during the same period.

            Goodwill  was  recorded  when the Company  purchased  the  remaining
interest in the stock from the estate of Lee Middleton, the founder of Middleton
Doll, on April 30, 1998. The purchase price exceeded book value by $0.62 million
which is being  amortized over 20 years.  As of December 31, 1999 the balance of
the goodwill, net of accumulated amortization, is $0.57 million.

            Middleton Doll increased its short-term  borrowings by $0.20 million
based on a line of credit with a bank during the year ended  December  31, 1999.
The line of credit had an availability of $2.5 million as of December 31, 1999.

            Accounts payable  decreased by $0.14 million as of December 31, 1999
compared to December 31, 1998. Other liabilities  decreased by $0.84 million due
to a decrease in accrued taxes for Middleton Doll.




                                       14
<PAGE>

Financial Services

            Total  assets of  financial  services  were  $140.49  million  as of
December 31, 1999 and $139.88 million as of December 31, 1998.

            Cash  increased  to $1.51  million at December 31, 1999 from $0.63
million at December 31, 1998.

            Interest  receivable  decreased to $0.60  million as of December 31,
1999 from $0.64  million at December  31,  1998.  Fixed  assets and other assets
including prepaid amounts increased by $0.24 million.

            Total loans on the balance sheet decreased by $2.53 million or 2% to
$113.23  million at December 31, 1999 from $115.76  million at December 31, 1998
due to normal market competition and an unanticipated sale of a business. During
1999 the allowance for doubtful accounts was increased from zero to $150,000 due
to an analysis of impaired loans. Leased properties  increased to $24.07 million
as of December 31, 1999 compared to $22.0 million as of December 31, 1998.  Five
properties  were  purchased   during  the  year  ended  December  31,  1999  and
construction was completed on two additional  properties.  Eight properties were
sold since the beginning of the year and  construction is in progress on two new
properties.

            The financial services' total consolidated  indebtedness at December
31, 1999 increased $0.63 million.  As of December 31, 1999,  financial  services
had $47.97 million  outstanding in long-term debt and $73.66 million outstanding
in short-term  borrowings  compared to $62.47  million  outstanding in long-term
debt and $58.53 million outstanding in short-term  borrowings as of December 31,
1998.  Financial services'  short-term  commercial paper facility increased from
$60 million to $70 million during the quarter ended June 30, 1999.


Year 2000 Compliance

            The  Year  2000  has  posed a  unique  set of  challenges  to  those
industries reliant on information technology.  In 1997, the Company moved into a
newly  constructed  building.  The Company purchased new computer systems during
this move and the Year 2000 problem was factored  into the  selection of the new
equipment. During this time, the Company identified hardware and software issues
required to assure Year 2000  compliance.  The Company  began by  assessing  the
issues  related to the Year 2000 problem and the  potential  for those issues to
adversely affect the Company's business and operations.

            The Company's  cumulative costs of the Year 2000 problem through the
twelve  months ended  December 31, 1999 have been  approximately  $13,000.  This
includes costs to upgrade  software and replace  equipment  specifically for the
purpose  of  Year  2000  compliance  and  certain  administrative  expenditures.
Additional costs related to Year 2000 will be immaterial.



                                       15
<PAGE>

            As a result of the efforts of the Company's Year 2000 committee, the
Company and its subsidiaries  experienced an uneventful  transition from 1999 to
2000. As of this date,  the Company has not  experienced  any  disruption in its
software or hardware and has not experienced any other significant problems as a
result of the Year 2000 issues. In addition, the Company has not experienced nor
has it  been  informed  of any  such  problems  related  to any of its  material
third-party vendors or commercial customers.

            Among the benefits  derived from the time,  effort and costs related
to Year 2000 was a complete review and update of the Company's disaster recovery
and  contingency  plans.  As a result the Company is now better prepared to deal
with  technical  or  natural   disasters  which  could  threaten  the  Company's
operations.

            Despite the testing  process and lack of disruption as of this date,
there can be no assurance that Year 2000 related  disruptions  will not occur in
the future and will not have a material adverse impact on the Company's  results
of operations.  Based on currently available  information,  the Company believes
that any Year 2000  related  disruptions  that may occur in the future  will not
have a material  adverse  impact on the results of  operations.  The Company has
developed contingency plans to deal with potential Year 2000 related disruptions
and will continue to monitor its exposure as appropriate and will act to resolve
any problems that may occur.


Recent Accounting Pronouncements

            In June  1998,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial  Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging  Activities".  This statement,  as amended,  establishes
accounting and reporting standards for derivative instruments.  It requires that
an entity  recognize  all  derivatives  as either assets or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
This statement is effective for all fiscal years  beginning after June 15, 2000.
The Company does not believe that this statement will have a material  impact on
the financial statements.

Safe Harbor Statement under the Private  Securities  Litigation  Reform Act of
1995

            This report contains certain  forward-looking  statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E  of  the  Securities   Exchange  Act  of  1934.  The  Company  intends  such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995,  and is including  this statement for purposes of these safe harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally  identifiable by use of the words "may", "will",  "could",  "believe",
"expect", "intend", "anticipate", "estimate", "project", or similar expressions.
The Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain.  Factors which could have a material adverse
effect  on  the  operations  and  future   prospects  of  the  Company  and  the
subsidiaries  include,  but are not



                                       16
<PAGE>

limited to, changes in: interest rates, general economic  conditions,  including
the condition of the local real estate market,  legislative/regulatory  changes,
monetary and fiscal policies of the U.S.  Government,  including policies of the
U.S.  Treasury and the Federal Reserve Board,  the quality or composition of the
loan or investment portfolios, demand for loan products, competition, demand for
financial  services  in the  Company's  market  area,  demand for the  Company's
consumer  products  and  accounting  principles  and  policies.  These risks and
uncertainties should be considered in evaluating  forward-looking statements and
undue reliance should not be placed on such statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

            The Company enters into interest rate swap agreements primarily as a
means  of  managing  interest  rate  risk.  To the  extent  that  the  Company's
variable-rate  loans are funded with fixed-rate  debt, the Company is subject to
interest  rate risk.  To reduce  interest  rate risk,  the  Company  enters into
certain  interest  rate  swaps  designed  to  convert  variable-rate  loans into
fixed-rate loans.  Although these swaps reduce interest rate risk, the potential
for  profit  or  loss  on  interest  rate  swaps  still  exists  depending  upon
fluctuations in interest  rates.  In addition,  the Company enters into interest
rate swaps in an attempt to further  manage  interest rate risk  resulting  from
interest rate movements.

            In accordance with  applicable  accounting  policies,  the Company's
interest rate swap  agreements  are held for purposes other than trading and are
further classified as either hedges or as investment contracts.  Both hedges and
investment  contracts  have the  potential  for  profit  and  loss.  Hedges  are
accounted  for using the  designation  method  which  matches the swaps with the
assets that are being hedged.  When the designated  asset  matures,  or is sold,
extinguished  or terminated,  the hedge would be  reclassified as an investment.
Accounting principles dictate that those contracts not meeting hedge criteria be
classified as investments and  marked-to-market  with any associated  unrealized
gain or loss recorded in the statements of operations,  whereas those  contracts
meeting   hedge   criteria  are  not  to  be  classified   as   investments   or
marked-to-market.

            At December  31, 1999 there were no swaps which were  classified  as
investment  contracts  while  at  December  31,  1998  the  market  value of the
investment contracts was $49,579. Unrealized losses were $49,579 and $73,434 for
the years ended December 31, 1999 and December 31, 1998, respectively.

            The average notational amount of investment swaps outstanding during
the years ended December 31, 1999, 1998 and 1997 was $1,375,000,  $2,750,000 and
$45,750,000,  respectively.  Based on quoted  market  valuations,  the estimated
market  value of the hedge swaps at December  31, 1999 and December 31, 1998 was
approximately ($0.5 million) and $3.4 million, respectively.

            The following table  summarizes the interest rate swap agreements in
effect  at  December  31,  1999,  all of which are hedge  swaps.  No funds  were
borrowed or are to be repaid under these agreements.



                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                           Current Interest
                                                              Rates Paid
                                                                                    Original
                         Company        Bank           By             By             Notional        Expiration
Bank                     Payment       Payment       Company         Bank            Amount             Date

<S>                      <C>            <C>           <C>              <C>           <C>                <C>   <C>
LaSalle Bank             Floating       Fixed         6.15250% (1)     6.340%        $ 5,400,000        03/21/01
   Chicago, IL
Firstar Bank             Floating       Fixed         6.19880% (1)     7.435%        $10,325,000 (2)    09/28/01
   Milwaukee, WI
Firstar Bank             Floating       Fixed         6.18125% (1)     5.725%        $16,908,000        06/30/03
   Milwaukee, WI
LaSalle Bank             Floating       Fixed         6.12000% (1)     7.600%        $ 5,000,000        03/10/05
   Chicago, IL
LaSalle Bank             Floating       Fixed         6.10125% (1)     6.660%        $ 5,250,000 (3)    05/23/05
   Chicago, IL
LaSalle Bank             Floating       Fixed         6.18125% (1)     6.500%        $ 5,000,000 (4)    09/29/05
   Chicago, IL
LaSalle Bank             Floating       Fixed         6.12125% (1)     7.090%        $12,500,000        09/05/06
   Chicago, IL
Firstar Bank             Floating       Fixed         6.12125% (1)     5.760%        $10,000,000 (5)    06/16/08
   Milwaukee, WI

(1)   Adjusted every three months to the three-month LIBOR rate then in effect.
(2)   The notional amount  decreases by $166,667 each quarter and was $4,825,000
      at December 31, 1999.
(3)   The notional amount  decreases by $100,000 each quarter and was $3,450,000
      at December 31, 1999.
(4)   The notional  amount  decreases by $75,000 each quarter and was $3,725,000
      at December 31, 1999.
(5)   The notional amount  decreases by $166,667 each quarter and was $8,999,998
      at December 31, 1999.

</TABLE>

            As  a  result  of  hedge  arrangements,  the  Company  recognized  a
$711,006,  $519,795 and $1,193,877  reduction in interest  expense for the years
ended December 31, 1999, 1998 and 1997,  respectively.  In addition, the Company
recognized a $88,131, $93,201 and $353,962 reduction in interest expense for the
years ended  December  31,  1999,  1998 and 1997,  respectively,  as a result of
investment swap contracts which have now expired.

            The Company may be susceptible to risk with respect to interest rate
swap agreements to the extent of  nonperformance  by the financial  institutions
participating  in the interest rate swap agreements.  However,  the Company does
not anticipate nonperformance by these institutions.


                                       18
<PAGE>


Item 8.    Financial Statement and Supplementary Data

                      Bando McGlocklin Capital Corporation

                        Consolidated Financial Statements

                                    Contents

Report of BDO Seidman,  LLP,  Independent  Auditors . . . . . . . . . . . .  20

Consolidated Balance Sheets as of December 31, 1999, 1998 and 1997  . . . .  21

Consolidated Statements of Operations
         For the years ended December 31, 1999, 1998 and 1997 . . . . . . .  23

Consolidated Statement of Changes in Shareholders' Equity . . . . . . . . .  25

Consolidated Statements of Cash Flows
         For the years ended December 31, 1999, 1998 and 1997 . . . . . . .  26

Notes to  Consolidated  Financial  Statements . . . . . . . . . . . . . . .  29


                          Financial Statement Schedules

     Schedule I    Condensed Financial Information of Registrant  . . . . .  51

     Schedule II   Valuation and Qualifying Accounts  . . . . . . . . . . .  51

     Schedule IV   Mortgage Loans on Real Estate  . . . . . . . . . . . . .  52


                                       19
<PAGE>


To  the  Shareholders  and  Board  of  Directors  of  Bando  McGlocklin  Capital
Corporation:

We have audited the accompanying consolidated balance sheets of Bando McGlocklin
Capital   Corporation  as  of  December  31,  1999  and  1998  and  the  related
consolidated  statements of income,  stockholders' equity and cash flows for the
years ended  December  31,  1999,  1998 and 1997 in  conformity  with  generally
accepted  accounting  principles.  We have also audited the schedules  listed in
Item 8. These financial  statements and schedules are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and schedules based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Bando McGlocklin
Capital  Corporation  at  December  31,  1999 and 1998  and the  results  of its
operations  and its cash flows for the years ended  December 31, 1999,  1998 and
1997 in conformity with generally accepted accounting principles.

Also, in our opinion,  the schedules present fairly,  in all material  respects,
the information set forth therein.

/s/ BDO Seidman, LLP

BDO Seidman, LLP
Milwaukee, Wisconsin
February 14, 2000



                                       20
<PAGE>
<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

<CAPTION>
                                                  December 31, 1999    December 31, 1998
<S>                                                   <C>               <C>
ASSETS
Consumer Products
Cash                                                  $    530,919      $  2,209,105
Accounts receivable, net of allowance of
   $129,280 and $75,557 as of December 31,
   1999 and 1998, respectively                           2,954,428         2,177,385
Inventory                                                4,784,645         3,261,553
Prepaid inventory                                          872,531           473,335
Other prepaid expenses                                     407,361           141,027
                                                      ------------      ------------
   Total current assets                                  9,549,884         8,262,405
                                                      ------------      ------------
Fixed assets, net of accumulated depreciation of
   $1,408,103 and $1,069,042 as of December 31,
   1999 and 1998, respectively                           2,880,881         2,648,947
Loans                                                      621,968           621,968
Prepaid expenses and other assets                        1,955,593         2,413,210
Goodwill, net of accumulated amortization of
   $51,640 and $20,656 as of December 31,
   1999 and 1998, respectively                             568,113           599,097
                                                      ------------      ------------
   Total Consumer Products assets                       15,576,439        14,545,627
                                                      ------------      ------------

Financial Services
Cash                                                     1,509,148           626,838
Interest receivable                                        597,705           644,780
Other current assets                                       204,224           235,292
                                                      ------------      ------------
   Total current assets                                  2,311,077         1,506,910
                                                      ------------      ------------
Loans, net of allowance for doubtful accounts
   of $150,000 as of December 31, 1999                 113,229,680       115,759,968
Leased properties:
   Buildings, net of accumulated depreciation of
   $536,684 and $214,822 as of December 31,
   1999 and 1998, respectively                          17,897,897        18,782,045
   Land                                                  2,848,326         3,090,572
   Construction in progress                              3,324,085           133,649
                                                      ------------      ------------
      Total leased properties                           24,070,308        22,006,266
Fixed assets, net of accumulated depreciation of
   $429,167 and $329,216 as of December 31,
   1999 and 1998, respectively                             313,393           384,703
Other assets, net                                          564,627           220,613
                                                      ------------      ------------
   Total Financial Services assets                     140,489,085       139,878,460
                                                      ------------      ------------
   Total Assets                                       $156,065,524      $154,424,087
                                                      ============      ============

</TABLE>

    The accompanying notes are an integral part of the financial statements.


                                       21
<PAGE>
<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)
<CAPTION>
                                                        December 31, 1999    December 31, 1998

<S>                                                       <C>                 <C>
LIABILITIES, MINORITY INTEREST,
PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Consumer Products
Short-term borrowings                                     $     200,000       $        --
Accounts payable                                                888,469             748,838
Accrued liabilities                                           1,122,413           1,959,191
                                                          -------------       -------------
   Total current liabilities                                  2,210,882           2,708,029
Long-term debt                                                   29,926              35,279
                                                          -------------       -------------
   Total Consumer Products liabilities                        2,240,808           2,743,308

Financial Services
Commercial paper                                             68,657,172          52,487,321
Notes payable to banks                                        5,000,000           6,040,000
                                                          -------------       -------------
   Short-term borrowings                                     73,657,172          58,527,321
Accrued liabilities                                           1,760,157           1,898,342
                                                          -------------       -------------
   Total current liabilities                                 75,417,329          60,425,663

State of Wisconsin Investment Board notes
   payable                                                   13,666,667          15,000,000
Loan participations with repurchase options                  32,724,235          45,881,418
Other notes payable                                           1,583,761           1,588,989
                                                          -------------       -------------
   Total Financial Services liabilities                     123,391,992         122,896,070
                                                          -------------       -------------

Minority interest in subsidiaries                                41,055              20,399
Redeemable Preferred stock, 1 cent par value,
   3,000,000 shares authorized in 1999 and 1998;
   674,791 shares issued and outstanding
   after deducting 15,209 shares in treasury
   as of December 31, 1999 and 1998                          16,908,025          16,908,025

Shareholders' Equity
Common stock, 6 2/3 cents par value,
   15,000,000 shares authorized in 1999 and 1998,
   4,401,599 shares and 4,001,540 shares issued
   and outstanding as of December 31, 1999 and 1998,
   respectively, before deducting shares in treasury            293,441             266,769
Additional paid-in capital                                   16,604,744          13,671,947
Retained earnings                                             1,218,617           1,770,080
Treasury stock, at cost (416,710 shares and 312,438
   shares as of December 31, 1999 and 1998,
   respectively)                                             (4,633,158)         (3,852,511)
                                                          -------------       -------------
   Total Shareholders' Equity                                13,483,644          11,856,285
                                                          -------------       -------------

   Total Liabilities, Minority Interest,
   Preferred Stock and Shareholders' Equity               $ 156,065,524       $ 154,424,087
                                                          =============       =============

</TABLE>

The accompanying notes are an integral part of the financial statements.


                                       22
<PAGE>
<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
                                              For the Years Ended December 31,
                                             1999            1998            1997
<S>                                     <C>             <C>             <C>
Consumer Products
Net sales                               $ 23,466,464    $ 19,745,491    $ 19,000,778
Cost of sales                             12,535,759      10,448,494      10,381,039
                                        ------------    ------------    ------------
Gross profit                              10,930,705       9,296,997       8,619,739

Operating expenses
   Sales and marketing                     3,665,249       3,202,906       2,340,625
   New product development                   617,496         550,176         451,973
   General and administrative              1,985,265       1,838,074       1,945,361
                                        ------------    ------------    ------------
      Total operating expenses             6,268,010       5,591,156       4,737,959

Other income (expense)
   Interest expense                          (77,934)        (39,900)         (7,074)
   Other income, net                          77,457         118,598          65,019
                                        ------------    ------------    ------------
      Total other income (expense)              (477)         78,698          57,945

Income before income taxes
   and minority interest                   4,662,218       3,784,539       3,939,725
Income tax expense                          (952,018)     (1,492,636)     (1,539,265)
Minority interest in earnings
   of subsidiaries                           (20,655)       (216,136)     (1,082,362)
                                        ------------    ------------    ------------
Net income                                 3,689,545       2,075,767       1,318,098
                                        ------------    ------------    ------------

Financial Services
Revenues
   Interest on loans                       8,551,453      10,698,422      11,021,265
   Rental income                           2,727,023       1,183,891            --
   Gain on sales of leased properties        763,228            --              --
   Other income                              361,488         329,323         897,298
                                        ------------    ------------    ------------
      Total revenues                      12,403,192      12,211,636      11,918,563
                                        ------------    ------------    ------------

Expenses
   Interest expense                        6,969,619       7,673,884       5,649,910
   Other operating expenses                2,207,799       1,481,223       2,794,051
                                        ------------    ------------    ------------
      Total expenses                       9,177,418       9,155,107       8,443,961
                                        ------------    ------------    ------------

Net income                              $  3,225,774    $  3,056,529    $  3,474,602
                                        ------------    ------------    ------------


</TABLE>

    The accompanying notes are an integral part of the financial statements.


                                       23
<PAGE>
<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
<CAPTION>
                                            For the Years Ended December 31,
                                            1999            1998           1997

<S>                                     <C>             <C>             <C>
Total Company
Income before income taxes and
minority interest
   Consumer products                    $  4,662,218    $  3,784,539    $  3,939,725
   Financial services                      3,225,774       3,056,529       3,474,602
                                        ------------    ------------    ------------
      Total company                        7,887,992       6,841,068       7,414,327
Income tax expense                          (952,018)     (1,492,636)     (1,539,265)
Minority interest in earnings of
   subsidiaries                              (20,655)       (216,136)     (1,082,362)
                                        ------------    ------------    ------------

Net income                                 6,915,319       5,132,296       4,792,700
Preferred stock dividends                 (1,438,992)     (1,362,659)     (1,286,320)
                                        ------------    ------------    ------------
Net income available to common
   shareholders                         $  5,476,327    $  3,769,637    $  3,506,380
                                        ============    ============    ============

Basic Earnings Per Share                $       1.50    $       1.02    $       0.95
                                        ============    ============    ============

Diluted Earnings Per Share              $       1.50    $       1.02    $       0.95
                                        ============    ============    ============

Segment Reconciliation

Consumer products
   Net income                           $  3,689,545    $  2,075,767    $  1,318,098
   Intersegment expenses                  (1,644,609)     (1,171,929)       (451,352)
                                        ------------    ------------    ------------
Total segment net income                   2,044,936         903,838         866,746

Financial services
   Net income                              3,225,774       3,056,529       3,474,602
   Intersegment income                     1,644,609       1,171,929         451,352
                                        ------------    ------------    ------------
Total segment net income                   4,870,383       4,228,458       3,925,954

Total company net income                $  6,915,319    $  5,132,296    $  4,792,700
                                        ============    ============    ============

</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       24
<PAGE>
<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
                                                           Additional         Retained
                                              Common         Paid-In          Earnings       Treasury
                                               Stock         Capital          (Deficit)        Stock

<S>                                        <C>            <C>             <C>             <C>
BALANCE, December 31, 1996                 $    263,716   $ 19,498,326    $   (859,728)   $ (3,262,613)

Proceeds from exercise of stock options           3,053        333,621            --              --
Purchase of treasury stock                         --             --              --          (589,898)
Net income                                         --             --         4,792,700            --
Cash dividends on preferred stock                  --             --        (1,286,320)           --
Cash dividends on common stock                     --             --        (1,990,055)           --
Capitalization of InvestorsBancorp, Inc.           --       (6,160,000)           --              --
                                           ------------   ------------    ------------    ------------

BALANCE, December 31, 1997                 $    266,769   $ 13,671,947    $    656,597    $ (3,852,511)

Net income                                         --             --         5,132,296            --
Cash dividends on preferred stock                  --             --        (1,362,659)           --
Cash dividends on common stock                     --             --        (2,656,154)           --
                                           ------------   ------------    ------------    ------------

BALANCE, December 31, 1998                 $    266,769   $ 13,671,947    $  1,770,080    $ (3,852,511)

Purchase of treasury stock                         --             --              --          (780,647)
Net income                                         --             --         6,915,319            --
Cash dividends on preferred stock                  --             --        (1,438,992)           --
Cash dividends on common stock                     --             --        (3,067,561)           --
Stock dividend on common stock                   26,672      2,932,797      (2,960,229)           --
                                           ------------   ------------    ------------    ------------

BALANCE, December 31, 1999                 $    293,441   $ 16,604,744    $  1,218,617    $ (4,633,158)
                                           ============   ============    ============    ============

</TABLE>




    The accompanying notes are an integral part of the financial statements.


                                       25
<PAGE>

<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                         For the Years Ended December 31,
                                                     1999              1998             1997
Consumer Products

Cash Flows from Operating Activities:

<S>                                                 <C>            <C>            <C>
Net income                                          $ 3,689,545    $ 2,075,767    $ 1,318,098

Adjustments to reconcile net
 cash provided by operating activities:
   Depreciation and amortization                        471,041        353,453        252,463
   Allowance for doubtful accounts                       53,723       (193,239)       170,713
   Inventory reserve                                   (231,093)       259,049        207,612
   Change in minority interest in subsidiaries           20,656        216,136      1,082,362

Increase (decrease) in cash due to change in:
   Accounts receivable                                 (830,766)       (25,474)    (1,084,608)
   Inventory                                         (1,291,999)      (240,430)    (1,786,970)
   Other assets                                        (207,913)       (22,422)      (361,192)
   Accounts payable                                     139,631       (199,237)       382,272
   Other liabilities                                   (836,778)       895,680        372,695
                                                    -----------    -----------    -----------

Net Cash Provided by Operations                         976,047      3,119,283        553,445
                                                    -----------    -----------    -----------

Cash Flows from Investing Activities:
   Proceeds from sale of land                              --             --          129,675
   Purchase of fixed assets                            (671,991)    (1,294,689)      (685,682)
   Acquisition of minority interest in subsidiary          --       (2,500,000)          --
   Acquisition of royalty rights                           --       (2,500,000)          --
                                                    -----------    -----------    -----------

Net Cash Used in Investing                             (671,991)    (6,294,689)      (556,007)
                                                    -----------    -----------    -----------

Cash Flows from Financing Activities:
    Increase in short term borrowings                   200,000           --             --
   (Decrease) increase in other notes payable            (5,353)        12,343         (6,533)
                                                    -----------    -----------    -----------

Net Cash (Used) Provided by Financing                   194,647         12,343         (6,533)
                                                    -----------    -----------    -----------

Net intercompany transactions                        (2,176,889)     5,372,168       (654,841)

Net (decrease) increase in cash                      (1,678,186)     2,209,105       (663,936)

Cash, beginning of period                             2,209,105           --          663,936
                                                    -----------    -----------    -----------

Cash, end of period                                 $   530,919    $ 2,209,105    $      --
                                                    ===========    ===========    ===========

Supplemental Disclosure of Cas
 Flow Information:
   Taxes paid                                       $ 1,780,573    $   628,100    $ 1,179,023
   Interest paid                                    $    77,934    $    39,900    $     2,972

</TABLE>

    The accompanying notes are an integral part of the financial statements.


                                       26
<PAGE>
<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<CAPTION>
                                                   For the Years Ended December 31,
                                                 1999            1998             1997
Financial Services

Cash Flows from Operating Activities:

<S>                                          <C>             <C>             <C>
Net income                                   $  3,225,774    $  3,056,529    $  3,474,602

Adjustments to reconcile net cash
 provided by operating activities:
   Change in appreciation on investments           53,096          73,434         321,244
   Depreciation and amortization                  604,468         388,278         215,479
   Provision for loan loss reserve                150,000        (450,000)          6,335

Increase (decrease) in cash due
 to change in:
   Interest receivable                             47,075         200,060         488,513
   Other assets                                  (206,860)        282,439         329,744
   Other liabilities                             (138,185)        459,348        (392,824)
                                             ------------    ------------    ------------

Net Cash Provided by Operations                 3,735,368       4,010,088       4,443,093
                                             ------------    ------------    ------------

Cash Flows from Investing Activities:
   Loans made                                 (76,152,875)    (79,143,575)    (53,759,887)
   Principal collected on loans                78,533,163      93,795,013      43,821,836
   Loan and interest charge off                      --             1,869            --
   Loans purchased                                   --              --       (49,647,182)
   Cash paid for Bando McGlocklin
     Real Estate Investment
     Corporation's assets                            --       (19,095,424)           --
   Proceeds from sale of leased properties      6,999,387            --              --
   Premium expense - net                             --              --            59,230
   Purchase or construction of leased
      properties                               (9,727,128)     (2,855,729)       (399,844)
   Purchase of fixed assets                       (28,641)        (49,051)       (235,291)
                                             ------------    ------------    ------------

Net Cash Used in Investing                       (376,094)     (7,346,897)    (60,161,138)
                                             ------------    ------------    ------------

</TABLE>

    The accompanying notes are an integral part of the financial statements.


                                       27
<PAGE>

<TABLE>
              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<CAPTION>
                                                            For the Years Ended December 31,
                                                           1999           1998             1997
Financial Services

<S>                                                     <C>             <C>              <C>
Cash Flows from Financing Activities:
   Increase in short term borrowings                    15,129,851      26,017,349       1,041,578
   Proceeds from loan participations
      with repurchase options - net                    (13,157,183)    (23,369,049)     63,901,848
   Proceeds from SWIB note                                    --        10,000,000            --
   Repayment of SWIB notes                              (1,333,333)     (1,000,000)       (666,667)
   (Decrease) increase in other notes payable               (5,228)      1,508,752            --
   Capitalization and distribution of InvestorsBank           --              --        (6,160,000)
   Proceeds from exercise of stock options                    --              --           336,674
   Preferred stock dividends paid                       (1,438,992)     (1,362,659)     (1,286,320)
   Common stock dividends paid                          (3,067,561)     (2,656,154)     (1,990,055)
   Repurchase of common stock                             (781,407)           --          (589,898)
                                                      ------------    ------------    ------------

Net Cash (Used) Provided by Financing                   (4,653,853)      9,138,239      54,587,160
                                                      ------------    ------------    ------------

Net intercompany transactions                            2,176,889      (5,372,168)        654,841

Net increase (decrease) in cash                            882,310         429,262        (476,044)

Cash, beginning of period                                  626,838         197,576         673,620
                                                      ------------    ------------    ------------

Cash, end of period                                   $  1,509,148    $    626,838    $    197,576
                                                      ============    ============    ============

Supplemental Disclosure of Cash Flow Information:
   Interest paid                                      $  6,598,990    $  7,812,817    $  7,110,310

</TABLE>


    The accompanying notes are an integral part of the financial statements.


                                       28
<PAGE>


              BANDO McGLOCKLIN CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS - Bando McGlocklin Capital  Corporation (the "Company"),  was
incorporated  in February,  1980,  to provide  long-term  secured loans to small
businesses.  At present  the  Company  consists of two  business  segments,  the
Financial Service Business and the Consumer Products Business.

The  Financial  Service  Business  segment  consists  of  the  Company  and  the
wholly-owned  subsidiary Bando  McGlocklin  Small Business  Lending  Corporation
(BMSBLC).  Both the Company and BMSBLC are operated as a real estate  investment
trust ("REIT") pursuant to the provisions of Section 856 of the Internal Revenue
Code of 1986, as amended.  The principal business of the segment is making loans
and leasing  buildings to small  businesses.  The segment also  participates  in
loans with third party loan originators.

The  Consumer  Products  Business  segment  consists  of a 99%  interest  in Lee
Middleton Original Dolls, Inc.  ("Middleton Doll") and a 51% interest in License
Products,  Inc.  ("License  Products").  Middleton  Doll  is a  manufacturer  of
collectible vinyl dolls and a distributor of vinyl play dolls and resin figures.
License Products  designs,  develops and markets a line of quality,  proprietary
time pieces.

On September 3, 1997,  the Company  capitalized  InvestorsBancorp,  Inc., a bank
holding company,  for approximately $6.2 million and then distributed all of the
outstanding shares of InvestorsBancorp,  Inc. to the Company's shareholders. The
Company and InvestorsBancorp, Inc., share common offices and personnel.

BASIS OF  PRESENTATION - These  financial  statements are prepared in accordance
with generally  accepted  accounting  principles.  The  preparation of financial
statements in conformity with generally accepted accounting  principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from these
estimates.

PRINCIPLES  OF  CONSOLIDATION  - The  consolidated  financial  statements  as of
December  31, 1999 and  December  31, 1998 and for the years ended  December 31,
1999,  1998, and 1997,  include the accounts of the Company,  BMSBLC,  Middleton
Doll  and  License   Products.   All  significant   intercompany   accounts  and
transactions have been eliminated in consolidation.

COMPREHENSIVE INCOME - The Company adopted the Statement of Financial Accounting
Standards No. 130, "Reporting  Comprehensive  Income" as of January 1, 1998. The
Company does not have any components of comprehensive income.

SEGMENT INFORMATION - The Company adopted the Statement of Financial  Accounting
Standards  No. 131,  "Disclosure  About  Segments of an  Enterprise  and Related
Information" as of


                                       29
<PAGE>

January 1, 1998.  Following  the  provisions of this  Statement,  the Company is
reporting  segment assets,  liabilities,  sales and operating income in the same
format reviewed by the Company's management.  As discussed in Nature of Business
above,  the  Company  has two  reportable  segments:  Consumer  Products  (which
includes  Middleton  Doll and License  Products) and Financial  Services  (which
includes the Company and BMSBLC).  Segment information  required to be disclosed
under the Statement is included in the accompanying financial statements.

Intersegment  charges  are  reflected  in  the  segment  reconciliation  on  the
consolidated statements of operations and on the consolidated statements of cash
flows.  The  statements  for  the  year  ended  December  31,  1997,  have  been
reclassified to conform to the current year presentation.

TREASURY STOCK - Preferred stock has been reduced by the cost of shares acquired
for  treasury  stock.  The  common  treasury  stock is shown as a  reduction  in
shareholders' equity at cost.

INVESTMENT  VALUATION  - The  Company's  investment  swap  contracts  and  stock
investments  are  valued at  current  market  value.  Loans are stated at unpaid
principal balance unless loss reserves are considered  necessary.  Land owned is
stated at the lower of cost or net realizable value.

INTEREST  RATE SWAP  AGREEMENTS  - The Company  enters into  interest  rate swap
agreements as a means of managing its interest rate exposure.  The  differential
to be paid or  received  on all  interest  rate swap  agreements  is  accrued as
interest rates change and is recognized over the life of the  agreements.  Those
agreements  which are considered to be  investments  are accounted for at market
value in the financial statements.

ACCOUNTS  RECEIVABLE  - Accounts  receivable  represent  sales on credit made by
Middleton Doll and License Products, net of an allowance for doubtful accounts.

INVENTORY - Inventories of Middleton Doll and License Products are valued at the
lower of cost or market. Middleton Doll and License Products utilize the average
cost method to determine cost. The components of inventory are as follows:

                                   December 31, 1999    December 31, 1998
Raw materials, net of reserve
   of $235,568 and $466,661,
   respectively                         $2,157,740        $1,600,051
Work in process                             90,613           275,755
Finished goods                           2,536,292         1,356,646
Prepaid Inventory                             --              29,101
                                        ----------        ----------
   Total                                $4,784,645        $3,261,553
                                        ==========        ==========




                                       30
<PAGE>

FIXED ASSETS - Fixed assets primarily represent  manufacturing  property,  plant
and equipment of Middleton Doll and License Products. Fixed assets are stated at
cost and are depreciated  using  straight-line  methods for financial  statement
purposes and accelerated methods for income tax purposes. Maintenance and repair
costs are charged to expense as incurred,  and renewals  and  improvements  that
extend  the  useful  life of the  assets  are added to the  plant and  equipment
accounts. The major classes of fixed assets are as follows:

<TABLE>
<CAPTION>
                          Useful Lives     December 31, 1999        December 31, 1998
                        ----------------  ---------------------    ---------------------

<S>                         <C>                      <C>                      <C>
Land                            -                    $ 283,817                $ 173,590
Building                    40 years                 1,649,276                1,579,838
Furniture & fixtures         7 years                   755,964                  727,323
Machinery & equipment       3-5 years                2,342,487                1,951,157
                                          ---------------------    ---------------------
   Total                                           $ 5,031,544              $ 4,431,908
                                          =====================    =====================

</TABLE>

LEASED  PROPERTIES - Depreciation is calculated using the  straight-line  method
over 40 years  for book  purposes  and 39 years for tax  purposes.  The costs of
normal repairs and maintenance are charged to expense as incurred.

RECOGNITION  OF  INTEREST  INCOME - Interest  income is  recorded on the accrual
basis to the  extent  that  management  anticipates  that such  amounts  will be
collected.  In all other cases,  the unpaid  interest is monitored  and interest
income is recorded only upon receipt.

PREMIUM  (EXPENSE) INCOME - Premium (expense) income represents the differential
at the time a portion  of a loan is sold  between  the  present  value of excess
servicing  income  on the sold  portion  and the  retained  loan  discount,  and
subsequent  to sale,  amortization  of the  retained  loan  discount  and excess
servicing asset.

INCOME TAXES - Beginning  January 1, 1997,  the Company and its  qualified  REIT
subsidiary,  BMSBLC,  qualified  as real  estate  investment  trusts  under  the
Internal  Revenue  Code.  Accordingly,  they are not  subject  to income  tax on
taxable income that is distributed to shareholders.

In order to qualify as a REIT under the  Internal  Revenue  Code,  the  Company,
together with its qualified REIT subsidiary,  BMSBLC,  among other requirements,
must meet  certain  annual  income and  quarterly  asset  diversification  tests
including not holding the securities of any one issuer valued at more than 5% of
total assets, and not holding more than 10% of the outstanding voting securities
of any one issuer.

Middleton Doll and License Products file their own tax returns. Income taxes are
calculated using the liability  approach which generally  requires that deferred
income taxes be recognized when assets and liabilities have different values for
financial  statement  and tax  reporting  purposes.  Income  tax  expense in the
accompanying  financial  statements  is based on their  operations  prior to the
elimination  of  approximately  $1.64 million of interest and other  expenses on
transactions with the Company.



                                       31
<PAGE>
The Company's ordinary taxable income was reduced by $223,911 for the year ended
December  31, 1997 due to a payment  which was made during the fiscal year ended
June 30, 1995 and was amortized through 1997. The payment was made to modify the
terms of certain investment swap contracts.

FAIR VALUE OF  FINANCIAL  INSTRUMENTS  - Financial  Accounting  Standards  Board
Statement  No. 107,  "Disclosures  About Fair Value of  Financial  Instruments",
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly  affected by the assumptions used,  including
the  discount  rate and  estimates  of future cash flows.  In that  regard,  the
derived  fair  value  estimates   cannot  be   substantiated  by  comparison  to
independent  markets  and,  in many cases,  could not be  realized in  immediate
settlement  of the  instrument.  Statement  No. 107 excludes  certain  financial
instruments from its disclosure  requirements.  Accordingly,  the aggregate fair
value amounts presented do not represent the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments.

          Carrying Amounts Approximate Fair Values for the Following Instruments
             Cash
             Net loans
             Short-term borrowings
             Variable rate long-term notes payable

          Quoted Market Prices (where available,  or if not available,  based on
     quoted  market  prices  of   comparable   instruments   for  the  following
     instruments)
             Interest rate swaps
             Redeemable preferred stock

          Discounted Cash Flows (using interest rates currently being offered on
     instruments with similar terms and with similar credit quality)
             Fixed rate long-term debt

          Off-Balance-Sheet Instruments
             Letters of credit
             Lending commitments

          Since the  majority  of the  Company's  off-balance-sheet  instruments
     consist of  nonfee-producing,  variable rate  commitments,  the Company has
     determined it does not have a distinguishable fair value.

NEW  ACCOUNTING  PRONOUNCEMENTS  -  In  June,  1998,  the  Financial  Accounting
Standards Board issued the Statement of Financial  Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities".  This statement,
as amended,  establishes


                                       32
<PAGE>

accounting and reporting standards for derivative instruments.  It requires that
an entity  recognize  all  derivatives  as either assets or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
This statement is effective for all fiscal years  beginning after June 15, 2000.
The Company does not believe  that this  statement  will have a material  impact
upon its financial statements.


NOTE 2.  INVESTORSBANCORP, INC.

InvestorsBancorp.  Inc. is a bank holding company that was  incorporated on June
12, 1996 and  capitalized  on  September 3, 1997  primarily by the Company.  The
Company distributed all of its outstanding shares of  InvestorsBancorp,  Inc. to
its  shareholders on September 6, 1997 to shareholders of record on September 5,
1997.

InvestorsBank  (the  "Bank")  is a  Wisconsin  chartered  commercial  bank  with
depository  accounts insured by the Federal Deposit Insurance  Corporation.  The
Bank started  providing a full range of commercial and consumer banking services
on September 8, 1997.

All employees, except certain officers, ceased their employment with the Company
on  September  8, 1997 and became  employees  of the Bank.  The  officers of the
Company became officers of both the Company and the Bank.

The Company and the Bank entered into a Management  Services and  Allocation  of
Expenses  Agreement (the "Agreement") on September 2, 1997. The Agreement allows
the  employees of the Bank to provide loan  management,  leasing and  accounting
services to the  Company  for a fee,  payable  monthly.  Management  fee expense
relating to the  Agreement  was $872,201  for the year ended  December 31, 1999,
$775,892  for the year ended  December 31, 1998 and $229,285 for the period from
September  3, 1997 to December  31,  1997.  Overhead  expenses and rent are also
shared between the two entities in accordance with the Agreement.


NOTE 3   ACQUISITION OF MINORITY INTEREST

On April 30, 1998, the Company paid $5 million for an additional 49% interest of
Middleton Doll and the right to produce  certain dolls under a five year royalty
agreement.  $2.5  million  was  allocated  to the  acquisition  of the  minority
interest based upon an appraisal of Middleton  Doll. This exceeded the amount of
the recorded minority interest by $619,751 and this difference has been recorded
as goodwill in the accompanying financial statements and is being amortized over
twenty years on a straight line basis.

The $2.5  million  allocated  to the  right to  produce  certain  dolls has been
recorded as a prepaid royalty in the accompany financial statements and is being
amortized  on a  straight  line  basis  over the five year  term of the  royalty
agreement.



                                       33
<PAGE>

NOTE 4.  CONCENTRATION OF CREDIT RISK

The Consumer Products  Segment's  customers are not concentrated in any specific
geographic  region.  The Company  establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers, historical
trends and other  information.  The Company  routinely  assesses  the  financial
strength  of its  customers,  and,  as a  consequence,  believes  that its trade
accounts receivable credit risk exposure is limited. For the year ended December
31, 1999 the Consumer Products Segment had one unrelated customer that accounted
for  approximately  13% of the  Segment's  sales  and  approximately  30% of the
Segment's December 31, 1999 gross trade accounts receivable.


NOTE 5.  SIGNIFICANT SUPPLIER

Approximately  84% and 47% of Middleton Doll raw materials were acquired  during
1999 and 1998, respectively, from a single supplier in Hong Kong. There has been
no formal agreement between Middleton Doll and this supplier. As of December 31,
1999,  Middleton  Doll has entered  into  commitments  to acquire  approximately
$1,743,000  of raw material from this  supplier.  After those goods are shipped,
Middleton Doll will no longer buy raw materials from this supplier.

Effective  January 1, 2000,  Middleton Doll entered into a Shareholder  and Loan
Agreement with Middleton (HK) Limited,  a Hong Kong corporation.  Middleton (HK)
is a management  corporation  which will provide  Middleton Doll with all of its
raw materials and finished  goods from Asia.  Middleton  Doll has acquired a 51%
equity  ownership in this Hong Kong  corporation  and the owner of the remaining
49% is affiliated with the former  supplier used by Middleton Doll.  Through the
Shareholder and Loan Agreement,  Middleton Doll is committed to lending $306,000
as an investment  loan which bears  interest at the prime rate plus 1%,  payable
quarterly  and has a  maturity  date of  January 1,  2005.  In  addition  to the
investment  loan Middleton Doll has also agreed to fund a revolving loan up to a
maximum of $700,000 at an interest rate of the prime rate plus 1%. The revolving
line also matures on January 1, 2005. The revolving loan is secured by assets of
Middleton (HK) Limited.


NOTE 6.  LOANS

The Company's exposure to loss in the event of nonperformance by the borrower is
represented by the outstanding principal amount of the loans. The Company's loan
portfolio  consists  primarily  of  variable-rate  loans  with  terms of five to
fifteen  years.  Substantially  all loans are fully  secured  by first or second
mortgages on commercial  real estate.  Approximately  88% of the Company's  loan
portfolio at December 31, 1999 is comprised of loans to borrowers located within
the  State of  Wisconsin.  As of  December  31,  1999,  the  Company  has  loans
outstanding to its largest borrower totaling $14,116,064.

The  Company  routinely  monitors  its  loan  portfolio  for  evidence  of  loan
impairment. A loan is considered impaired when, based on current information and
events,  it is probable  that the


                                       34
<PAGE>

Company will be unable to collect all amounts due  according to the  contractual
terms of the loan.  Historically  impairment  has not been an indicator of loss.
When a loan is deemed  impaired,  the Company  computes the present value of the
loan's  future  cash flows,  discounted  at the  effective  interest  rate.  The
effective  rate used is the  contractual  rate  adjusted for any deferred  fees,
deferred costs,  premiums or discounts  existing at origination.  If the present
value is less than the  carrying  value of the loan,  a valuation  allowance  is
recorded. For collateral-dependent loans, the Company uses the fair value of the
collateral,  less  estimated  costs to sell, on a discounted  basis,  to measure
impairment.  As of December 31, 1999 and  December 31, 1998 loans with  balances
aggregating $584,227 and $721,816,  respectively,  were considered impaired.  At
December 31, 1999 a loan loss reserve of $150,000 was  established.  At December
31, 1998, no loss reserve was recorded on impaired loans.  The average  impaired
loan balance during the year ended  December 31, 1999 was $634,334.  The accrued
interest on the impaired loans was $37,241 at December 31, 1999. Net of the loan
loss  reserve of  $150,000  the  remaining  balances  are  expected  to be fully
collected.

Undisbursed loan commitments and lines of credit totaled  $9,705,418 at December
31, 1999. There were no letters of credit outstanding as of December 31, 1999.


NOTE 7.  LOANS SOLD

The following  table  summarizes  the  outstanding  balance of loans sold by the
Company to third parties.

  Principal Balance Sold      Percentage   Principal Balance sold    Recourse
     at Date of Sale             Sold       at December 31, 1999     Provision

  During the year ended
   December 31, 1999
         $480,000                80%              $378,939             None

During the year ended
   June 30, 1995
        $2,837,677              75-80%            $224,348             None

The Company also sells loans with the option to repurchase them at a later date.
During 1999,  the Company sold  $15,447,540  in loans to third  parties with the
option to  repurchase  them.  As of  December  31,  1999,  the  balance  of loan
participations   with  repurchase  options  was  $32,724,235.   Of  this  amount
approximately  $23.7 million is sold to a single  non-related  party. These loan
participations  mature as the  corresponding  notes  mature with the  maturities
ranging from one to nine years as of December 31, 1999. As of December 31, 1998,
the balance of loan  participations  with  repurchase  options was  $45,881,418.
During the year ended  December 31, 1998,  the Company  resold with an option to
repurchase,  loans with unpaid principal  balances  totaling  $5,331,814.  These
sales all have been accounted for as secured financing. Loan participations that
mature are refinanced with new debt such as commercial  paper and long-term debt
(see Notes 11 and 12).



                                       35
<PAGE>

For the loans sold with no recourse,  the Company is  susceptible to loss on the
loans up to the percentage of the retained interest to the extent the underlying
collateral is insufficient in the event of nonperformance  by the borrower.  The
Company's  retained  interest is subordinated to the portion sold. For the loans
sold with full  recourse,  the Company is susceptible to loss equal to the total
principal  balance  of the  loan to the  extent  the  underlying  collateral  is
insufficient in the event of nonperformance. No associated loss reserve has been
established as of December 31, 1999, for loans which have been sold.

Under the terms of the agreements,  the Company retains servicing rights for the
entire loan. As servicer and provider of recourse,  certain  agreements  require
the Company to comply with various  covenants,  including the maintenance of net
worth.  As of  December  31,  1999,  the Company  was in  compliance  with these
covenants.


NOTE 8.  LOAN BACKED CERTIFICATES

During the year ended June 30,  1996,  the Company sold loans having a principal
balance of $8,666,538 to a trust which issued two classes of  certificates.  The
"A"  Certificate  in the amount of $7,453,223  was sold to a third party and the
"B" Certificate in the amount of $1,213,315 was sold to the Company.

On May 1, 1997, the Company  repurchased all of the loans sold to the trust. The
unpaid  principal  balances for the A and B  certificates  were  $8,097,561  and
$1,497,499,  respectively.  As a result of these  transactions,  during the year
ended December 31, 1997, the Company  recognized  $1,297 of premium  expense and
the excess  servicing  asset and retained loan discount  related to the original
sale were reduced by $202,437 and $201,140, respectively.


NOTE 9.  BUSINESS ACQUISITION

In  July,  1998,   BMSBLC  acquired  Bando  McGlocklin  Real  Estate  Investment
Corporation  ("BMREIC"),  an independently  owned real estate  investment trust.
This acquisition was accounted for as a purchase. Under the terms of the Plan of
Merger,  BMSBLC acquired leased properties and other assets with a fair value of
approximately  $19.6  million and assumed  liabilities  of  approximately  $13.8
million.  Cash of  approximately  $5.1 million was paid to the  shareholders  of
BMREIC.  Of the  liabilities  assumed,  $13.4 million were paid by BMSBLC at the
date of the closing.

In  addition,  BMSBLC paid  $555,379  to a related  party to acquire the rights,
title and interest  under an Advisory  Agreement  between the related  party and
BMREIC.  This purchase was made in  connection  with the  acquisition  of BMREIC
described above and has been capitalized as part of the purchase price.



                                       36
<PAGE>


NOTE 10. LEASED PROPERTIES

The  Company  has $24  million  in leased  properties  located  in  southeastern
Wisconsin  as of  December  31,  1999  as  compared  to $22  million  in  leased
properties as of December 31, 1998.  This includes the $18.3 million of acquired
properties  described  in Note 9. The  Company  has  entered  into  construction
contracts totaling $5,051,638 of which $1,727,553 is unfunded as of December 31,
1999.

The Company  normally  leases its properties  pursuant to a lease agreement with
initial lease terms,  primarily  ranging from five to fifteen years.  The leases
require the lessee to pay all operating expenses including utilities,  insurance
and taxes. The lease agreements,  all of which are operating  leases,  expire at
various  dates  through  2014 and provide the lessee with  renewal and  purchase
options.  Minimum future rental income,  by year, from these leases based on the
agreements in effect at December 31, 1999 is as follows:

                                       Projected
            Year                      Rental Income

            2000                        $ 3,345,430
            2001                          3,317,269
            2002                          3,357,301
            2003                          3,206,296
            2004                          2,885,783
        Future Years                     11,771,088
                                  ------------------
                                       $ 27,883,167
                                  ==================

The Company  subleases  half of its office space with  InvestorsBank,  a related
party.  Monthly rents are variable  based on LIBOR interest rates and the rental
agreement is for a ten year term.  Rental  income from the related party for the
years ended  December  31, 1999 and  December  31, 1998 was $50,981 and $67,452,
respectively.


NOTE 11. SHORT-TERM BORROWINGS

Commercial paper is issued for working capital purposes with maturities of up to
90 days. The average yield on commercial paper  outstanding at December 31, 1999
was 6.49%.

On June 25,  1999,  Lee  Middleton  Original  Dolls,  Inc.  entered  into a loan
agreement  with a bank providing for a line of credit of $2,700,000 at the prime
rate.  The note is a demand  note and is due on April  30,  2000  with  interest
payable quarterly.  At December 31, 1999, the outstanding  principal balance was
$200,000 and the interest rate was 8.5%.

BMSBLC has  entered  into an  amended  and  restated  loan  agreement  with five
participating  banks as of April 30, 1999. The agreement  provides for a maximum
principal of $70,000,000  less the  outstanding  principal  amount of commercial
paper and bears interest at the prime rate or at the 30, 60 or 90 day LIBOR plus
one and  three-eighths  percent.  Interest is payable  monthly and the agreement
expires on April 28, 2000. BMSBLC is also required to pay a commitment fee equal


                                       37
<PAGE>

to one-half of one percent per year on the unused amount of the loan commitment.
There was no outstanding principal balance at December 31, 1999.

On April 30, 1998, the Company  entered into a credit  agreement with one of its
correspondent  banks providing for a note of $5,000,000  bearing interest at the
prime  rate.  The  proceeds  from this note  were used for the  purchase  of the
remaining  49%  interest  in  Middleton  Doll and the rights to produce  certain
dolls.  The agreement  expired on April 30, 1999 and was extended under the same
terms until April 30, 2000. As of December 31, 1999, the  outstanding  principal
balance was $5,000,000.


NOTE 12. LONG-TERM DEBT

On November 7, 1991,  BMSBLC  borrowed  $10,000,000  from the State of Wisconsin
Investment  Board  ("SWIB")  pursuant to a term note which  bears  interest at a
fixed rate of 9.05% per year  through  its  maturity  and is secured by specific
loans.  The note is payable in equal  quarterly  installments of $166,667 with a
final payment of unpaid principal due on November 7, 2006. At December 31, 1999,
the outstanding principal balance was $4,666,667.

On June 12, 1998,  BMSBLC borrowed an additional  $10,000,000  from the State of
Wisconsin Investment Board ("SWIB") pursuant to a term note which bears interest
at a fixed  rate of 6.98%  per year  through  its  maturity  and is  secured  by
specific loans. The note is payable in equal quarterly  installments of $166,667
with a final  payment of unpaid  principal  due on June 1, 2013. At December 31,
1999, the outstanding principal balance was $9,000,000.

The  SWIB  agreements  and the  loan  agreements  described  in Note 11  contain
restrictions  on BMSBLC's new  indebtedness,  acquisition  of its common  stock,
return of capital  dividends,  past due loans, and realized losses on loans, and
requires  maintenance  of  collateral,  minimum  equity and loan to debt ratios.
Under the most  restrictive  covenant,  approximately  $2  million  of  BMSBLC's
capital is available  for payment of dividends to BMCC. As of December 31, 1999,
BMSBLC is in compliance with all such requirements.

On December 1, 1998,  BMSBLC  entered into a Loan and Trust  Agreement  with the
City of Franklin,  Wisconsin,  which issued an  industrial  development  revenue
bond. The bond matures on December 1, 2018 with interest  payable monthly to the
trustee.  The interest rate changes  weekly based upon the  remarketing  agent's
lowest  rate to permit the sale of the  bonds.  As of  December  31,  1999,  the
outstanding principal balance was $1,510,000 and the interest rate was 5.7%.


                                       38
<PAGE>

Future  annual  maturities  of  long-term  debt as of  December  31, 1999 are as
follows:

           December 31, 2000                     $ 1,338,856
           December 31, 2001                       1,339,197
           December 31, 2002                       1,339,558
           December 31, 2003                       1,339,942
           December 31, 2004                       1,340,350
           Later Years                             8,552,525
                                             ----------------
                                                $ 15,250,428
                                             ================


NOTE 13. INTEREST RATE SWAPS

The Company  enters into interest rate swap  agreements  primarily as a means of
managing  interest  rate risk.  To the extent that the  Company's  variable-rate
loans are funded with  fixed-rate  debt, the Company is subject to interest rate
risk. To reduce this risk, the Company  enters into certain  interest rate swaps
designed to convert  variable-rate  loans into fixed-rate loans.  Although these
swaps reduce  interest  rate risk,  the potential for profit or loss on interest
rate swaps still  exists  depending  upon  fluctuations  in interest  rates.  In
addition,  the Company  enters into interest rate swaps in an attempt to further
manage interest rate risk resulting from interest rate movements.

In accordance with applicable accounting principles, the Company's interest rate
swap  agreements  are held for  purposes  other  than  trading  and are  further
classified  as  either  hedges  or as  investment  contracts.  Both  hedges  and
investment  contracts  have the  potential  for  profit  and  loss.  Hedges  are
accounted  for using the  designation  method  which  matches the swaps with the
assets that are being  hedged.  When the  designated  asset  matures or is sold,
extinguished  or terminated,  the hedge would be  reclassified as an investment.
Accounting principles dictate that those contracts not meeting hedge criteria be
classified as investments and  marked-to-market  with any associated  unrealized
gain or loss recorded in the statements of operations,  whereas those  contracts
meeting   hedge   criteria  are  not  to  be  classified   as   investments   or
marked-to-market.

At December  31, 1999 there were no swaps which were  classified  as  investment
contracts  while at  December  31,  1998  the  market  value  of the  investment
contracts was $49,579.  Unrealized losses were $49,579 and $73,434 for the years
ended December 31, 1999 and December 31, 1998, respectively.

The average  notional amount of investment  swaps  outstanding  during the years
ended  December  31,  1999,  1998  and  1997  was  $1,375,000,  $2,750,000,  and
$45,750,000, respectively.

The following  table  summarizes the interest rate swap  agreements in effect at
December 31, 1999,  all of which are hedge swaps.  No funds were borrowed or are
to be repaid under these agreements.




                                       39
<PAGE>
<TABLE>
                                                         Current Interest
                                                             Rates Paid
                                                                                    Original
<CAPTION>
                         Company        Bank           By             By             Notional        Expiration
Bank                     Payment       Payment       Company         Bank            Amount             Date

<S>                      <C>            <C>           <C>              <C>           <C>                <C>   <C>
LaSalle Bank             Floating       Fixed         6.15250% (1)     6.340%        $ 5,400,000        03/21/01
   Chicago, IL
Firstar Bank             Floating       Fixed         6.19880% (1)     7.435%        $10,325,000 (2)    09/28/01
   Milwaukee, WI
Firstar Bank             Floating       Fixed         6.18125% (1)     5.725%        $16,908,000        06/30/03
   Milwaukee, WI
LaSalle Bank             Floating       Fixed         6.12000% (1)     7.600%        $ 5,000,000        03/10/05
   Chicago, IL
LaSalle Bank             Floating       Fixed         6.10125% (1)     6.660%        $ 5,250,000 (3)    05/23/05
   Chicago, IL
LaSalle Bank             Floating       Fixed         6.18125% (1)     6.500%        $ 5,000,000 (4)    09/29/05
   Chicago, IL
LaSalle Bank             Floating       Fixed         6.12125% (1)     7.090%        $12,500,000        09/05/06
   Chicago, IL
Firstar Bank             Floating       Fixed         6.12125% (1)     5.760%        $10,000,000 (5)    06/16/08
   Milwaukee, WI

(1) Adjusted every three months to the three-month LIBOR rate then in effect.
(2) The notional amount decreases by $166,667 each quarter and was $4,825,000 at
    December 31, 1999.
(3) The notional  amount  decreases by $100,000 each quarter and was  $3,450,000
    at December 31, 1999.
(4) The notional  amount  decreases by $75,000  each quarter and was  $3,725,000
    at December 31, 1999.
(5) The notional amount  decreases by $166,667  each quarter and was  $8,999,998
    at December 31, 1999.

</TABLE>

As a result of hedge arrangements,  the Company recognized a $711,006,  $519,795
and  $1,193,877  reduction in interest  expense for the years ended December 31,
1999,  1998 and 1997,  respectively.  In  addition,  the  Company  recognized  a
$88,131,  $93,201 and $353,962 reduction in interest expense for the years ended
December 31, 1999, 1998 and 1997,  respectively,  as a result of investment swap
contracts which have now expired.

The  Company  may be  susceptible  to risk with  respect to  interest  rate swap
agreements  to  the  extent  of  nonperformance  by the  financial  institutions
participating  in the interest rate swap agreements.  However,  the Company does
not anticipate nonperformance by these institutions.



                                       40
<PAGE>
NOTE 14. MANDATORILY REDEEMABLE PREFERRED STOCK

On October 20,  1993,  the Company  issued  690,000  shares of  Adjustable  Rate
Cumulative  Preferred Stock,  Series A, in a public offering at $25.00 per share
less an  underwriting  discount  of $1.0625 per share and other  issuance  costs
amounting to $295,221. The preferred stock is redeemable, in whole or in part at
the option of the Company,  on any dividend  payment date during the period from
July 1, 2001 to June 30,  2003 and from July 1, 2006 to June 30, 2008 at $25 per
share plus  accrued  and unpaid  dividends.  Any shares of  preferred  stock not
redeemed prior to July 1, 2008 are subject to mandatory  redemption on that date
by the  Company  at a price  of $25 plus  accrued  dividends.  Dividends  on the
preferred  stock were paid  quarterly  at the annual rate of 7.625%  through the
dividend  period  ending June 30,  1998.  The  dividend  rate was adjusted to an
annual rate of 8.53% for the dividend period  commencing July 1, 1998 and ending
June 30, 2003.  The next  adjustment  will be effective for the five year period
commencing  July 1, 2003. As of December 31, 1997,  the Company had  repurchased
15,209 shares.

For the year ended  December 31, 1998,  the Company began  presenting  preferred
stock dividends as a deduction from net income to arrive at net income available
to common shareholders.  In prior periods, the Company presented preferred stock
dividends as part of the interest expense. Prior period consolidated  statements
of operations have been reclassified to conform to current period presentation.


NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments at December 31,
1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                        1999                             1998
                                              Carrying       Estimated         Carrying       Estimated
                                               Amount        Fair Value         Amount       Fair Value
FINANCIAL ASSETS
<S>                                        <C>             <C>              <C>             <C>
   Cash                                    $   2,040,067   $   2,040,067    $   2,835,943   $   2,835,943
   Net loans                                 113,851,648     113,851,648      116,381,936     116,381,936

FINANCIAL LIABILITIES
   Short-term borrowings                      73,857,172      73,857,172       58,527,321      58,527,321
   Variable rate long-term debt               10,612,778      10,612,778       17,005,436      17,005,436
   Fixed rate long-term debt
      Practicable to estimate fair value      13,740,428      13,045,454       15,078,990      15,369,133
      Not practicable                         23,651,383            --         30,421,260            --
   Redeemable preferred stock                 16,908,025      11,640,145       16,908,025      15,604,542
   Interest rate swaps                              --          (548,067)            --         3,731,276
</TABLE>


The estimated fair value of fee income on letters of credit at December 31, 1999
and 1998 was  insignificant.  Loan  commitments on which the committed  interest
rate is less than the current market rate was also insignificant at December 31,
1999 and 1998.


                                       41
<PAGE>

The Company  assumes  interest  rate risk (the risk that general  interest  rate
levels  will  change) as a result of its normal  operations.  As a result,  fair
values of the  Company's  financial  instruments  will change when interest rate
levels  change and that change may be either  favorable  or  unfavorable  to the
Company.  Borrowers with fixed rate  obligations  are less likely to prepay in a
rising rate environment and more likely to repay in a falling rate  environment.
Management  monitors rates and maturities of assets and liabilities and attempts
to minimize interest rate risk by using interest rate swaps (see Note 13).


NOTE 16. OPERATING LEASES

The  Company's  Consumer  Products  Segment  leases from third  parties  various
buildings.  The leases are classified as operating  leases and the buildings are
used as warehouses and outlet stores for the storage,  distribution  and sale of
Lee Middleton  Original Dolls merchandise as well as for a variety of equipment.
Minimum  future  lease  payments,  by  year,  from  these  leases  based  on the
agreements in effect at December 31, 1999 is as follows:

                                    Future Minimum
           Year                     Lease Payments
     -----------------           ---------------------

           2000                             $ 203,947
           2001                               107,941
           2002                                62,476
           2003                                54,816
           2004                                18,672
                                 ---------------------
                                            $ 447,852
                                 =====================


NOTE 17. TREASURY STOCK

During the quarter ended June 30, 1999, the Company  purchased  17,500 shares of
its common  stock and through its  subsidiary  purchased  an  additional  48,890
shares of common stock in the open market at an average  price of $11.76.  It is
the Company's intention to hold these shares as treasury stock.


NOTE 18. RETIREMENT PLANS

On September 8, 1997,  the Company  terminated its profit sharing plan and money
purchase plan. The Company continues to have an employee benefit expense through
the sharing of employees and expenses according to the Agreement (see Note 2).

As of July 1, 1998, the Company's subsidiary, Lee Middleton Original Dolls, Inc.
has a qualified defined contribution plan for eligible employees.  Employees can
contribute  between  1% and 15% of their  base  compensation  to the  plan.  The
Company's  contribution  to the plan is at the discretion of the Company's Board
of Directors.  No Company  contributions  were made to the plan during the years
ended  December  31,  1999 and  December  31,  1998.



                                       42
<PAGE>

The  Company  provided  an  additional  supplemental  retirement  benefit for an
executive  officer  totaling  $55,412,  $38,098  and $38,347 for the years ended
December  31,  1999,  1998 and 1997,  respectively.  In the prior  periods  this
benefit was given to two  executive  officers.  These  payments were made at the
sole discretion of the outside members of the Board of Directors.


NOTE 19. STOCK OPTION PLANS

The Company has three stock option plans,  the 1990 Stock Option Plan,  the 1993
Stock Option Plan and the 1997 Stock Option Plan (the  "Plans").  In  accordance
with the Plans'  provisions,  the exercise  prices for stock  options may not be
less than the fair market value of the optioned stock at the date of grant.  The
exercise price of all options granted was equal to the market value of the stock
on the date of the grant.  All of the  options,  except for the options  granted
under the 1997 Stock Option Plan, are "incentive stock options" as defined under
Section 422 of the Code.  Options  granted  under the 1997 Stock Option Plan are
considered  "non-qualified  stock  options" as defined by the  Internal  Revenue
Code. All options must be exercised within ten years of the date of grant.

Additional information relating to the Plans is shown below:

<TABLE>
<CAPTION>
                                            For the year ended          For the year ended        For the year ended
                                             December 31, 1999           December 31, 1998         December 31, 1997
                                           Number        Average        Number     Average         Number      Average
                                             of          Option           of        Option           of         Option
                                          Options         Price        Options      Price         Options       Price
                                         -----------    ----------    ----------- -----------    -----------  -----------

<S>                                         <C>            <C>           <C>         <C>            <C>          <C>
Options outstanding at                      205,870        $11.23        205,870     $ 12.73        169,424      $ 10.45
   beginning of year
      Options granted                        -              -             -           -             189,450        12.90
      Options exercised                      -              -             -           -             (45,796)        7.35
      Options terminated unexercised         -              -             -           -            (107,208)       11.70
      Increase due to stock dividend         20,587 (1)     -             -           -              -            -
                                         -----------                  -----------                -----------
Options outstanding at end of year          226,457         10.21 (1)    205,870       11.23 (2)    205,870        12.73

Options available for grant at
   end of year                              172,601         -            173,188      -             173,188       -
                                         -----------                  -----------                -----------


Total reserved shares                       399,058         -            379,058      -             379,058       -

Options exercisable at end of year          216,953        $10.19        192,590     $ 11.25        187,950      $ 12.94


(1)      On February 22, 2000, the Board of Directors of the Company  approved a
         10% increase in  outstanding  options and a 10% downward  adjustment of
         the exercise price on all options.  This  adjustment was to reflect the
         Company's 10% stock dividend as of December 31, 1999.



                                       43
<PAGE>

(2)      On February 11, 1998, the Board of Directors of the Company  approved a
         downward  adjustment of $1.67 in the exercise  prices of the 1997 Stock
         options that were  granted on February 3, 1997 and June 25,  1997.  The
         downward  price  adjustment was to reflect the Company's 1997 return of
         capital dividend.
</TABLE>

<TABLE>
<CAPTION>
                                       Outstanding Options      Exercisable Options
                                    Remaining
                                     Average         Average
    Exercise                           Life          Exercise                      Exercise
  Price Range         Shares         In Years         Price          Shares         Price

<S>                     <C>                 <C>        <C>            <C>            <C>
  $7.00-$8.00            12,012             0.9         $ 7.27          8,008         $ 7.27

  $9.50-$13.50          214,445             7.1        $ 10.37        208,945        $ 10.30
                    ------------   -------------    -----------    -----------    -----------

     Total              226,457             6.8        $ 10.21        216,953        $ 10.19
</TABLE>

The Company  has adopted the  disclosure  only  option  under the  Statement  of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation".  The impact of the provision of this statement on proforma income
and earnings per share is not material.


NOTE 20. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income  available to common
shareholders by the weighted-average  number of common shares outstanding during
the period.  Diluted  earnings  per share is  computed  by giving  effect to all
dilutive  potential  common shares.  A  reconciliation  of the income and shares
issued in computing the basic and diluted earnings per share for the years ended
December 31, 1999, 1998 and 1997, are as follows:

<TABLE>
<CAPTION>
                                                    For the years ended December 31,
                                                 1999              1998              1997

<S>                                            <C>               <C>               <C>
Net income available to
   common shareholders                         $ 5,476,327       $ 3,769,637       $ 3,506,380
                                             --------------    --------------   ---------------
Determination of shares:
   Weighted average common shares
   outstanding (basic)                           3,647,513         3,689,102         3,685,990
   Assumed conversion of stock options               2,536             2,468            11,597
                                             --------------    --------------   ---------------
   Weighted average common shares
   outstanding (diluted)                         3,650,049         3,691,570         3,697,587
                                             ==============    ==============   ===============

Basic earnings per share                            $ 1.50            $ 1.02            $ 0.95
Diluted earnings per share                          $ 1.50            $ 1.02            $ 0.95

</TABLE>

                                       44
<PAGE>
NOTE 21. INCOME TAXES

Taxes on income consist of the following:

                                   For the years ended December 31,

                                1999             1998              1997
                            --------------   --------------    --------------
Current taxes
   Federal                      $ 913,418      $ 1,188,422       $ 1,311,497
   State                          138,600          234,404           227,126
                            --------------   --------------    --------------
                                1,052,018        1,422,826         1,538,623
                            --------------   --------------    --------------
Deferred taxes
   Federal                       (100,000)          53,000               642
   State                                -           16,810                 -
                            --------------   --------------    --------------
                                 (100,000)          69,810               642
                            --------------   --------------    --------------
Taxes on income                 $ 952,018      $ 1,492,636       $ 1,539,265
                            ==============   ==============    ==============

The  Company and its  subsidiary,  BMSBLC,  qualify as a real estate  investment
trust under the  Internal  Revenue  Code.  Accordingly,  they are not subject to
income tax on taxable income that is distributed to shareholders. The income tax
expense  recorded  by the  Company is  attributable  to the  Consumers  Products
segment.  Tax expense is  calculated  on net income  before the  elimination  of
intercompany  expenses  and,  at the  present  time,  is  attributable  only  to
Middleton Doll income as License Products has a net operating loss  carryforward
to offset its current net income. A reconciliation  of Consumer  Products income
before taxes to income subject to taxes is as follows.

                                  1999             1998              1997
                             ---------------   --------------    --------------

Income before taxes             $ 4,662,218      $ 3,784,539       $ 3,939,725
Less intercompany
  eliminations                   (1,644,609)      (1,171,929)         (451,352)
Plus License Products
  loss not benefited                      -        1,062,752           567,700
                             ---------------   --------------    --------------
Income subject to taxes         $ 3,017,609      $ 3,675,362       $ 4,056,073
                             ===============   ==============    ==============

A reconciliation of the statutory Federal income tax rate and the effective rate
as a percentage of income subject to taxes for Consumer Products is as follows.

                                        1999           1998           1997
                                    ------------   ------------   ------------

Federal statutory rate                    34.0%          34.0%          34.0%
State taxes                                4.6%           6.9%           5.4%
Other                                     -7.2%          -0.1%          -0.8%
                                    ------------   ------------   ------------
Effective rate                            31.4%          40.8%          38.6%
                                    ============   ============   ============


                                       45
<PAGE>

Temporary   differences  and  carryforwards   create  deferred  tax  assets  and
liabilities.  The following  table lists the items which affect the deferred tax
calculation for the Company:

                                          For the years ended December 31,
                                          1999          1998          1997

Deferred tax assets:
   Accrued expenses and reserves          $ 231,900     $ 125,000    $ 195,100
   Net operating loss carryforwards       1,222,100     1,172,000      784,000
                                      --------------  ------------  -----------
                                          1,454,000     1,297,000      979,100
Valuation allowance                      (1,227,600)   (1,172,000)    (784,000)
                                      --------------  ------------  -----------
                                            226,400       125,000      195,100
Deferred tax liabilities:
   Depreciation and amortization             (6,400)       (5,000)      (5,290)
                                      --------------  ------------  -----------
Net deferred tax assets                   $ 220,000     $ 120,000    $ 189,810
                                      ==============  ============  ===========

The valuation  allowance  represents net operating loss carryforwards at License
Products for which  utilization  is  uncertain.  The  increase in the  valuation
allowance is a result of the increased  deferred tax asset  associated  with the
net operating loss  carryforwards.  A portion of the deferred  income tax assets
may be realized  through  carrybacks  with the remainder  dependent  upon future
income.  Management believes that sufficient income will be earned in the future
to realize the remaining net deferred income tax assets.


NOTE 22. DISTRIBUTIONS

For the years ended December 31, 1999,  1998,  and 1997, the Company's  Board of
Directors has declared the following common stock distributions.

<TABLE>
<CAPTION>
                                                                    For the years ended December 31,
                                                                 1999              1998             1997

<S>                                                           <C>               <C>              <C>
Total common stock distributions                              $ 6,027,790       $ 2,397,916      $ 8,150,055

Common stock distributions per share (tax basis)
   Ordinary income                                                 $ 0.70            $ 0.65           $ 0.61
   Capital gains                                                   $ 0.14               $ -              $ -
   Return of capital                                                  $ -               $ -           $ 1.67
   Nontaxable                                                      $ 0.81               $ -              $ -
                                                            --------------    --------------   --------------

Total common stock distributions declared per share                $ 1.65            $ 0.65           $ 2.28
                                                            ==============    ==============   ==============

Distribution in cash                                               $ 0.84            $ 0.65           $ 0.61
Distribution in stock                                              $ 0.81               $ -           $ 1.67

</TABLE>

                                       46
<PAGE>

NOTE 23. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
                                                      Quarters Ended (in thousands, except per share data)

                                                 3/31/1999         6/30/1999         9/30/1999         12/31/1999

<S>                                                <C>               <C>               <C>               <C>
Total revenues                                     $ 7,292           $ 7,054           $ 9,660           $ 11,864
Net operating income before
    income taxes and minority interest             $ 1,333           $ 1,228           $ 2,006            $ 3,321
Net income available to
   common shareholders                               $ 898             $ 900           $ 1,280            $ 2,398
Basic earnings per share                            $ 0.24            $ 0.25            $ 0.35             $ 0.66
Diluted earnings per share                          $ 0.24            $ 0.25            $ 0.35             $ 0.66

<CAPTION>
                                                 3/31/1998         6/30/1998         9/30/1998         12/31/1998

<S>                                                <C>               <C>               <C>                <C>
Total revenues                                     $ 6,357           $ 6,799           $ 8,844            $ 9,957
Net operating income before
    income taxes and minority interest               $ 705           $ 1,038           $ 1,768            $ 1,968
Net income available to
   common shareholders                               $ 456             $ 700           $ 1,321            $ 1,293
Basic earnings per share                            $ 0.12            $ 0.19            $ 0.36             $ 0.35
Diluted earnings per share                          $ 0.12            $ 0.19            $ 0.36             $ 0.35

</TABLE>


                                       47
<PAGE>


NOTE 24. BANDO McGLOCKLIN CAPITAL CORPORATION (PARENT ONLY)

Pursuant to covenants  contained in its debt  agreements,  BMSBLC is  prohibited
from declaring or paying any dividend on its common stock which would constitute
a  return-of-capital  dividend for income tax purposes.  The  Company's  balance
sheet as of December 31, 1999 and December  31, 1998 and related  statements  of
operations and cash flows for the years ended  December 31, 1999,  1998 and 1997
on an unconsolidated basis are as follows:


                                    December 31, 1999   December 31, 1998
ASSETS
Loans                                    $  5,056,087    $  5,199,672
Investment in BMSBLC                       26,915,624      25,226,128
Investment in other subsidiaries            4,064,476       2,019,516
                                         ------------    ------------
   Total investments                       36,036,187      32,445,316
Other assets - net                            405,890       1,327,153
                                         ------------    ------------
   Total assets                          $ 36,442,077    $ 33,772,469
                                         ============    ============

LIABILITIES
Note payable                             $  5,000,000       5,000,000
Other liabilities                             455,640           8,159
                                         ------------    ------------
   Total liabilities                        5,455,640       5,008,159
Preferred stock                            16,908,025      16,908,025
SHAREHOLDERS' EQUITY
Common stock                                  293,441         266,769
Additional paid-in capital                 16,604,744      13,671,947
Retained earnings                           1,218,617       1,770,080
Treasury stock, at cost                    (4,038,390)     (3,852,511)
                                         ------------    ------------
   Total shareholders' equity              14,078,412      11,856,285
   Total liabilities, preferred stock,
      common stock and other
      shareholders' equity               $ 36,442,077    $ 33,772,469
                                         ============    ============


                                       48
<PAGE>

                                                    For the Years Ended
                                                       December 31,
                                               1999         1998         1997
Revenues
   Interest on loans                        $1,000,596   $  712,120   $  551,793
   Equity in income of BMSBLC                4,341,967    4,333,785    4,791,300
   Equity in income of other subsidiaries    2,065,616      901,856      798,482
   Other income                                103,963      194,400      881,967
                                            ----------   ----------   ----------
      Total revenues                         7,512,142    6,142,161    7,023,542
                                            ----------   ----------   ----------

Expenses
   Interest expense                            327,128      328,920      157,419
   Salaries and employee benefits                 --        118,917      916,574
   Other operating expenses                    249,960      553,009    1,156,849
                                            ----------   ----------   ----------
      Total expenses                           577,088    1,000,846    2,230,842
                                            ----------   ----------   ----------

Net income                                   6,935,054    5,141,315    4,792,700
Preferred stock dividends                    1,438,992    1,362,659    1,286,320
                                            ----------   ----------   ----------
Net income available for
   common shareholders                      $5,496,062   $3,778,656   $3,506,380
                                            ==========   ==========   ==========


                                       49
<PAGE>
<TABLE>
<CAPTION>
                                                 For the Years Ended December 31,
                                                1999          1998           1997

<S>                                         <C>            <C>            <C>
Cash Flows from Operating Activities:

Net income                                  $ 6,915,319    $ 5,141,315    $ 4,792,700

Adjustments to reconcile net cash
 (used) provided by operating activities:
   Equity in subsidiaries' earnings          (6,386,927)    (5,226,622)    (5,693,211)
   Dividends from subsidiaries                2,652,471      5,344,251      2,846,038
   Other                                      1,373,454       (376,356)      (162,070)
                                            -----------    -----------    -----------

Net Cash (Used) Provided by Operations        4,554,317      4,882,588      1,783,457
                                            -----------    -----------    -----------

Cash Flows from Investing Activities:
   Loans made to related parties                   --       (5,000,000)          --
   Principal collected on loans                 143,585      1,401,572      6,226,917
   Proceeds from maturity of securities            --         (664,104)          --
   Other                                        (28,641)          --         (235,290)
                                            -----------    -----------    -----------

Net Cash (Used) Provided by Investing           114,944     (4,262,532)     5,991,627
                                            -----------    -----------    -----------

Cash Flows from Financing Activities:
   Proceeds from loan participations
      with repurchase options - net                --       (1,600,000)     1,600,000
   (Decrease) increase in other notes
      payable                                      --        5,000,000           --
   Capitalization and distribution
      of InvestorsBank                             --             --       (6,160,000)
   Preferred stock dividends paid            (1,438,992)    (1,362,659)    (1,286,320)
   Common stock dividends paid               (3,067,560)    (2,656,153)    (1,990,055)
   Repurchase of common stock                  (186,640)          --         (589,898)
   Other                                           --             --          336,674
                                            -----------    -----------    -----------

Net Cash (Used) Provided by Financing        (4,693,192)      (618,812)    (8,089,599)
                                            -----------    -----------    -----------

Net (decrease) increase in cash                 (23,931)         1,244       (314,515)

Cash, beginning of period                        28,454         27,210        341,725
                                            -----------    -----------    -----------

Cash, end of period                         $     4,523    $    28,454    $    27,210
                                            ===========    ===========    ===========

</TABLE>

                                       50
<PAGE>

Schedule I
Condensed Financial Information of Registrant
(Refer to footnote 23 of the financial statements)

Schedule II
Valuation and Qualifying Accounts

Changes in the reserves  deducted from assets in the consolidated  balance sheet
other than  accumulated  depreciation  for the years ended  December  31,  1999,
December 31, 1998 and December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                   Balance at      Charged                     Balance
                                   beginning         to                         at end
                                   of period       expense      Deductions     of period
<S>                                 <C>            <C>          <C>            <C>
Reserve for loan losses:
Year ended:
   December 31, 1999                $   --         150,000          --         $150,000
   December 31, 1998                $450,000          --        (450,000)      $   --
   December 31, 1997                $450,000         6,335        (6,335)      $450,000

Reserve for doubtful accounts:
Year ended:
   December 31, 1999                $ 75,557       234,400      (180,677)      $129,280
   December 31, 1998                $268,796        95,568      (288,807)      $ 75,557
   December 31, 1997                $ 98,083       202,379       (31,666)      $268,796

Inventory reserve:
Year ended:
   December 31, 1999                $466,661       129,421      (360,514)      $235,568
   December 31, 1998                $207,612       300,326       (41,277)      $466,661
   December 31, 1997                $   --         229,446       (21,834)      $207,612

</TABLE>

                                       51
<PAGE>

Schedule IV
Mortgage Loans on Real Estate
<TABLE>
<CAPTION>
                                                                                                                Principal
                                                                                                                  amount
                                                                                                 Carrying        of loans
                                                                                                  Amount        subject to
                                                                                   Face             of          delinquent
                                           Final      Periodic                    Amount         Mortgages      Principal
                             Interest     Maturity     Payment       Prior          of             as of            or
      Description              Rate         Date        Terms        Liens      Mortgages       12/31/1999       Interest   (1)
------------------------    -----------  ----------- ------------ ------------ -------------  ---------------- -----------------
<S>                          <C>         <C>             <C>          <C>          <C>             <C>              <C>
Residential
   First Mortgage             10.625%    6/01/2027       N/A          N/A          N/A               $ 68,164

Commercial
   First Mortgage            7.0% to     1/1/00 to       N/A          N/A          N/A             90,843,905       309,383
                              12.50%     1/01/2015
   Second Mortgage           7.5% to     11/1/00 to      N/A          N/A          N/A              7,435,824        62,227
                              12.25%     9/01/2008
   Third Mortgage            7.5% to     11/1/00 to      N/A          N/A          N/A              2,146,857        65,049
                              12.25%     5/01/2009
   Construction              7.0% to     10/1/00 to      N/A          N/A          N/A              5,715,330
                              8.75%      6/01/2006                                                -----------
Total Commercial                                                                                  106,141,916

All others              (2)    N/A          N/A          N/A          N/A          N/A              7,791,568

Total loans             (3)                                                                     $ 114,001,648
                                                                                                 ============


(1)  Delinquent is defined as ninety days or more past due.
(2)  This category includes all non-mortgage loans on the balance sheet.
(3)  No individual mortgage loan exceeded 3% of the total carrying
     value of mortgages.
</TABLE>


                                       52
<PAGE>


Reconciliation of Loans on the Balance Sheet

<TABLE>
<CAPTION>
                                             For the Years Ended December 31,
                                           1999                1998               1997

<S>                                     <C>               <C>               <C>
Loans on balance sheet,
   Beginning of period                  $116,381,936      $131,035,245      $ 71,456,347 (1)
   Additions during the period
      Loans made                          76,152,875        79,143,575        53,759,887
      Loans purchased                           --                --          49,647,182

   Deductions during period
      Principal collected on loans        78,533,163        93,795,015        43,821,836
      Principal charged off                     --               1,869             6,335
                                        ------------      ------------      ------------

Loans on balance sheet,
   end of period                        $114,001,648      $116,381,936      $131,035,245
                                        ============      ============      ============

(1) Loans on balance sheet include loan-backed certificates where applicable.

</TABLE>





                                       53
<PAGE>


                                    Part III

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

                  Not Applicable.

Item 10. Directors and Executive Officers of the Registrant

     Pursuant  to  Instruction  G, the  information  required by this item (with
respect to directors of the registrant) is incorporated herein by reference from
the Company's  definitive  Proxy Statement  involving the election of directors.
The  information  with  respect to  executive  officers  of the Company has been
included in Part I hereof. The definitive proxy statement will be filed with the
Securities and Exchange Commission within 120 days after the Company's year end.

Item 11. Executive Compensation

     Pursuant  to  Instruction  G,  information  required by this item is hereby
incorporated by reference from the Company's  definitive proxy statement for its
2000 annual  meeting of  shareholders  under the caption  "Board of  Directors -
Director Compensation" and "Executive Compensation";  provided however, that the
subsection entitled "Executive  Compensation - Report on Executive Compensation"
shall not be deemed to be incorporated herein by reference. The definitive proxy
statement will be filed with the Securities and Exchange  Commission  within 120
days after the Company's year end.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     Pursuant  to  Instruction  G,  information  required by this item is hereby
incorporated by reference from the Company's  definitive proxy statement for its
2000 annual meeting of shareholders under the caption "Principal  Shareholders".
The  definitive  proxy  statement will be filed with the Securities and Exchange
Commission within 120 days after the Company's year end.

Item 13. Certain Relationships and Related Transactions

     Pursuant  to  Instruction  G,  information  required by this item is hereby
incorporated by reference from the Company's  definitive proxy statement for its
2000  annual  meeting  of   shareholders   under  the  caption   "Related  Party
Transactions".  The definitive proxy statement will be filed with the Securities
and Exchange Commission within 120 days after the Company's year end.



                                       54
<PAGE>

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

     1.   Exhibits

          Reference is made to the separate  exhibit index contained on page I-1
          through I-2 hereof.

     2.   Financial Statements and Financial Statement Schedules

          Reference  is  made to the  separate  index  in Item 8 of this  Annual
          Report on Form 10-K  with  respect  to the  financial  statements  and
          schedules filed herewith.

     3.   Reports on Form 8-K

          None.




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<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  registrant  caused  this  report to be  signed on its  behalf by the
undersigned, thereunto duly authorized on March 29, 2000.

                                     BANDO McGLOCKLIN CAPITAL CORPORATION

                                     By:  /s/ George R. Schonath
                                          George R. Schonath,
                                          President and Chief Executive Officer

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities indicated on March 29, 2000.

          Signature                                          Title


/s/   George R. Schonath               President and Chief Executive Officer
George R. Schonath                     (Principal Financial Officer)


/s/   Susan J. Hauke                   Vice President Finance
Susan J. Hauke                         (Principal Accounting Officer)


/s/   Salvatore L. Bando               Director
Salvatore L. Bando


/s/   Robert A. Cooper                 Director
Robert A. Cooper


/s/   Peter A. Fischer                 Director
Peter A. Fischer


/s/   David A. Geraldson, Sr.          Director
David A. Geraldson, Sr.


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<PAGE>

                                INDEX TO EXHIBITS

Exhibit No.                     Exhibit Description

3.1       Articles of  Incorporation,  as amended  (incorporated by reference to
          Exhibit 3.1 to the Company's Form 10-Q for the quarterly  period ended
          March 31, 1997).

3.2       By-laws  (incorporated  by reference  to Exhibit 3.2 to the  Company's
          Form 10-Q for the quarterly period ended March 31, 1997).

4.1       Instruments  defining the Rights of Security Holders  (incorporated by
          reference to Exhibit 3.1 to the Company's  Form 10-Q for the quarterly
          period ended March 31, 1999).

4.2       Amended and Restated  Credit  Agreement  dated April 30, 1999,  by and
          among Bando  McGlocklin Small Business  Lending  Corporation,  Firstar
          Bank Milwaukee, N.A., as agent, and the Financial Institutions parties
          thereto  (incorporated  by reference  to Exhibit 4.1 to the  Company's
          Form 10-Q for the quarterly period ended March 31, 1999).

4.3       Credit  Agreement  dated  April 30,  1998,  between  Bando  McGlocklin
          Captial Corporation and Firstar Bank Milwaukee, N.A., (incorporated by
          reference to Exhibit 4.5 to the Company's  Form 10-Q for the quarterly
          period ended June 30, 1998).

4.4       First Amendment to Credit  Agreement  dated June 16, 1998,  amends and
          supplements  that  certain  Credit  Agreement  dated  April 30,  1998,
          between  Bando  McGlocklin   Capital   Corporation  and  Firstar  Bank
          Milwaukee,  N.A.,  (incorporated  by  reference  to Exhibit 4.6 to the
          Company's Form 10-Q for the quarterly period ended June 30, 1998).

4.5       Second Amendment to Credit Agreement dated April 30, 1999,  amends and
          supplements  that  certain  Credit  Agreement  dated  April 30,  1998,
          between  Bando  McGlocklin   Capital   Corporation  and  Firstar  Bank
          Milwaukee,  N.A.,  (incorporated  by  reference  to Exhibit 4.6 to the
          Company's Form 10-Q for the quarterly period ended June 30, 1999).

4.6       Loan Participation Certificate and Agreement dated May 1, 1997, by and
          between  Bando  McGlocklin  Small  Business  Lending  Corporation  and
          Security  Bank SSB  (incorporated  by  reference  to Exhibit 10 to the
          Company's Form 10-Q for the quarterly period ended June 30, 1997).

4.7       Master Note  Purchase  Agreement  dated  January 1, 1997,  between the
          State of Wisconsin  Investment Board,  Bando McGlocklin Small Business
          Lending   Corporation  and  Bando   McGlocklin   Capital   Corporation
          (incorporated  by reference to Exhibit 4.7 to the Company's  Form 10-Q
          for the quarterly period ended March 31, 1997).

4.8       First Amendment to Master Note Purchase  Agreement dated June 1, 1998,
          by and among the State of Wisconsin Investment Board, Bando McGlocklin
          Small  Business  Lending  Corporation  and  Bando  McGlocklin  Capital
          Corporation (incorporated by reference to Exhibit 4.2 to the Company's
          Form 10-Q for the quarterly period ended June 30, 1998).

4.9       Third Amended and Restated Credit Agreement dated June 1, 1998, by and
          among State of Wisconsin  Investment  Board,  Bando  McGlocklin  Small
          Business Lending  Corporation and Bando McGlocklin Capital Corporation
          (incorporated  by reference to Exhibit 4.1 to the Company's  Form 10-Q
          for the quarterly period ended June 30, 1998).


                                       57
<PAGE>
Exhibit No.                     Exhibit Description

4.10      Agreement  and Plan of Merger dated April 1, 1998,  by and among Bando
          McGlocklin  Small Business  Lending  Corporation and Bando  McGlocklin
          Real Estate  Investment  Corporation  (incorporated  by  reference  to
          Exhibit 2.1 to the Company's Form 10-Q for the quarterly  period ended
          September 30, 1998).

4.11      Agreement between Schonath, Kestly, Bando & McGlocklin, Inc. and Bando
          McGlocklin  Small  Business  Lending  Corporation  dated July 13, 1998
          (incorporated  by reference to Exhibit 2.2 to the Company's  Form 10-Q
          for the quarterly period ended September 30, 1998).

10.1      Bando McGlocklin Capital  Corporation 1990 Incentive Stock Option Plan
          (incorporated  by reference to Exhibit 7.4 to the  Company's  Form N-5
          Registration Statement, Registration No. 33-51406).

10.2      Bando McGlocklin Capital  Corporation 1993 Incentive Stock Option Plan
          (incorporated   by  reference  to  Exhibit  (i)(6)  to  the  Company's
          Pre-Effective  Amendment  No.  1 to Form N-2  Registration  Statement,
          Registration No. 33-66258).

10.3      Bando   McGlocklin   Capital   Corporation   1997  Stock  Option  Plan
          (incorporated  by reference to Exhibit 10.4 to the Company's Form 10-Q
          for the quarterly period ended March 31, 1997).

10.4      Management  Services  and  Allocation  of  Expenses  Agreement,  dated
          September 2, 1997, by and between  InvestorsBank  and Bando McGlocklin
          Capital Corporation  (incorporated by reference to Exhibit 10.5 to the
          Company's Form 10-K for the fiscal year ended December 31, 1997).

21        List of subsidiaries of Bando McGlocklin Capital Corporation.

27        Financial Data Schedule (with EDGAR filing only).


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