<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

/X/      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

         FOR THE FISCAL YEAR ENDED JUNE 30, 2000

                                       OR

/ /      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
         FOR THE TRANSITION PERIOD FROM

         _______________________ TO _______________________

COMMISSION FILE NUMBER

                          SPECTRUM BANCORPORATION, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Iowa                                     42 0867112
-------------------------------------       -----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

10834 Old Mill Road, Suite One, Omaha, NE                 68154-2648
-------------------------------------------------------------------------------
 (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:       (402) 333-8330
                                                          --------------

           Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class                   Name of Each Exchange on Which Registered
-------------------                   -----------------------------------------
10.00% Cumulative Trust Preferred     American Stock Exchange
Securities of Spectrum
Capital Trust I

           Securities Registered Pursuant to Section 12(g) of the Act:

                                      NONE
                                      ----
                                (Title of class)

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

Indicate by 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
Form10-K: [X]

All voting and non-voting common equity is held by affiliates of the registrant.


                                      -1-
<PAGE>

At September 18, 2000, there were 79,068 shares of registrant's common stock
outstanding.

PART I

ITEM 1.  BUSINESS

THE COMPANY

Spectrum, a multi-bank holding company, offers full service community banking
through 17 banking locations in South Dakota, ten banking locations in Iowa and
two banking locations in northern Missouri. Spectrum was acquired by its
Chairman, Deryl F. Hamann, in 1971. At that time it had a single location in
Leon, Iowa. In 1974, Mr. Hamann acquired the parent company of F&M Bank,
Watertown, South Dakota. The parent was merged into Spectrum on May 31, 1999.
Acquisitions of other banks and savings institutions had been made by both
holding companies in the years preceding the merger on both strategic and
opportunistic bases. Expansion also occurred through acquisition of offices of
failed financial institutions and de novo branching. See "Subsequent Events" and
"Acquisitions" for additional information.

THE BANKS

Spectrum has five direct subsidiaries: F&M Bank, Watertown, South Dakota;
Rushmore Bank & Trust, Rapid City, South Dakota; Citizens Bank, Mount Ayr, Iowa;
Citizens Bank of Princeton, Princeton, Missouri; and Citizens Bank, Carlisle,
Iowa. Each subsidiary bank is chartered by the state banking authorities of the
state in which its headquarters is located. See "Supervision and Regulation."
The following table sets forth information regarding Spectrum's banks as of June
30, 2000:

<TABLE>
<CAPTION>
                                      Common Stock
                                        Ownership              Assets            Net Loans           Net Deposits
                                      ------------             ------            ---------           ------------
                                                                 (dollars in thousands)
<S>                                         <C>                <C>                   <C>                 <C>
F&M Bank                                    97.9%              $346,596              $255,278            $280,413
Rushmore Bank & Trust                       90.0%               221,878               177,792             180,629
Citizens Bank, Mount Ayr                   100.0%               101,371                76,859              83,806
Citizens Bank of Princeton                 100.0%                35,887                28,662              31,761
Citizens Bank, Carlisle                     95.2%                73,190                36,368              62,369
</TABLE>

SPECTRUM BANC SERVICE CORPORATION

As of June 30, 2000 the subsidiary banks owned 89% of Spectrum Banc Service
Corporation, which provides data processing services to its bank owners. The
remaining 11% was owned by Citizens Bank, Chariton, Iowa, an affiliated bank of
Spectrum, which merged into Citizens Bank, Mt. Ayr on August 7, 2000. See
"Subsequent Events" for additional information.

STRATEGIES  See "Certain Relationships and Related Transactions."

Growth. Spectrum intends to grow within its existing markets, to branch into or
acquire financial institutions in existing markets, and to branch into or
acquire financial institutions in other markets consistent with its capital
requirements and management abilities.

Spectrum seeks opportunities to acquire banks at acceptable prices. Spectrum's
operating strategy is to provide high quality community banking services to its
customers and increase


                                      -2-
<PAGE>

market share through solicitation of new business, repeat business and referrals
from customers, and promotional strategies.

Branch Expansion. F&M Bank has purchased property for further expansion in Sioux
Falls, South Dakota. Should Spectrum be unable to acquire existing banks or
other financial institutions at acceptable prices, it will continue to seek
expansion through new branches or possibly by chartering new banks.

LOANS

Spectrum has the ability to provide a broad range of commercial and retail
lending services. Rushmore Bank & Trust does not offer agricultural loans. The
other banking subsidiaries offer agricultural loans as well as other commercial,
retail and real estate loans. The two South Dakota banks have credit policies
tailored to their respective markets. Spectrum's Iowa and Missouri banks have
substantially uniform credit policies. All of the credit policies contain
underwriting and loan administration criteria, including levels of loan
commitment, loan types, credit criteria, concentration limits, loan
administration, loan review and grading and related matters.

The Chief Credit Officer of the holding company manages Spectrum's external loan
review program. The Chief Credit Officer contracts with an independent firm to
perform external loan reviews for each of the subsidiary banks. The scope and
frequency of the reviews are determined based on asset quality results of
previous reviews and regulatory safety and soundness examinations. Spectrum is
able to facilitate substantial credit requests, or augment loan demand, through
the purchase and sale of participations among its subsidiary banks, as well as
other affiliated and unaffiliated banks or other financial institutions. As of
June 30, 2000, approximately 94% of all loans and leases were to customers
within Spectrum's market area.

Real Estate Mortgage Loans. These loans include various types of loans for which
Spectrum holds real property as collateral. Such loans often mature in one year
or less and typically have adjustable interest rates. However, Spectrum is
experiencing increasing demand for fixed rate loans for terms longer than one
year. The primary risks of real estate mortgage loans include the borrower's
inability to pay and deterioration in value of real estate that is held as
collateral.

Real estate mortgage loans include commercial and residential real estate
construction loans. Real estate construction loans are principally made to
builders to construct business buildings or single and multi-family residences.
These loans typically have maturities of 6 to 12 months and adjustable interest
rates, and are subject to origination fees. Terms may vary depending upon many
factors, including location, type of project and financial condition of the
builder.

Commercial and Agricultural Loans. These loans consist primarily of loans to
business for various purposes, including revolving lines of credit and equipment
financing. The loans secured by collateral other than real estate or equipment
generally mature within one year, have adjustable interest rates, and are
secured by inventory, accounts receivable, livestock, crops, machinery and other
commercial or agricultural project assets. Revolving lines of credit generally
are for business purposes and generally mature in twelve months or less.

Loans to Individuals. Loans to individuals, which are not secured by real
estate, generally have terms of two to six years and bear interest at fixed
rates. These loans usually are secured by motor vehicles, investment securities,
or other personal assets, and in some instances are unsecured.


                                      -3-
<PAGE>

Citizens Bank, Mount Ayr, and Citizens Bank of Princeton have weekly joint loan
committee meetings with an affiliated bank. Rushmore Bank & Trust's loan
committee meets weekly. F&M Bank has three regional loan committees that meet
weekly. Citizens Bank, Carlisle has a Directors Loan Committee meeting as
needed.

Interest rates charged on loans vary with the degree of risk, maturity,
underwriting and servicing costs, loan amount and extent of other banking
relationships maintained with customers and are further subject to competitive
pressures, prevailing market interest rates, availability of funds and
government regulations.

In the ordinary course of business, Spectrum's banks issue letters of credit.
See Note 17 to Consolidated Financial Statements. Spectrum's banks apply the
same credit standards to those commitments as they use in direct lending
activities and have included these commitments in their lending risk
evaluations. Spectrum's exposure to credit loss under letters of credit is
represented by the amount of those commitments.

Under applicable federal and state law, permissible loans to one borrower after
June 30, 2000, were limited to $4,078,822 for F&M Bank, $3,191,878 for Rushmore
Bank & Trust, $1,349,250 for Citizens Bank, Mount Ayr, $862,891 for Citizens
Bank of Princeton and $1,575,000 for Citizens, Carlisle. Certain exceptions,
depending on the laws of the different states in which the Banks operate,
increase the loan limit to one borrower for certain purposes.

COMPETITION

The banking and financial services industry is highly competitive and undergoing
rapid consolidation. Within the market area of Spectrum's banks, numerous
commercial banks, savings and loan associations, mortgage brokers, finance
companies, credit unions, investment firms and private lenders compete with the
banks for deposits and loans. Many of these competitors have significantly
greater resources than Spectrum, including higher lending limits and a wider
range of financial, technical and marketing resources.

EMPLOYEES

As of June 30, 2000, Spectrum had approximately 273 full-time equivalent
employees. Management considers its relationship with its employees to be very
good.

SUPERVISION AND REGULATION

Spectrum and its subsidiary banks are extensively regulated under federal and
state laws. These laws and regulations are primarily intended to protect
depositors and the deposit insurance fund of the Federal Deposit Insurance
Corporation, not stockholders of Spectrum. The following information is
qualified in its entirety by reference to the particular statutory and
regulatory provisions. Any change in applicable laws, regulations or regulatory
policies may have a material effect on the business, operations and prospects of
Spectrum and its banks. Spectrum is unable to predict the nature or extent of
the effects that fiscal or monetary policies, economic controls or new federal
or state legislation may have on its business and earnings in the future.


                                      -4-
<PAGE>

SPECTRUM

General. Spectrum is a bank holding company registered under the Bank Holding
Company Act of 1956 and is subject to regulation, supervision and examination by
the Federal Reserve. Spectrum is required to file an annual report and the other
reports as the Federal Reserve now requires or may require.

Acquisitions. As a bank holding company, Spectrum is required to obtain the
prior approval of the Federal Reserve before acquiring direct or indirect
ownership or control of more than 5% of the voting shares of a bank or bank
holding company. The Federal Reserve will not approve any acquisition, merger or
consolidation that would have a substantial anti-competitive result, unless the
anti-competitive effects of the proposed transaction are outweighed by a greater
public interest in meeting the needs and convenience of the public. The Federal
Reserve also considers managerial, capital and other financial factors in acting
on acquisition or merger applications.

Permissible Activities. Subject to limited exceptions, a bank holding company
may not engage in, or acquire direct or indirect control of more than 5% of the
voting shares of any company engaged in a non-banking activity, unless this
activity has been determined by the Federal Reserve to be closely related to
banking or managing banks. The Federal Reserve has identified specific
non-banking activities in which a bank holding company may engage with notice
to, or prior approval by, the Federal Reserve.

Capital Adequacy. The Federal Reserve monitors the regulatory capital adequacy
of bank holding companies. As discussed below, Spectrum's banks are also subject
to the regulatory capital adequacy requirements of the Federal Deposit Insurance
Corporation and South Dakota, Iowa and Missouri regulations, as applicable. The
Federal Reserve uses a combination of risk-based guidelines and leverage ratios
to evaluate the regulatory capital adequacy of Spectrum.

The Federal Reserve has adopted a system using risk-based capital adequacy
guidelines to evaluate the regulatory capital adequacy of bank holding companies
on a consolidated basis. Under the risk-based capital guidelines, different
categories of assets are assigned different risk weights, based generally on the
perceived credit risk of the asset. These risk weights are multiplied by
corresponding asset balances to determine a risk-weighted asset base. Some off
balance sheet items, such as loan commitments in excess of one year, mortgage
loans sold with recourse and letters of credit, are added to the risk-weighted
asset base by converting them to a balance sheet equivalent and assigning to
them the appropriate risk weight. For purposes of the regulatory risk-based
capital guidelines, total capital is defined as the sum of core and
supplementary capital elements, with supplementary capital being limited to 100%
of core capital. For bank holding companies, core capital, also known as Tier I
capital, generally includes common stockholders' equity, trust preferred
securities and minority interests in consolidated subsidiaries, less the
unamortized balance of intangible assets. No more than 25% of core capital may
be comprised of cumulative preferred stock and/or trust preferred stock.
Supplementary capital, also known as Tier 2 capital, generally includes certain
forms of perpetual preferred stock and/or trust preferred stock, as well as
maturing capital instruments and the allowance for loan losses limited to 1.25%
of risk-weighted assets. The regulatory guidelines require a minimum ratio of
total capital to risk-weighted assets of 8% to be adequately capitalized, of
which at least 4% should be in the form of core capital.

At June 30, 2000, Spectrum's core capital was $54,469,000.

In addition to the risk-based capital guidelines, the Federal Reserve and the
Federal Deposit


                                      -5-
<PAGE>

lnsurance Corporation use a leverage ratio as an additional tool to evaluate the
capital adequacy of banks and bank holding companies. The leverage ratio is
defined to be a company's core capital divided by its average tangible assets.
Based upon the current capital status of Spectrum, the applicable minimum
required leverage ratio is 4%.

The table below presents ratios of (I) total capital to risk-weighted assets,
(2) core capital to risk-weighted assets and (3) core capital to tangible
assets, at June 30, 2000:

<TABLE>
<CAPTION>

Ratio                                                                                   At June 30, 2000
-----                                                                                   ----------------
                                                                                                   Minimum
                                                                                       Actual      Required
                                                                                       ------      --------
<S>                                                                                    <C>          <C>
      Total Capital to Risk-Weighted Assets...........................................11.61%         8.00%
      Core Capital (Tier I) to Risk-Weighted Assets....................................9.38%         4.00%
      Core Capital (Tier I) to Average Assets..........................................7.03%         4.00%
</TABLE>

Failure to meet the regulatory capital guidelines may result in the initiation
by the Federal Reserve of appropriate supervisory or enforcement actions. All
three of Spectrum's capital ratios were above the minimum required as of June
30, 2000.

THE BANKS

General. Spectrum owns five banks: F & M Bank, Watertown, South Dakota, a South
Dakota banking corporation with 12 banking locations; Rushmore Bank & Trust Co.,
Rapid City, South Dakota, a South Dakota banking corporation with five banking
locations; Citizens Bank, Mount Ayr, Iowa, an Iowa banking corporation with
seven banking locations; Citizens Bank of Princeton, Princeton, Missouri, a
Missouri banking corporation with two banking locations; and Citizens, Carlisle,
an Iowa corporation with three banking locations. Subject to regulatory limits,
the deposits of Spectrum's banks are insured by the Federal Deposit Insurance
Corporation, and the banks are subject to supervision and regulation by the
Federal Deposit Insurance Corporation. In addition, the South Dakota banks are
regulated by the South Dakota Division of Banking, the Iowa banks are regulated
by the Iowa Division of Banking, and the Missouri bank is regulated by the
Missouri Division of Finance.

Permissible Activities. No state bank may engage in any activity not permitted
for national banks, unless the institution complies with applicable capital
requirements and the Federal Deposit Insurance Corporation determines that the
activity poses no significant risk to the Bank Insurance Fund. None of
Spectrum's banks is presently involved in the types of activities covered by
this limitation.

Community Reinvestment Act. Enacted in 1977, the federal Community Reinvestment
Act has become important to financial institutions, including their holding
companies. The Community Reinvestment Act currently allows regulators to turn
down an applicant seeking to make an acquisition or establish a branch unless it
has performed satisfactorily under the Community Reinvestment Act. Satisfactory
performance means meeting adequately the credit needs of the communities the
applicant serves. The applicable federal regulators regularly conduct Community
Reinvestment Act examinations to assess the performance of financial
institutions. During their last examinations, ratings of satisfactory or
outstanding were received by each of Spectrum's banks. As a result, management
believes that the banks' performance under the Community Reinvestment Act will
not impede regulatory approvals of any proposed acquisitions or branching
opportunities.


                                      -6-
<PAGE>

Dividend Restrictions. Dividends paid by Spectrum's banks provide substantially
all of the operating and investing cash flow of Spectrum. Spectrum's banks are
subject to legal limitations on the frequency and amount of dividends that may
be paid to Spectrum. Under South Dakota law, the approval of the principal
regulator is required prior to the declaration of any dividend by a bank if the
total of all dividends declared in any calendar year exceeds the total of its
net profits of that year to date combined with its retained net profits for the
preceding two years. Under Iowa law, a bank may declare and pay dividends only
out of undivided profits and only if not restricted by the principal regulator.
The Iowa principal regulator requires that Iowa state banks maintain an adjusted
equity capital ratio of not less than 6.5% of adjusted assets plus a fully
funded allowance for loan losses unless a lower ratio is approved by the
principal regulator. An Iowa state bank operating below the minimum requirement
would be subject to immediate dividend restriction, a request for immediate
capital injection and/or a possible cease and desist order. Under Missouri law,
a bank may not pay dividends that would impair capital. The Missouri principal
regulator generally requires that Missouri state banks maintain equity capital
of not less than 6% of assets. In addition, either the applicable state banking
regulator or the Federal Deposit Insurance Corporation has the power to prohibit
Spectrum's banks from paying dividends if such payments would constitute unsafe
or unsound banking practices or cause the bank to be undercapitalized.

Examinations. Spectrum's banks are examined from time to time by the Federal
Deposit Insurance Corporation. Based upon an evaluation, the examining regulator
may revalue the assets of an insured institution and require that it establish
specific reserves to compensate for the difference between the value determined
by the regulator and the book value of Spectrum's assets. The state bank
regulators also conduct examinations of state-chartered banks. State bank
regulators may accept the results of a federal examination in lieu of conducting
an independent examination. South Dakota, Iowa and Missouri regulators have the
authority to revalue the assets of a state-chartered institution and require it
to establish reserves.

Capital Adequacy. The Federal Deposit Insurance Corporation has adopted
regulations establishing minimum requirements for the capital adequacy of
insured institutions. The requirements address both risk-based capital and
leverage capital, with risk-based assets and core and supplementary capital
being determined in basically the same manner as described above for bank
holding companies. The Federal Deposit Insurance Corporation may establish
higher minimum requirements if, for example, a bank has previously received
special attention or has a high susceptibility to interest rate risk.

The Federal Deposit Insurance Corporation risk-based capital guidelines require
state non-member banks to have a ratio of core capital to total risk-weighted
assets of 4% and a ratio of total capital to total risk-weighted assets of 8%.

The Federal Deposit Insurance Corporation leverage guidelines require that state
banks maintain core capital of no less than 3% and up to 5% of total tangible
assets. The applicable guideline for Spectrum's banks is estimated to be 4%.
Banks with regulatory capital ratios below the required minimum are subject to
administrative actions, including the termination of deposit insurance upon
notice and hearing, or a temporary suspension of insurance without a hearing in
the event the institution has no tangible capital.

The table below presents the regulatory capital ratios of the Spectrum
subsidiary banks at June 30, 2000:


                                      -7-
<PAGE>

<TABLE>
<CAPTION>
                                                        At June 30, 2000
                                       ----------------------------------------------------


                                                      Rushmore Bank &     Citizens Bank,
              Ratio                    F&M Bank            Trust            Mount AYR
              -----                    --------       ---------------     --------------
<S>                                    <C>            <C>                 <C>
Total capital to risk-
  weighted assets.........               11.46%             10.92%              11.24%
Core capital (Tier 1)  to
  risk-weighted assets...                10.26%              9.75%               9.99%
Core capital (Tier I) to
  average asset.......                    7.84%              8.14%               7.54%

                                                         At June 30, 2000
                                       ----------------------------------------------------

                                       Citizens
                                        Bank of        Citizens Bank,
              Ratio                    Princeton          Carlisle       Minimum Required
              -----                    --------       ---------------     --------------
Total capital to risk-
  weighted assets.........               12.59%             12.90%               8.00%
Core capital (Tier I) to
  risk-weighted assets                   11.33%             11.65%               4.00%
Core capital (Tier I) to
  average assets..........                8.74%              6.94%               4.00%
</TABLE>

Banking regulators have adopted regulations that define five capital
levels: well capitalized, adequately capitalized, undercapitalized, severely
undercapitalized and critically undercapitalized. An institution is critically
undercapitalized if it has a tangible equity to total assets ratio that is equal
to or less than 2%. An institution is well capitalized if it has a total
risk-based capital ratio of 10% or greater, core risk-based capital ratio of 6%
or greater, and a core capital leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement, capital directive, or
prompt corrective action directive to meet and maintain a specific capital level
for any capital measure. An institution is adequately capitalized if it has a
total risk-based capital ratio of not less than 8%, a core risk-based capital
ratio not less than 4% and a leverage ratio of not less than 4%. Under these
regulations, as of June 30, 2000, all of Spectrum's subsidiary banks were well
capitalized.

The Federal Deposit Insurance Corporation Improvement Act requires the
federal banking regulators to take prompt corrective action to resolve the
problems of depository institutions, including capital-deficient institutions.
In addition to requiring the submission of a capital restoration plan, Federal
Deposit Insurance Corporation Improvement Act contains broad restrictions on
activities of institutions which are less than adequately capitalized, involving
asset growth, acquisitions, branch establishment, and expansion into new lines
of business. With limited exceptions, an insured depository institution is
prohibited from making capital distributions, including dividends, and is
prohibited from paying management fees to control persons if the institution
would be undercapitalized after any distribution or payment.

As an institution's capital decreases, the powers of the federal regulators
become greater. A significantly undercapitalized institution is subject to
mandated capital raising activities, restrictions on interest rates paid and
transactions with affiliates, removal of management, and other restrictions. The
regulators have limited discretion in dealing with a critically undercapitalized
institution and are virtually required to appoint a receiver or conservator if
the capital deficiency is not corrected promptly.


                                      -8-
<PAGE>

Real Estate Lending Evaluations. The federal regulators have adopted uniform
standards for evaluations of loans secured by real estate or made to finance
improvements to real estate. Banks are required to establish and maintain
written internal real estate lending policies consistent with safe and sound
banking practices and appropriate to the size of the institution and the nature
and scope of its operations. The regulations establish loan to value ratio
limitations on real estate loans, which generally are equal to or less than the
loan to value limitations established by Spectrum's banks.

Deposit Insurance Premiums. The assessment schedule for banks ranges from 0 to
27 cents per $100 of deposits subject to Bank Insurance Fund assessments, based
on each institution's risk classification. The subsidiary banks' insured
deposits are subject to assessment payable to the Bank Insurance Fund. An
institution's risk classification is based on an assignment of the institution
by the Federal Deposit Insurance Corporation to one of three capital groups and
to one of three supervisory subgroups. The capital groups are well capitalized,
adequately capitalized and undercapitalized. The three supervisory subgroups are
Group A, for financially solid institutions with only a few minor weaknesses,
Group B, for those institutions with weaknesses which, if uncorrected could
cause substantial deterioration of the institution and increase the risk to the
deposit insurance fund, and Group C, for those institutions with a substantial
probability of loss to the fund absent effective corrective action. All five
Spectrum subsidiary banks are rated "one" (well capitalized) and "Group A"
(financially solid institutions with only a few minor weaknesses) for these
purposes.

Interstate Banking Legislation. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, which became effective September 1995, has eliminated
many of the historical barriers to the acquisition of banks by out-of-state bank
holding companies. This law facilitates the interstate expansion and
consolidation of banking organizations by permitting: (I) bank holding companies
that are adequately capitalized and managed to acquire banks located in states
outside their home states regardless of whether acquisitions are authorized
under the laws of the host state; (2) the interstate merger of banks after June
1, 1997, subject to the right of individual states either to pass legislation
providing for earlier effectiveness of mergers or to opt out of this authority
prior to that date; (3) banks to establish new branches on an interstate basis
provided that this action is specifically authorized by the law of the host
state; (4) foreign banks to establish, with approval of the appropriate
regulators in the United States, branches outside their home states to the same
extent that national or state banks located in that state would be authorized to
do so; and (5) banks to receive deposits, renew time deposits, close loans,
service loans and receive payments on loans and other obligations as agent for
any bank or thrift affiliate, whether the affiliate is located in the same or
different state. Spectrum's subsidiary banks do not currently have any plans to
take any actions permitted by this law.

The passage of the Gramm-Leach-Bliley Act (GLBA) during the fourth quarter of
1999 permits qualified bank holding companies to elect to become financial
holding companies and to engage in expanded financial activities. The effective
date allowing election to a Financial Holding Company was March 11, 2000. As of
June 30, 2000 Spectrum Bancorp had not elected to convert but reserves this
right under the new rule.

CHANGING REGULATORY STRUCTURE

The laws and regulations affecting banks and bank holding companies are in a
state of flux. The rules and the regulatory agencies in this area have changed
significantly over recent years, and there is reason to expect that similar
changes will continue in the future. It is not possible to predict the outcome
of these changes.


                                      -9-
<PAGE>

One of the major additional burdens imposed on the banking industry is the
increased authority of federal agencies to regulate the activities of federal
and state banks and their holding companies. The Federal Reserve, the
Comptroller of the Currency and the Federal Deposit Insurance Corporation have
extensive authority to police unsafe or unsound practices and violations of
applicable laws and regulations by depository institutions and their holding
companies. These agencies can assess civil money penalties and other laws have
expanded the agencies' authority in recent years, and the agencies have not yet
fully tested the limits of their powers. In addition, the South Dakota Division
of Banking, Iowa Division of Banking and Missouri Division of Finance possess
broad enforcement powers to address violations of their banking laws by banks
chartered in their respective state.

ECONOMIC ENVIRONMENT

The policies of regulatory authorities, including the monetary policy of the
Federal Reserve, have a significant effect on the operating results of bank
holding companies and their subsidiaries. Among the means available to the
Federal Reserve to affect the money supply are open market operations in U.S.
Government securities, changes in the discount rate on member bank borrowings,
and changes in reserve requirements against member bank deposits. These means
are used in varying combinations to influence overall growth and distribution of
bank loans, investments and deposits, and their use may affect interest rates
charged on loans or paid on deposits.

The Federal Reserve's monetary policies have materially affected the operating
results of commercial banks in the past and are expected to continue to do so in
the future. The nature of future monetary policies and the effect of these
policies on the business and earnings of Spectrum and its subsidiaries cannot be
predicted.


ITEM 2.  PROPERTIES

The offices of Spectrum are located in a leased one-story building at 10834 Old
Mill Road, Suite One, Omaha, Nebraska 68154. The table below presents property
information concerning the main office and branches of Spectrum's subsidiary
banks.

<TABLE>
<CAPTION>
                                                                                                      Approximate Square
Name of Bank and Address of Branch              Year Opened              Type of Interest             Footage of Facility
----------------------------------              -----------              ----------------             -------------------
<S>                                              <C>         <C>                                      <C>
F&M Bank Main Office                             1935        Land and building owned by F&M Bank          10,078
35 1st Ave. NE
Watertown, SD  57201

F&M Bank Watertown Branch                        1980        Land and building owned by F&M Bank          3,000
Hwys. 212 & 81
Watertown, SD  57201

F&M Bank Garden City Branch                      1946        Land and building owned by F&M Bank          1,250
Main Street
Garden City, SD  57236


                                      -10-
<PAGE>

F&M Bank Rosholt Branch                          1984        Land and building owned by F&M Bank          3,500
Main Street
Rosholt, SD  57260

F&M Bank McIntosh Branch                         1978        Land and building owned by F&M Bank          1,800
217 Main St.
McIntosh, SD  57641

F&M Bank Morristown Branch                       1978        Land and building owned by F&M Bank          1,250
302 Main St.
Morristown, SD  57645

F&M Bank Madison Branch                          1996        Land and building owned by F&M Bank          2,500
301 N. Egan Ave
Madison, SD  57042

F&M Bank Aberdeen Branch                         1996        Land and building owned by F&M Bank          4,200
517 So. Lincoln St.
Aberdeen, SD  57402

F&M Bank Sioux Falls Branch                      1996        Land and building owned by F&M Bank          2,500
1901 W. 41st St.
Sioux Falls, SD  57105

F&M Bank Webster Branch                          1996        Land and building owned by F&M Bank          1,800
1301 Main St.
Webster, SD  57274

F&M Bank Chamberlain Branch                      1996        Leased                                       1,250
111 W. Lawler
Chamberlain, SD  57325

F&M Bank Gettysburg Branch                       1996        Land and building owned by F&M Bank          1,250
108 S. Exene
Gettysburg, SD  57442

Rushmore Bank & Trust Main Office                1952        Land and building owned by                   12,419
14 St. Joseph St.                                            Rushmore Bank & Trust
Rapid City, SD  57701

Rushmore Bank & Trust
South Canyon Branch                              1974        Land and building owned by                   3,798
3510 Sturgis Rd.                                             Rushmore Bank & Trust
Rapid City, SD  57702


                                      -11-
<PAGE>

Rushmore Bank & Trust
Spearfish Branch                                 1999        Land and building owned by                   3,720
526 N. Main St.                                              Rushmore Bank & Trust
Spearfish, SD  57785

Rushmore Bank & Trust                            1997        Leased                                        500
FTC West Branch (grocery store)
751 Mountain View Rd.
Rapid City, SD  57702

Rushmore Bank & Trust                            1999        Leased                                        500
FTC East Branch (grocery store)
1516 E. St. Patrick St.
Rapid City, SD  57701

Citizens Bank, Mount Ayr                         1998        Land and building owned by                   2,500
Main Office                                                  Citizens Bank, Mt. Ayr
100 E. South
Mount Ayr, IA 50174

Citizens Bank, Mount Ayr                         1999        Land and building owned by                   8,265
Leon Branch                                                  Citizens Bank, Mt. Ayr
111 No. Main
Leon, IA 50144

Citizens Bank, Mount Ayr                         1977        Land and building owned by                   1,200
Leon Drive-in Branch                                         Citizens Bank, Mt. Ayr
1008 W. First
Leon, IA 50144

Citizens Bank, Mount Ayr                         1937        Land and building owned by                    960
Grand River Branch                                           Citizens Bank, Mt. Ayr
126 Broadway
Grand River, IA 50108

Citizens Bank, Mount Ayr                         1993        Land and building owned by                   2,500
Hamburg Branch                                               Citizens Bank, Mt. Ayr
1220 Main
Hamburg, IA 51640

Citizens Bank, Mount Ayr                         1993        Land and building owned by                   1,200
Riverton Branch                                              Citizens Bank, Mt. Ayr
186 Summer St.
Riverton, IA 51650


                                      -12-
<PAGE>

Citizens Bank, Mount Ayr                         1994        Land and building owned by                   2,500
Osceola Branch                                               Citizens Bank, Mt. Ayr
610 W. McLane
Osceola, IA 50313

Citizens Bank of Princeton                       1988        Land and building owned by                   4,708
Main Office                                                  Citizens Bank of Princeton
US Highway 136 & 65
Princeton, MO 64673

Citizens Bank of Princeton                       1994        Land and building owned by                   1,450
Milan Branch                                                 Citizens Bank of Princeton
825 N. Pearl
Milan, MO 63556

Citizens Bank, Carlisle                          1938        Land and building owned by                   2,800
100 1st St                                                   Citizens Bank, Carlisle
Carlisle, IA 50047

Citizens Bank, Carlisle                          1974        Land and building owned by                    550
Highway 5 and Vine                                           Citizens Bank, Carlisle
Hartford, IA 50118

Citizens Bank, Carlisle                          1999        Land and building owned by                    960
206 Brown                                                    Citizens Bank, Carlisle
Runnells, IA 50237
</TABLE>

All of the leased properties are leased from unaffiliated third parties. The
grocery store leases are for five-year terms. The Chamberlain branch has a
month-to-month lease with a sixty-day termination clause.

ITEM 3.  LEGAL PROCEEDINGS

Spectrum and its subsidiaries are from time to time parties to various legal
actions arising in the normal course of business. Management believes that there
is no proceeding threatened or pending against Spectrum or any of its
subsidiaries which, if determined adversely, would have a material adverse
effect on the financial condition or results of operations of Spectrum.

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

No matter was submitted to a vote of security holders, through solicitation of
proxies or otherwise, during the quarter ending June 30, 2000.


                                      -13-
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION AND HOLDERS. There is no established public trading market
for any class of common equity of Spectrum or any of its subsidiaries.

On May 31,1999, the Company issued 61,063 shares of its common stock and 8,000
shares of its 10% non-voting non-cumulative perpetual preferred stock in the
merger of Spectrum Bancorporation, Inc. and Rushmore Financial Services, Inc.,
into the Company. Shares of common stock were issued to Deryl F. Hamann,
individually and as trustee of separate trusts for the benefit of his four
children and to three of his children as co-trustees of the Deryl F. Hamann
Irrevocable Qualified Marital Trust. Shares of preferred stock were issued to
Spectrum Financial Services, Inc., which is owned by Deryl F. Hamann
individually or as trustee for the benefit of his children. No underwriters were
involved in the transaction and the issuance was made in a transaction exempt
from the requirements of Section 5 of the Securities Act of 1933 pursuant to
Section 4(2) thereof. No cash proceeds were generated from the issuance. The
issued common and preferred shares replaced existing common and preferred shares
of the merged companies.

ITEM 6.  SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data for Spectrum
for each of the years in the five-year period ended June 30, 2000. The data set
forth below includes the accounts of American Federal Bank, fsb, Madison, South
Dakota from May 31, 1996, the date of acquisition of American Federal; the
accounts of First Savings and Loan Association of South Dakota, Aberdeen, South
Dakota, from March 27, 1998, the date of acquisition of accounts of First
Savings; and the accounts of Hartford-Carlisle Savings Bank in Carlisle, Iowa,
from January 14, 2000, the date of the acquisition of certain accounts of
Hartford-Carlisle Savings Bank. The completed acquisitions were accounted for
under the purchase method of accounting. The following table should be read in
conjunction with the consolidated financial statements of Spectrum and the notes
thereto appearing elsewhere in this report and the information contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The merger of Spectrum and its affiliated entities on May 31, 1999 has been
accounted for at historical cost in a manner similar to a pooling-of-interests
combination and, accordingly, the consolidated financial statements prior to the
combination have been restated to include the accounts and results of operations
of Spectrum. The Selected Consolidated Financial Data below take into account
this restatement.

<TABLE>
<CAPTION>
                                                                           At or for the Year Ended June 30,
                                                             -----------------------------------------------------------
                                                           2000          1999          1998            1997           1996
                                                           ----          ----          ----            ----           ----
                                                              (dollars in thousands, except per common share data)
<S>                                                      <C>           <C>           <C>             <C>            <C>
CONSOLIDATED STATEMENTS OF INCOME:

Interest income..................                        $ 55,572      $ 46,273      $ 41,905        $ 37,144       $ 29,197
Interest expense.................                          28,899        23,156        21,760          18,531         14,196


                                      -14-
<PAGE>

Net interest income..............                          26,673        23,117        20,145          18,613         15,001
Provision for loan losses........                           1,826         1,333         1,374           1,233          2,541
Other income.....................                           6,438         5,950         4,574           3,582          2,945
Other expenses...................                          18,936        16,518        14,074          13,302         10,635
Income taxes.....................                           4,359         4,014         3,124           2,266          1,691
Minority interest in earnings
  of subsidiaries................                             404           357           312             261            248
Net income.......................                           7,586         6,845         5,835           5,133          2,831
PER COMMON SHARE DATA:
Earnings per share...............                        $ 103.89       $ 93.34       $ 79.15         $ 69.34        $ 36.81
Cash dividends...................                            2.80          1.39             0               0              0
Tangible book value per share(1)                           467.86        458.47        376.67          315.30         237.17

CONSOLIDATED BALANCE SHEETS:
Assets...........................                         773,956       611,170       548,077         487,619        423,539
Loans, net of unearned
  income(2)......................                         582,011       472,990       408,470         360,904        296,168
Allowance for loan losses........                           7,352         6,020         5,599           5,404          4,790
Deposits.........................                         629,373       506,909       450,790         399,178        357,489
Nonperforming assets.............                           8,209         6,719         8,109           7,068          2,934
Stockholders' equity.............                          43,033        37,197        31,548          26,242         20,803
</TABLE>

<TABLE>
<CAPTION>
                                                                   At or for the Year Ended June 30,
                                                           ---------------------------------------------------
                                                         2000         1999         1998        1997      1996
                                                         ----         ----         ----        ----      ----
                                                          (dollars in thousands, except per common share data)
<S>                                                     <C>          <C>         <C>          <C>      <C>
KEY RATIOS:
 Net interest margin(3)..........                        4.15%        4.29%       4.22%        4.49%     4.55%
 Return on average assets........                         1.09         1.17        1.12         1.14      0.79
 Return on average
   stockholders' equity..........                        18.19        19.69       20.40        22.76     14.33
 Nonperforming loans to total loans                       1.39         1.40        1.96         1.92      0.85
 Loan charge-off to average loans                         0.10         0.21        0.45         0.19      0.26
 Allowance for loan losses to total loans                 1.26         1.27        1.37         1.50      1.62
 Allowance for loan losses to nonperforming loans....... 90.79        91.17       69.93        77.84    189.55
 Core risk-based capital.............                     9.38         7.77        7.55         7.30      6.74

--------
(1) Stockholders' equity less preferred stock less cost in excess of net assets
    acquired (goodwill), divided by period end shares outstanding of common
    stock.
(2) Before allowance for loan losses.
(3) On a tax equivalent basis.


                                      -15-
<PAGE>

Total risk-based capital.........                        11.61         9.02        8.80         8.55      7.99
Leverage ratio...................                         7.03         6.17        5.58         5.40      5.24
Stockholders' equity to assets...                         5.56         6.09        5.76         5.38      4.91

RATIO OF EARNINGS TO FIXED CHARGES(4):
Including interest on deposits...                        1.42x        1.47x       1.41x        1.40x    1.31x
Excluding interest on deposits...                        3.16x        4.01x       3.37x        3.70x    3.42x
</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS ENVIRONMENT AND RISK FACTORS

The following discussion should be read in conjunction with the consolidated
financial statements and related notes included in this report. Spectrum's
future operating results may be affected by various trends and factors that are
beyond Spectrum's control. Accordingly, past results and trends may not be
reliable indicators of future results or trends. With the exception of
historical information, the matters discussed below include forward-looking
statements that involve risks and uncertainties. Spectrum cautions readers that
a number of important factors discussed below could affect Spectrum's actual
results and cause actual results to differ materially from those in the
forward-looking statements.

THE MERGER

On May 31, 1999, Decatur Corporation became the surviving corporation in a
merger of its affiliated bank holding companies, Spectrum Bancorporation, Inc.
and Rushmore Financial Services, Inc. Decatur then changed its name to Spectrum
Bancorporation, Inc. but retained its Iowa charter to facilitate acquisitions
within that state. The merger has been accounted for at historical cost in a
manner similar to a pooling-of-interests combination and, accordingly, the
consolidated financial statements prior to the combination have been restated to
include the accounts and results of operations of Spectrum.

Prior to the combination, Decatur's fiscal year ended December 31 and the fiscal
year of Spectrum Bancorporation, Inc. and its wholly-owned subsidiary, Rushmore
Financial Services, Inc., ended June 30. In recording the combination, the
related financial statements for the twelve months ended June 30, 1998, were
combined with Spectrum Bancorporation, Inc.'s financial statements for the same
period. For previous periods, Decatur's fiscal years ended December 31, 1997 and
1996, were combined with Spectrum Bancorporation, Inc.'s fiscal years ended June
30, 1997 and 1996. An adjustment has been made to stockholders' equity as of
June 30, 1998, to eliminate the effect of including Decatur's results of
operations for the six months ended December 31, 1997, in both the years ended
June 30, 1998 and 1997. Spectrum's fiscal year ends June 30.

-----------------------
(4) The ratio of earnings to fixed charges is computed by dividing (x) the sum
    of income before income taxes and fixed charge by (y) fixed charge. Fixed
    charges consist of interest on borrowings, amortization of debt expense,
    implicit interest on leases and dividends on Spectrum's series 1 and 2
    preferred stock.


                                      -16-
<PAGE>

ACQUISITIONS

On January 14, 2000, Spectrum acquired selected assets and the deposits of
Hartford-Carlisle Savings Bank in Carlisle, Iowa through a newly chartered,
wholly owned bank subsidiary ("Citizens Bank, Carlisle"). On January 14, 2000,
state and federal banking regulators closed the Harford-Carlisle Savings Bank
with offices in the Iowa towns of Carlisle, Hartford, and Runnells. Following
the closing of the bank, Spectrum assumed certain deposits and purchased certain
assets of the bank from the FDIC. Spectrum paid the FDIC a $5.5 million premium
to assume approximately $70.5 million in deposits, $4.8 million in liquid
assets, and $139,000 in loans. After the initial purchase, Spectrum acquired an
additional $34.4 million in loans and the fixed assets of the bank. All three of
the bank's locations were kept open.

The newly chartered state bank, Citizens Bank, Carlisle, was capitalized with
$10.5 million in capital; the purchase included a $5.5 million premium paid to
the FDIC. Spectrum borrowed $3 million and funded the rest of the purchase price
from liquid resources on hand. The acquisition was accounted for in a manner
similar to a purchase and the deposit premium was allocated to goodwill and will
be amortized over 15 years. A major reason for this acquisition was the
proximity of this bank's offices to the Des Moines market, and the ability to
branch. Management intends to enter West Des Moines when appropriate.

On March 27, 1998, Spectrum acquired all of the outstanding shares of First
Savings & Loan Association of South Dakota, Inc., Aberdeen, South Dakota. First
Savings was merged into F&M Bank, a subsidiary bank of Spectrum. Assets of
$16,999,000, loans, net of unearned fees, of $14,016,000 and deposits of
$14,085,000 were acquired in connection with the merger.

On May 31, 1996, Spectrum acquired all of the outstanding shares of Am-First
Financial Corporation. Am-First owned 100% of the outstanding stock of American
Federal Bank, fsb, Madison, South Dakota. American Federal was merged into F&M
Bank. Assets of $56,429,000, loans, net of unearned fees, of $29,338,000 and
deposits of $45,206,000 were acquired in connection with the merger.

SUBSEQUENT EVENTS

On July 13, 2000, the Company's subsidiary, Citizens Bank, Mt. Ayr purchased the
assets and assumed the liabilities of the branch of Commercial Federal Bank, FSB
(Commercial) located in Kellerton, Iowa. A premium of approximately $175,000 was
paid to acquire deposits of approximately $3,300,000.

As of August 7, 2000 the Company acquired all of the outstanding shares of
Hamburg Financial, Inc. (HFI), an unaffiliated holding company which owned two
banks in southeastern Iowa. The Company paid $8,730,995 in cash which included a
premium of $2,356,156 to acquire HFI and its subsidiaries; Thurman State
Corporation, a second-tier holding company which owned the United National Bank
of Iowa, headquartered in Sidney, Iowa; and Iowa State Bank, headquartered in
Hamburg, Iowa. Deposits of $55,990,045 and loans of $48,659,556 were acquired.
The transaction was accounted for as a purchase. HFI and Thurman State
Corporation were merged into the Company. HFI's bank subsidiaries were merged
into the Company's subsidiary bank, Citizens Bank, Mt. Ayr.

On August 7, 2000, the Company acquired all of the outstanding shares of
Citizens Corporation (Citizens), an affiliated one-bank holding company which
owned Citizens Bank, Chariton, Iowa. The transaction was accounted for in a
manner similar to a pooling of interests. The Company


                                      -17-
<PAGE>

exchanged 7,584 newly issued shares of common stock for all 4,628 outstanding
shares of Citizens, and assumed a $1,200,000 10.00% capital note payable.
Citizens Bank, Chariton, Iowa was merged into the Company's subsidiary, Citizens
Bank, Mt. Ayr. Deposits of $60,382,514 and loans of $52,472,988 were acquired.

RESULTS OF OPERATIONS

GENERAL

Net income for the year ended June 30, 2000, was $7,586,000 compared to net
income of $6,845,000 for the year ended June 30, 1999, and compared to net
income of $5,835,000 for the year ended June 30, 1998.

For the years ended June 30, 2000, 1999 and 1998, the return on average assets
was 1.09%, 1.17%, and 1.12%. For the years ended June 30, 2000, 1999 and 1998,
the return on average stockholders' equity was 18.19%, 19.69%, and 20.40%.

NET INTEREST INCOME

Net interest income represents the amount by which interest income on
interest-earning assets, including loans and securities, exceeds interest paid
on interest-bearing liabilities, including deposits and other borrowed funds.
Net interest income is the principal source of Spectrum's earnings. Interest
rate fluctuations, as well as changes in the amount and type of interest-earning
assets and interest-bearing liabilities, combine to affect net interest income.

The following table presents the average balances of Spectrum for each of the
last three fiscal years and indicates the interest earned or paid on each major
category of interest-earning assets and interest-bearing liabilities on a fully
taxable-equivalent basis, assuming a 34% tax rate, and the average rates earned
or paid on each major category. This analysis details the contribution of
interest-earning assets and the overall impact of the cost of funds on net
interest income.

<TABLE>
<CAPTION>
                                                                Year Ended June 30,
                                             -----------------------------------------------------
                                2000                                1999                            1998
                                ----                                ----                            ----
                                           Interest                            Interest                        Interest
                              Average      Income/      Yield/     Average     Income/  Yield/     Average      Income/     Yield/
                              Balance      Expense       Rate      Balance     Expense   Rate      Balance      Expense      Rate
                              -------      -------      ------     -------     -------  ------    ---------    ---------    -------
                                                                                              (dollars in thousands)
Interest-earning assets:
<S>                         <C>          <C>          <C>         <C>         <C>       <C>       <C>            <C>        <C>

  Loans, net of un-
    earned fees(1)(2)...    $517,471     $46,950      9.07%       $429,346    $38,924   9.07%     $380,681       $35,414    9.30%

----------------------
(1) The data includes the accounts of American Federal from May 31, 1996, the
    date of acquisition of American Federal, accounts of First Savings from
    March 27, 1998, the date of acquisition of First Savings and the accounts of
    Hartford-Carlisle Savings Bank from January 16, 2000, the date of
    acquisition. The completed acquisitions were accounted for under the
    purchase method of accounting.
(2) Nonaccrual loans are included in the Average Balance columns and income
    recognized on these loans, if any, is included in the Interest
    Income/Expense columns. Interest income on loans includes fees on loans,
    which are not material in amount.


                                      -18-
<PAGE>

  Investment securities:
    taxable.............      94,402       6,346      6.72%    85,721       5,449     6.36%        73,250      4,542        6.20%

    Tax exempt (tax
      equivalent).......       8,058         733      9.09%     9,233         779     8.44%        11,720        964        8.23%
 Federal funds sold.....      28,128       1,764      6.27%    20,246       1,386     6.85%        19,604      1,313        6.70%
                            --------       -----               ------      ------                 -------     ------

    Total interest-
      earning assets....    $648,059     $55,793      8.61%  $544,546     $46,538     8.55%      $485,255    $42,233        8.70%
                             =======                          =======                            ========
Interest-bearing
  liabilities:
 Demand, savings
    and money market
    deposits..........      $169,463      $4,392     2.59%   $145,849      $3,924     2.69%      $122,747     $3,622        2.95%
 Time deposits........       344,606      19,131     5.55%    284,523      15,827     5.56%       253,690     14,548        5.73%
                             -------       ------              -------      ------                --------    ------

 Total interest-
   bearing deposits...       514,069      23,523     4.58%    430,372      19,751     4.59%       376,437     18,170        4.83%

Federal Home Loan Bank
borrowings, federal funds
purchased and securities
sold under agreements
to repurchase                 56,178       3,334     5.93%     46,019       2,500     5.43%        45,509      2,591        5.69%
Notes payable.........         3,158         231     7.30%     12,367         905     7.32%        12,681       999         7.88%
Company obligated
  mandatory redeemable
  preferred securities of
  subsidiary trust
  holding solely junior
  subordinated debentures     18,700       1,811     9.68%          0          0      0.00%             0           0        0.00%
                              ------       -----     -----          -          -      -----             -           -        -----

Total interest-bearing
  liabilities.........      $592,105      $28,899    4.88%   $488,758     $23,156      4.74%     $434,627     $21,760        5.01%
                            --------       -------            =======     -------                ========     ------

Net interest income...                    $26,894                         $23,382                             $20,473
                                            ======                         ======                             ======
Interest rate spread                                 3.73%                             3.81%                                3.69%
Net interest margin(4)                               4.15%                             4.29%                                4.22%
Ratio of average
  interest-bearing
  liabilities to average
  interest-earning assets     91.37%                           89.76%                              89.57%
</TABLE>

Net interest income, on a tax-equivalent basis, was $26,894,000 for the year
ended June 30, 2000, an increase of $3,512,000 from $23,382,000 in 1999. This
increase resulted primarily from an increase of $103,513,000 in average
interest-earning assets to $648,059,000 for the year ended June 30, 2000, from
$544,546,000 in 1999. The majority of the asset growth was due to a bank
acquisition and growth in the loan portfolio. Average loans increased
$88,125,000 to $517,471,000 for the year ended June 30, 2000, from $429,346,000
in 1999.

-------------------------
(4)  The net interest margin is equal to net interest income divided by average
     interest-earning assets.


                                      -19-
<PAGE>

Interest expense increased $5,743,000 to $28,899,000 for the year ended June 30,
2000, from $23,156,000 in 1999. The cost of interest-bearing liabilities for the
year ended June 30, 2000, was 4.88% compared to 4.74% in 1999. When combined
with noninterest-bearing deposits, the cost of funds was 4.46% for the year
ended June 30, 2000, compared to 4.30% in 1999. The average balance of Federal
Home Loan Bank borrowings, federal funds purchased, and securities sold under
agreements to repurchase increased to $56,178,000 in 2000, an increase of
$10,159,000 from $46,019,000 in 1999. This source was used to supplement core
deposits in funding the loan growth.

As a result of these factors, net interest margin, on a tax-equivalent basis,
decreased to 4.15% for the year ended June 30, 2000, compared to 4.29% for the
year ended June 30, 1999.

Net interest income, on a tax-equivalent basis, was $23,382,000 for the year
ended June 30, 1999, an increase of $2,909,000 from $20,473,000 in 1998. This
increase resulted primarily from an increase of $59,291,000 in average
interest-earning assets to $544,546,000 for the year ended June 30, 1999, from
$485,255,000 in 1998. The majority of the asset growth was due to growth in the
loan portfolio. Average loans increased $48,665,000 to $429,346,000 for the year
ended June 30, 1999, from $380,681,000 in 1998.

Interest expense increased $1,396,000 to $23,156,000 for the year ended June 30,
1999, from $21,760,000 in 1998. The cost of interest-bearing liabilities for the
year ended June 30, 1999, was 4.74% compared to 5.01% in 1998. When combined
with non-interest-bearing deposits the cost of funds was 4.30% for the year
ended June 30, 1999, compared to 4.26% for 1998. The average balances of Federal
Home Loan Bank borrowings, federal funds purchased, and securities sold under
agreements to repurchase increased to $46,019,000 in 1999, an increase of
$510,000 from $45,509,000 in 1998. This source was used to supplement core
deposits in funding loan growth.

Net interest margin, on a tax-equivalent basis, increased to 4.29% for the year
ended June 30, 1999, compared to 4.22% for the year ended June 30, 1998.

The following table presents the changes in the components of net interest
income and identifies the portion of each change due to differences in the
average volume of interest-earning assets and interest-bearing liabilities and
the portion of each change due to the average rate on those assets and
liabilities. The changes in interest due to both volume and rate changes in the
table have been allocated to volume or rate change in proportion to the absolute
dollar amounts of the change in each.

<TABLE>
<CAPTION>
                                     2000 vs. 1999                  1999 vs. 1998                     1998 vs. 1997
                            ----------------------------   ------------------------------  ---------------------------------
                               Increase (Decrease) Due to         Increase (Decrease) Due to         Increase (Decrease) Due to
                                    Changes In:                         Changes In:                        Changes In:
                            ----------------------------   ------------------------------  ---------------------------------
                               Volume       Rate      Total      Volume       Rate      Total      Volume       Rate       Total
                               ------       ----      -----      ------       ----      -----      ------       ----       -----
                                                              (dollars in thousands)
<S>                            <C>        <C>        <C>         <C>        <C>         <C>         <C>       <C>         <C>
Interest-earning assets:
Loans, net of unearned
fees.....................      $ 7,993       $ 33     $ 8,026     $4,431     $ (921)     $3,510      $ 5,273      $(698)   $  4,575
Investment securities:
Taxable..................
                                   568        329         897        790         117        907        (195)       (224)       (419)


                                      -20-
<PAGE>

Tax exempt (tax
  equivalent)............        (103)         57        (46)      (209)          24      (185)          112        (84)         28

Federal funds sold.......          517      (139)        378          44          29        73           599        (12)        587
                                   ---      -----        ----     ------       -----     ------         ----        ----       ---
Total interest income....        8,975        280       9,255      5,056       (751)      4,305        5,789     (1,018)      4,771

Interest-bearing
liabilities:
Demand, savings and
money market deposits              624      (156)         468        644       (342)        302          509        (24)        485
Time deposits............        3,340       (36)       3,304      1,731       (452)      1,279        1,704        (10)      1,694
                                   ---      -----        ----     ------       -----     ------         ----        ----       ---
Total interest-bearing
  deposit expense..........      3,964      (192)       3,772      2,375       (794)      1,581        2,213        (34)      2,179
Federal Home Loan Bank
  borrowings, federal
  funds purchased and
  securities sold under
  agreements to
  repurchase                       577        257         834         29       (120)        (91)         823          86        909
Notes payable............       (673)          (2)      ( 674)       (25)       (69)        (94)         (20)        161        141

Company obligated
  mandatorily redeemable
  preferred securities
  of subsidiary trust
  holding solely junior
  subordinated debentures        1,811          0       1,811          0          0           0            0           0          0

Total interest expense...        5,680         63       5,743      2,379       (983)      1,396        3,016         213      3,229
                               -------   --------    --------    -------    -------     -------     --------    --------    -------
Increase (decrease) in
net interest income......      $ 3,295   $    217    $  3,512    $ 2,677    $   232     $ 2,909     $  2,773    $ (1,231)   $ 1,542
                               =======   ========    ========    =======    =======     =======     ========    ========    =======
</TABLE>

PROVISION FOR LOAN LOSSES

The amount of the provision for loan losses is based on a quarterly or a more
frequent evaluation of the loan portfolio, especially nonperforming and other
potential problem loans. During these evaluations, consideration is given to
such factors as: management's evaluation of specific loans; the level and
composition of nonperforming loans; historical loss experience; results of
examinations by regulatory agencies; expectations of future economic conditions
and their impact on particular industries and individual borrowers; the market
value of collateral; the strength of available guarantees; concentrations of
credits; and other judgmental factors. In addition, an unaffiliated company
selected by Spectrum performs loan review services on an annual basis.

The provision for loan losses for the year ended June 30, 2000, was $1,826,000
compared to $1,333,000 for the year ended June 30, 1999. This represents an
increase of $493,000, or 36.98%. This increase was primarily due to increased
loan volume. The provision for loan losses for the year ended June 30, 1999, was
$1,333,000, compared to $1,374,000 for the previous year.


OTHER INCOME

The following table presents Spectrum's other income for the indicated periods.


                                      -21-
<PAGE>

<TABLE>
<CAPTION>
                                                                           Year Ended June 30,
                                                            -------------------------------------------
                                                                 2000            1999           1998
                                                                -------         -------        -------
                                                                       (dollars in thousands)
<S>                                                         <C>             <C>             <C>
Service charges and other fees.........                     $     3,789     $     2,899     $    2,126
Net gains from sale of loans...........                             628           1,120            803
Gain (loss) on securities, net.........                            (13)              27            179
Other income...........................                           2,034           1,904          1,466
                                                                  -----            ------       ------
          Total other income........                        $     6,438     $     5,950     $    4,574
                                                                  =====           ======         =====
</TABLE>

During the year ended June 30, 2000, total other income increased to $6,438,000
from $5,950,000 for the year ended June 30, 1999, due primarily to increases in
fees for customer services. Net gains from the sale of loans arise when the
subsidiary banks originate loans and sell them in the secondary market with
servicing released. For this they receive fees that are realized immediately
into income. Other income for the year ended June 30, 2000, increased to
$2,034,000 compared to $1,904,000 in 1999, an increase of $130,000 due primarily
to increases in other operating income including commissions from the sale of
non-depository investment products.

OTHER EXPENSES

The following table presents Spectrum's other expenses for the indicated
periods.


<TABLE>
<CAPTION>
                                                                           Year Ended June 30,
                                                            -------------------------------------------
                                                                 2000            1999           1998
                                                                -------         -------        -------
                                                                       (dollars in thousands)
<S>                                                         <C>             <C>             <C>
Salaries and employee benefits.........                     $      9,774    $      8,875    $   7,854
Occupancy expense, net.................                            1,131             961          804
Data processing........................                            1,464           1,286          717
Other expenses.........................                            6,567           5,396        4,699
                                                                   -----          ------        -----
             Total other expense.......                     $     18,936    $     16,518     $ 14,074
                                                                  ======         =======       ======
</TABLE>

Other expenses increased $2,418,000 or 14.64%, to $18,936,000 during the year
ended June 30, 2000, from $16,518,000 for the year ended June 30, 1999. This
increase is primarily a result of an increase in salaries and employee benefits,
advertising and bank acquisition. Other expenses increased $2,444,000 or 17.37%,
to $16,518,000 in 1999 from $14,074,000 in 1998, primarily due to increases in
salaries and benefits and data processing expense.

Salaries and employee benefits rose $899,000 or 10.13%, to $9,774,000 for the
year ended June 30, 2000, from $8,875,000 for the corresponding period of 1999.
Salaries and benefits rose $1,021,000, or 13.00%, to $8,875,000 in 1999 from
$7,854,000 in 1998. The increases in salaries were due to Spectrum's recent bank
acquisition in 2000.

Net occupancy expense increased $170,000, or 17.69%, to $1,131,000 for the year
ended June 30, 2000, from $961,000 for the year ended June 30, 1999. Net
occupancy costs increased primarily due to bank acquisition in 2000. Net
occupancy expense increased $157,000, or 19.53%, to $961,000 in 1999 from
$804,000 in 1998.


                                      -22-
<PAGE>

Data processing costs increased $178,000, or 13.84% to $1,464,000 for the year
ended June 30, 2000, from $1,286,000 during the year ended June 30, 1999. Data
processing expense increased $569,000, or 79.36%, to $1,286,000 in 1999 from
$717,000 in 1998. Data center costs increased in the year ended June 30, 1999,
due to the purchase of new equipment and software for the in-house data center.

Other operating expenses include, among many other items, equipment expense,
postage, due from bank account charges, armored car and courier fees, travel and
entertainment, advertising, regulatory examination fees, directors' fees, dues
and subscriptions, and FDIC insurance premiums. These expenses increased
$1,171,000, or 21.70%, to $6,567,000 for the year ended June 30, 2000, from
$5,396,000 for the year ended June 30, 1999. These expenses increased $697,000,
or 14.83%, to $5,396,000 during 1999 from $4,699,000 during 1998. Other
operating expenses increased for the year ended June 30, 2000 due in part to
increases in advertising costs, which accounted for an increase of $357,000, or
30.49% of increase.

FEDERAL INCOME TAX

Spectrum's consolidated income tax rate varies from statutory rates principally
due to interest income from tax-exempt securities. The provision for income
taxes increased by $345,000 to $4,359,000 for the year ended June 30, 2000, from
$4,014,000 for the year ended June 30, 1999, reflecting the increase of income
before taxes for the period. Spectrum's recorded income tax expenses totaled
$4,014,000 in 1999 and $3,124,000 in 1998.

RECENT ACCOUNTING PRONOUNCEMENT

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 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that all
derivatives be recognized as either assets or liabilities in the statement of
financial position and that those instruments be measured at fair value.
Spectrum adopted this statement beginning July 1, 1998.

ANALYSIS OF FINANCIAL CONDITION

LOAN PORTFOLIO

Total loans, net of unearned fees, increased $109,021,000, or 23.05%, to
$582,011,000 at June 30, 2000, from $472,990,000 at June 30, 1999. Total loans,
net of unearned fees, increased $72,520,000, or 15.80 %, at June 30, 1999, from
$408,470,000 at June 30, 1998.

Spectrum's subsidiary banks primarily make installment loans to individuals and
commercial loans to small to medium-sized businesses and professionals. The
subsidiary banks offer a variety of commercial lending products including
revolving lines of credit, letters of credit, working capital loans and loans to
finance accounts receivable, inventory and equipment. See "Business-Loans."
Typically, the subsidiary banks' commercial loans have floating rates of
interest, are for varying terms, generally not exceeding five years, are
personally guaranteed by principals of the borrower and are collateralized by
accounts receivable, inventory or other business assets.


                                      -23-
<PAGE>

The following tables present Spectrum's loan balances at the dates indicated
categorized by loan type:

<TABLE>
<CAPTION>
                                            June 30, 2000                 June 30, 1999                  June 30, 1998
                                            -------------                 -------------                  -------------
                                                                      (dollars in thousands)
<S>                                  <C>                    <C>         <C>            <C>           <C>              <C>
Loans to individuals...........      $        96,216         16.74%       $ 75,579        16.18%       $ 58,205          14.45%
Real estate loans..............              118,060          20.54         90,789         19.44        129,761          32.21
Commercial and agricultural                  363,808          63.31        304,632         65.24        209,387          51.97
Other loans....................                4,227           0.74          2,455          0.53         11,531           2.86
                                          -----------        -------    ----------     ---------      ---------       --------
 Total face amount of loans....              582,311         101.33        473,455        101.39        408,884         101.49
Unearned loan fees.............                 (300)         (0.05)          (465)        (0.10)          (414)         (0.10)
                                          -----------        -------    ----------     ---------      ---------       --------
Loans..........................              582,011         101.28%       472,990        101.29%       408,470         101.39%
Less allowance for loan losses                (7,352)         (1.28)        (6,020)        (1.29)        (5,599)         (1.39)
                                          -----------        -------    ----------     ---------      ---------       --------
Net Loans.....................             $ 574,659         100.00%      $466,970        100.00%      $402,871         100.00%
</TABLE>

<TABLE>
<CAPTION>
                                                  June 30, 1997                June 30, 1996
                                                  -------------                -------------
                                                             (dollars in thousands)
<S>                                  <C>                   <C>         <C>             <C>
Loans to individuals...........      $       54,982           15.47%      $ 61,478         21.10%
Real estate loans..............             144,463           40.64        107,939         37.04
Commercial and agricultural                 152,906           43.01        117,758         40.41
Other loans....................               8,825            2.48          9,065          3.11
                                          -----------        -------    ----------     ---------
  Total face amount of loans...             361,176          101.60        296,240        101.66
Unearned loan fees.............                (272)          (0.08)           (72)        (0.02)
                                          -----------        -------    ----------     ---------
Loans..........................             360,904          101.52%       296,168        101.64%
Less allowance for loan losses               (5,404)          (1.52)        (4,790)        (1.64)
                                           ---------         ------       --------      --------
  Net loans....................          $  355,500          100.00%     $ 291,378        100.00%
                                          =========          =======      ========       =======
</TABLE>

As of June 30, 2000, loans, net of unearned fees, were $582,011,000 or
$109,021,000 greater than loans of $472,990,000 at June 30, 1999. Spectrum's
primary category of loans, commercial and agricultural loans, constituting
almost two-thirds of loans as of June 30, 2000, trended upward as indicated at
the stated dates. At June 30, 2000, agricultural loans totaled $77,742,000. Of
this amount, $31,468,000 comprised loans primarily secured by agricultural real
estate, and $46,274,000 comprised loans primarily secured by agricultural
operating assets. At June 30, 1999, agricultural loans totaled $66,296,000. Of
this amount, $26,869,000 comprised loans primarily secured by agricultural real
estate, and $39,427,000 comprised loans primarily secured by agricultural
operating assets. Commercial and agricultural loans were $363,808,000 as of June
30, 2000, an increase of $59,176,000 over the $304,632,000 balance as of June
30, 1999.


                                      -24-
<PAGE>

Loan concentrations are considered to exist when there are amounts loaned to a
multiple number of borrowers engaged in similar activities that would cause them
to be similarly impacted by economic or other conditions. Spectrum had no
concentrations of loans at June 30, 2000, except for those set forth in the
above table. Spectrum had no loans outstanding to foreign countries or borrowers
headquartered in foreign countries at June 30, 2000.

Management of Spectrum's subsidiary banks may renew loans at maturity, when
requested by a customer whose financial strength appears to support such renewal
or when such renewal appears to be in Spectrum's best interest. Spectrum
requires payment of accrued interest in such instances and may adjust the rate
of interest, require a principal reduction or modify other terms of the loan at
the time of renewal.

Although the risk of non-payment exists for a variety of reasons relating to all
loans, other more specific risks are associated with each type of loan. Risks
associated with real estate mortgage loans include the borrower's inability to
pay and deterioration in value of real estate held as collateral. Several risks
are present in construction loans, including economic conditions in the building
industry, fluctuating land values, failure of the contractor to complete work
and the borrower's inability to repay. Risks associated with commercial and
agricultural loans are the quality of the borrower's management and the impact
of local economic factors as well as prices received for products. Loans to
individuals face the risk of a borrower's unemployment as a result of
deteriorating economic conditions as well as the personal circumstances of the
borrower. Management believes that risk levels associated with the various types
of loans are dependent upon the existence of the risks at any particular time,
for example, economic conditions in the building industry.

LOAN MATURITIES

The following tables present, at June 30, 2000, and June 30, 1999, loans, net of
unearned fees, by maturity in each major category of Spectrum's portfolio based
on contractual repricing schedules. Actual maturities may differ from the
contractual repricing maturities shown below as a result of renewals and
prepayments. Loan renewals are evaluated by Spectrum in the same manner as new
credit applications. If loans are not repaid upon maturity, these loans are
subject to the same credit evaluation and other underwriting criteria as new
loan applications, and are subject to new terms and conditions as deemed
appropriate by Spectrum's lending personnel.

<TABLE>
<CAPTION>
                                                                              At June 30, 2000
                                                 ---------------------------------------------------------------------------
                                                          Over One Year
                                                         Through Five Years                      Over Five Years
                                                        --------------------                    ------------------
                                               One Year                        Floating                 Floating
                                               or Less         Fixed Rate        Rate     Fixed Rate      Rate          Total
                                               -----------     ----------    -----------  -----------   -----------  -----------
                                                                             (dollars in thousands)
<S>                                            <C>             <C>           <C>          <C>          <C>           <C>
Loans to individuals.......................    $  10,953       $  71,512     $  2,963     $ 10,716     $     72      $ 96,216
Real estate loans..........................       28,961          40,858       23,211       20,505        4,474       118,009
Commercial and agricultural................      142,442          95,660       72,976       19,334       33,147       363,559
Other loans................................          102           3,653           25          447            0         4,227
                                               -----------     ----------    -----------  -----------   -----------  -----------
Total loans................................    $ 182,458        $211,683      $99,175      $51,002      $37,693      $582,011
                                               ==========      =========      ========     ========     =======      ========
</TABLE>


                                      -25-
<PAGE>

<TABLE>
<CAPTION>
                                                                              At June 30, 1999
                                                 ---------------------------------------------------------------------------
                                                          Over One Year
                                                         Through Five Years                      Over Five Years
                                                        --------------------                    ------------------
                                               One Year                        Floating                 Floating
                                               or Less         Fixed Rate        Rate     Fixed Rate      Rate          Total
                                               -----------     ----------    -----------  -----------   -----------  -----------
                                                                             (dollars in thousands)
<S>                                            <C>             <C>           <C>          <C>          <C>           <C>
Loans to individuals.......................       $12,458       $  48,883    $    4,683     $   9,543  $         12      $  75,579
Real estate loans..........................        28,059          27,577        16,580        18,482             0         90,698
Commercial and agricultural................       149,694          97,846        32,127        12,174        12,417        304,258
Other loans................................           112           2,236             0           107             0          2,455
                                               -----------     ----------    -----------  -----------   -----------    -----------
         Total loans.......................      $190,323        $ 76,542       $53,390      $ 40,306       $12,429       $472,990
                                               ==========       =========       ========      ========     =======       ========
</TABLE>

LOAN REVIEW PROCESS

Spectrum's subsidiary banks follow both internal and external loan review
programs to evaluate the credit risk in their loan portfolios and assess the
adequacy of the allowance for loan losses.

Internally, each bank maintains a classified loan list that, along with the list
of non-performing loans discussed below, helps Spectrum management assess the
overall quality of the loan portfolio and the adequacy of the allowance for loan
losses. The classification categories of substandard, doubtful and loss
correspond with those of state and FDIC examiners. Loans classified as
"substandard" are those loans with clear and defined weaknesses such as highly
leveraged positions, unfavorable financial ratios, uncertain repayment sources
or poor financial condition, which may jeopardize repayment. Loans classified as
"doubtful" are those loans that have characteristics similar to substandard
loans, but also have an increased risk of loss or would require a partial
write-off in a liquidation. Although loans classified as substandard do not
duplicate loans classified as doubtful, both substandard and doubtful loans may
include some loans that are past due at least 90 days, are on nonaccrual status
or have been restructured. Loans classified as "loss" are those loans that are
in the process of being charged off.

In addition to the internally classified loans, the subsidiary banks also have a
"watch list" of loans that further assists their monitoring of their loan
portfolios. A loan is included on the watch list if it demonstrates one or more
deficiencies requiring attention in the near term or if the loan's ratios have
weakened to a point where more frequent monitoring is warranted. These loans do
not have all the characteristics of a classified loan (substandard, doubtful or
loss), but do have weakened elements as compared with those of a satisfactory
credit. Management of the subsidiary banks reviews these loans to assist in
assessing the adequacy of the allowance for loan losses. Substantially all of
the loans on the watch list at June 30, 2000 were current and paying in
accordance with loan terms. Spectrum's external loan review process has
consisted of intensive on-site reviews performed at each subsidiary bank. The
scope of the reviews consistently covered at least 50% or higher of the dollars
outstanding in each respective bank's loan portfolio. An independent consulting
firm has performed the reviews with the on-site assistance of affiliated bank
loan officers. The external loan review program through June 30, 2000 has been
under the direct oversight of Spectrum's President. As of July 1, 2000 Spectrum
has hired a Chief Credit Officer with oversight responsibilities for all credit
originated by the subsidiary banks. The Chief Credit Officer will continue the
external loan review program and will be actively involved in on-site review at
each subsidiary bank. The Chief Credit Officer will engage independent loan
reviews as needed. External loan review results of each subsidiary


                                      -26-
<PAGE>

bank are reported to bank management and the Board of Directors for each bank.
In addition, the President of Spectrum reviews the results of each loan review.

NONPERFORMING LOANS

Non-performing loans consist of nonaccrual, past due and restructured loans. A
past due loan is an accruing loan that is contractually past due 90 days or more
as to principal and/or interest payments. Loans on which management does not
expect to collect interest in the normal course of business are placed on
nonaccrual or are restructured. When a loan is placed on nonaccrual, any
interest previously accrued but not yet collected is reversed against current
income unless, in the opinion of management, the outstanding interest remains
collectible. Thereafter, interest is included in income only to the extent of
cash received. A loan is restored to accrual status when all interest and
principal payments are current and the borrower has demonstrated to management
the ability to make payments of principal and interest as scheduled.

A restructured loan is one upon which interest accrues at a below market rate or
upon which certain principal has been forgiven so as to aid the borrower in the
final repayment of the loan, with any interest previously accrued, but not yet
collected, being reversed against current income. Thereafter, interest is
accrued based upon the new loan terms.

Nonperforming loans are fully or substantially collateralized by assets, with
any excess of loan balances over collateral values allocated in the allowance.
Assets acquired through foreclosure are carried at the lower of cost or
estimated fair value, net of estimated costs of disposal, if any.

The following table lists nonaccrual, past due and restructured loans and other
real estate and other repossessed assets at June 30, 2000, and for each of the
past four years.

<TABLE>
<CAPTION>
                                                                               At June 30,
                                                 ------------------------------------------------------------------
                                                 2000          1999           1998          1997          1996
                                                 ----          ----           ----          ----          ----
                                                                          (dollars in thousands)
<S>                                           <C>          <C>               <C>          <C>            <C>
Nonaccrual loans.....................         $  1,381     $    1,401       $2,337       $ 1,971         $ 1,936

Accruing loans past due over
  90 days............................            1,831          1,016        1,484           543             340

Restructured loans...................            4,887          4,186        4,186         4,428             251
                                                 -----       --------        ------       ------          ------
Total non-performing loans...........            8,099          6,603        8,007         6,942           2,527
Other real estate and other
  repossessed assets.................              110            116          102           126             407
                                                 -----       --------        ------       ------          ------
Total non-performing assets..........           $8,209         $6,719      $ 8,109       $ 7,068         $ 2,934
                                                 =====          =====        ======        ======          ======

Ratio of total nonperforming loans to
  total loans........................             1.39%          1.40%        1.96%         1.92%           0.85%

Ratio of total nonperforming assets to
  total loans plus other real estate
  and other repossessed assets.......             1.41           1.42         1.98          1.96            0.99

Ratio of nonperforming assets to
  total assets........................            1.06           1.10         1.48          1.45            0.69
</TABLE>


                                      -27-
<PAGE>

Restructured loans were $4,887,000, $4,186,000 and $4,186,000 at June 30, 2000,
1999, and 1998. These loans were primarily serviced by a single servicer that
declared bankruptcy in 1996. A settlement was reached with the bankruptcy
trustee that resulted in a partial charge-off of amounts owing to Spectrum's
subsidiary banks, with the remaining balances of $3,629,000 carried at a
below-market rate of interest for an eight-year period. These loans begin a
two-year principal amortization in 2002 and are scheduled to be completely
repaid in 2004. Payments of interest are being received monthly and have been
received according to the terms of the settlement since its inception. Payments
are current on these loans.

A potential problem loan is defined as a loan where information about possible
credit problems of the borrower is known, causing management to have serious
doubts as to the ability of the borrower to comply with the present loan
repayment terms and which may result in the inclusion of such loan in one of the
nonperforming asset categories. Spectrum does not believe it has any potential
problem loans other than those reported in the above table.

ALLOWANCE FOR LOAN LOSSES

Implicit in Spectrum's lending activities is the fact that loan losses will be
incurred and that the risk of loss will vary with the type of loan being made
and the creditworthiness of the borrower over the term of the loan. To reflect
the currently perceived risk of loss associated with Spectrum's loan portfolio,
additions are made to the allowance for possible loan losses. The allowance is
created by direct charges of the provision against income and the allowance is
available to absorb realized loan losses.

The following table presents the provisions, loans charged off and recoveries of
loans previously charged off, the amount of the allowance, average loans
outstanding and certain pertinent ratios for the year ended June 30, 2000, and
for each of the prior four years.

<TABLE>
<CAPTION>
                                                                        At June 30,
                                                 --------------------------------------------------------
                                                 2000       1999        1998        1997          1996
                                                 ----       ----        ----        ----          ----
                                                                          (dollars in thousands)
<S>                                           <C>         <C>        <C>          <C>           <C>
Average loans outstanding(1) ..............   $517,471    $429,346    $380,681    $324,076      $248,637
                                               ========    ========    ========   ========       ========
Total loans at end of period(1) ...........   $582,011    $472,990    $408,470    $360,904      $296,168
                                               ========    ========    ========   ========       ========
Allowance at beginning of period ..........   $  6,020    $  5,599    $  5,803(2) $  4,790      $  2,599
Loans charged off:
  Loans to individuals ....................        356         181         481         203           550
  Real estate loans .......................         68          57          15          23            18
  Commercial and agricultural .............        175         723       1,013         379           510
  Other loans .............................        198          98         422         421           451
                                               --------    --------    --------   --------       --------
    Total charge-offs .....................        797       1,059       1,931       1,026         1,529
                                               --------    --------    --------   --------       --------

-------------------------
(1) Net of unearned fees.
(2) Restated balance at end of 1997 does not equal the 1998 beginning
    balance due to a change in reporting periods. See "-The Merger."


                                      -28-
<PAGE>

Recoveries of loans previously charged off:
  Loans to individuals ....................        102          74          60          55           414
  Real estate loans .......................         46           9           2           2             5
  Commercial and agricultural .............         84          63         162         350            45
  Other loans .............................         71           1           0           0           422
                                              --------    --------    --------    --------      --------
  Total recoveries ........................        303         147         224         407           886
                                              --------    --------    --------    --------      --------

  Net loans charged off ...................        494         912       1,707         619           643
  Provision for loan losses ...............      1,826       1,333       1,374       1,233         2,541
  Business acquisition ....................          0           0         129           0           293
                                              --------    --------    --------    --------      --------
  Allowance at end of period ..............   $  7,352    $  6,020    $  5,599    $  5,404(2)   $  4,790
                                              ========    ========    ========    ========      ========

Net loan charge-offs to average
  loans ...................................      0.10%       0.21%       0.45%        0.19%        0.26%
Allowance  to  total  loans,  at  end of
period ....................................      1.26%       1.27%       1.37%        1.50%        1.62%
</TABLE>

The amount of the allowance equals the cumulative total of the provisions made
from time to time, reduced by loan charge-offs and increased by recoveries of
loans previously charged off. Spectrum's allowance was $7,352,000, or 1.26%, of
loans, net of unearned fees, at June 30, 2000, compared to $6,020,000, or 1.27%
of loans, net of unearned fees, at June 30, 1999, and compared to $5,599,000, or
1.37% of loans, net of unearned fees, at June 30, 1998. See "Provision for Loan
Losses."

Credit and loan decisions are made by management and the board of directors of
the subsidiary banks in conformity with loan policies established by their
boards of directors. The subsidiary banks' practice is to charge off any loan or
portion of a loan when the loan is determined by management to be uncollectable
due to the borrower's failure to meet repayment terms, the borrower's
deteriorating or deteriorated financial condition, the depreciation of the
underlying collateral, the loan's classification as a loss by regulatory
examiners or for other reasons. Spectrum charged off $797,000 during the year
ended June 30, 2000. Recoveries during the year ended June 30, 2000, were
$303,000.

Foreclosures on defaulted loans result in Spectrum acquiring other real estate
and other repossessed assets. Accordingly, Spectrum incurs other expenses,
specifically net costs applicable to other real estate and other repossessed
assets, in maintaining, insuring and selling such assets. Spectrum's subsidiary
banks attempt to convert nonperforming loans into interest-earning assets either
through liquidation of the collateral securing the loan or through intensified
collection efforts.

The amount of the allowance is established by bank management based upon
estimated risks inherent in the existing loan portfolio. Management reviews the
loan portfolio on a continuing basis to evaluate potential problems. This review
encompasses management's estimate of current economic conditions and the
potential impact on various industries, prior loan loss experience and financial
conditions of individual borrowers. Loans that have been specifically identified
as problem or nonperforming loans are reviewed on at least a quarterly basis,
and management critically evaluates the prospect of ultimate losses arising from
such loans, based on the borrower's financial condition and the value of
available collateral. When a risk can be


                                      -29-
<PAGE>

specifically quantified for a loan, that amount is specifically allocated in the
allowance. In addition, Spectrum allocates the allowance based upon the
historical loan loss experience of the different types of loans. Despite such
allocation, the entire allowance is available for charge-offs of all loans.

The following table shows the allocations in the allowance and the respective
percentages of each loan category to total loans at June 30, 2000, and at
year-end for each of the prior four years. Portions of the allowance have been
allocated to categories based on an analysis of the status of particular loans
and homogenous pools of loans. The allocation table should not be interpreted as
an indication of the specific amounts, by loan classification, to be charged to
the allowance. Management believes that the table may be a useful device for
assessing the adequacy of the allowance as a whole. The table has been derived
in part by applying historical loan loss ratios to both internally classified
loans and the portfolio as a whole in determining the allocation of the loan
losses attributable to each category of loans.

<TABLE>
<CAPTION>
                                                At June 30, 2000         At June 30, 1999             At June 30, 1998
                                                ----------------         ----------------             ----------------
                                                       Percent of                   Percent of                   Percent of
                                                        Loans by                     Loans by                     Loans by
                                        Amount of       Category      Amount of      Category      Amount of      Category
                                        Allowance       To Loans      Allowance      To Loans      Allowance      To Loans
                                        ---------      ---------      ---------     ---------      ---------     ----------
                                                                    (dollars in thousands)
<S>                                     <C>               <C>        <C>               <C>        <C>           <C>
Loans to individuals...............     $  1,171           16.52%      $   826         15.98%     $     625        14.25%
Real estate loans..................        1,290           20.27           964         19.17            912        31.73
Commercial and agricultural........        4,689           62.48         4,129         64.33          3,460        51.20
Other loans........................          202            0.73           101          0.52            602         2.82
                                        ---------      ---------      ---------     ---------      ---------      ---------
Total allowance for loan losses....     $  7,352          100.00%      $ 6,020        100.00%      $  5,599       100.00%
                                        =========      =========       ========     =========      =========      =========
</TABLE>

<TABLE>
<CAPTION>
                                                At June 30, 1997         At June 30, 1996
                                                ----------------         ----------------
                                                       Percent of                   Percent of
                                                        Loans by                     Loans by
                                        Amount of       Category      Amount of      Category
                                        Allowance       To Loans      Allowance      To Loans
                                        ---------      ---------      ---------     ---------
                                                         (dollars in thousands)
<S>                                     <C>           <C>            <C>           <C>
Loans to individuals...............       $    691          15.23%     $  635            20.76%
Real estate loans..................            850          39.99         730            36.43
Commercial and agricultural........          3,248          42.33       3,372            39.75
Other loans........................            615           2.45          53             3.06
                                         ---------      ---------      ---------     ---------
  Total allowance for loan losses..       $  5,404         100.00%     $4,790           100.00%
                                         =========      =========      =========     =========
</TABLE>

SECURITIES

Securities, all of which are classified as available-for-sale and carried at
fair value, increased $26,288,000, or 28.84%, to $117,428,000 at June 30, 2000,
from $91,140,000 at June 30, 1999.

The board of directors of each subsidiary bank reviews all securities
transactions monthly and the securities portfolio periodically. Spectrum's
current investment policy provides for the purchase of U.S. Treasury securities
and federal agency securities having maturities of five years or less. For
state, county, municipal and other securities, Spectrum's investment policy
allows for the purchase of securities with maturities in excess of ten years. As
of June 30, 2000,


                                      -30-
<PAGE>

81.82% of Spectrum's securities, excluding mortgage-backed securities, with
defined maturities mature in less than ten years.

As of June 30, 2000, 97.57% of Spectrum's investment portfolio had defined
maturities. The investment portfolio with defined maturities were concentrated
in the following categories: mortgage-backed securities totaled $60,833,000, or
51.80% of the portfolio, other securities totaled $46,515,000, or 39.61% of the
portfolio, and the other category, which is composed of corporate securities,
totaled 7,223,000, or 6.15% of the portfolio. The remaining 2.43% of Spectrum's
investment portfolio is in equity securities which primarily is stock in the
Federal Home Loan Bank of Des Moines.

Certain of Spectrum's securities are pledged to secure public and trust fund
deposits and for other purposes required or permitted by law. At June 30, 2000,
the amortized cost of U.S. Government and other securities so pledged amounted
to $87,848,000, or 73.04% of the total securities portfolio.

The following table provides the maturity distribution and weighted average
interest rates of Spectrum's securities portfolio at June 30, 2000. The yield
has been computed by relating the forward income stream on the securities, plus
or minus the anticipated amortization of premium or accretion of discount, to
the book value of the securities. The restatement of the yields on tax-exempt
securities to a fully taxable-equivalent basis has been computed assuming a tax
rate of 34%. The equity securities are primarily composed of stock in the
Federal Home Loan Bank of Des Moines. The yield is set quarterly by the Federal
Home Loan Bank's board of directors.  For the quarter ended June 30, 2000, the
yield was 6.86%.

Historically, Federal Home Loan Bank stock has been redeemable at the preset
price of $100 per share, its current carrying value, but there can be no
assurance that this policy will continue.

<TABLE>
<CAPTION>
                                                                                  At June 30, 2000
                                                             ---------------------------------------------------------------
                                                                                                Estimated         Weighted
                                                             Principal        Amortized           Fair            Average
TYPE AND MATURITY                                             Amount             Cost             Value            Yield
                                                             ---------        ---------         ---------         --------
                                                                                 (dollars in thousands)
<S>                                                       <C>           <C>               <C>                  <C>
U.S. Treasury securities:
 Within one year....................................      $        300       $      301       $      298         4.66%
  After one but within five years...................             5,100            5,149            5,098         5.98
                                                             ---------        ---------         ---------       --------
    Total U.S. Treasury securities..................             5,400            5,450            5,396         5.91
                                                             ---------        ---------         ---------       --------

Obligations of other U.S. Government
 agencies and corporations:
  Within one year...................................             4,000             4,002            3,995        6.55%
  After one but within five years...................            12,144            12,064           12,003        7.91
  After five but within ten years...................             2,252             2,227            2,201        6.98
  After ten years...................................            12,890            12,880           12,191        7.34
                                                                ------            ------           ------
    Total obligations of U.S. Government
      agencies and corporations.....................            31,286            31,173           30,390        7.43
                                                                ------            ------           ------

Mortgage-backed securities:.........................            63,915            62,458           60,833       6.95%
                                                                ------            ------           ------


                                      -31-
<PAGE>

Obligations of states and political subdivisions:
  Within one year...................................               485               485              485       4.65%
  After one but within five years...................             2,246             2,248            2,204        5.82
  After five but within ten years...................             5,420             5,445            5,304        4.89
  After ten years...................................             2,930             2,882            2,736        6.10
                                                                ------            ------          -------
    Total obligations of states and
     political subdivisions.........................            11,081            11,060           10,729        5.39
                                                                ------            ------           ------

Other securities:
  Within one year...................................                 0                 0                0        0.00%
  After one but within five years...................             2,000             1,994            1,987        7.59
  After five but within ten years...................               200               193              174       10.00
  After ten years...................................             5,160             5,088            5,062        5.00
                                                                ------            ------           ------
    Total other securities..........................             7,360             7,275            7,223        5.84
                                                                ------            ------           ------

    Total securities with defined maturities........           119,042           117,416          114,571        6.82

Equity securities...................................             2,857             2,857            2,857        5.93
                                                                ------            ------           ------

      Total securities..............................      $    121,899      $    120,273      $   117,428        6.80%
                                                           ============      ===========       ===========
</TABLE>

DEPOSITS

Total deposits increased $122,464,000, or 24.16%, to $629,373,000 at June 30,
2000, from $506,909,000 at June 30, 1999. The increase in deposits is primarily
due to bank acquisition. The increase in total deposits of $56,119,000, or
12.45%, at June 30, 1999, from $450,790,000 at June 30, 1998.

The following table presents the average amounts and the average rates paid on
deposits of Spectrum for the year ended June 30, 2000, and for each of the last
two years:

<TABLE>
<CAPTION>
                                                         Year Ended June 30,
                                       -----------------------------------------------------
                                       2000                    1999                     1998
                                       -----                   ----                     ----

                                     Average     Average      Average    Average       Average      Average
                                     Amount        Rate       Amount      Rate         Amount        Rate
                                     -------     -------     --------    --------     --------      --------
                                                     (dollars in thousands)
<S>                                   <C>         <C>       <C>            <C>          <C>          <C>
Interest-bearing demand,
  savings and money market
deposits.....................         $169,463     2.59%       $145,849     2.69%        $122,747     2.95%
Time deposits of less than
  $100,000...................          253,422     5.58         219,934     5.72          202,977     6.29
Time deposits of $100,000 or
more.........................           91,184     5.49          64,589     5.03           50,713     3.55
                                    ----------               ----------                    ------
Total interest-bearing deposits        514,069     4.58         430,372     4.59          376,437     4.83
Noninterest-bearing
  demand deposits............           56,055     0.00          49,394     0.00           50,165     0.00
                                    ----------               ----------                    ------


                                      -32-
<PAGE>

Total deposits...............         $570,124     4.13%       $479,766    4.12%         $426,602    4.26%
                                       =======                  =======                   =======
</TABLE>

         The maturity distribution of time deposits of $100,000 or more at June
30, 2000 is presented below:

<TABLE>
<CAPTION>
                                                              At June 30, 2000
                                                              ----------------
                                                          (dollars in thousands)
<S>                                                                <C>
3 months or less.................................                  $33,069
Over 3 through 6 months..........................                   13,866
Over 6 through 12 months.........................                   29,699
Over 12 months...................................                   20,150
                                                      -             ------
  Total time deposits of
    $100,000 or more.............................                  $96,784
                                                                   =======
</TABLE>

The subsidiary banks rely to a limited extent on time deposits of $100,000 or
more. Time deposits of $100,000 or more are a more volatile funding source than
other deposits and are more likely to affect Spectrum's future earnings because
of interest rate sensitivity.

FEDERAL HOME LOAN BANK BORROWINGS

All of the subsidiary banks are members of the Federal Home Loan Bank of Des
Moines. Due to the competitive rates available, each subsidiary bank has
utilized Federal Home Loan Bank advances as a source of funding. At June 30,
2000, the subsidiary banks had $41,466,000 in Federal Home Loan Bank advances
compared to $25,989,000 at June 30, 1999 and $24,500,000 at June 30, 1998. At
June 30, 2000, based on its Federal Home Loan Bank stockholdings, the aggregate
unused borrowing capacity of Spectrum was $29,475,000.

A variety of borrowing terms and maturities can be chosen from the Federal Home
Loan Bank. Maturities available range generally from one day to 10 years.
Interest rates can be either fixed or variable and prepayment options are
available if desired. The Federal Home Loan Bank offers both amortizing and
non-amortizing advances.


                                      -33-
<PAGE>

LIQUIDITY

SOURCES OF LIQUIDITY

Liquidity with respect to a financial institution is the ability to meet
short-term needs for cash without suffering an unfavorable impact on on-going
operations. The need for the subsidiary banks to maintain funds on hand arises
principally from maturities of short-term borrowings, deposit withdrawals,
customers' borrowing needs and the maintenance of reserve requirements.
Liquidity needs may be met from either assets or liabilities.

On the asset side of the balance sheet, the primary sources of liquidity are
cash and due from banks, federal funds sold, maturities of securities and
scheduled repayments and maturities of loans. The subsidiary banks maintain
adequate levels of cash and near-cash investments to meet their day-to-day
needs. Cash and due from banks averaged $22,600,000 and $17,433,000 during the
years ended June 30, 2000 and 1999. These amounts comprised 3.26% and 2.99% of
average total assets during the years ended June 30, 2000 and 1999. The average
level of securities and federal funds sold was $130,588,000 and $115,200,000
during the years ended June 30, 2000 and 1999.

At June 30, 2000, $4,778,000, or 8.89%, of Spectrum's securities portfolio,
excluding mortgage-backed securities and equity securities, matured within one
year and $21,292,000 or 39.62%, excluding mortgage-backed securities, matured
after one but within five years. The subsidiary banks' commercial lending
activities are concentrated in loans with maturities of less than five years and
with both fixed and adjustable interest rates. Its consumer lending activities
are concentrated in loans with maturities of two to six years and with generally
fixed interest rates. At June 30, 2000, approximately $182,458,000, or 31.35%,
of Spectrum's loans, net of unearned fees, matured within one year. See "Loan
Maturities."

On the liability side of the balance sheet, the principal sources of liquidity
are deposits, borrowed funds and access to money and capital markets. Spectrum
attracts its deposits primarily from individuals and businesses located within
the market areas served by its subsidiary banks. Borrowed funds come primarily
from two sources, Federal Home Loan Bank borrowings and Spectrum's notes payable
at LaSalle Bank. Interest on the balance, $2,300,000 at June 30, 2000, is due
quarterly at either the lender's reference rate, the Prime rate plus 2% per
annum or the LIBOR rate plus 1.5% per annum, at the option of Spectrum. The
maturity date of this outstanding debt was January 31, 2001. Spectrum's capital
liquidity source has been the sale of junior subordinated debentures. Junior
subordinated debentures were purchased by its subsidiary, Spectrum Capital Trust
I, with the proceeds of a sale of $20,400,000 of mandatorily redeemable
preferred securities in August 1999. The Trust holds solely junior subordinated
debentures of the Company.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk arises when an interest-earning asset matures or when such
asset's rate of interest changes in a time frame different from that of the
supporting interest-bearing liability. Spectrum seeks to reduce the risk of
significant adverse effects on Spectrum's net interest income caused by interest
rate changes.

Spectrum does not attempt to match each interest-earning asset with a specific
interest-bearing liability. Instead, as shown in the table below, it aggregates
all of its interest-earning assets and interest-bearing liabilities to determine
the difference between the two in specific time frames.


                                      -34-
<PAGE>

This difference is known as the rate-sensitivity gap. A positive gap indicates
that more interest-earning assets than interest-bearing liabilities mature in a
time frame, and a negative gap indicates the opposite. Maintaining a balanced
position will reduce the risk associated with interest rate changes, but it will
not guarantee a stable interest rate spread since various rates within a
particular time frame may change by differing amounts and in different
directions. Management regularly monitors the interest sensitivity position and
considers this position in its decisions with regards to interest rates and
maturities for interest-earning assets acquired and interest-bearing liabilities
accepted.

The following tables show the cumulative gap ratio to be (25.56%) at the less
than three-month interval, (34.91%) at the three month to less than one-year
interval and (7.53%) at the one to five year intervals at June 30, 2000.
Currently, Spectrum is in a liability-sensitive position. Spectrum had
$188,028,000 of interest-bearing demand, savings and money market deposits at
June 30, 2000 that is somewhat less rate-sensitive. Excluding these deposits,
Spectrum's interest-sensitive ratio would have been (1.27)% at the less than
three-month interval, (10.61%) at the three month to less than one year interval
and 16.76% at the one to five year interval at June 30, 2000. The interest
sensitivity position is presented as of a point in time and can be modified to
some extent by management as changing conditions dictate.

The following table shows the interest rate sensitivity position of Spectrum at
June 30, 2000:

<TABLE>
<CAPTION>
                                                               Estimated Maturity or Repricing at June 30, 2000
                                                               ------------------------------------------------
                                                                     Three Months
                                                       Less Than     to Less Than         One to           Over
                                                      Three Months      One Year       Five Years       Five Years       Total
                                                      ------------    ------------     -----------      ----------     ---------
Interest-earning assets:                                                       (dollars in thousands)
<S>                                                   <C>             <C>              <C>              <C>          <C>
Loans, net of unearned fees..................             $ 89,664       $  92,794        $310,858         $88,695      $582,011
  Investment securities:
    Taxable...................................               2,653           5,594          57,063          42,452       107,762
 Tax exempt...................................                   0             485           2,248           6,933         9,666
  Federal funds sold..........................              17,762               0              99               0        17,861
                                                       -----------       ---------       ---------        --------     ---------
        Total interest-earning assets.........             110,079          98,873         370,268         138,080       717,300
Interest-bearing liabilities:
Deposits:
Demand, savings and money market
    deposits..................................
                                                           188,028               0               0               0       188,028
    Time deposits.............................                             149,557         143,393           1,067       381,185
                                                            87,168
Federal Home Loan Bank borrowings, federal
  funds purchased and securities sold
  under agreements to repurchase.........
                                                            32,735          19,324          15,000               0        67,059

Notes payable.................................

                                                                 0           2,300               0               0         2,300
                                                       -----------       ---------       ---------        --------    ----------
    Total interest-bearing liabilities........         $   307,931       $ 171,181      $  158,393       $   1,067     $ 638,572
Interest rate gap.............................         $  (197,852)      $ (72,308)     $  211,875       $ 137,013     $  78,728
                                                       ===========       =========      ==========       =========     =========

Cumulative interest rate gap
   at June 30, 2000...........................         $  (197,852)      $(270,160)     $  (58,285)      $  78,728
                                                       ===========       =========      ==========       =========


                                      -35-
<PAGE>

Cumulative interest rate gap to total assets..              (25.56)%        (34.91)%         (7.53)%          7.54%
                                                       ===========       =========      ==========        =========
</TABLE>

The following table indicates that at June 30, 2000, if there had been a sudden
and sustained increase in prevailing market interest rates, Spectrum's 2000
interest income would be expected to decrease, while a decrease in rates would
indicate an increase in income.

<TABLE>
<CAPTION>

                                                                               (Decrease)
                                                     Net Interest Income        Increase              Percent Change
                                                     -------------------        ---------             --------------
                                                                     (dollars in thousands)
Changes in Interest Rates
<S>                                                   <C>                   <C>                            <C>
200 basis point rise.................                 $     22,316              $  (4,330)                 (16.25)%
100 basis point rise.................                       24,481                 (2,165)                  (8.13)
Base rate scenario................                          26,646                      0                    0.00
100 basis point decline............                         29,058                  2,412                    9.05
200 basis point decline............                         32,008                  5,362                   20.12
</TABLE>

CAPITAL RESOURCES

Spectrum monitors compliance with bank and bank holding company regulatory
capital requirements, focusing primarily on risk-based capital guidelines. As
indicated in the table immediately below, at June 30, 2000, Spectrum was above
the total capital minimum requirements. Under the risk-based capital method of
capital measurement, the ratio computed is dependent upon the amount and
composition of assets recorded on the balance sheet, and the amount and
composition of off-balance sheet items, in addition to the level of capital.
Included in the risk-based capital method are two measures of capital adequacy,
core capital and total capital, which consists of core and supplementary
capital. See "Supervision and Regulation - Spectrum - Capital Adequacy."

The following tables present Spectrum's capital ratios as of the indicated
dates.

<TABLE>
<CAPTION>
                                                                       Risk-Based Capital Ratios
                                                                       -------------------------
                                                        June 30, 2000                         June 30, 1999
                                                        -------------                         -------------
                                                 Amount               Ratio              Amount             Ratio
                                                 ------               -----              ------             -----
                                                                           (dollars in thousands)
<S>                                              <C>                  <C>             <C>                   <C>
Core capital...............................      $ 54,469             9.38%            $  37,055             7.77%
Core capital minimum requirement...........        23,222             4.00                19,088             4.00
                                                  -------            ------               ------             ----
Excess.....................................      $ 31,247             5.38%            $  17,967             3.77%
                                                  =======            ======               ======             ====

Total capital..............................      $ 67,428            11.61%               43,020             9.02%
Total capital minimum requirement..........        46,445             8.00                38,175             8.00
                                                  -------            ------               ------             ----
Excess.....................................      $ 20,983             3.61%            $   4,845             1.02%
                                                  =======            ======               ======             ====

      Total risk-weighted assets...........      $580,561                              $ 477,189
                                                  =======                              =========
</TABLE>


                                      -36-
<PAGE>

<TABLE>
<CAPTION>
                                                                                Leverage Ratios
                                                                          -------------------------
                                                       June 30, 2000                          June 30, 1999
                                                       -------------                          -------------
                                                 Amount               Ratio              Amount             Ratio
                                                 ------               -----              ------             -----
                                                                           (dollars in thousands)
<S>                                              <C>                  <C>              <C>                  <C>

Core capital...............................      $ 54,469             7.03%             $  37,055             6.17%
Minimum requirement........................
                                                   31,005             4.00                 24,033             4.00
                                                 --------                                -------
Excess.....................................      $ 23,464             3.03%                13,022             2.17%
                                                 ========                                =======

Average total assets.......................      $775,120                               $ 600,832
                                                 ========                                =======
</TABLE>

IMPACT OF INFLATION

The effects of inflation on the local economy and on Spectrum's operating
results have been relatively modest for the past several years. Because
substantially all of Spectrum's assets and liabilities are monetary in nature,
such as cash, securities, loans and deposits, their values are less sensitive to
the effects of inflation than to changing interest rates, which do not
necessarily change in accordance with inflation rates. Spectrum attempts to
control the impact of interest rate fluctuations by managing the relationship
between its interest rate sensitive assets and liabilities. See "-Quantitative
and Qualitative Disclosures About Market Risk" above.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company at June 30, 2000 and 1999, together with
the Independent Auditor's Report, are included in this Form 10-K on the pages
indicated below.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

                                                     PART III

ITEM 10.  EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of Spectrum and their respective ages and
positions as of the date of this report are as follows:

<TABLE>
<CAPTION>

      Name                       Age        Position With Spectrum            Position With Subsidiary
      ----                       ---        ----------------------            ------------------------
<S>                              <C>     <C>                              <C>
Deryl F. Hamann                  67      Chairman of the Board, CEO and    Chairman and Director of F&M Bank,
                                         Director                          Rushmore Bank & Trust and Citizens
                                                                           bank, Carlisle


                                      -37-
<PAGE>

Daniel A. Hamann                 42      President and Director            Chairman and Director of Citizens
                                                                           Bank, Mount Ayr and  Citizens Bank of
                                                                           Princeton ; Vice Chairman and
                                                                           Director of F&M Bank, Rushmore Bank &
                                                                           Trust and Citizens Bank, Carlisle;
                                                                           Chairman and Director of Spectrum
                                                                           Banc Service Corporation

Daniel J. Brabec                 41      Executive Vice President, CFO,    Director of Rushmore Bank & Trust and
                                         Director, Secretary and           F&M Bank
                                         Treasurer

W. Eric Bunderson                44      Vice President, Chief Credit      None
                                         Officer, Assistant Secretary
                                         and Director

Thomas B. Fischer                53      Senior Vice President and         None
                                         Director
</TABLE>

Deryl F. Hamann is the father of Daniel A. Hamann and the father-in-law of
Daniel J. Brabec and W. Eric Bunderson. All directors of Spectrum hold office
until the next meeting of stockholders or until their successors are elected and
qualified.

DERYL F. HAMANN. Mr. Hamann has been Chairman or President and CEO of Spectrum
since 1971. He has been President and Director of Farmers & Merchants Investment
Co. since 1974, which merged into an acquired company, changed its name to
Spectrum Bancorporation, Inc. in 1996, and merged into Spectrum on May 31, 1999.
He also serves as Chairman or President of two affiliated bank holding
companies, Great Western Securities, Inc. and Citizens Corporation, and as
Chairman of the Executive Committee of Great Western Bank, Omaha, Nebraska. He
is Chairman of the affiliated Spectrum Life Insurance Company, an Arizona
reinsurance company. He is Chairman of the affiliated Spectrum Financial
Services, Inc. He is a partner in the Omaha, Nebraska law firm of Baird, Holm,
McEachen, Pedersen, Hamann & Strasheim.

DANIEL A. HAMANN. Mr. Daniel Hamann has been President of Spectrum since 1996
and served as Vice President of Spectrum from 1992 to 1996. He is Chairman and
Director of Citizens Bank, Mount Ayr and Citizens Bank of Princeton and Vice
Chairman of F&M Bank and Rushmore Bank & Trust and Citizens Bank, Carlisle. He
is Vice President and Director of the affiliated Spectrum Life Insurance
Company. He is Chairman and Director of the affiliated Citizens Bank, Chariton,
Iowa and President of Spectrum's banks' subsidiary, Spectrum Banc Service
Corporation.

DANIEL J. BRABEC. Mr. Brabec has served as Vice President of Spectrum since
1992. Mr. Brabec served as Executive Vice President and Director of Rushmore
Bank & Trust from 1993 to 1999. He has served as Chief Financial Officer and
Executive Vice President of Spectrum Bancorporation since December 1999. He is
President of the affiliated Spectrum Life Insurance Company. He serves as a
Director of Rushmore Bank & Trust and F&M Bank.

W. ERIC BUNDERSON. Mr. Bunderson has served since 1994 as a Commercial Real
Estate Loan Officer and in1999 as Assistant Vice President at Great Western
Bank, an affiliate of Spectrum. In July 2000, he became the Chief Credit Officer
of Spectrum with oversight responsibility for all credit


                                      -38-
<PAGE>

activity of the subsidiary banks. He is Chief Investment Officer of the
affiliated Spectrum Life Insurance Company.

THOMAS B. FISCHER. Mr. Fischer is President of Spectrum Financial Services, Inc.
an affiliate of Spectrum. He has held this position since May 1996. In 1997, he
was elected Senior Vice President and Director of Spectrum. From 1992 to 1996,
Mr. Fischer was Vice President, General Counsel, and Secretary of FirsTier
Financial, Inc., a multi-bank holding company headquartered in Omaha, Nebraska.



ITEM 11.  EXECUTIVE COMPENSATION

The following table presents the cash compensation paid by Spectrum and its
subsidiaries to its Chief Executive Officer and its President for the years 1998
through 2000. No other executive officer of Spectrum received compensation from
Spectrum exceeding $100,000 for these years.

<TABLE>
<CAPTION>
                                                                                       All Other
       Name and Principal Position                         Year      Salary          Compensation(1)
       ---------------------------                         ----      ------          ---------------
<S>                                                        <C>      <C>              <C>
       Deryl F. Hamann, Chairman and
       Chief Executive Officer                              2000     $258,796            $6,800
                                                            1999      251,485             6,800
                                                            1998      292,750             5,434
       Daniel A. Hamann, President
                                                            2000     $141,629            $3,490
                                                            1999      127,840             3,196
                                                            1998      103,663             2,486
</TABLE>
------------------------
(1) Amounts represent 401(k) Plan employer contributions.

Spectrum does not have any compensatory stock option plan for its executive
officers and directors. None of the directors or officers of Spectrum have any
options, warrants or other similar rights to purchase securities of Spectrum.

Spectrum has an audit committee at the holding company level with Director
Thomas Fischer as chairman.

INDEMNIFICATION

The articles of incorporation of Spectrum provide that the board of directors is
authorized to indemnify, in the manner and to the extent provided by the Iowa
Business Corporation Act, any person entitled to indemnification thereunder.
Generally under Iowa law, any individual who is made a party to a proceeding
because the individual is or was a director may be indemnified if the individual
acted in good faith and had reasonable basis to believe that: (1) in the case of
conduct in the individual's official capacity with the corporation, that the
individual's conduct was in the corporation's best interests; and (2) in all
other cases, that the individual's conduct was at least not opposed to the
corporation's best interest; and regarding any criminal proceedings, the
individual had no reasonable cause to believe the individual's conduct was
unlawful. Iowa law also extends such indemnification to officers, employees, and
agents of the corporation and further provides that an Iowa corporation may
advance expenses to a director, officer, employee, or agent of the corporation.


                                      -39-
<PAGE>

Iowa law also provides that an Iowa corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by that individual in that capacity or arising from the individual's
status as a director, officer, employee, or agent.

The indemnification and advancement of expenses provided by Iowa law are not
exclusive of any other rights to which persons seeking indemnification or
advancement of expenses are entitled under a provision in the articles of
incorporation or bylaws, agreements, vote of stockholders or disinterested
directors, or otherwise, both as to action in a person's official capacity and
as to action in another capacity while holding office. However, such provisions,
agreements, votes or other actions shall not provide indemnification for a
breach of a director's duty of loyalty to the corporation or its stockholders,
for acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of the law, for a transaction from which the person seeking
indemnification derives an improper personal benefit, or for liability for
unlawful distributions.

Iowa law provides that a director is not liable for any action taken as a
director, or any failure to take any action, as long as the director discharged
his or her duties (1) in good faith, (2) with the care of an ordinarily prudent
person in a like position would exercise under similar circumstances, and (3) in
a manner the director reasonably believes to be in the best interests of the
corporation.

There is no pending litigation or proceeding involving a director, officer,
employee or other agent of Spectrum as to which indemnification is being sought.
Spectrum is not aware of any other threatened litigation that may result in
claims for indemnification by any director, officer, employee or other agent.

PHANTOM STOCK AGREEMENTS

Spectrum's subsidiary banks have phantom stock agreements with four senior bank
officers, including Daniel A. Hamann, Chairman of Citizens Bank, Mount Ayr. Cash
amounts are accumulated for the officers based on their bank's performance, 50%
by achieving certain annual growth rates in net income and 50% by achieving
certain annual rates of return on assets. Accumulated amounts are payable to the
officers over ten years beginning at age 65 or prior death or permanent
disability.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

The following table presents information regarding beneficial ownership of
common stock of Spectrum as of September 1, 2000 by (1) each shareholder known
by Spectrum to be the beneficial owner of more than 5% of its outstanding common
stock and (2) each director of Spectrum and each named executive officer and (3)
all directors and executive officers as a group. Based on information furnished
by the owners, management believes that the stockholders listed below have sole
investment and voting power regarding their shares, except that co-trustees
share investment and voting power.


                                      -40-
<PAGE>

<TABLE>
<CAPTION>

                                                                                    Shares
                                                                                  Beneficially     Percentage
Name and Address of Beneficial Owner                                                 Owned          of Class
------------------------------------                                              ------------     ----------
<S>                                                                                  <C>             <C>
         Deryl F. Hamann ............................................................45,393(1)       57.4%
                1500 Woodmen Tower
                Omaha, NE 68102

         Daniel A. Hamann ............................................................2,677(2)       28.7%
                10834 Old Mill Road, Suite One
                Omaha, NE 68154

         Esther Hamann Brabec .......................................................24,685(3)       31.2%
                10834 Old Mill Road, Suite One
                Omaha, NE 68154

         Daniel J. Brabec ............................................................. 420(4)           *
                10834 Old Mill Road, Suite One
                Omaha, NE 68154

         Julie Hamann Bunderson .....................................................26,873(5)       34.0%
                10834 Old Mill Road, Suite One
                Omaha, NE 68154

         W. Eric Bunderson .............................................................454(6)           *
                10834 Old Mill Road, Suite One
                Omaha, NE 68104

-------------------------------------------
(1)Of this amount, an aggregate of 14,944 shares are held by four separate
   trusts for which Mr. Hamann serves as trustee for the benefit of his
   children, Daniel A. Hamann, Esther Hamann Brabec, Julie Hamann Bunderson, and
   Karl E. Hamann.
(2)Of this amount, 2,221 shares are owned by his revocable trust for which he
   serves as sole trustee, 176 shares are owned by his spouse, and an aggregate
   of 20,280 shares are held by various Hamann family trusts for which he serves
   as co-trustee with Esther Hamann Brabec and Julie Hamann Bunderson.
(3)Of this amount, 2,033 shares are owned by her revocable trust for which she
   serves as sole trustee, 420 shares are owned by her spouse, an aggregate of
   20,280 shares are held by various Hamann family trusts for which she serves
   as co-trustee with Daniel A. Hamann and Julie Hamann Bunderson, and 1,952
   shares are owned by her as trustee for Julie Hamann Bunderson's issue.
(4)Does not include shares beneficially owned by his spouse. Mr. Brabec
   disclaims beneficial ownership of such shares.
(5)Of this amount, 2,128 shares are owned by her revocable trust for which she
   serves as sole trustee, 454 shares are owned by her spouse, an aggregate of
   20,280 shares are held by various Hamann family trusts for which she serves
   as co-trustee with Daniel A. Hamann and Esther Hamann Brabec, 2,403 shares
   are owned by her as trustee for Esther Hamann Brabec's issue and 1,608 shares
   are owned by her as trustee for Daniel A. Hamann's issue.
(6)Does not include shares beneficially owned by his spouse. Mr. Bunderson
   disclaims beneficial ownership of such shares.


                                      -41-
<PAGE>

         Thomas B. Fischer...............................................        ---                   ---
                10834 Old Mill Road, Suite One
                Omaha, NE 68154

         All executive officers and directors as
         a group (five persons)..........................................       79,068               100.0%
</TABLE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Spectrum's subsidiary banks purchase loan participations from, and sell loan
participations to, Spectrum's affiliated banks, Great Western Bank, Omaha,
Nebraska, and Citizens Bank, Chariton, Iowa, in the ordinary course of business.
The participations are made on terms similar to those with unaffiliated parties.
Approximate loan principal balances outstanding under the participations are
summarized as follows:

<TABLE>
<CAPTION>

               Affiliate Loan Participations                        At June 30, 2000             At June 30, 1999
              -------------------------------                      ----------------             ----------------
<S>                                                                 <C>                          <C>
           Purchased by Spectrum's banks...............                  $25,569,135                  $20,026,000
           Sold by Spectrum's banks....................                   10,151,584                    7,372,000
</TABLE>

Deryl F. Hamann, Chairman, CEO and controlling stockholder of Spectrum, owns as
trustee for the benefit of his children 50% of the common stock of Great Western
Securities, Inc., a bank holding company for Great Western Bank, Omaha,
Nebraska. An unrelated individual owns the remaining 50% common stock interest.
Great Western Bank has ten banking locations in the Omaha, Nebraska metropolitan
area. At June 30, 2000, it had total assets of $650,442,000, total deposits of
$539,162,000 and total loans net of unearned fees of $476,184,000. Daniel A.
Hamann, Esther Hamann Brabec and Julie Hamann Bunderson individually and Deryl
F. Hamann as trustee for another of his children own all of the common stock of
Citizens Corporation, a bank holding company for Citizens Bank, Chariton, Iowa.
At June 30, 2000, it had total assets of $77,591,000, total deposits of
$621,160,000 and total loans net of unearned fees of $52,745,000. Citizens Bank,
Chariton has seven banking offices in Wayne and Lucas counties in southern Iowa.
Those counties are adjacent to Decatur and Clarke counties in Iowa where
Spectrum's subsidiary bank, Citizens Bank, Mount Ayr, has four banking offices.
Wayne County, Iowa is adjacent to Mercer County, Missouri where Spectrum's
subsidiary Citizens Bank of Princeton has a banking office. See "Subsequent
Event" for additional information.

Spectrum Life Insurance Company and Spectrum Financial Services, Inc. are
affiliates of Spectrum. They are owned, directly or indirectly, by Deryl F.
Hamann, individually or as trustee for the benefit of his children. Spectrum
Life Insurance Company reinsures certain credit life, accident, health and
unemployment insurance policies sold by Spectrum's subsidiary banks, its
affiliated banks and unaffiliated banks as agents for an unaffiliated insurance
company. Spectrum Life Insurance Company reinsures certain of the mortality and
morbidity risks under such policies in accordance with separate treaties with
the unaffiliated insurance company, and received compensation from such
insurance company of $298,186 during Spectrum's fiscal year ended June 30, 2000,
and $227,440 for the year ended June 30, 1999, for assuming such reinsurance
risks with respect to credit insurance originated by Spectrum's subsidiary
banks. Spectrum's subsidiary banks receive a commission on such sales of credit
insurance as permitted by applicable state law.

In addition, Spectrum Financial Services receives a commission as general agent
from the unaffiliated insurance company on such sales of credit insurance where
permitted by law. Such


                                      -42-
<PAGE>

commissions on credit insurance originated by Spectrum's subsidiary banks was
$279,208 during the fiscal year ended June 30, 2000, and $69,761 during the
fiscal year ended June 30, 1999. Spectrum believes that the foregoing
arrangements are on terms similar to those which would be obtained with an
unaffiliated party.

An affiliate of Spectrum Financial Services places investment centers in banks,
including Spectrum's subsidiary banks, its affiliated banks and unaffiliated
banks. The investment centers engage in the sale of life insurance, annuities,
mutual funds and certain other securities on the premises of the banks under
lease arrangements and with joint or common employees. The division of Spectrum
Financial Services pays Spectrum's subsidiary banks lease rentals based on
commissions generated. Gross commissions originated from Spectrum's subsidiary
banks were $453,486 during Spectrum's fiscal year ended June 30, 2000, and
$280,599 during the fiscal year ended June 30, 1999. Each Spectrum bank received
approximately 25% of the amount of gross commissions generated from its leased
space as rental. Spectrum believes that these arrangements are on terms similar
to those that would be obtained with an unaffiliated party.

Spectrum's banks and its affiliate, Citizens Bank, Chariton, Iowa own all of the
stock of Spectrum Banc Service Corporation. It provides data processing services
and certain related services to the five banks on a break even basis. Spectrum
believes that these arrangements are on terms similar to those that would be
obtained with an unaffiliated party.

On May 31, 1999, Spectrum, which was then named Decatur Corporation, became the
surviving corporation in a merger with two affiliated bank holding companies,
Spectrum Bancorporation, Inc. and Rushmore Financial Services, Inc., which owned
F & M Bank, Watertown, South Dakota, and Rushmore Bank & Trust, Rapid City,
South Dakota. The Hamann family or their interests owned beneficially all of the
stock of all parties to the merger. In the merger, the Hamann family or their
interests received a total of 61,063 shares of common stock of Spectrum and
8,000 shares of 10% nonvoting, noncumulative perpetual preferred stock of
Spectrum.

In 1995 Spectrum entered into a split dollar insurance agreement with Deryl F.
Hamann under which it pays an annual premium of $60,000 to purchase a policy on
Mr. Hamann's life in the face amount of $1,000,000. Mr. Hamann is taxed on the
economic benefit in accordance with Internal Revenue Service rules. The policy
is owned by three of Mr. Hamann's children, Daniel A. Hamann, Esther Hamann
Brabec, and Julie Hamann Bunderson, who have the right to designate
beneficiaries, borrow on the security of the policy and to surrender the policy.
They have assigned the death benefit under the policy to Spectrum as security
for repayment of the amounts which Spectrum contributes toward the payment of
the premiums due on the policy.

Deryl F. Hamann is a partner in the law firm of Baird, Holm, McEachen, Pedersen,
Hamann & Strasheim, Omaha, Nebraska, counsel to Spectrum.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)      Documents filed with this report.

                  (1) See index to consolidated financial statements on page F-1
                  of this report.

                  (2) All supplemental schedules are omitted because of the
                  absence of conditions under which they are required or because
                  the information is shown in the Consolidated Financial
                  Statements or notes thereto.


                                      -43-
<PAGE>

(3)      Exhibits

(a) (3) EXHIBITS

<TABLE>
<CAPTION>

                                                                                                        SEQUENTIAL
                                                                             REFERENCE TO               PAGE NUMBER
                                                                             PRIOR FILING             WHERE ATTACHED
                                                                              OR EXHIBIT          EXHIBITS ARE LOCATED IN
    REGULATION S-K                                                              NUMBER             THIS FORM 10-K REPORT
    EXHIBIT NUMBER                                                             ATTACHED
                                           DOCUMENT                             HERETO
<S>                     <C>                                                    <C>                 <C>
          2             Agreement and Plan of Merger dated March 31,
                        1999, between Spectrum Bancorporation, Inc.,
                        Decatur Corporation and Rushmore Financial
                        Services, Inc.                                           (1)                  Not Applicable
        3.1             Articles of Amendment to Articles of
                        Incorporation of Spectrum Bancorporation, Inc.           (1)                  Not Applicable
        3.2             Bylaws of Spectrum Bancorporation, Inc.                  (1)                  Not Applicable
        4.1             Form of Subordinated Indenture dated August
                        18, 1999, to be entered into between the
                        Registrant and Wilmington Trust Company, as
                        Indenture Trustee.                                       (1)                  Not Applicable
        4.2             Form of Junior Subordinated Debenture.                   (1)                  Not Applicable
        4.3             Certificate of Trust of Spectrum Capital I.              (1)                  Not Applicable
        4.4             Trust Agreement of Spectrum Capital I dated
                        as of June 11, 1999.                                     (1)                  Not Applicable
        4.5             Form of Amended and Restated Trust Agreement
                        of Spectrum Capital I, dated August 18, 1999.            (1)                  Not Applicable
        4.6             Form of Preferred Security Certificate of
                        Capital 1.                                               (1)                  Not Applicable
        4.7             Form of Preferred Securities Guarantee                   (1)                  Not Applicable
        4.8             Form of Agreement as to Expenses and
                        Liabilities.                                             (1)                  Not Applicable
       10.3             Agreement for Advances, Pledge and Security
                        Agreement dated September 11, 1995, between
                        Federal Home Loan Bank of Des Moines and
                        Rushmore Bank & Trust.  (Registrant's other
                        subsidiary banks have identical agreements)              (1)                  Not Applicable
       10.4             Form of CMS(TM)Agency Agreement (reverse
                        repurchase agreement) between F&M Bank and
                        its customers.                                           (1)                  Not Applicable


                                      -44-
<PAGE>


       10.5             Phantom Stock Long-Term Incentive Plan dated
                        January 16, 1998, between Daniel A. Hamann
                        and Citizens Bank.                                       (1)                  Not Applicable
       10.6             License Agreement dated September 5, 1997
                        between Jack Henry & Associates, Inc. and
                        Spectrum Banc Service Corporation.
                                                                                 (1)                  Not Applicable
       10.7             Split-Dollar Agreement dated July 12, 1995
                        among Decatur Corporation and Daniel A.
                        Hamann, Esther Hamann Brabec and Julie Hamann
                        Bunderson.                                               (1)                  Not Applicable
       12.1             Statement re Computation of Ratios.                      (2)
         21             Subsidiaries of Registrant.                              (2)

         27             Financial Data Schedule                                  (2)
</TABLE>

(1)      Filed as exhibits to the Company's Form S-1 registration statement
         filed on June 11, 1999, (File No. 333-80551) pursuant to Section 5 of
         the Securities Act of 1933.

(2)      Filed herewith.

All of such previously filed documents are hereby incorporated herein by
reference in accordance with Item 601 of Regulation S-K.

(b)      REPORTS ON FORM 8-K

No current reports on Form 8-K were filed by the Company during the quarter
ended June 30, 2000.


                                   SIGNATURES

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

                                    SPECTRUM BANCORPORATION, INC.

                                    By  /s/ Deryl F. Hamann
                                        -------------------------------
                                        Deryl F. Hamann, Chairman
                                        and Chief Executive Officer
                                        (Duly Authorized Representative)

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

/s/ Deryl F. Hamann                            /s/ Daniel A. Hamann
-----------------------------------            --------------------------------
Deryl F. Hamann, Chairman,                     Daniel A. Hamann, President
Chief Executive Officer and Director           and Director
(Principal Executive and Operating Officer)


                                      -45-
<PAGE>

Date:    9/21/00                        Date:      9/21/00
      --------------                           --------------

/s/ Thomas B. Fischer
----------------------------------- --------------------------------
Thomas B. Fischer,
Senior Vice President and Director

Date:    9/21/00
      --------------

/s/ Daniel J. Brabec
-----------------------------------
Daniel J. Brabec,
Executive Vice President, Chief Financial Officer
Secretary/Treasurer and Director

Date:    9/21/00
      --------------

/s/ W. Eric Bunderson
-----------------------------------
W. Eric Bunderson, Vice President, Chief Credit Officer
Assistant Secretary and Director

Date:    9/21/00
      --------------

                                      -46-
<PAGE>

                                    CONTENTS


------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT                                              F-2
------------------------------------------------------------------------------

CONSOLIDATED FINANCIAL STATEMENTS

   Balance sheets                                                         F-3

   Statements of income                                                   F-4

   Statements of stockholders' equity                                     F-5

   Statements of cash flows                                       F-6 and F-7

   Notes to consolidated financial statements                      F-8 - F-34

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





                                       F-1



<PAGE>


                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Spectrum Bancorporation, Inc.
Omaha, Nebraska

We have audited the accompanying consolidated balance sheets of Spectrum
Bancorporation, Inc. and subsidiaries as of June 30, 2000 and 1999, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended June 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 Spectrum
Bancorporation, Inc. and subsidiaries as of June 30, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 2000 in conformity with generally accepted accounting
principles.

                                            McGLADREY & PULLEN, LLP

Sioux Falls, South Dakota
August 10, 2000

                                      F-2


<PAGE>

SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 1999 (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

ASSETS                                                              2000         1999
                                                                 ---------     ---------
<S>                                                              <C>          <C>
Cash and due from banks (Note 3)                                 $  24,129     $  18,389
Federal funds sold                                                  15,089         7,255
                                                                 ---------     --------
              TOTAL CASH AND CASH EQUIVALENTS                       39,218        25,644
Certificates of deposit                                              2,772           792
Securities available for sale (Notes 4, 8 and 9)                   117,428        91,140
Loans receivable, net (Notes 5, 9 and 18)                          574,659       466,970
Premises and equipment, net (Note 6)                                16,971        12,668
Accrued interest receivable                                          7,640         5,775
Cost in excess of net assets acquired                                7,893         2,667
Other assets (Note 11)                                               7,375         5,514
                                                                 ---------     ---------
                                                                $  773,956    $  611,170
                                                                ==========     =========

<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------------------
<S>                                                             <C>           <C>
Liabilities
   Deposits (Note 7):
      Non interest bearing                                       $  60,160     $  49,934
      Interest bearing                                             569,213       456,975
                                                                 ---------     ---------
              TOTAL DEPOSITS                                       629,373       506,909
   Federal funds purchased and securities sold
      under agreements to repurchase (Note 8)                       22,415        19,777
   Notes payable (Note 9)                                           46,944        39,024
   Company obligated mandatorily redeemable
      preferred securities of subsidiary trust
      holding solely subordinated debentures (Note 10)              20,400           --
   Accrued interest and other liabilities (Note 12)                  8,951         6,243
                                                                 ---------     ---------
                                                                   728,083       571,953
                                                                 ---------     ---------

Minority interest in subsidiaries (Note 2)                           2,840         2,020
                                                                 ---------     ---------
Commitments and Contingencies (Notes 16 and 17)

Stockholders' Equity (Notes 9 and 14)
   Preferred stock, $100 par value; 500,000 shares
      authorized; issued and outstanding: 9,000 shares
      of 8% cumulative, nonvoting; 8,000 shares of 10%
      noncumulative, nonvoting                                       1,700         1,700
   Common stock, $1 par value, authorized 1,000,000
      shares, issued and outstanding: 2000 71,484 shares;
      1999 71,607 shares                                                72            72
   Additional paid-in capital                                        1,649         1,654
   Retained earnings                                                41,440        34,276
   Accumulated other comprehensive income (loss) (Note 4)           (1,828)         (505)
                                                                 ---------     ---------
                                                                    43,033        37,197
                                                                 ---------     ---------
                                                                $  773,956    $  611,170
                                                                ==========     =========
</TABLE>

See Notes to Consolidated Financial Statements.

                                            F-3


<PAGE>

SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                          2000           1999          1998
                                                                      ---------       -------      --------
<S>                                                                 <C>               <C>          <C>
Interest income on:
   Loans receivable                                                  $    46,950      $ 38,924     $ 35,414
   Taxable securities                                                      6,175         5,340        4,308
   Nontaxable securities                                                     484           514          636
   Dividends on securities                                                   171           109          234
   Federal funds sold and other                                            1,792         1,386        1,313
                                                                      ----------       -------      -------
                                                                          55,572        46,273       41,905
                                                                      ----------       -------      -------
Interest expense on:
   Deposits                                                               23,523        19,751       18,170
   Federal funds purchased and securities sold
      under agreements to repurchase                                       1,155           895          934
   Notes payable and company obligated mandatorily
      redeemable preferred securities                                      4,221         2,510        2,656
                                                                      ----------       -------      -------
                                                                          28,899        23,156       21,760
                                                                      ----------       -------      -------
              NET INTEREST INCOME                                         26,673        23,117       20,145
Provision for loan losses (Note 5)                                         1,826         1,333        1,374
                                                                      ----------       -------      -------
              NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES         24,847        21,784       18,771
                                                                      ----------       -------      -------
Other income:
   Service charges and other fees                                          3,789         2,899        2,126
   Net gains from sale of loans                                              628         1,120          803
   Gain (loss) on securities, net (Note 4)                                   (13)           27          179
   Trust department income                                                   313           233          165
   Other                                                                   1,721         1,671        1,301
                                                                      ----------       -------      -------
                                                                           6,438         5,950        4,574
                                                                      ----------       -------      -------
Other expenses:
   Salaries and employee benefits (Notes 12 and 13)                        9,774         8,875        7,854
   Occupancy expenses, net                                                 1,131           961          804
   Data processing                                                         1,464         1,286          717
   Equipment expenses                                                        675           532          566
   Advertising                                                             1,075           718          708
   Other operating expenses                                                4,817         4,146        3,425
                                                                      ----------       -------      -------
                                                                          18,936        16,518       14,074
                                                                      ----------       -------      -------
              INCOME BEFORE INCOME TAXES AND MINORITY
                INTEREST IN NET INCOME OF SUBSIDIARIES                    12,349        11,216        9,271
Income taxes (Note 11)                                                     4,359         4,014        3,124
                                                                      ----------       -------      -------
              INCOME BEFORE MINORITY INTEREST
                IN NET INCOME OF SUBSIDIARIES                              7,990         7,202        6,147
Minority interest in net income of subsidiaries                              404           357          312
                                                                      ----------       -------      -------
              NET INCOME                                             $     7,586      $  6,845     $  5,835
                                                                     ===========       =======      =======
Basic earnings per common share                                      $    103.89      $  93.34     $  79.15
                                                                     ===========       =======      =======
Weighted average shares outstanding                                       71,556        71,703       71,798
                                                                     ===========       =======      =======
</TABLE>


See Notes to Consolidated Financial Statements.

                                               F-4


<PAGE>

SPECTRUM BANCORPORATION, INC.  AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                              Accumulated
                                                                                     Additional                 Other
                                                Comprehensive   Preferred   Common    Paid-in     Retained  Comprehensive
                                                    Income       Stock       Stock    Capital     Earnings  Income (Loss)  Total
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>       <C>          <C>         <C>        <C>           <C>
Balance, June 30, 1997                                        $1,700    $    72      $ 1,663     $ 22,657    $     150    $ 26,242
   Comprehensive income:
      Net income                                  $  5,835        --         --           --        5,835           --       5,835
      Other comprehensive income, net of tax:
        Net change in unrealized gain
        (loss) on securities available for sale        233        --         --           --           --          233         233
        (Note 4)
                                                  --------
              Comprehensive income                $  6,068
                                                  ========
   Cash dividends paid on preferred stock                         --         --           --         (152)         --         (152)

   Purchase of 103 shares of common stock
      for retirement                                              --         --           (4)         (51)         --          (55)

   Adjustment to conform year ends (Note 15)                      --         --           --         (539)         (16)       (555)
                                                               -----    -------      -------      -------      -------       ------

Balance, June 30, 1998                                         1,700         72        1,659       27,750          367      31,548
   Comprehensive income:
      Net income                                  $  6,845        --         --           --        6,845          --        6,845
      Other comprehensive income, net of tax:
        Net change in unrealized gain
        (loss) on securities available for                        --         --           --           --         (872)       (872)
        sale (Note 4)                                 (872)
                                                  --------
              Comprehensive income                $  5,973
                                                  ========

   Purchase of 120 shares of common stock
      for retirement                                              --         --         (5)           (67)         --          (72)

   Cash dividends paid:
      Preferred stock                                             --         --         --           (152)         --         (152)
      Common stock                                                --         --         --           (100)         --         (100)
                                                               -----      -----       ------      -------       -------      ------
Balance, June 30, 1999                                         1,700         72        1,654       34,276         (505)     37,197
   Comprehensive income:
      Net income                                  $  7,586        --         --           --        7,586           --       7,586
      Other comprehensive income, net of tax:
        Net change in unrealized gain
        (loss) on securities available for              --        --         --           --                    (1,323)     (1,323)
        sale (Note 4)                               (1,323)
                                                  --------
              Comprehensive income                $  6,263
                                                  ========
   Purchase of 123 shares of common stock
      for retirement                                              --         --           (5)         (70)         --          (75)

   Cash dividends paid:
      Preferred stock                                             --         --           --         (152)         --         (152)
      Common stock                                                --         --           --         (200)         --         (200)
                                                              ------    -------     --------     --------    ---------     --------
Balance, June 30, 2000                                        $1,700    $    72     $  1,649     $ 41,440    $ (1,828)    $ 43,033
                                                              ======    =======     ========     ========    ========     ========
</TABLE>

See Notes to Consolidated Financial Statements.

                                                   F-5
<PAGE>


SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                           2000               1999            1998
                                                                      -------------       -----------     ----------
<S>                                                                   <C>                <C>             <C>
Cash Flows from Operating Activities
   Net income                                                         $    7,586           $  6,845         $   5,835
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization                                        1,733              1,717             1,344
      (Gain) loss on sale of securities                                       13                (27)             (179)
      (Gain) loss on sale of other real estate owned and other                --                121                37
      Provision for loan losses                                            1,826              1,333             1,374
      Provision for deferred income taxes                                   (780)              (125)             (146)
      Minority interest in net income of subsidiaries                        404                357               312
      Loans originated for resale                                        (44,242)           (70,381)          (40,255)
      Proceeds from sale of loans originated for resale                   46,016             70,709            36,858
      (Increase) in accrued interest receivable                           (1,865)              (452)             (442)
      (Increase) in other assets                                            (129)               (76)             (257)
      Increase in accrued interest and other liabilities                   2,089                566               769
                                                                      ----------           --------         ---------
              NET CASH PROVIDED BY OPERATING ACTIVITIES                   12,651             10,587             5,250
                                                                      ----------           --------         ---------

Cash Flows from Investing Activities
   Purchase of certificates of deposit                                    (4,153)               --             (2,438)
   Proceeds from maturities of certificates of deposit                     2,173              1,216             1,721
   Purchase of securities available for sale                             (54,636)           (53,937)          (32,105)
   Proceeds from sales and maturities of securities
      available for sale                                                  27,224             41,139            41,316
   Net increase in loans                                                (111,150)           (65,760)          (35,176)
   Purchase of premises and equipment                                     (5,581)            (4,064)           (2,764)
   Purchase of other assets                                                 (800)            (1,087)           (1,692)
   Proceeds from sale of premises and equipment                                9                450               186
   Proceeds from sale of other assets                                      1,350                 --                73
   Business acquisition (Note 2)                                          63,952                 --            (1,141)
                                                                      ----------           --------         ---------
              NET CASH (USED IN) INVESTING ACTIVITIES                    (81,612)           (82,043)          (32,020)
                                                                      ----------           --------         ---------
</TABLE>

See Notes to Consolidated Financial Statements.

                                   (continued)

                                                        F-6


<PAGE>


SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                         2000         1999        1998
                                                                      ---------    ---------   ----------
<S>                                                                  <C>          <C>         <C>
Cash Flows From Financing Activities
   Net increase in deposits                                           $ 52,618      $ 56,119     $ 38,555
   Net increase in federal funds purchased and
      securities sold under agreements to repurchase                     2,638           989          703
   Proceeds from issuance of preferred securities                       20,400            --           --
   Proceeds from notes payable                                          20,860         4,145       11,488
   Principal payments on notes payable                                 (12,940)       (4,423)     (10,375)
   Debt issuance costs incurred                                         (1,061)          --           --
   Purchase of minority interest in subsidiaries                            (6)         (152)         --
   Proceeds from sale of minority interest in subsidiary                   500           --           290
   Purchase of common stock for retirement                                 (75)          (72)         (55)
   Dividends paid, including $47, $58 and $52 paid
      to minority interest, respectively                                  (399)         (310)        (204)
                                                                      ---------    ---------    ---------
              NET CASH PROVIDED BY FINANCING ACTIVITIES                 82,535        56,296       40,402
                                                                      ---------    ---------    ---------
              NET INCREASE (DECREASE) IN CASH
                        AND CASH EQUIVALENTS                            13,574       (15,160)      13,632
Cash and Cash Equivalents
   Beginning                                                            25,644        40,804       27,172
                                                                     ---------    ---------    ---------
   Ending                                                             $ 39,218      $ 25,644     $ 40,804
                                                                     ==========    =========    =========

Supplemental Disclosures of Cash Flow Information
   Cash payments for:
      Interest                                                        $ 26,626      $ 22,726     $ 20,978
      Income taxes                                                       5,361         3,562        3,173

Supplemental Schedules of Noncash Investing
   and Financing Activities
Net change in unrealized gain (loss) on
      securities available for sale                                     (1,323)        (872)         233


</TABLE>

See Notes to Consolidated Financial Statements.

                                                                F-7

<PAGE>

SPECTRUM BANCORPORATION, INC. AND STRUCTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTES 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS: The Company is a multi-bank holding company organized under
the laws of Iowa whose primary business is providing the traditional functions
of trust, commercial, consumer, and mortgage banking services through its South
Dakota, Missouri and Iowa based subsidiary banks. Substantially all of the
Company's income is generated from banking operations.

BASIS OF FINANCIAL STATEMENT PRESENTATION AND ACCOUNTING ESTIMATES: The
accounting and reporting policies of the Company conform to generally accepted
accounting principles. In preparing the accompanying financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses for the period.
Actual results could differ from those estimates. A material estimate that is
particularly susceptible to significant change in the near term relates to the
determination of the allowance for loan losses. Management believes that the
allowance for loan losses is adequate. While management uses available
information to recognize possible losses, future additions to the allowance may
be necessary based on changes in economic conditions.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its subsidiaries. All material intercompany accounts
and transactions with subsidiaries are eliminated in consolidation.

The consolidated subsidiaries are as follows: Spectrum Capital Trust I (100%
owned); Citizens Bank (100% owned), which is chartered in Mount Ayr, Iowa;
Citizens Bank of Princeton (100% owned), which is chartered in Princeton,
Missouri; F&M Bank (97.9%, 97.9% and 97.2% owned at June 30, 2000, 1999 and
1998, respectively), which is chartered in Watertown, South Dakota; Citizens
Bank (95.2% owned at June 30, 2000), which is chartered in Carlisle, Iowa;
Rushmore Bank & Trust (90% owned), which is chartered in Rapid City, South
Dakota; and Spectrum Banc Service Corporation (89% owned), a data processing
organization. Also at June 30, 2000, Rushmore Bank & Trust owns 99% of
Ameriloan, LLC, a loan origination company, which is currently inactive.

CASH AND CASH EQUIVALENTS AND CASH FLOWS: For purposes of reporting cash flows,
cash and cash equivalents include cash on hand, amounts due from banks
(including cash items in process of clearing) and federal funds sold. Cash flows
from loans (other than those originated for resale), deposits, federal funds
purchased and securities sold under agreements to repurchase are reported net.

TRUST ASSETS: Assets of the trust departments of the Company's subsidiaries,
other than trust cash on deposit at that bank, are not included in these
financial statements because they are not assets of the Company.

                                      F-8

<PAGE>

NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SECURITIES AVAILABLE FOR SALE: Securities classified as available for sale are
those securities that the Company intends to hold for an indefinite period of
time, but not necessarily to maturity. Any decision to sell a security
classified as available for sale would be based on various factors, including
significant movements in interest rates, changes in the maturity mix of the
Company's assets and liabilities, liquidity needs, regulatory capital
considerations, and other similar factors. Securities available for sale are
reported at fair value with unrealized gains or losses reported as a separate
component of other comprehensive income, net of the related deferred tax effect.
The amortization of premiums and accretion of discounts, computed by the
interest method over their contractual lives, are recognized in interest income.
Realized gains or losses, determined on the basis of the amortized cost of
specific securities sold, are included in earnings. Declines in the fair value
of individual securities classified as available for sale below their amortized
cost that are determined to be other than temporary result in write-downs of the
individual securities to their fair value with the resulting write-downs
included in current earnings as realized losses.

LOANS RECEIVABLE: Loans receivable that management has the intent and ability to
hold for the foreseeable future or until maturity or pay-off are stated at the
amount of unpaid principal, reduced by unearned discount and fees and an
allowance for loan losses.

The Company grants real estate, commercial, and consumer loans to customers
primarily in South Dakota, Missouri and Iowa and has purchased loans primarily
originated in those states and surrounding states. The amount of collateral
obtained, if deemed necessary, is based on management's credit evaluation of the
borrower. Collateral held varies, but includes accounts receivable, inventory,
property and equipment, residential real estate, income-producing commercial
properties and government guarantees.

Loans sold on the secondary market are sold on a prearranged basis. Loans held
for sale are included in loans receivable and are stated at the lower of cost or
market on an aggregate basis. Loans held for sale totaled $2,806,000 and
$4,580,000 as of June 30, 2000 and 1999, respectively.

The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans receivable are charged against the allowance for loan
losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans, based on an evaluation of their
collectibility and prior loss experience. The evaluation also takes into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrower's ability to pay. While
management uses the best information available to make its evaluation, future
adjustments to the allowance may be necessary if there are significant changes
in economic conditions. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses,
and may require the Company to make additions to the allowance based on their
judgment about information available to them at the time of their examinations.

                                      F-9

<PAGE>

NOTES 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOANS RECEIVABLE (CONTINUED): Impaired loans are measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. A loan is
impaired when it is probable the creditor will be unable to collect all
contractual principal and interest payments due in accordance with the terms of
the loan agreement. The amount of impairment, if any, and any subsequent changes
are included in the provision for loan losses.

Interest on loans is accrued daily on the outstanding balances. For impaired
loans, accrual of interest is discontinued when management believes, after
considering collection efforts and other factors, that the borrower's financial
condition is such that collection of interest is doubtful. Cash collections on
impaired loans are credited to the loan receivable balance, and interest income
is generally not recognized on those loans until the principal balance has been
collected.

A substantial portion of loan fees charged or received on the origination of
mortgage loans are related to loans sold on the secondary market with servicing
released and are recognized as income when received. Certain other loan fees,
net of certain direct loan origination costs, are deferred and the net amount
amortized as an adjustment of the related loan's yield. The Company is generally
amortizing this amount over the contractual life of the loan. Commitment fees
based upon the amount of a customer's line of credit and fees related to letters
of credit are not significant and are recognized in income when received.

OTHER REAL ESTATE OWNED: Other real estate owned (OREO) represents properties
acquired through foreclosure or other proceedings and is initially recorded at
fair value at the date of foreclosure, which establishes cost. After
foreclosure, OREO is held for sale and is carried at the lower of cost or fair
value less estimated costs of disposal. Any write-down to fair value at the time
of transfer to OREO is charged to the allowance for loan losses. Property is
evaluated regularly to ensure the recorded amount is supported by its current
fair value, and valuation allowances to reduce the carrying amount to fair value
less estimated costs to dispose are recorded if necessary. OREO is included in
other assets in the accompanying consolidated balance sheets.

PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed principally by the
straight-line method over the following estimated useful lives:

<TABLE>
<CAPTION>
                                                           Years
                                                     ----------------
<S>                                                       <C>
Buildings and building improvements                       3 - 50
Furniture and equipment                                   5 - 15
</TABLE>

                                      F-10

<PAGE>

NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COST IN EXCESS OF NET ASSETS ACQUIRED: Cost in excess of net assets acquired
represents the excess of the acquisition cost over the fair value of the net
assets acquired in the purchase of subsidiaries and branches and is being
amortized over periods of eleven to forty years using the straight-line method.
Costs in excess of net assets acquired is net of accumulated amortization of
$2,889,000 and $2,480,000 at June 30, 2000 and 1999, respectively.

LONG-LIVED ASSETS: Long-lived assets, including intangibles, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset is not recoverable.

INCOME TAXES: Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.

DEFERRED COMPENSATION: The net present value of payments expected to be made
under deferred compensation agreements is being accrued over the respective
employees' expected employment service period.

EARNINGS PER COMMON SHARE: Earnings per common share has been computed on the
basis of the weighted-average number of common shares outstanding during each
period presented. Dividends accumulated or declared on cumulative and
noncumulative preferred stock, which totaled $152,000 in each of the years ended
June 30, 2000, 1999 and 1998, reduced the earnings available to common
stockholders in the computation.

OPERATING SEGMENTS: The Company uses the "management approach" for reporting
information about segments in annual and interim financial statements. The
management approach is based on the way the chief operating decision-maker
organizes segments within a company for making operating decisions and assessing
performance. Reportable segments are based on products and services, geography,
legal structure, management structure and any other manner in which management
disaggregates a company. Based on the "management approach" model, the Company
has determined that its business is comprised of a single operating segment.

                                      F-11

<PAGE>

NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were
used by the Company in estimating the fair value of its financial instruments as
presented in Note 19:

CARRYING AMOUNTS APPROXIMATE FAIR VALUES for the following instruments:

      Cash and due from banks
      Federal funds sold
      Certificates of deposit
      Securities available for sale
      Variable rate loans that reprice frequently where no significant change in
      credit risk has occurred
      Accrued interest receivable
      Variable rate money market deposit accounts and deposits payable on demand
      Federal funds purchased and securities sold under agreements to repurchase
      Notes payable with a variable interest rate
      Accrued interest payable

DISCOUNTED CASH FLOWS using interest rates currently being offered on
instruments with similar terms and with similar credit quality:

      All loans except variable rate loans described above
      Fixed rate time certificates
      Notes payable with a fixed interest rate
      Company obligated mandatorily redeemable preferred securities

FEES CURRENTLY BEING CHARGED for similar instruments, taking into account the
remaining terms of the agreements and the counterparties' credit standing:

   Off-balance sheet instruments:
      Letters of credit
      Commitments to extend credit

EMERGING ACCOUNTING STANDARDS: The FASB has issued Statement No. 133, ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This Statement, as amended by
FASB Statement No. 137, establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This Statement
is effective for fiscal years beginning after June 15, 2000. Management does not
believe the application of this Statement to transactions of the Company and its
banking subsidiaries that have been typical in the past will materially affect
the Company's financial position and results of operations.

                                      F-12

<PAGE>

NOTES 2. CHANGES IN MINORITY INTEREST AND BUSINESS COMBINATIONS

On January 14, 2000 the Company, through a newly chartered bank subsidiary,
acquired selected assets and assumed the FDIC insured deposits of Hartford -
Carlisle Savings Bank in Carlisle, Iowa. Liquid assets of $4,800,000 and loans
of $139,000 were acquired and $70,465,000 of deposits and other liabilities was
assumed. A premium of $5,500,000 was paid for the right to assume the insured
deposits. The bank was capitalized with $10,500,000 in paid-in capital,
including $500,000 by a minority shareholder. Cash was received from the FDIC
for the deposits assumed net of assets purchased and premium paid. The
acquisition has been accounted for in a manner similar to a purchase and the
results of operation of the branches acquired since the date of acquisition are
included in the consolidated financial statements. The deposit premium of
$5,500,000 has been allocated to goodwill and is being amortized over 15 years
using the straight-line method. Under a purchase and assumption agreement with
the FDIC, the new bank exercised its right to purchase certain securities and
the buildings, real estate, furniture, fixtures and equipment of the failed
bank. The acquisition cost of these assets were determined by independent
appraisal. Since acquisition date, $34,400,000 of additional loans were acquired
from the FDIC. A summary of the fair value of net assets acquired and net cash
and cash equivalents received (in thousands) on the date of acquisition is as
follows:

<TABLE>
<S>                                                       <C>
Assets acquired:
   Securities                                             $             862
   Loans receivable                                                     139
   Other assets                                                          12
   Cost in excess of net assets acquired                              5,500
Liabilities assumed:
   Deposits                                                         (69,846)
   Other liabilities                                                   (619)
                                                          -------------------
        Net cash and cash equivalents received            $         (63,952)
                                                          ===================
</TABLE>

In March 1999, the Company acquired 67 shares (.7%) of the common stock of
F&M Bank for $151,621 in cash from a minority shareholder.  The transaction
was accounted for as a purchase.

                                     F-13

<PAGE>

NOTE 2.  CHANGES IN MINORITY INTEREST AND BUSINESS COMBINATIONS (CONTINUED)

On March 27, 1998, the Company acquired all of the outstanding shares of First
Savings & Loan Association of South Dakota, Inc. (First Savings & Loan) for
$2,287,254 in cash and incurred other acquisition costs of $35,408. The excess
of the acquisition cost over the fair value of the net assets acquired of
$327,184 is being amortized over eleven years using the straight-line method.
The acquisition has been accounted for as a purchase and results of operations
of First Savings & Loan since the date of acquisition are included in the
consolidated financial statements. Concurrent with the purchase, First Savings &
Loan was merged into the Company's subsidiary, F&M Bank. A summary of the fair
value of net assets acquired and net cash and cash equivalents paid (in
thousands) is as follows:

<TABLE>
<S>                                                                  <C>
Assets acquired                                                      $            16,999
Liabilities assumed                                                               14,676
                                                                     -------------------
        Net assets acquired                                          $             2,323
                                                                     ===================

Cost of net assets acquired                                          $             2,323
Less cash and cash equivalents acquired                                            1,182
                                                                     -------------------
        Net cash and cash equivalents paid for cash flow purposes    $             1,141
                                                                     ===================
</TABLE>

NOTE 3.  RESTRICTIONS ON CASH AND DUE FROM BANKS
The Company's banking subsidiaries are required to maintain reserve balances in
cash and on deposit with the Federal Reserve Bank based on a percentage of
deposits. The total requirement was approximately $6,061,000 and $3,727,000 at
June 30, 2000 and 1999, respectively.

                                     F-14

<PAGE>

NOTE 4.  SECURITIES AVAILABLE FOR SALE

Amortized cost and fair value of investments in securities, all of which are
classified as available for sale according to management's intent, are
summarized as follows:

<TABLE>
<CAPTION>
                                                                     June 30, 2000 (In Thousands)
                                                 ------------------------------------------------------------------
                                                                    Gross           Gross
                                                     Amortized      Unrealized      Unrealized       Fair
                                                       Cost         Gains           Losses           Value
                                                 ------------------------------------------------------------------
<S>                                              <C>             <C>           <C>               <C>
U.S. Treasury securities                         $      5,450    $       --    $          (54)   $   5,396
U.S. Government agencies and
   corporations, including
   mortgage-backed securities                          93,631            139           (2,547)      91,223
States and political subdivision securities            11,060             12             (343)      10,729
Corporate debt securities                               7,275             24              (76)       7,223
Stock in Federal Home Loan Bank
   and Federal Reserve Bank                             2,857             --               --        2,857
                                                 ------------------------------------------------------------------
                                                 $    120,273    $       175   $       (3,020)   $ 11,7428
                                                 ==================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                     June 30, 1999 (In Thousands)
                                                 ------------------------------------------------------------------
                                                                    Gross           Gross
                                                     Amortized      Unrealized      Unrealized       Fair
                                                       Cost         Gains           Losses           Value
                                                 ------------------------------------------------------------------
<S>                                              <C>             <C>           <C>               <C>
U.S. Treasury securities                         $      8,998    $        15   $           (9)   $   9,004
U.S. Government agencies and
   corporations, including
   mortgage-backed securities                          65,187            177             (895)      64,469
States and political subdivision securities            10,691            101             (195)      10,597
Corporate debt securities                               4,997             18               (8)       5,007
Stock in Federal Home Loan Bank
   and Federal Reserve Bank                             2,063             --               --        2,063
                                                 ------------------------------------------------------------------
                                                 $      9,936    $       311   $       (1,107)  $   91,140
                                                 ==================================================================
</TABLE>

                                     F-15

<PAGE>

NOTE 4.     SECURITIES AVAILABLE FOR SALE (CONTINUED)

No ready market exists for the Federal Home Loan Bank stock, and it has no
quoted market value. For disclosure purposes, this stock is assumed to have a
fair value which is equal to cost.

The amortized cost and fair value of debt securities available for sale (in
thousands) as of June 30, 2000, by contractual maturity, are shown below.
Maturities may differ from contractual maturities in mortgage-backed securities
because the mortgages underlying the securities may be called or repaid without
any penalties. Therefore, these securities are not included in the maturity
categories in the following maturity summary.

<TABLE>
<CAPTION>
                                                                Amortized
                                                                   Cost          Fair Value
                                                             ---------------------------------
<S>                                                          <C>                <C>
Due in one year or less                                      $     4,788        $      4,778
Due after one year through five years                             21,455              21,292
Due after five years through ten years                             7,865               7,679
Due after ten years                                               20,850              19,989
Mortgage-backed securities                                        62,458              60,833
                                                             ---------------------------------
                                                             $   117,416        $    114,571
                                                             =================================
</TABLE>

Proceeds from sales of securities available for sale were $7,585,000, $2,004,062
and $11,385,932 for the years ended June 30, 2000, 1999 and 1998, respectively.
Gross gains of $18,000, $26,697 and $194,849 and gross losses of $31,000, none
and $15,698 were realized on those sales for the years ended June 30, 2000,
1999, and 1998, respectively.

Securities with an amortized cost of approximately $87,848,000 and $63,992,000
at June 30, 2000 and 1999, respectively, were pledged as collateral on public
deposits, securities sold under agreements to repurchase, notes payable to
Federal Home Loan Bank and for other purposes as required or permitted by law.

                                     F-16

<PAGE>

NOTE 4.  SECURITIES AVAILABLE FOR SALE (CONTINUED)

The components of other comprehensive income - net change in unrealized gain
(loss) on securities available for sale (in thousands) are as follows:

<TABLE>
<CAPTION>
                                                                             Years Ended June 30,
                                                          ---------------------------------------------------------
                                                              2000               1999               1998
                                                          ---------------------------------------------------------
<S>                                                       <C>              <C>                  <C>
Unrealized holding gain (loss) arising
   during the period                                      $       (2,062)  $           (1,343)  $      547
Less reclassification adjustment for net
   (gain) loss realized in net income                                 13                  (27)        (179)
                                                          ---------------------------------------------------------
        Net change in unrealized gain (loss)
           before income taxes                                    (2,049)              (1,370)         368
Income (taxes) benefit                                               695                  475         (126)
Minority interest in unrealized gain (loss)                           31                   23           (9)
                                                          ---------------------------------------------------------
        Other comprehensive income - net change
           in unrealized gain (loss) on securities        $       (1,323)  $             (872)  $      233
                                                          =========================================================
</TABLE>

NOTE 5.  LOANS RECEIVABLE

The composition of net loans receivable (in thousands) is as follows:

<TABLE>
<CAPTION>
                                                 June 30,
                                    --------------------------------------
                                           2000                1999
                                    --------------------------------------
<S>                                 <C>                    <C>
Commercial and agricultural         $      363,808         $     304,632
 Real estate loans                         118,060                90,789
Loans to individuals                        96,216                75,579
Other loans                                  4,227                 2,455
                                    -------------------------------------
                                           582,311               473,455
                                    -------------------------------------

Deduct:
   Allowance for loan losses                 7,352                 6,020
   Unearned net loan fees                      300                   465
                                    -------------------------------------
                                             7,652                 6,485
                                    -------------------------------------
                                    $      574,659         $     466,970
                                    =====================================
</TABLE>

                                     F-17

<PAGE>

NOTE 5.  LOANS RECEIVABLE (CONTINUED)

Loans guaranteed by agencies of the U.S. government totaled $20,984,000 and
$18,511,000 at June 30, 2000 and 1999, respectively.

Certain real estate mortgage loans are sold on the secondary market on a
prearranged basis. The loans are sold without recourse, except for limited
recourse during the first four months after the sale. The Company has
experienced no losses on these recourse sales during 2000, 1999 or 1998.

Information about impaired loans (in thousands) is as follows:

<TABLE>
<CAPTION>
                                                                       As of and for the year
                                                                           ended June 30,
                                                              --------------------------------------
                                                                  2000               1999
                                                              --------------------------------------
<S>                                                           <C>                 <C>
Loans receivable for which there is a related
   allowance for loan losses                                  $       4,609       $    2,423
Other impaired loans                                                     -                -
                                                              --------------------------------------
      Total impaired loans                                    $       4,609       $    2,423
                                                              ======================================

Related allowance for loan losses                             $         311       $      269
Average monthly balance of impaired loans
   (based on month-end balances)                                      4,457            2,183
Interest income recognized on impaired loans                             73               81
</TABLE>

Past due and nonaccrual and restructured loans (in thousands) are as follows:

<TABLE>
<CAPTION>
                                                                             June 30,
                                                            ----------------------------------------
                                                                    2000                1999
                                                            ----------------------------------------
<S>                                                         <C>                   <C>
Outstanding principal balance of accruing loans having
   payment delinquent by more than ninety days              $      1,831          $   1,016
Loans on which the accrual of interest has been
   discontinued or reduced                                         6,268              5,587
</TABLE>

                                     F-18

<PAGE>

NOTE 5.  LOANS RECEIVABLE (CONTINUED)

Changes in the allowance for loan losses (in thousands) are as follows:

<TABLE>
<CAPTION>
                                                                       Years ended June 30,
                                                     ------------------------------------------------------
                                                         2000                  1999               1998
                                                     ------------------------------------------------------
<S>                                                 <C>                   <C>                <C>
Balance, beginning                                   $    6,020            $   5,599          $      5,803
   Provision charged to operating expense                 1,826                1,333                 1,374
   Business acquisition (Note 2)                             -                    -                    129
   Recoveries of amounts charged off                        303                  147                   224
                                                     ------------------------------------------------------
                                                          8,149                7,079                 7,530
   Amounts charged off                                     (797)              (1,059)               (1,931)
                                                     ------------------------------------------------------
Balance, ending                                      $    7,352            $   6,020          $      5,599
                                                     ======================================================
</TABLE>

NOTE 6.  PREMISES AND EQUIPMENT

The major classes of premises and equipment and the total amount of accumulated
depreciation (in thousands) are as follows:

<TABLE>
<CAPTION>
                                                                             June 30,
                                                            ----------------------------------------
                                                                2000                1999
                                                            ----------------------------------------
<S>                                                         <C>                  <C>
Land                                                        $     3,089          $     2,856
Buildings and building improvements                              13,827                9,568
Furniture and equipment                                           7,939                6,834
                                                            ----------------------------------------
                                                                 24,855               19,258
Less accumulated depreciation                                     7,884                6,590
                                                            ----------------------------------------
                                                            $    16,971          $    12,668
                                                            ========================================
</TABLE>

                                     F-19

<PAGE>

NOTE 7.  DEPOSITS

The composition of deposits (in thousands) is as follows:

<TABLE>
<CAPTION>
                                                                           June 30,
                                                            ----------------------------------------
                                                                 2000                  1999
                                                            ----------------------------------------
<S>                                                         <C>                     <C>
Noninterest bearing demand                                  $      60,160           $   49,934
NOW accounts, money market and savings                            188,028              145,972
Time certificates, $100,000 or more                                96,784               83,551
Other time certificates                                           284,401              227,452
                                                            ----------------------------------------
                                                            $     629,373           $  506,909
                                                            ========================================
</TABLE>

At June 30, 2000, the scheduled maturities of time certificates (in thousands)
are as follows:

<TABLE>
<CAPTION>
Year ending June 30,
----------------------------------------------------------------------------------------------------
<S>                                                                                 <C>
2001                                                                                $        236,725
2002                                                                                          89,552
2003                                                                                          40,282
2004 - 2005                                                                                   13,559
2006 and thereafter                                                                            1,067
                                                                                    ----------------
                                                                                    $        381,185
                                                                                    ================
</TABLE>

NOTE 8.  FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
         REPURCHASE

Federal funds purchased totaled $775,000 and $3,925,000 at June 30, 2000 and
1999, respectively.

Securities sold under agreements to repurchase, which generally mature within
one to four days from the transaction date, totaled $21,640,400 and $15,851,819
at June 30, 2000 and 1999, respectively. The mortgage-backed securities
underlying the agreements had an amortized cost of approximately $24,328,000 and
$19,169,000, and fair value of approximately $23,712,000 and $19,062,000 at June
30, 2000 and 1999, respectively. The securities are held by the Company. For the
years ended June 30, 2000, 1999 and 1998, respectively, the maximum month-end
balance of the agreements was $23,107,186, $21,900,784 and $22,278,990, they had
an average balance of $19,058,049, $19,737,173 and $19,197,839 and an average
interest rate of 4.8%, 4.4% and 4.8%.

                                     F-20

<PAGE>

NOTE 9.  NOTES PAYABLE

Notes payable consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                             June 30,
                                                                             --------------------------------------
                                                                                    2000             1999
                                                                             --------------------------------------
<S>                                                                            <C>             <C>
Note payable to bank, due January 2001, interest due
   quarterly at LIBOR, plus 1.5%, secured by stock
   in Citizens Bank, Carlisle                                                  $    2,300      $       --
Notes payable to bank                                                                 --             11,695
Notes payable to Federal Home Loan Bank, interest rates
   from 4.23% to 6.9% and maturity dates from July
   2000 to December 2013, secured by real estate loans and
   Federal Home Loan Bank stock                                                    41,466           25,989
 Notes payable to Federal Reserve Bank, consisting of
   treasury, tax and loan deposits, due on demand                                   3,178            1,250
Other                                                                                 --                90
                                                                             --------------------------------------
                                                                              $    46,944      $    39,024
                                                                             ======================================
</TABLE>

As of June 30, 2000, notes payable are due or callable (whichever is earlier) as
follows (in thousands):

<TABLE>
<CAPTION>
Year ending June 30,
----------------------------------------------------------------------------------------------------
<S>                                                                                 <C>
2001                                                                                $        31,944
2002                                                                                          6,500
2003                                                                                          8,500
                                                                                    ----------------
                                                                                    $        46,944
                                                                                    ================
</TABLE>

                                     F-21

<PAGE>

NOTE 10. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
         SUBSIDIARY TRUST HOLDING SOLELY SUBORDINATED DEBENTURES

The Company has issued 2,040,000 shares, $10 par value, of Company Obligated
Mandatorily Redeemable Preferred Securities (Preferred Securities) of Spectrum
Capital Trust I. Distributions accumulate from August 18, 1999 and are paid
quarterly beginning October 15, 1999. Cumulative cash distributions are
calculated at a 10.0% annual rate. The Company may, at one or more times, defer
interest payments on the capital securities for up to 20 consecutive quarters,
but not beyond August 18, 2029. At the end of any deferral period, all
accumulated and unpaid distributions will be paid. The capital securities will
be redeemed on August 18, 2029, however, the Company has the option to shorten
the maturity date to a date not earlier than August 18, 2004. The redemption
price is $10 per capital security plus any accrued and unpaid distributions to
the date of redemption.

Holders of the Preferred Securities have no voting rights. The Preferred
Securities are unsecured and rank junior in priority of payment to all of the
Company's indebtedness and senior to the Company's common stock.

The Preferred Securities are traded on the American Stock Exchange under the
symbol "SBK PRA".

NOTE 11.  INCOME TAX MATTERS

The provision for income taxes charged to operations consists of the following
(in thousands):

<TABLE>
<CAPTION>
                                                              Years Ended June 30,
                                           ---------------------------------------------------------
                                              2000                1999               1998
                                           ---------------------------------------------------------
<S>                                        <C>             <C>                   <C>
Currently paid or payable:
   Federal                                 $  4,426        $      3,559          $    2,816
   State                                        713                 580                 454
Deferred (benefit)                              780                (125)               (146)
                                           ---------------------------------------------------------
                                           $  4,359        $      4,014          $    3,124
                                           =========================================================
</TABLE>

The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income due to the following
(in thousands):

<TABLE>
<CAPTION>
                                                                           Years Ended June 30,
                                                          -------------------------------------------------
                                                              2000               1999               1998
                                                          -------------------------------------------------
<S>                                                      <C>                 <C>               <C>
Computed "expected" tax expense                           $ 4,322             $ 3,926           $  3,245
 Increase (decrease) in income taxes
   resulting from:
      Benefit of income taxed at lower rates                 (100)               (112)               (93)
      Tax exempt interest income, net                        (325)               (289)              (297)
      State income tax, net of federal benefit                463                 383                300
      Other                                                    (1)                106                (31)
                                                          -------------------------------------------------
                                                          $ 4,359             $ 4,014           $  3,124
                                                          =================================================
</TABLE>

                                     F-22

<PAGE>

NOTE 11.  INCOME TAX MATTERS (CONTINUED)

Net deferred tax assets (liabilities) (in thousands) consist of the following
components:

<TABLE>
<CAPTION>
                                                                         June 30,
                                                         --------------------------------------
                                                            2000               1999
                                                         --------------------------------------
<S>                                                      <C>                <C>
Deferred tax assets:
   Allowance for loan losses                             $  2,341           $  1,587
   Securities available for sale                              979                277
   Deferred compensation                                      155                136
   Other                                                       72                 70
                                                         --------------------------------------
                                                            3,547              2,070
                                                         --------------------------------------
Deferred tax liabilities:
   Premises and equipment                                    (777)              (733)
   Other assets                                              (453)              (389)
   Other                                                     (111)              (224)
                                                         --------------------------------------
                                                           (1,341)            (1,346)
                                                         --------------------------------------
                                                         $  2,206           $    724
                                                         ======================================
</TABLE>

In the accompanying consolidated balance sheets, net deferred tax assets are
included in other assets. The deferred tax asset amounts above include no
valuation allowance.

Retained earnings at June 30, 2000 includes approximately $1,107,000 related to
the pre-1988 allowance for loan losses of an acquired savings bank for which no
deferred income tax liability has been recognized. If the Company no longer
qualifies as a bank or in the event of a liquidation of the Company, income
would be created, for tax purposes only, which would be subject to the then
current corporate income tax rate. The unrecorded deferred income tax liability
on the above amount for financial statement purposes was $376,000 at June 30,
2000.

NOTE 12.  DEFERRED COMPENSATION

The Company has entered into deferred compensation agreements with certain
officers, directors and employees which provide for payments to the employees or
their beneficiaries over a period of ten years beginning at age 65 or prior
death or disability. The level of payments is dependent upon earnings of the
Company's subsidiaries during employment. The net present value of the payments
is being accrued over the respective employees' expected employment service
period. Deferred compensation charged to expense during the years ended June 30,
2000, 1999 and 1998 was $113,777, $117,788 and $61,884, respectively, with a
total amount accrued as of June 30, 2000 and 1999 of $399,839 and $388,588,
respectively.

                                     F-23

<PAGE>

NOTE 13.  PROFIT-SHARING PLAN

The Company participates in a multiple employer 401(k) profit sharing plan (the
Plan). All employees are eligible to participate beginning with the first
eligibility date following the completion of one year of service and having
reached the age of 21. In addition to employee contributions, the Company may
contribute discretionary amounts for eligible participants. Contribution rates
for participating employers must be equal. The Company contributed $331,133,
$265,526 and $245,854 to the Plan for the years ended June 30, 2000, 1999 and
1998, respectively.

NOTE 14. REGULATORY RESTRICTIONS

The Company and its bank subsidiaries are subject to certain restrictions on the
amount of dividends which may be declared without prior regulatory approval and
are subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and its bank
subsidiaries must meet specific capital guidelines that involve quantitative
measures of assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Company and its bank subsidiaries to maintain minimum amounts and
ratios (set forth in the table following) of total and Tier I capital to
risk-weighted assets, and of Tier I capital to average assets (all as defined in
the regulations). Management believes the Company and its bank subsidiaries meet
all capital adequacy requirements to which they are subject as of June 30, 2000.

The most recent notifications from the regulatory agencies categorize each of
the Company's bank subsidiaries as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
the banks must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table. There are no conditions or events
since those notifications that management believes have changed the category.

                                     F-24

<PAGE>

NOTE 14. REGULATORY RESTRICTIONS (CONTINUED)

Actual capital amounts and ratios are also presented in the following tables
(amounts in thousands).

<TABLE>
<CAPTION>

                                                                                                       To Be Well
                                                                             For Capital           Capitalized  Under
                                                                               Adequacy             Prompt Corrective
                                                          Actual             Purposes (a)            Action Provisions (a)
                                                ------------------------------------------------------------------------
                                                   Amount       Ratio     Amount      Ratio        Amount       Ratio
                                                -----------------------------------------------------------------------
<S>                                             <C>            <C>      <C>         <C>         <C>            <C>
As of June 30, 2000:
   Total capital (to risk-weighted assets):
      Consolidated                              $   67,428        11.6%  $ 46,445        8.0%        N/A          N/A
      Citizens Bank, Mount Ayr                       8,423        11.2      6,013        8.0      $ 7,516        10.0%
      Citizens Bank of Princeton                     3,499        12.6      2,236        8.0        2,796        10.0
      F&M Bank                                      29,706        11.5     20,743        8.0       25,929        10.0
      Rushmore Bank & Trust                         19,151        10.9     14,032        8.0       17,540        10.0
      Citizens Bank, Carlisle                        5,465        12.9      3,390        8.0        4,237        10.0

   Tier I capital (to risk-weighted assets:)
      Consolidated                                  54,469         9.4     23,222        4.0         N/A          N/A
      Citizens Bank, Mount Ayr                       7,483        10.0      3,006        4.0        4,509         6.0
      Citizens Bank of Princeton                     3,150        11.3      1,118        4.0        1,677         6.0
      F&M Bank                                      26,614        10.3     10,372        4.0       15,558         6.0
      Rushmore Bank & Trust                         17,100         9.8      7,016        4.0       10,524         6.0
      Citizens Bank, Carlisle                        4,935        11.7      1,695        4.0        2,542         6.0

   Tier I capital (to average assets):
      Consolidated                                  54,469         7.0     31,005        4.0         N/A          N/A
      Citizens Bank, Mount Ayr                       7,483         7.5      3,968        4.0        4,960         5.0
      Citizens Bank of Princeton                     3,150         8.7      1,442        4.0        1,803         5.0
      F&M Bank                                      26,614         7.8     13,574        4.0       16,967         5.0
      Rushmore Bank & Trust                         17,100         8.1      8,400        4.0       10,500         5.0
      Citizens Bank, Carlisle                        4,935         6.9      2,846        4.0        3,557         5.0
</TABLE>

                                                        F-25


<PAGE>

NOTE 14.    REGULATORY RESTRICTIONS (CONTINUED)

<TABLE>
<CAPTION>

                                                                                             To Be Well
                                                                       For Capital        Capitalized Under
                                                                        Adequacy          Prompt Corrective
                                                    Actual             Purposes (a)      Action Provisions (a)
                                           --------------------------------------------------------------------
                                            Amount       Ratio     Amount      Ratio      Amount        Ratio
                                           --------------------------------------------------------------------

<S>                                       <C>         <C>        <C>          <C>      <C>           <C>
As of June 30, 1999:
   Total capital (to risk-weighted assets):
      Consolidated                          $43,020         9.0%    $38,175     8.0%     N/A           N/A
      Citizens Bank, Mount Ayr                7,608        11.3       5,378     8.0    $ 6,723        10.0%
      Citizens Bank of Princeton              4,243        15.8       2,148     8.0      2,685        10.0
      F&M Bank                               25,745        11.5      17,910     8.0     22,387        10.0
      Rushmore Bank & Trust                  15,986        10.5      12,161     8.0     15,201        10.0

   Tier I capital (to risk-weighted assets:)
      Consolidated                           37,055         7.8      19,088     4.0       N/A          N/A
      Citizens Bank, Mount Ayr                6,889        10.2       2,689     4.0      4,034         6.0
      Citizens Bank of Princeton              3,904        14.5       1,074     4.0      1,611         6.0
      F&M Bank                               23,043        10.3       8,955     4.0     13,432         6.0
      Rushmore Bank & Trust                  14,195         9.3       6,081     4.0      9,121         6.0

   Tier I capital (to average assets):
      Consolidated                           37,055         6.2      24,095     4.0       N/A          N/A
      Citizens Bank, Mount Ayr                6,889         7.5       3,647     4.0      4,559         5.0
      Citizens Bank of Princeton              3,904        11.1       1,412     4.0      1,765         5.0
      F&M Bank                               23,043         7.8      11,790     4.0     14,738         5.0
      Rushmore Bank & Trust                  14,195         7.9       7,217     4.0      9,021         5.0
</TABLE>

(a) The amounts and ratios are minimums under the regulations. Prompt corrective
    action provisions only apply to the bank subsidiaries.

                                                    F-26

<PAGE>

NOTE 15. MERGER OF DECATUR CORPORATION AND SPECTRUM BANCORPORATION, INC.

On May 31, 1999, Decatur Corporation (Decatur) issued 61,063 shares of its
common stock in exchange for all outstanding common stock of Spectrum
Bancorporation, Inc. (Spectrum). Decatur simultaneously changed its name to
Spectrum Bancorporation, Inc. Since the entities were under common control, the
merger has been accounted for at historical cost in a manner similar to a
pooling-of-interests and, accordingly, the consolidated financial statements for
periods prior to the combination have been restated to include the accounts and
results of both entities.

The results of operations previously reported by the separate entities and the
combined amounts presented in the accompanying consolidated financial statements
(in thousands) are summarized below.

<TABLE>
<CAPTION>

                                                                                Years Ended June 30,
                                                                             -------------------------
                                                                                 1998         1997
                                                                             ------------------------
<S>                                                                         <C>          <C>
Interest income:
   Decatur Corporation and Subsidiaries                                      $   9,103    $   9,293
   Spectrum Bancorporation, Inc. and Subsidiaries                               32,802       27,851
                                                                             -----------------------
        Combined                                                             $  41,905    $  37,144
                                                                             =======================

Net income:
   Decatur Corporation and Subsidiaries                                      $   1,198    $   1,328
   Spectrum Bancorporation, Inc. and Subsidiaries                                4,737        3,905
   Intercompany dividend income                                                   (100)        (100)
                                                                             -----------------------
        Combined                                                             $   5,835    $   5,133
                                                                             =======================
</TABLE>

Prior to the combination, Decatur's fiscal year ended December 31. In recording
the combination, Decatur's financial statements for the twelve months ended June
30, 1999 and 1998 were combined with Spectrum's financial statements for the
same period. For 1997, financial statements for Decatur's fiscal year ended
December 31, 1997 were combined with Spectrum's fiscal year ended June 30, 1997.
Decatur's unaudited results of operations for the six months ended December 31,
1997 included interest income of $4,513,000, net income of $575,032, dividends
paid of $36,000, and other comprehensive loss of $16,000. An adjustment has been
made to stockholders' equity as of June 30, 1998 to eliminate the effect of
including Decatur's results of operations for the six months ended December 31,
1997 in both the years ended June 30, 1998 and 1997.

                                       F-27

<PAGE>

NOTE 16. STOCK PURCHASE AND REDEMPTION AGREEMENT

The Company has entered into stock purchase agreements with two of the minority
stockholders of its subsidiary banks under which the Company has the right of
first refusal to purchase the minority shares of common stock offered for sale
by each stockholder at a specified price. In addition, the Company has agreed to
purchase the shares upon the death or termination of employment of each
shareholder, and obligates the estate or shareholder to sell such shares. If the
purchase occurred on June 30, 2000, the total purchase price would be
approximately $962,000. This redemption price exceeds the recorded amount of the
related minority interest in those subsidiaries by approximately $79,000.

NOTE 17. COMMITMENTS AND CONTINGENCIES

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is party to
financial instruments with off-balance-sheet risk in the normal course of
business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and letters of credit. They
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheets. The Company's exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit and letters of credit is represented by the
contractual amount of those instruments. A summary of the Company's commitments
(in thousands) is as follows:

<TABLE>
<CAPTION>

                                                                                       June 30,
                                                                           -----------------------------
                                                                               2000                1999
                                                                           -----------------------------
<S>                                                                      <C>                 <C>
Commitments to extend credit                                                $ 97,288            $ 88,958
Letters of credit                                                                965               1,177
</TABLE>


Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The credit and collateral policy for
commitments and letters of credit is comparable to that for granting loans.

CONSTRUCTION IN PROGRESS: The Company has entered into contracts to complete
construction of additional facilities. Total estimated costs to complete these
projects is approximately $2,529,000 at June 30, 2000. Construction in progress
is approximately $3,917,000 as of June 30, 2000.

                                     F-28

<PAGE>

NOTE 17. COMMITMENTS AND CONTINGENCIES (CONTINUED)

CONTINGENCIES: In the normal course of business, the Company is involved in
various legal proceedings. In the opinion of management, any liability resulting
from such proceedings would not have a material adverse effect on the Company's
financial statements.

FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT RISK BY GEOGRAPHIC LOCATION:
A substantial portion of the Company's customers' abilities to honor their
contracts is dependent on the economy in northern Missouri, Iowa and South
Dakota. Although the Company's loan portfolio is diversified, there is a
relationship in these regions between the agricultural economy and the economic
performance of loans made to nonagricultural customers. The concentration of
credit in the regional agricultural economy is taken into consideration by
management in determining the allowance for loan losses.

NOTE 18. TRANSACTIONS WITH RELATED PARTIES

The Company has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with stockholders, directors,
principal officers, their immediate families and affiliated companies in which
they are principal stockholders (commonly referred to as related parties). Total
loans to related parties were approximately $5,619,000 and $7,372,000 at June
30, 2000 and 1999, respectively. The Company had participation loans sold of
approximately $10,152,000 and $9,877,000 and participations loans purchased of
approximately $25,569,000 and $20,026,000 at June 30, 2000 and 1999,
respectively, with other banks partially owned by a stockholder of the Company.
These transactions have been, in the opinion of management, on the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with others.





                                     F-29
<PAGE>

NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS AND INTEREST RATE RISK

The estimated fair values of the Company's financial instruments (in thousands)
are as follows:

<TABLE>
<CAPTION>

                                                                              June 30,
                                                    -------------------------------------------------------
                                                                2000                           1999
                                                    -------------------------------------------------------
                                                      Carrying         Fair            Carrying       Fair
                                                       Amount          Value           Amount         Value
                                                    -------------------------------------------------------
<S>                                               <C>               <C>             <C>            <C>
Financial Assets
   Cash and due from banks                             $ 24,129      $  24,129       $  18,389     $ 18,389
   Federal funds sold                                    15,089         15,089           7,255        7,255
   Certificates of deposit                                2,772          2,772             792          792
   Securities                                           117,428        117,428          91,140       91,140
   Loans receivable                                     574,659        570,993         466,970      468,102
   Accrued interest receivable                            7,640          7,640           5,775        5,775

Financial Liabilities
   Deposits                                             629,373        626,699         506,909      508,866
   Federal funds purchased and securities
      sold under agreements to repurchase                22,415         22,415          19,777       19,777
   Notes payable                                         46,944         45,965          39,024       38,814
   Company obligated mandatorily
      redeemable preferred securities                    20,400         20,400              --           --
   Accrued interest payable                               6,734          6,734           4,461        4,461
</TABLE>

The estimated fair value of commitments to extend credit and letters of credit
at June 30, 2000 and 1999 is insignificant. Loan commitments on which the
committed interest rate is less than the current market rate are also
insignificant at June 30, 2000 and 1999.

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. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, 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. Conversely,
depositors who are receiving fixed rates are more likely to withdraw funds
before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the Company's overall interest rate risk.

                                     F-30
<PAGE>

NOTE 20. CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY

The following presents condensed parent company only financial statements for
Spectrum Bancorporation, Inc.

                            Condensed Balance Sheets
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                       June 30,
                                                            -----------------------------
                                                                 2000           1999
                                                            -----------------------------
<S>                                                         <C>              <C>
Assets
   Cash and due from banks                                     $     962       $      18
   Investment in subsidiaries                                     62,205          47,198
   Other assets                                                    3,723           2,057
                                                               -------------------------
        Total assets                                           $  66,890       $  49,273
                                                               =========================
Liabilities
   Notes payable                                               $  23,331       $  11,740
   Accounts payable and accrued liabilities                          526             336
                                                              --------------------------
        Total liabilities                                         23,857          12,076
                                                              --------------------------
Stockholders' Equity
   Preferred stock                                                 1,700           1,700
   Common stock                                                       72              72
   Additional paid-in capital                                      1,649           1,654
   Retained earnings                                              41,440          34,276
   Accumulated other comprehensive income (loss)                  (1,828)           (505)
                                                              --------------------------
        Total stockholders' equity                                43,033          37,197
                                                               -------------------------
        Total liabilities and stockholders' equity             $  66,890       $  49,273
                                                               =========================
</TABLE>
                                          F-31
<PAGE>


NOTE 20. CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY (CONTINUED)


                         Condensed Statements of Income
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                          Years ended June 30,
                                                          -------------------------------------------------
                                                              2000               1999               1998
                                                          -------------------------------------------------
<S>                                                      <C>                <C>             <C>
Income:
   Dividends received from subsidiaries                     $    3,431         $    2,479      $      2,087
   Other                                                           104                 85               111
   Interest                                                        227                  9                11
                                                          -------------------------------------------------
        Total income                                             3,762              2,573             2,209
                                                          -------------------------------------------------

Expense:
   Salaries and employee benefits                                  173                 67                81
   Interest                                                      2,042                905               951
   Other                                                           370                243               232
                                                          -------------------------------------------------
        Total expenses                                           2,585              1,215             1,264
                                                          -------------------------------------------------
   Income before income tax (benefit) and
      equity in undistributed income of subsidiaries             1,177              1,358               945
Income tax (benefit)                                              (710)              (352)             (362)
                                                          -------------------------------------------------
   Income before equity in undistributed income
      of subsidiaries                                            1,887              1,710             1,307
Equity in undistributed income of subsidiaries                   5,699              5,135             4,528
                                                          -------------------------------------------------
Net income                                                  $    7,586         $    6,845      $      5,835
                                                          =================================================
</TABLE>

                                        F-32

<PAGE>

NOTE 20.    CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY (CONTINUED)



                       Condensed Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                              Years ended June 30,
                                                           --------------------------------------------------------
                                                                    2000              1999               1998
                                                           --------------------------------------------------------
<S>                                                          <C>                <C>               <C>
Cash flows from operating activities:
   Net income                                                     $  7,586         $      6,845        $ 5,835
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and other                                            29                   54             43
      Equity in undistributed income of subsidiaries                (5,699)              (5,135)        (4,528)
   Changes in deferrals and accruals:
      Other assets                                                      31                 (317)          (104)
      Accounts payable and accrued liabilities                         190                   43            120
                                                             -------------------------------------------------
        Net cash provided by operating activities                    2,137                1,490          1,366
                                                             -------------------------------------------------

Cash flows from investing activities:
   Acquire stock of subsidiaries                                   (10,631)                  --             --
   Business acquisition                                                 --                   --         (2,321)
   Other                                                              (665)                  --             --
                                                             -------------------------------------------------
        Net cash (used in) investing activities                    (11,296)                  --         (2,321)
                                                             -------------------------------------------------

Cash flows from financing activities:
   Proceeds from notes payable                                      24,031                  145          2,188
   Payments on notes payable                                       (12,440)              (1,363)        (1,065)
   Incur debt issuance costs                                        (1,061)                  --             --
   Proceeds from sale (purchase) of
      minority interest                                                 --                 (153)           113
   Dividends paid                                                     (352)                (252)          (152)
   Stock purchased for retirement                                      (75)                 (72)           (55)
                                                             -------------------------------------------------
        Net cash provided by (used in)
           financing activities                                     10,103               (1,695)         1,029
                                                             -------------------------------------------------
        Net increase (decrease) in cash                                944                 (205)            74
Cash at beginning of period                                             18                  223            149
                                                             -------------------------------------------------
Cash at end of period                                        $         962         $         18        $   223
                                                             =================================================
</TABLE>


                                               F-33

<PAGE>

NOTE 21.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands except earnings per share data)

<TABLE>
<CAPTION>

                                                                        Year Ended June 30, 2000
                                                    ------------------------------------------------------------------
                                                        First              Second             Third          Fourth
                                                    ------------------------------------------------------------------
<S>                                               <C>               <C>             <C>               <C>
Total interest income                                $  12,319           $  12,641          $  14,262     $   16,350
Net interest income                                      6,122               5,960              6,506          8,085
Provision for losses on loans                              396                 253                743            434
Net income                                               1,980               1,885              1,603          2,118
Basic earnings per common share                          27.12               25.79              21.88          29.10


                                                                        Year Ended June 30, 1999
                                                    ------------------------------------------------------------------
                                                        First             Second             Third          Fourth
                                                    ------------------------------------------------------------------

Total interest income                                $  11,399           $10,907           $11,771      $   12,196
Net interest income                                      5,535             5,017             6,120           6,445
Provision for losses on loans                              224               279               379             451
Net income                                               1,689             1,570             1,789           1,798
Basic earnings per common share                          23.02             21.36             24.41           24.55

</TABLE>

NOTE 22. SUBSEQUENT EVENTS

On July 13, 2000 the Company's subsidiary, Citizens Bank, Mt. Ayr, purchased
certain assets and liabilities of the branch of Commercial Federal Bank, FSB,
located in Kellerton, Iowa. A premium of approximately $175,000 was paid to
acquire deposits of approximately $3,300,000.

On August 7, 2000 the Company acquired all of the outstanding shares of Hamburg
Financial, Inc. (HFI), an unaffiliated holding company which owned two banks in
southeastern Iowa. The Company paid $8,730,995 in cash which included a premium
of $2,356,156 to acquire HFI and its subsidiaries; Thurman State Corporation, a
second-tier holding company which owned the United National Bank of Iowa,
headquartered in Sidney, Iowa; and Iowa State Bank, headquartered in Hamburg,
Iowa. Deposits of $55,990,045 and loans of $48,659,556 were acquired. The
transaction was accounted for as a purchase. HFI and Thurman State Corporation
were merged into the Company. HFI's bank subsidiaries were merged into the
Company's subsidiary bank, Citizens Bank, Mt. Ayr.

On August 7, 2000, the Company acquired all of the outstanding shares of
Citizens Corporation (Citizens), an affiliated holding company which owned
Citizens Bank, Chariton, Iowa. Since the entities were under common control,
the transaction was accounted for in a manner similar to a pooling of
interests. The Company exchanged 7,584 newly issued shares of common stock
for all 4,628 outstanding shares of Citizens, and assumed a $1,200,000
capital note payable. Citizens Bank, Chariton, Iowa was merged into the
Company's subsidiary, Citizens Bank, Mt. Ayr.  Deposits of $60,382,514 and
loans of $52,472,988 were acquired.


                                        F-34