<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR FISCAL YEAR ENDED JUNE 30, 2001               COMMISSION FILE NUMBER 0-22224
                            ------------------------

                              LEDGER CAPITAL CORP.
             (Exact name of registrant as specified in its charter)

                                   WISCONSIN
                            (State of Incorporation)
                                   39-1762467
                       (IRS Employer Identification No.)

                          5555 N. PORT WASHINGTON ROAD
                           GLENDALE, WISCONSIN 53217
             (Address and Zip Code of principal executive offices)

                 Registrant's telephone number: (414) 290-7900
                            ------------------------

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

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par
                                                            value $1.00 per
                                                            share.
                                                       (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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/A or any amendment to
this Form 10-K.  YES [X]  NO [ ]

     As of September 10, 2001, there were issued and outstanding 3,162,500 and
2,437,141 shares of the Registrant's Common Stock, respectively. The aggregate
market value of the voting stock held by non-affiliates of the Registrant,
computed by reference to the average of the bid and asked price of such stock as
of September 10, 2001, was $42.8 million. Solely for purposes of this
calculation, all executive officers and directors of the Registrant are
considered to be affiliates; also included as "affiliate shares" are certain
shares held by various employee benefit plans where the trustees are directors
of the Registrant or are required to vote a portion of unallocated shares at the
direction of executive officers or directors of the Registrant. The exclusion
from such amount of the market value of the shares owned by any person shall not
be deemed an admission by the Registrant that such person is an affiliate of the
Registrant.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Part III of Form 10-K: Portions of the Proxy Statement/Prospectus for the
2001 Annual Meeting of Shareholders are incorporated by reference into Part III
hereof.
--------------------------------------------------------------------------------
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<PAGE>   2

                          FORM 10-K TABLE OF CONTENTS

<Table>
<Caption>
                                                                               PAGE
                                                                               ----
<S>         <C>  <C>                                                           <C>
PART I
Item 1      --   Business....................................................    1
Item 2      --   Properties..................................................   46
Item 3      --   Legal Proceedings...........................................   47
Item 4      --   Submission of Matters to a Vote of Security Holders.........   47
PART II
Item 5      --   Market for the Registrant's Common Equity and Related
                 Security Holder Matters.....................................   48
Item 6      --   Selected Financial Data.....................................   49
Item 7      --   Management's Discussion and Analysis of Financial Condition
                 and Results of Operations...................................   51
Item 7A     --   Quantitative and Qualitative Disclosures About Market
                 Risk........................................................   68
Item 8      --   Financial Statements and Supplementary Data.................   69
Item 9      --   Changes in and Disagreements With Accountants on Accounting
                 and Financial Disclosure....................................  101
PART III
Item 10     --   Directors and Executive Officers of the Registrant..........  101
Item 11     --   Executive Compensation......................................  101
Item 12     --   Security Ownership of Certain Beneficial Owners and
                 Management..................................................  101
Item 13     --   Certain Relationships and Related Transactions..............  101
PART IV
Item 14     --   Exhibits, Financial Statement Schedules, and Reports on Form
                 8-K.........................................................  102
                                                                               105
Signatures...................................................................
</Table>
<PAGE>   3

                                    PART I.

FORWARD-LOOKING STATEMENTS

     When used in this Annual Report on Form 10-K or future filings with the
Securities and Exchange Commission, in quarterly reports or press releases or
other public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, various words or phrases are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements include words and phrases such as "will likely result," "are expected
to," "will continue," "is anticipated," "estimate," "project," "intend" or
similar expressions and various other statements indicated herein with an
asterisk after such statements. Ledger Capital Corp. (the "Company") wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and to advise readers that
various factors could affect the Company's financial performance and could cause
actual results for future periods to differ materially from those anticipated or
projected. Such factors include, but are not limited to: (i) general market
interest rates; (ii) general economic conditions; (iii) legislative/regulatory
changes; (iv) monetary and fiscal policies of the U.S. Treasury and Federal
Reserve; (v) changes in the quality or composition of the Company's loan and
investment portfolios; (vi) demand for loan products; (vii) deposit flows;
(viii) competition; (ix) demand for financial services in the Company's markets;
and (x) changes in accounting principles, policies or guidelines.

     The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.

     ON SEPTEMBER 11, 2001, THERE WERE TERRORIST ATTACKS ON THE UNITED STATES.
THE COMPANY IS UNAWARE OF ANY DIRECT IMPACT THIS TRAGEDY WILL HAVE ON THE
FINANCIAL POSITION OR RESULTS OF OPERATIONS OF THE COMPANY. FURTHERMORE, IT IS
UNKNOWN AS TO WHETHER OR TO WHAT EXTENT THESE TRAGIC EVENTS WILL HAVE DIRECTLY
OR INDIRECTLY ON THE COMPANY'S FINANCIAL POSITION AND RESULTS OF OPERATIONS IN
THE FUTURE.

ITEM 1. BUSINESS

GENERAL

     Ledger Capital Corp. (the "Company") is a holding company incorporated
under the laws of the State of Wisconsin and is engaged in the financial
services business through its wholly owned subsidiary, Ledger Bank S.S.B. (the
"Bank"), a Wisconsin state-chartered stock savings bank headquartered in
Milwaukee, Wisconsin. The Company's initial public offering was consummated in
December 1993, and the Company acquired all of the outstanding common stock of
the Bank issued in the mutual to stock conversion of the Bank (the "Conversion")
on December 30, 1993.

     On June 15, 2001, the Company announced that it had entered into a
definitive agreement with Anchor BanCorp Wisconsin, Inc. ("Anchor") (Nasdaq:
"ABCW"), headquartered in Madison, Wisconsin, providing for the merger of the
Company with and into Anchor (the "Merger"). Anchor is the parent holding
company for Anchor Bank, fsb, a $3.13 billion financial institution with 49
full-service offices and three lending-only facilities in 37 Wisconsin cities.
Completion of the Merger is subject to certain conditions, including approval by
shareholders of the Company. The Merger currently is expected to be completed
during the fourth calendar quarter of 2001. The Company filed a Current Report
on Form 8-K, dated June 15, 2001, with the Securities and Exchange Commission,
in connection with its announcement of the Merger.

     The Company's primary strategy since the Conversion through fiscal 2001 has
been to focus on effectively utilizing the capital acquired in the Conversion to
fund asset growth and asset portfolio diversification into higher-yielding
assets. This strategy resulted in an increase in the Company's asset size from
$179.6 million at June 30, 1994 to $506.9 million at June 30, 2001. The
Company's asset growth has come primarily through (i) the origination and
purchase of mortgage loans (principally loans secured by one-to-four family
owner-occupied homes) within and outside of the Company's primary lending area,
(ii) the purchase of mortgage-backed and related securities, and (iii) the
origination and purchase of commercial real-estate and business loans within and
outside of the Company's primary lending area. This asset growth was funded
through
                                        1
<PAGE>   4

significant increases in Federal Home Loan Bank ("FHLB") advances and other
borrowings, and increases in deposits consisting primarily of brokered and
non-brokered wholesale deposits.

     The Company's asset portfolio diversification has been achieved by altering
the composition of loans and securities originated, purchased, sold and held in
the total asset portfolio. In particular, the Company has focused on originating
and purchasing higher-yielding non-conforming one-to-four family, multi-family,
commercial real estate and commercial business loans secured by properties or
assets located within the Company's primary lending area (as defined herein) and
outside of the Company's primary lending area, to either replace or supplement
lower-yielding one-to-four family mortgage loans and principal run-off from the
mortgage securities portfolio. In fiscal 2001, the Company originated and
purchased loans or participation interests (loan production) totaling $147.8
million and $28.0 million, respectively, (total loan production of $175.8
million) as compared to fiscal 2000 when originated and purchased loans and
participation interests totaled $140.4 million and $118.9 million, respectively
(total loan production of $259.3 million). Approximately $31.4 million and
$132.4 million of the Company's total loan production related to properties or
business assets located outside of the Company's primary lending area in fiscal
2001 and 2000, respectively (representing 8.66% and 32.09% of gross loans at
June 30, 2001 and 2000, respectively). A significant portion of the Company's
loan production in 2001 related to one-to-four family mortgage loan originations
and commercial business loans. The Company had a decrease in the level of
purchased loans due to the lack of availability of such loans that would have
met the Bank's underwriting requirements.

     Under regulations established for state savings banks by the Wisconsin
Department of Financial Institutions ("DFI"), the Bank is limited in the amount
of commercial real estate and commercial business loans it can hold in its loan
portfolio. The DFI approved limit for the Bank was 30% of the Bank's total asset
base at June 30, 2001 and June 30, 2000. At June 30, 2001, the Bank had $131.1
million of such loans in its portfolio, representing 25.8% of the Bank's total
asset base of $507.4 million. At June 30, 2000, the Bank had $138.3 million of
such loans in its portfolio, representing 26.6% of the Bank's asset base of
$520.0 million. The Company projects that the percentage of total assets
represented by commercial real estate and commercial business loans will remain
the same in fiscal 2002 as in fiscal 2001, since a substantial portion of these
new originations and purchases are expected to be sold in the secondary market.*

     The Company began the process of increasing the level of core retail
deposits relative to brokered and non-brokered wholesale deposits in fiscal
2001, which is expected to reduce the overall cost of liabilities for the
Company.* This process started through the use of several different strategies,
including changing the bank name from West Allis Savings Bank to Ledger Bank,
S.S.B., opening a new full-service banking center in Glendale, Wisconsin and
implementing a proactive internal sales culture. The new full-service banking
center in Glendale, Wisconsin began operations during the third quarter of
fiscal 2001. This location currently serves as the executive and administrative
headquarters for the Company and Bank. Location-specific market research was
conducted during fiscal 2000 by a third-party company, and this site was ranked
by that market research company as one of the top five locations for attracting
core deposit balances in Milwaukee County. The full-service banking center
offers traditional deposit products and services, discount brokerage services,
and mortgage, consumer and commercial business lending services.

MARKET AREA

     The Company offers a variety of retail deposits and services primarily in
the metropolitan Milwaukee area. The Company also offers a variety of mortgage,
consumer and commercial lending products in the southern Wisconsin counties of
Milwaukee, Waukesha, Racine, Kenosha, Ozaukee, Washington, Sheboygan, Fond du
Lac, Dodge, Jefferson, Dane, Rock and Walworth ("primary lending area"). In
addition, management evaluates lending opportunities on a national basis, and
also will evaluate opportunities to originate and purchase one-to-four family,
multi-family, multi-family construction, commercial real estate, commercial
construction and commercial business loans, or participation interests in such
loans originated by other lenders and secured by properties located outside of
the Company's primary lending area.

     The Company's administrative office is located at 5555 N. Port Washington
Road, Glendale, Wisconsin. The city of Glendale is immediately north of the city
of Milwaukee, which is located on the western shore of

                                        2
<PAGE>   5

Lake Michigan, approximately 90 miles north of Chicago, Illinois. The Company
has four full-service branches located in West Allis, Greenfield, New Berlin and
Glendale, which are suburbs in Milwaukee and Waukesha counties. The Company also
operates a limited-services office inside of a senior community residence in
West Allis. All of the Company's locations are in areas generally characterized
as residential neighborhoods.

     During fiscal 2001, the Company opened a new retail banking office in the
building that houses the administrative office in Glendale, Wisconsin. The new
banking location is located in a retail commercial business district and
management anticipates opportunity for increased commercial loan origination and
deposit acquisition in this market.* See "Item I. Business -- General."

     The City of Milwaukee is the largest city in Wisconsin, and the Milwaukee
metropolitan statistical area ("MSA") which includes Milwaukee, Waukesha,
Ozaukee and Washington counties, is the largest MSA within the State of
Wisconsin. The MSA includes a diverse economic base, including business,
industry and agriculture. Major employers include Johnson Controls, Inc., Briggs
and Stratton Corp., Harley-Davidson, Inc., A.O. Smith Corp., Rockwell
Allen-Bradley and Northwestern Mutual Life Insurance Co., and the home offices
of numerous other insurance companies and financial institutions. Although the
local economy was adversely impacted by the reduction in the number of jobs in
heavy industry in the late 1920's and early 1980's, the addition of many service
industry and small manufacturing jobs has had a favorable impact upon the area's
economy. The MSA has eleven colleges and universities each with enrollments
exceeding 1,000 students, including Marquette University, the Milwaukee campus
of the University of Wisconsin and Concordia University.

LENDING ACTIVITIES

  GENERAL

     The largest component of the Bank's gross loan portfolio, which totaled
$362.7 million at June 30, 2001, was first mortgage loans secured by
owner-occupied one-to-four family residences. At June 30, 2001, one-to-four
family owner-occupied mortgage loans totaled $140.4 million or 38.7% of gross
loans. Of the remaining gross loans held at June 30, 2001, 22.7% were commercial
real estate loans, 13.0% were multi-family mortgage loans, 6.8% were commercial
construction and lot loans, 6.6% were commercial business loans, 5.9% were home
equity loans, 3.6% were one-to-four family non-owner-occupied mortgage loans,
1.1% were multi-family construction loans, 0.7% were one-to-four family
construction loans and 0.8% were in various consumer loans. As part of its
strategy to manage interest rate risk, the Bank originates primarily ARM loans
or fixed-rate loans which have short- and intermediate-term maturities for its
own loan portfolio. The Bank also offers longer-term fixed-rate loans, of which
substantially all are sold to secondary market investors within guidelines
established by the Asset/Liability Committee.

     Since fiscal 1996, the Bank has been actively diversifying its loan
portfolio from lower-yielding one-to-four family mortgage loans into
higher-yielding non-conforming one-to-four family, multi-family, commercial real
estate and commercial business loans while increasing the total asset size of
the Bank. At June 30, 2001, total gross loans receivable decreased 12.1% to
$362.7 million from $412.6 million at June 30, 2000. The Bank experienced a
decline in the balance of substantially all loan categories, with the exception
of multi-family loans, during fiscal 2001 due to an increase in loan repayments
and a decrease in loans purchased. During periods of lower interest rates,
customers generally prefer long-term fixed rate mortgages, which the Bank
originates and typically sells in the secondary market based on its
asset/liability management strategy. Substantially all of the 30-year fixed-rate
conforming one-to-four family mortgage loans originated in fiscal 2001 were sold
in the secondary market on a service-released basis in lieu of being retained in
the Bank's portfolio.

     In fiscal 2001, approximately 32.76% (or $118.8 million) of the Company's
gross loan portfolio related to properties or business assets located outside of
the Company's primary lending area, compared to approximately 32.09% (or $132.4
million) in fiscal 2000. In terms of geographic distribution of loans, no single
state (other than Wisconsin) represented in excess of 10% of the Company's gross
loan portfolio at June 30, 2001. However, the Company did have loan balances
secured by properties located in California, Illinois, Minnesota,
                                        3
<PAGE>   6

Michigan and New York that represented 5.4%, 3.4 %, 3.0%, 2.1% and 1.7% of the
Company's gross loan portfolio at June 30, 2001, respectively.

     In deciding whether or not to purchase a loan or participation interest in
a loan originated outside of the Company's primary lending area, management of
the Company has applied, and intends to continue to apply, underwriting
guidelines at least as strict as those applicable to the origination of
comparable loans within its market area.* Management of the Company intends to
continue to closely monitor the performance of such loans secured by
multi-family and commercial real estate as well as business assets, as these
types of loans generally involve a greater degree of credit risk than
one-to-four family loans and carry larger balances.* The increased credit risk
is the result of several factors, including the concentration of principal in a
limited number of loans and borrowers, the effect of general economic conditions
on income producing properties, and the increased difficulty of evaluating and
monitoring these types of loans. These risks may be increased with respect to
loans secured by properties located outside the Company's primary lending area
due to the increased difficulty of monitoring such loans. Due to the risks
associated with this type of lending, the Company uses a separate risk
monitoring and analysis process for its portfolio of purchased loans both within
and outside of its primary lending area.

     The Company also applies a stringent underwriting review process before
purchasing one-to-four family non-conforming loans that involve higher
loan-to-value and debt-to-income ratios both within and outside of its primary
lending area. Additional procedures have been implemented relative to
non-conforming one-to-four family mortgage loans originated by the Company for
its own portfolio which include a secondary review process in the areas of
underwriting, risk and yield analysis. A monthly review of the portfolio is
conducted by the Company's Asset Quality Committee.

  COMPOSITION OF LOAN PORTFOLIO

     The following table presents information concerning the composition of the
Bank's loan portfolio in dollar amounts and in percentages (before deduction for
loans in process, deferred fees and discounts, allowance for loan losses and
allowance for uncollected interest) as of the dates indicated.
<Table>
<Caption>
                                                                   AT JUNE 30,
                                     -----------------------------------------------------------------------
                                            2001                 2000                 1999            1998
                                     ------------------   ------------------   ------------------   --------
                                      AMOUNT    PERCENT    AMOUNT    PERCENT    AMOUNT    PERCENT    AMOUNT
                                      ------    -------    ------    -------    ------    -------    ------
                                                             (DOLLARS IN THOUSANDS)
<S>                                  <C>        <C>       <C>        <C>       <C>        <C>       <C>
REAL ESTATE LOANS:
  One-to-four family:
    Owner-occupied.................  $137,272     37.9%   $169,028     41.0%   $132,924     44.5%   $134,877
    Non-owner occupied.............    16,327      4.5      17,248      4.2      15,036      5.0      20,205
  Home equity......................    21,469      5.9      21,758      5.2      20,457      6.8      25,079
  Multi-family.....................    47,190     13.0      41,751     10.1      36,320     12.1      33,513
  Commercial/nonresidential........    82,290     22.7      86,521     21.0      42,366     14.2      34,610
  One-to-four family
    construction...................     2,550      0.7       9,414      2.2       3,933      1.3       3,718
  Multi-family construction........     4,000      1.1      11,870      2.9       8,740      2.9       3,120
  Other construction and land......    24,832      6.8      27,179      6.6      17,056      5.7      13,874
                                     --------    -----    --------    -----    --------    -----    --------
      Total real estate loans......   335,930     92.6     384,769     93.2     276,832     92.6     268,996
CONSUMER AND OTHER LOANS:
  Automobile.......................       184      0.1         262      0.1         444      0.1         755
  Credit card......................     1,909      0.5       2,112      0.5       2,372      0.8       2,777
  Other consumer loans.............       658      0.2         853      0.2       1,030      0.4       1,476
                                     --------    -----    --------    -----    --------    -----    --------
      Total consumer loans.........     2,751      0.8       3,227      0.8       3,846      1.3       5,008
  Commercial loans.................    23,982      6.6      24,589      6.0      18,254      6.1      14,646
  Gross loans receivable...........   362,663    100.0%    412,585    100.0%    298,932    100.0%    288,650
ADD:
  Accrued interest, net............     2,415                2,573                1,664                1,764
LESS:
  Loans in process.................    (8,084)             (18,589)             (16,279)              (6,848)
  Deferred fees and discounts......      (484)                (630)                (490)                (319)
  Allowance for loan losses........    (3,351)              (3,201)              (2,648)              (2,329)
  Allowance for uncollected
    interest.......................      (487)                (432)                 (59)                 (29)
                                     --------             --------             --------             --------
      Total additions/deductions...   (12,406)             (22,852)             (19,476)              (7,762)
                                     --------             --------             --------             --------
        Loans receivable, net......  $352,672             $392,306             $281,120             $280,889
                                     ========             ========             ========             ========

<Caption>
                                             AT JUNE 30,
                                     ----------------------------
                                      1998            1997
                                     -------   ------------------
                                     PERCENT    AMOUNT    PERCENT
                                     -------    ------    -------
                                        (DOLLARS IN THOUSANDS)
<S>                                  <C>       <C>        <C>
REAL ESTATE LOANS:
  One-to-four family:
    Owner-occupied.................    46.7%   $153,618     53.6%
    Non-owner occupied.............     7.0      13,893      4.9
  Home equity......................     8.7      25,297      8.8
  Multi-family.....................    11.6      27,616      9.7
  Commercial/nonresidential........    12.0      21,693      7.6
  One-to-four family
    construction...................     1.3      17,382      6.1
  Multi-family construction........     1.1       9,621      3.4
  Other construction and land......     4.8       7,385      2.6
                                      -----    --------    -----
      Total real estate loans......    93.2     276,505     96.7
CONSUMER AND OTHER LOANS:
  Automobile.......................     0.3       1,195      0.4
  Credit card......................     0.9       2,730      1.0
  Other consumer loans.............     0.5       1,950      0.7
                                      -----    --------    -----
      Total consumer loans.........     1.7       5,875      2.1
  Commercial loans.................     5.1       3,471      1.2
  Gross loans receivable...........   100.0%    285,851    100.0%
ADD:
  Accrued interest, net............               1,694
LESS:
  Loans in process.................             (11,998)
  Deferred fees and discounts......                (197)
  Allowance for loan losses........              (1,762)
  Allowance for uncollected
    interest.......................                 (32)
                                               --------
      Total additions/deductions...             (12,295)
                                               --------
        Loans receivable, net......            $273,566
                                               ========
</Table>

                                        4
<PAGE>   7

  LOAN MATURITY

     The following table shows the contractual maturity of the Bank's loan and
mortgage-backed and related securities portfolio at June 30, 2001. Loans that
have adjustable rates are shown as being due in the period during which the last
payment is due. Demand loans that have no schedule for repayment and no stated
maturity are reported as due in one year or less. The table does not include
estimated prepayments or scheduled principal amortization. Prepayments and
scheduled principal amortization on loans totaled $151.5 million, $110.3 million
and $199.7 million for the years ended June 30, 2001, 2000 and 1999,
respectively. Management anticipates that if and when the Bank purchases
one-to-four family, multi-family, commercial real estate and commercial business
loans, or participation interests in such loans, there will not be a material
impact on the contractual maturities of the Bank's loan portfolio.*
<Table>
<Caption>
                                                                    AT JUNE 30, 2001
                          -----------------------------------------------------------------------------------------------------
                                                                                                                       TOTAL
                                                                                                                     MORTGAGE-
                                       ONE-TO-                                                                         BACKED
                          ONE-TO-        FOUR                              MULTI-      COMMERCIAL/       OTHER          AND
                            FOUR        FAMILY       HOME     MULTI-       FAMILY         NON-       CONSTRUCTION/    RELATED
                           FAMILY    CONSTRUCTION   EQUITY    FAMILY    CONSTRUCTION   RESIDENTIAL       LAND        SECURITIES
                          -------    ------------   ------    ------    ------------   -----------   -------------   ----------
                                                                     (IN THOUSANDS)
<S>                       <C>        <C>            <C>       <C>       <C>            <C>           <C>             <C>
AMOUNTS DUE:
 Within one year........  $    123     $    --      $   120   $ 3,488      $3,000        $ 1,557        $ 7,201       $    --
 After one year:
   One to three years...     2,262          --          349    11,153          --         22,561          3,396           522
   Three to five
     years..............       847          --        2,911    17,004       1,000         23,634          8,886            --
   Five to ten years....    15,295          --       17,172     3,092          --         20,564          4,588           599
   Ten to 20 years......    67,760          --          917     3,667          --         13,974            761        16,357
   Over 20 years........    67,312       2,550           --     8,786          --             --             --        43,922
                          --------     -------      -------   -------      ------        -------        -------       -------
     Total due after one
       year.............   153,476       2,550       21,349    43,702       1,000         80,733         17,631        61,400
                          --------     -------      -------   -------      ------        -------        -------       -------
     Total amounts due..   153,599       2,550       21,469    47,190       4,000         82,290         24,832        61,400
LESS:
 Loans in process.......      (846)     (1,271)          --        --      (1,935)            --         (4,032)           --
 Deferred fees and
   discounts............      (233)         --           --        --          --           (251)            --           (67)
 Allowance for loan
   losses...............      (834)         (8)        (256)     (377)        (16)        (1,162)          (214)           --
 Unrealized loss on
   securities available-
   for-sale.............        --          --           --        --          --             --             --           258
                          --------     -------      -------   -------      ------        -------        -------       -------
Loans receivable and
 mortgage-backed and
 related securities,
 net....................  $151,686     $ 1,271      $21,213   $46,813      $2,049        $80,877        $20,586       $61,591
                          ========     =======      =======   =======      ======        =======        =======       =======

<Caption>
                                  AT JUNE 30, 2001
                          --------------------------------

                          CONSUMER   COMMERCIAL    TOTAL
                          --------   ----------    -----
                                   (IN THOUSANDS)
<S>                       <C>        <C>          <C>
AMOUNTS DUE:
 Within one year........   $2,053     $12,819     $ 30,361
 After one year:
   One to three years...      162       4,969       45,374
   Three to five
     years..............      103       6,111       60,496
   Five to ten years....      327          83       61,720
   Ten to 20 years......      106          --      103,542
   Over 20 years........       --          --      122,570
                           ------     -------     --------
     Total due after one
       year.............      698      11,163      393,702
                           ------     -------     --------
     Total amounts due..    2,751      23,982      424,063
LESS:
 Loans in process.......       --          --       (8,084)
 Deferred fees and
   discounts............       --          --         (551)
 Allowance for loan
   losses...............     (123)       (361)      (3,351)
 Unrealized loss on
   securities available-
   for-sale.............       --          --          258
                           ------     -------     --------
Loans receivable and
 mortgage-backed and
 related securities,
 net....................   $2,628     $23,621     $412,335
                           ======     =======     ========
</Table>

                                        5
<PAGE>   8

     The following table sets forth at June 30, 2001, the dollar amount of all
loans and mortgage-backed and related securities due after June 30, 2002, and
whether such loans have fixed interest rates or adjustable interest rates.

<Table>
<Caption>
                                                                     DUE AFTER JUNE 30, 2002
                                                                ----------------------------------
                                                                 FIXED      ADJUSTABLE     TOTAL
                                                                 -----      ----------     -----
                                                                          (IN THOUSANDS)
<S>                                                             <C>         <C>           <C>
Mortgage loans:
  One-to-four family........................................    $124,328     $ 29,148     $153,476
  One-to-four family construction...........................          --        2,550        2,550
  Home equity...............................................       2,142       19,207       21,349
  Multi-family..............................................      33,636       10,066       43,702
  Multi-family construction.................................       1,000           --        1,000
  Commercial/nonresidential.................................      67,075       13,658       80,733
  Other construction and land...............................       2,893       14,738       17,631
Consumer loans..............................................         698           --          698
Commercial loans............................................      10,436          727       11,163
                                                                --------     --------     --------
  Gross loans receivable....................................     242,208       90,094      332,302
Mortgage-backed and related securities......................      47,687       13,713       61,400
                                                                --------     --------     --------
  Gross loans receivable and mortgage-backed and related
     securities.............................................    $289,895     $103,807     $393,702
                                                                ========     ========     ========
</Table>

  ONE-TO-FOUR FAMILY MORTGAGE LENDING

     The majority of the Bank's historical lending activity has been the
origination of first mortgage loans secured by one-to-four family owner-occupied
residences located within the Bank's primary lending area. In fiscal 2001, the
Bank primarily originated one-to-four family real estate loans secured by
properties located within the Bank's primary lending area. At June 30, 2001, the
Bank's one-to-four family mortgage loan portfolio was $153.6 million
(representing 42.4% of gross loans) compared to $186.3 million (representing
45.2% of gross loans) at June 30, 2000. Due to the lower level of interest rates
and increased level of refinancing activity, the Bank's originations of
one-to-four family loans increased by 120.0% to $75.3 million at June 30, 2001
from $34.2 million at June 30, 2000. The Bank did not purchase one-to-four
family mortgage loans during fiscal 2001, compared to purchases of $38.0 million
in one-to-four family non-conforming loans in fiscal 2000. All one-to-four
family mortgage loans purchased in fiscal 2000 were retained in the Bank's loan
portfolio. The purchased loans either were underwritten in accordance with the
Bank's underwriting guidelines or if the Bank's underwriting guidelines were not
met, other credit enhancements or rate adjustments were obtained.

     The Bank offers conventional fixed-rate mortgage loans and ARM loans with
maturity dates that typically range from 15 to 30 years. During fiscal 2001,
substantially all of the ARM loans were originated for the Bank's own loan
portfolio. The Bank also originates 15-year fixed-rate loans that primarily have
been retained in the Bank's portfolio in recent fiscal years but which the Bank
may sell in the future.* During the fiscal year ended June 30, 2001, the Bank
originated $70.9 million in fixed-rate one-to-four family mortgage loans. The
Bank sold $67.3 million in fixed-rate one-to-four family mortgage loans in
fiscal 2001, of which substantially all were 30-year fixed-rate mortgage loans.
The Bank had sold primarily all of its 30-year fixed-rate loans in prior years.
Certain fixed-rate loans made under special loan terms or programs, principally
originated for purposes of compliance with the Community Reinvestment Act are
retained in the Bank's portfolio. The Bank follows Freddie Mac and Fannie Mae
underwriting guidelines for its conforming one-to-four family mortgage loans.

     Due to the highly competitive banking environment in its primary lending
area, the Bank offers a variety of rates, fees, origination terms and mortgage
products. While the interest rate on a mortgage loan is a function of the
origination points charged, the Bank has originated and intends to continue to
originate loans that are for sale in the secondary market and primarily without
points.*

                                        6
<PAGE>   9

     The Bank also originates mortgage loans secured by one-to-four family
properties located within its primary lending area for retention in its own
portfolio that do not conform to Freddie Mac and Fannie Mae underwriting
guidelines, typically due to higher loan-to-value ratios, source of down payment
or lower credit scores. The Company believes that substantially all of the
originations were comprised of one-to-four family conforming mortgage loans
secured by properties within the Company's primary lending area. To compensate
for the non-conforming characteristics that increase the risk on these loans,
the Bank receives a higher interest rate or fees. Additional procedures have
been implemented relative to non-conforming one-to-four family mortgage loans
originated by the Company for its own portfolio which include a secondary review
process in the areas of underwriting, risk and yield analysis. A monthly review
of the portfolio is conducted by the Company's Asset Quality Committee.

     Upon receipt of a completed mortgage application from a prospective
borrower, a credit report is ordered, an appraisal from an independent third
party is obtained, income and other deposit information is verified, and, as
necessary, additional financial information is requested. The Bank requires
title insurance on all first mortgage loans. Borrowers must present evidence of
appropriate hazard insurance and flood insurance (if applicable) prior to the
closing. Borrowers are generally required to advance funds on a monthly basis,
together with payments of principal and interest, to a mortgage escrow account
from which the Bank makes disbursements for items such as real estate taxes,
hazard insurance, and in some cases, flood insurance. For loans with lower
loan-to-value ratios, escrow requirements may be waived for an additional fee.
The lending policy of the Bank for its one-to-four family mortgage loans meeting
federal secondary market guidelines restricts mortgage loan amounts to 80% of
the lesser of the appraised value or purchase price of the real estate to be
mortgaged to the Bank. The Bank makes mortgage loans in amounts up to 95% of the
lesser of the appraised value or purchase price, subject to the availability of
private mortgage insurance insuring the amount in excess of 80% of the appraised
value or purchase price. One-to-four family non-conforming mortgage loans
purchased by the Company typically do not have private mortgage insurance.
Another exception to this policy is for ARM loans in which case the Bank loans
up to 95% of the appraised value or purchase price with the appropriate private
mortgage insurance. The Bank's underwriting department reviews all the pertinent
information and makes a credit decision for approval or denial within
established Bank policy guidelines. Utilizing the Bank's current underwriting
guidelines, a portion of one-to-four family loans were outsourced to a contract
underwriter, then reviewed by the Bank's internal underwriter during fiscal
2001. The use of outsourcing of one-to-four family loans to a contract
underwriter is consistent with the strategy to contain the Bank's variable per
loan origination costs. Recommendations to deny applications based on
underwriting considerations are reviewed by the Bank's underwriter prior to a
final loan denial and secondarily reviewed by the department manager. Summaries
of all one-to-four family mortgage loan applications are reviewed on a monthly
basis by the Board of Directors and the Loan Committee. Mortgage loans held in
the Bank's loan portfolio generally include due-on-sale clauses, which provide
the Bank with the contractual right to deem the loan immediately due and payable
in the event the borrower transfers the ownership of the property without the
Bank's prior consent. The Bank enforces the due-on-sale clauses of its mortgage
loans.

     The Bank makes loans under various governmental programs including the
Wisconsin Housing Economic Development Authority ("WHEDA"), the Federal Veterans
Administration ("Fed VA"), the State Department of Veterans Affairs ("State VA")
and utilizing whenever possible other grant programs offered through various
local and state programs. The WHEDA and State VA programs generally have lower
down payment requirements, lower interest rates and less restrictive
qualification ratios. The WHEDA and State VA loans are originated for the
agencies, underwritten and serviced by them. The Fed VA loans are originated for
wholesale investors and underwritten by the agency to remove any risk to the
Bank.

     One-year ARM loans currently adjust a maximum of 2 percentage points per
year with a lifetime interest rate cap of 6.0% above the original note rate.
Monthly payments of principal and interest are adjusted when the interest rate
adjusts to maintain full amortization of the mortgage loan within the remaining
term. The Bank also offers one- and three-year ARM loans, which adjust annually
after the initial one- and three-year terms, and provide for an option to
convert the ARM loan to a fixed-rate loan at certain intervals upon the payment
of a fee. The initial rates offered on ARM loans fluctuate with general interest
rate changes and are determined by competitive conditions and the Bank's yield
requirements. The Bank primarily uses the

                                        7
<PAGE>   10

one-year Constant Maturity United States Treasury index to determine the
interest rate payable upon the adjustment date of outstanding ARM loans.
Substantially all of the ARM loans that contain a fixed-rate conversion feature
permitting conversion to a fixed-rate for up to five years after origination are
sold in the secondary market. Substantially all ARM loans that are originated
for the Bank's own portfolio are non-convertible to a fixed rate. Conversion
terms are established at origination to permit the Bank to sell the ARM loan to
secondary market investors immediately upon conversion to a fixed rate. From
time to time, the Bank offers initial interest rates on the ARM loans it
originates below the fully indexed rate (i.e., "teasers"). To minimize the
associated risk with ARM loans, borrowers are qualified at the higher of the
initial offering rate or the fully indexed rate. ARM loans generally pose
different risks than fixed-rate loans. In a rising interest rate environment,
the underlying ARM loan payment rises, increasing the potential for default, and
the marketability of the underlying property may be adversely affected. In a
decreasing interest rate environment, mortgagors tend to refinance to fixed-rate
loans. The Bank's delinquency experience on its ARM loans has been minimal.

     Prior to the mid-1980s, the Bank originated ARM loans which carried
interest rates that were subject to annual adjustment by the Bank on a
discretionary basis ("non-index ARMs"). At June 30, 2001, the Bank had $2.1
million of non-index ARMs outstanding.

     The Bank offers one- to two-year ARM loan programs amortized over a 15-year
term for land loans. Under these programs, the interest rate and monthly payment
are fixed for the initial term and, thereafter, adjust annually after the
initial one- and two-year terms.

  HOME EQUITY LENDING

     The Bank originates closed- and open-ended home equity loans, also referred
to as flexLOANS, secured by one-to-four family residences within its primary
lending area. The closed-end home equity loans have fixed rates for periods of
up to fifteen years. Open-ended home equity loans are granted for up to a
ten-year term, renewable at the sole discretion of the Bank for up to additional
ten-year periods. The minimum periodic payment on open-ended home equity loans
is based on 1.5% for loans with combined loan-to-value ratios up to 100% and
interest-only on loans up to 85% combined loan-to-value ratios. After an initial
introductory interest rate that is set below the fully-indexed rate, open-ended
loans have an interest rate adjustable monthly, currently set at the prime rate
plus 2%-3% for loans with combined loan-to-value ratios above 85% and prime rate
for loans with combined loan-to-value ratios up to 85%. Origination fees are
charged on close-ended home equity loans. The Bank reviews completed loan
applications, receives a credit report, verifies income and other financial
data, and either uses the tax assessment of the property as assessed by the
local municipality or obtains a separate appraisal of the property to determine
the maximum amount it will loan on such property. The Bank's delinquency
experience on home equity loans has been minimal. At June 30, 2001, the home
equity loan portfolio was $21.5 million compared to $21.8 million at June 30,
2000. The open-ended home equity product is promoted by loan originators and
offers the Bank an asset that adjusts with current interest rates and is part of
the Bank's asset/liability management strategy.

  RESIDENTIAL CONSTRUCTION LENDING

     Construction loans are made to individuals who have signed construction
contracts with a homebuilder and to a lesser extent, directly to a self-builder.
Loan proceeds are disbursed through a title insurance company as residential
construction progresses. These loans have loan-to-value ratios not exceeding
95%. When the loan-to-value ratio exceeds 80%, private mortgage insurance is
required which insures payment of a portion of the principal balance, reducing
the Bank's exposure to 75% loan-to-value or less. Single-family residential
loans are structured to allow the borrower to pay interest-only on the funds
advanced during the first nine months of the loan. Thereafter, the borrower is
required to commence principal and interest payments based on an amortization
schedule of 351-months or fewer. The Bank's single-family residential
construction loan programs are primarily one- or three-year ARM loans which
require interest-only payments during the construction period. To increase the
volume of residential construction loan activity, the Bank offers permanent
financing on residential construction loans which enables borrowers to avoid
duplicate closing costs

                                        8
<PAGE>   11

normally associated with temporary financing during construction periods and
permanent financing upon completion of construction.

     For the fiscal year ended June 30, 2001, residential construction loan
originations and purchases totaled $3.3 million compared to $9.1 million during
fiscal 2000. In fiscal 2001, all originated one-to-four family construction
loans were secured by properties located within the Bank's primary lending area.
The decrease in residential one-to-four family construction lending during
fiscal 2001 was primarily due to a decrease in emphasis on such lending during
the period. A significant number of the Bank's construction loans result in
permanent mortgage loans. Because most residential construction loans are ARM
loans, residential construction loans afford the Bank the opportunity to
increase the repricing frequency of its loan portfolio. The Bank also receives
yields on fixed-rate residential construction loans that are higher than those
obtainable on fixed-rate loans secured by existing residential properties. While
higher risks generally are associated with residential construction lending
because of the uncertainties involved in the construction process, the Bank has
taken precautions to reduce such risks by requiring private mortgage insurance
if the loan-to-value ratio exceeds 80%. All construction loans originated by the
Bank are underwritten according to the Bank's underwriting guidelines. The Bank
originates and purchases construction loans whereby substantially all are
provided permanent financing as a part of the original loan agreement. The Bank
has had minimal delinquent residential construction loans to date.

  MULTI-FAMILY LENDING

     The Bank originates multi-family loans that it retains in its portfolio. In
the past, the Bank offered both ARM and fixed-rate multi-family loans.
Currently, the Bank offers fixed-rate balloon notes typically with three-to-five
year maturities amortized over 15 to 30 years. Multi-family loans generally have
shorter maturities than one-to-four family mortgage loans. The rates charged on
the Bank's multi-family loans typically are slightly higher than those charged
on loans secured by one-to-four family residential properties. An origination
fee equal to 0.5% to 1.0% of the principal amount is usually charged on such
loans.

     Multi-family loans generally are underwritten in amounts of up to 80% of
the lesser of the appraised value or purchase price of the underlying property.
Appraisals on properties which secure multi-family loans are performed by an
independent appraiser designated by the Bank. In addition, the Bank's
underwriting procedures require verification of the borrower's credit history,
an analysis of the borrower's income, personal and business (if applicable)
financial statements and banking relationships and a review of the property,
including cash flow projections and historical operating results. The Bank
evaluates all aspects of multi-family lending to mitigate risk to the extent
possible. The Bank seeks to ensure that the property securing the loans will
generate sufficient cash flow to adequately cover operating expenses and debt
service payments. Individual guarantees for all multi-family loans originated or
purchased is typically required as part of the overall credit analysis. The Bank
applies underwriting guidelines to purchased multi-family loans (both within and
outside of the market area) which are at least as strict to those existing for
multi-family loans originated in the Bank's primary lending area.

     The Bank originated $6.7 million and $11.6 million in multi-family loans
secured by properties within its primary lending area in fiscal 2001 and 2000,
respectively. The decrease in multi-family loan originations was primarily due
to the increased competition for such loans in the Bank's lending area during
fiscal 2001. The Bank purchased $3.1 million and $6.0 million of multi-family
loans in fiscal 2001 and 2000, respectively. Of the $3.1 million purchased by
the bank in fiscal 2001, $3.1 million were secured by properties located outside
its primary lending area. Of the $6.0 million purchased by the Bank in fiscal
2000, $3.5 million were secured by properties located outside its primary
lending area. The decrease in multi-family loan purchases in fiscal 2001 is
primarily due to the lack of availability of such loans that would have met the
Bank's underwriting requirements.

     Loans secured by multi-family real estate generally involve a greater
degree of credit risk than one-to-four family mortgage loans and carry larger
loan balances. This increased credit risk is a result of several factors,
including the concentration of principal in a limited number of loans and
borrowers, the effects of general economic conditions on income-producing
properties and the increased difficulty of evaluating and

                                        9
<PAGE>   12

monitoring these types of loans. Furthermore, the repayment of loans secured by
multi-family real estate is typically dependent upon the successful operation of
the related real estate project. If the cash flow from the project is reduced,
the borrower's ability to repay the loans may be impaired. The risk may be
increased on loans secured by properties located outside of the Bank's primary
market due to the decreased ability to actively monitor such properties. Despite
the risks inherent in multi-family real estate lending, the Bank's delinquent
multi-family loans as a percentage of gross loans have been minimal. To the
extent multi-family loans outside of the Company's primary lending area are
purchased, management will utilize local servicing of the originating lender to
attempt to mitigate the risks associated with this type of lending activity.

  MULTI-FAMILY CONSTRUCTION LENDING

     In fiscal 2001, the Bank increased its multi-family residential
construction lending activities as compared to fiscal 2000. For the fiscal year
ended June 30, 2001, the Bank originated $4.6 million in multi-family
residential construction loans. The Bank did not originate multi-family
construction loans in fiscal 2000. There were $0 and $3.1 million in purchases
of multi-family construction loans in fiscal 2001 and 2000, respectively. Of the
$3.1 million in multi-family construction loans purchased in fiscal 2000, all
related to properties located outside of the Bank's primary lending area and
consisted of two separate transactions in fiscal 2000, which related to
multi-family real estate located in Minnesota.

     Multi-family construction loans typically offered by the Bank are balloon
loans with three-to-five year terms amortized over 15 to 30 years after allowing
for interest only payments during a twelve-month construction period. Loan
proceeds are disbursed in increments through an insured title company as
construction of the project progresses. The rates charged on the Bank's
multi-family construction loans are typically higher than those charged on loans
secured by one-to-four family residential properties. An origination fee of 0.5%
to 1% of the principal amount is usually charged on such loans.

     The loan-to-value on multi-family construction loans does not exceed 80% of
the lessor of the appraised value or purchase price of the property. Appraisals
on properties that secure multi-family loans are performed by an independent
appraiser designated by the Bank. In addition, the Bank's underwriting
procedures require verification of the borrower's credit history, an analysis of
the borrower's income, personal and business (if applicable) financial
statements, banking relationships and a review of the property, including cash
flow projections and historical operating results. The Bank evaluates all
aspects of multi-family construction lending to mitigate risk to the extent
possible. The Bank seeks to ensure that the property securing the loans will
generate sufficient cash flow to adequately cover operating expenses and debt
service payments. Individual guarantees for all multi-family loans originated or
purchased are typically required as part of the overall credit analysis. The
Bank originates and purchases construction loans whereby substantially all are
provided permanent financing as a part of the original loan agreement.

     Loans secured by multi-family real estate generally involve a greater
degree of credit risk than one-to-four family loans and carry larger loan
balances. The increased credit risk is the result of several factors, including
the concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income-producing properties and the
increased difficulty of monitoring these types of loans. The risk may be
increased on loans secured by properties located outside of the Bank's primary
lending area due to the decreased ability to actively monitor such properties.
The Bank uses underwriting guidelines for construction loans purchased outside
its primary lending area which are at least as strict as those guidelines for
loans originated within its primary lending area. While higher risks generally
are associated with construction lending because of the uncertainties involved
in the construction process, the Bank has taken precautions to reduce such risks
by requiring the loan-to-value ratio to not exceed 80%. Despite the risks
inherent in multi-family construction real estate lending, the Bank's delinquent
multi-family construction loans as a percentage of gross loans have been
minimal.

  COMMERCIAL REAL ESTATE LENDING

     Prior to fiscal 1996, the Bank had minimal originations of commercial real
estate loans (i.e., loans secured by non-residential property). The Bank
originated and purchased $11.8 million, $52.9 million and

                                        10
<PAGE>   13

$49.8 million in commercial real estate loans in fiscal years 2001, 2000 and
1999, respectively. The significant decrease in originations and purchases in
fiscal 2001 is related to the increased competition to originate and purchase
such loans in fiscal 2001. In fiscal 2001, the Bank originated and purchased
$11.8 million of commercial real estate loans, of which $5.5 million, (or
46.8%), were loans originated or purchased and secured by properties within the
Bank's primary lending area, and $6.3 million were participation interests in
loans of which $1.6 million were secured by properties located outside of the
Bank's primary lending area.

     Commercial loans generally will be underwritten in amounts of up to 80% of
the lessor of the appraised value or purchase price of the underlying property.
Appraisals on properties that secure commercial real estate will be performed by
an independent appraiser designated by the lender at the time the application is
submitted. In addition, the Bank's underwriting procedures require verification
of the borrowers' credit history, an analysis of the borrower's income, credit
history, personal and business (if applicable) financial statements and banking
relationships and a review of the property, including cash flow projections,
historical operating results and environmental concerns. The Bank evaluates all
aspects of commercial real estate lending to mitigate risk to the extent
possible. The Bank seeks to ensure that the property securing the loans will
generate sufficient cash flow to adequately cover operating expenses and debt
service payments. The Bank uses underwriting guidelines for loans purchased
outside its primary lending area that are at least as strict as those guidelines
for loans originated within its primary lending area.

     Loans secured by commercial real estate generally involve a greater degree
of credit risk than one-to-four family mortgage loans and carry larger loan
balances. This increased credit risk is a result of several factors, including
the concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income-producing properties and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by commercial real estate is
typically dependent upon the successful operation of the related business
occupant. Payments on loans secured by commercial real estate also are often
susceptible to adverse conditions in the real estate market or the economy. The
risk may be increased on loans secured by properties located outside of the
Bank's primary lending area due to the decreased ability to actively monitor
such properties. To the extent commercial loans are purchased outside of the
Company's primary lending area, management will utilize local servicing of the
originating lender to attempt to mitigate the risks associated with this type of
lending activity. Despite the risks inherent in commercial real estate lending,
the Bank's delinquent commercial real estate loans as a percentage of gross
loans have been minimal.

  CONSUMER LENDING

     The Bank originates a variety of consumer loans, generally consisting of
automobile, motorcycle, boat, mobile home and credit card. At June 30, 2001,
these consumer loans totaled $2.8 million, or 0.8% of gross loans, compared to
$3.2 million or 0.8% at June 30, 2000. Consumer loans generally have shorter
terms and higher interest rates than mortgage loans but generally involve more
risk than mortgage loans because of the type and nature of the collateral and,
in certain cases, the absence of collateral. Consumer loans generally are
dependent on the borrower's continuing financial stability and thus are more
likely to be affected by adverse personal circumstances. Often the loans are
secured by rapidly depreciable personal property, such as automobiles. Despite
the risks inherent in consumer lending, the Bank's delinquent consumer loans as
a percentage of gross loans has been minimal.

  OTHER CONSTRUCTION/LAND LENDING

     In fiscal 2001, the Bank originated and purchased $14.6 million of
commercial real estate construction loans for commercial properties and
residential real estate land loans compared to $36.7 million in fiscal 2000. The
decrease in commercial construction and land loans was primarily due to the
increased competition for such loans in the Bank's lending area and the lack of
availability of such loans that would have met the Bank's underwriting
requirements. These loans consist of adjustable rate mortgage loans originated
at prevailing market rates and participation interests in commercial real estate
construction loans originated by other lenders. Of the $14.6 million originated
and purchased in fiscal 2001, $6.9 million were originated internally, and $6.4
million of the $6.9 million originated by the Bank consisted of commercial real
estate construction
                                        11
<PAGE>   14

loans and $500,000 consisted of residential land loans. The $7.7 million of
loans purchased consisted of land loans. The $7.7 million of land loans
purchased outside of the Bank's primary lending area consisted of 4 separate
transactions with the largest transaction aggregating $2.5 million.

     While higher risks generally are associated with commercial real estate
construction lending because of the uncertainties involved in the construction
process and the impact of adverse conditions in the real estate market or the
economy, the Bank has taken precautions to reduce such risks by requiring the
loan-to-value ratio to not exceed 80% of the lesser of the appraised value or
purchase price of the underlying property. The risk may be increased on loans
secured by properties located outside of the Bank's primary market due to the
decreased ability to actively monitor such properties. The Bank evaluates all
aspects of commercial real estate construction lending. Appraisals on properties
which secure commercial loans are performed by an independent appraiser. In
addition, the Bank's underwriting procedures require verification of the
borrower's credit history, an analysis of the borrower's income, personal and
business (if applicable) financial statements and banking relationships, and a
review of the property, including cash flow projections and historical operating
results. The Bank seeks to ensure that the property securing the loans will
generate sufficient cash flow to adequately cover operating expenses and debt
service payments. Individual guarantees for all commercial real estate
construction loans originated or purchased is typically required as part of the
overall credit analysis. The Bank originates and purchases construction loans
whereby substantially all are provided permanent financing as a part of the
original loan agreement. Despite the risks inherent in commercial real estate
construction and land lending, the Bank's delinquencies have been minimal.

  COMMERCIAL BUSINESS LENDING

     The commercial lending division originated $27.1 million in commercial
business loans during fiscal 2001 compared to $33.9 million in fiscal 2000.
During fiscal 2001, the Bank purchased $10.7 million in commercial business
loans, all of which related to businesses located outside of the Bank's primary
lending area. Aggregate commercial business loans purchased in fiscal 2000 were
$14.0 million. Of the $10.7 million in out-of-market commercial business loan
purchases, the largest single transaction consisted of a $4.0 million loan
secured by the equity interest in hotels located in scattered sites in the USA.
The commercial lending division originates loans collateralized by business
equipment, inventory and trade receivables. The transactions generally are in
the form of loans, leases, lines of credit and letters of credit. Such
transactions typically will be structured as short-term fixed or adjustable rate
loans with three-to-five year maturities.

     The focus of the Company's commercial lending operation is to provide
financing options to businesses with revenues up to $10 million by offering
commercial/ industrial real estate term loans, construction loans, equipment
leasing, inventory/equipment/receivables financing, lines of credit, letters of
credit and government loan programs both within and outside of the Bank's
primary lending area. Under regulations established for state savings banks by
the Wisconsin Department of Financial Institutions ("DFI"), the Bank is limited
in the amount of commercial real estate and commercial business loans it can
hold in its loan portfolio. The DFI approved limit for the Bank is 30% of the
Bank's total asset base at June 30, 2001 and 2000. At June 30, 2001, the Bank
had $131.1 million of such loans in its portfolio, which represents 25.8% of the
Bank's asset base of $507.4 million. At June 30, 2000, the Bank had 138.3
million of such loans in its portfolio, which represents 26.6% of the Bank's
asset base of $520.0 million.

     Loans secured by commercial business assets generally involve a greater
degree of credit risk than one-to-four family mortgage loans and carry larger
loan balances. This increased credit risk is a result of several factors,
including the concentration of principal in a limited number of loans and
borrowers, the effects of the general economic conditions on income producing
business assets and the increased difficulty of evaluating and monitoring these
types of loans. Also, the repayment of loans secured by commercial business
assets is typically dependent upon the successful operation of the business for
which the loan was made. To the extent the Bank originates or purchases
commercial loans for business located outside of its primary lending area, the
risks may be increased due to the decreased ability to monitor these loans. The
Bank and Board of Directors has taken precaution to reduce such risk by
establishing prudent loan underwriting guidelines and loan-to-value ratios. Cash
flows, both historical and future projections, of the business and the value of
the collateral are analyzed to give the Bank assurance that the business will
generate a sufficient level of cash flow to cover
                                        12
<PAGE>   15

ongoing business expenses and debt service. The loan-to-value ratios vary
depending on the type and liquidity of the collateral; and internal controls and
systems have been put in place to monitor collateral and other financial aspects
of these loans. Loans secured by properties or business assets outside of the
Company's primary lending area are generally serviced by a local financial
institution who closely monitors the performance of the loans and borrowers.

LOAN APPROVAL

     The Bank's residential lending underwriters are authorized by the Board of
Directors to approve one-to-four residential real estate secured loans up to the
maximum loan amount of $400,000, home equity loans up to $100,000 and consumer
loans up to $30,000. Authority exceeding the aforementioned limits for the
residential lending division are referred to the Senior Loan Committee and its
limits are $100,000 for consumer loans, $250,000 for home equity installment and
flexloans, and $750,000 for one-to-four family mortgage loans.

     A commercial lending policy approved by the Board of Directors has
established three levels of underwriting approval with individual loan officer
authority up to $250,000, Senior Loan Committee up to $1.5 million, and loans in
excess of $1.5 million will require the approval of the Board of Directors.
Loans exceeding the authority limits of the Senior Loan Committee must be
approved by the full Board of Directors. All loans approved pursuant to
designated authority are confirmed monthly by the Loan Committee. One-to-four
family, multi-family and commercial real estate loans purchased or participation
interests in such loans purchased that are secured by properties located outside
of the Bank's primary lending area will be underwritten pursuant to guidelines
at least as strict as those guidelines applicable to internal Bank loan
originations. See also "Lending Activities -- One-to-four Family Mortgage
Lending" and "Originations, Purchases and Sales of Loans -- Commercial Loan
Originations, Sales and Servicing (Ledger Financial, Inc.)."

ORIGINATIONS, PURCHASES AND SALES OF LOANS

     The following table sets forth the Company's total loan production
(originations and purchases) and gross loan sales for fiscal 2001, 2000 and
1999.

<Table>
<Caption>
                                                                      YEAR ENDED JUNE 30,
                                                                --------------------------------
                                                                  2001        2000        1999
                                                                  ----        ----        ----
                                                                         (IN THOUSANDS)
<S>                                                             <C>         <C>         <C>
Total loan originations.....................................    $147,836    $140,441    $202,098
Total loan purchases........................................      27,966     118,897      56,862
                                                                --------    --------    --------
     Total loan production..................................    $175,802    $259,338    $258,960
                                                                ========    ========    ========
Total loan sales............................................    $ 73,614    $ 33,932    $ 48,329
</Table>

     The principal sources of revenue from the Company's loan production and
loan sale activities are (i) mortgage loan origination fees, if any, (ii)
interest income earned on mortgage loans pending sale, (iii) mortgage loan
servicing fees, (iv) gains on the sale of mortgage loans and (v) gains on the
sale of mortgage servicing rights. The Company also receives income through
other loan related fees, including late payment charges and miscellaneous
service fees. The Company had a decrease in the level of purchased loans due to
the lack of availability of such loans that would have met the Bank's
underwriting requirements.

                                        13
<PAGE>   16

     The following table sets forth the Bank's loan originations and loan
purchases, sales and principal repayments by loan category for the periods
indicated. Mortgage loans and mortgage-backed and related securities held for
sale are included in the totals.

<Table>
<Caption>
                                                                    FISCAL YEAR ENDED JUNE 30,
                                                                ----------------------------------
                                                                  2001         2000        1999
                                                                  ----         ----        ----
                                                                          (IN THOUSANDS)
<S>                                                             <C>          <C>         <C>
MORTGAGE LOANS (GROSS):
At beginning of period......................................    $ 384,769    $276,832    $ 268,996
Mortgage loans originated:
  One-to-four family........................................       75,255      34,210       89,265
  One-to-four family construction...........................        3,319       9,082        5,148
  Home equity...............................................       13,589      14,259       10,899
  Multi-family..............................................        6,650      11,571       10,606
  Multi-family construction.................................        4,583          --        5,691
  Commercial/non-residential................................        5,269      14,964       28,833
  Other construction/land...................................        6,872      16,881        9,060
                                                                ---------    --------    ---------
       Total mortgage loans originated......................      115,537     100,967      159,502
Mortgage loans purchased:
  One-to-four family........................................           --      37,991        6,951
  One-to-four family construction...........................           --          28           --
  Multi-family..............................................        3,050       6,026        1,000
  Multi-family construction.................................           --       3,100           --
  Commercial/non-residential................................        6,503      37,911       20,936
  Other construction/land...................................        7,700      19,850       19,377
                                                                ---------    --------    ---------
       Total mortgage loans purchased.......................       17,253     104,906       48,264
                                                                ---------    --------    ---------
       Total mortgage loans originated and purchased........      132,790     205,873      207,766
                                                                ---------    --------    ---------
Transfer of mortgage loans to foreclosed real estate........         (628)     (1,473)        (682)
Principal repayments........................................     (107,387)    (62,531)    (150,919)
Sales of fixed-rate loans...................................      (73,614)    (33,932)     (48,329)
                                                                ---------    --------    ---------
At end of period............................................    $ 335,930    $384,769    $ 276,832
                                                                =========    ========    =========
CONSUMER LOANS:
At beginning of period......................................    $   3,227    $  3,846    $   5,008
  Consumer loans originated.................................        5,174       5,605        5,768
Principal repayments........................................       (5,650)     (6,224)      (6,930)
                                                                ---------    --------    ---------
At end of period............................................    $   2,751    $  3,227    $   3,846
                                                                =========    ========    =========
COMMERCIAL LOANS:
At beginning of period......................................    $  24,589    $ 18,254    $  14,646
  Commercial loans originated...............................       27,125      33,869       36,828
  Commercial loans purchased................................       10,713      13,991        8,598
  Principal repayments......................................      (38,445)    (41,525)     (41,818)
                                                                ---------    --------    ---------
At end of period............................................    $  23,982    $ 24,589    $  18,254
                                                                =========    ========    =========
MORTGAGE-BACKED AND RELATED SECURITIES:
At beginning of period......................................    $  50,961    $110,184    $ 122,831
Mortgage-backed and related securities purchased............       29,646      23,855       83,730
Sales of mortgage-backed and related securities.............       (2,955)    (50,861)      (2,503)
Amortization and repayments.................................      (16,893)    (32,073)     (93,577)
Market valuation allowance on available-for-sale
  mortgage-backed securities................................          832        (144)        (297)
                                                                ---------    --------    ---------
At end of period............................................    $  61,591    $ 50,961    $ 110,184
                                                                =========    ========    =========
</Table>

                                        14
<PAGE>   17

  RESIDENTIAL LOAN ORIGINATION, FEES AND SERVICING

     Mortgage loans are originated from real estate brokers, builders,
developers, existing or past customers, residents of the local communities
located in the Bank's primary lending areas, and purchased from other lenders
from within and outside of the Bank's primary lending area. The Bank advertises
its mortgage products in newspapers, through direct mail and other media in
addition to using its loan officers to directly solicit potential borrowers.

     In connection with the origination of mortgage loans, the Bank charges
points for origination, commitment and discounts, and fees for processing and
closing in addition to requiring borrower reimbursement for out-of-pocket fees
for costs associated with obtaining independent appraisals, credit reports,
title insurance, private mortgage insurance and other items. Because of the
highly competitive mortgage market in which the Bank originates loans, the point
structure varies considerably, depending upon the type of mortgage loan being
made, its interest rate and other competitive factors. While origination fees
ranging from zero to two points generally have been quoted on mortgage loans in
recent years, most of the Bank's borrowers typically accept a slightly higher
interest rate and pay zero points. Commitment fees are paid by the applicant at
time of loan commitment, whereas the origination and discount fees are paid at
time of closing. Loan origination and commitment fees and certain direct loan
origination costs are deferred and the net amounts amortized as an adjustment of
the related loan's yield in accordance with Statement of Financial Accounting
Standard No. 91. These amounts are amortized to interest income using the level
yield method over the contractual life of the related loans. Unamortized
deferred net loan fees and (costs) totaled $484,000, $630,000 and $490,000 at
June 30, 2001, 2000, and 1999, respectively. The decrease in unamortized
deferred loan fees at June 30, 2001 as compared to June 30, 2000, primarily
resulted from the increased level of loan refinancing in fiscal 2001.

     The Bank services residential real estate loans owned by the Bank as well
as for other secondary market purchasers for certain loans sold in the secondary
market. See "-- Sale of Residential Loans." Loan servicing includes collecting
and remitting loan payments, accounting for principal and interest, making
advances to cover delinquent payments, making inspections as required of
mortgaged premises, contacting delinquent mortgagors, supervising foreclosures
and property dispositions in the event of unremedied defaults and generally
administering the loans. The Bank receives fees for servicing residential
mortgage loans to compensate it for the servicing function. These fees generally
range from 0.25% to 0.375% of the declining principal balances of the loans per
annum.

  PURCHASES OF RESIDENTIAL LOANS

     During the fiscal year ended June 30, 2001, the Bank did not purchase
one-to-four family mortgage loans as compared to $38.0 million in fiscal 2000
and $7.0 in fiscal 1999. All of the loans purchased in fiscal 2000 and 1999
consisted of non-conforming one-to-four family mortgage loans secured by
properties located outside of the Bank's primary lending area, and were
purchased from, and are serviced by, a third-party bank, which originated the
loans. Purchases of non-conforming one-to-four family mortgage loans both within
and outside of the Company's primary lending area increased significantly during
fiscal 2000 as part of the Company's asset portfolio diversification strategy.
In fiscal 2001, however, the Company had a decrease in the level of purchased
loans due to the lack of availability of such loans that would have met the
Bank's underwriting requirements.

  SALE OF RESIDENTIAL LOANS

     The Bank sells one-to-four family mortgage loans, on a non-recourse basis,
into the secondary market to Freddie Mac, WHEDA, Fed VA, State VA and other
private secondary market purchasers. The amount of loans sold by the Bank is
based upon market conditions and the Bank's asset/liability strategy. The Bank
sold $67.3 million, or 95.9% of its total of $70.9 million in fixed-rate
one-to-four family mortgage loans in fiscal 2001. Of the $67.3 million,
substantially all were 30-year fixed-rate mortgage loans. The Bank had sold
nearly all of its 30-year fixed loans in prior years. Certain fixed-rate loans
made under special loan terms or programs, principally originated for purposes
of compliance with the Community Reinvestment Act are retained in the

                                        15
<PAGE>   18

Bank's portfolio. The Bank follows Freddie Mac and Fannie Mae underwriting
guidelines for its one-to-four family mortgage loans, which are sold in the
secondary market.

     For the fiscal years ended June 30, 2001, 2000 and 1999, the Bank's
fixed-rate loan sales to private and governmental investors totaled $67.3
million, $33.9 million and $48.3 million, with associated gross gains of
$988,000, $224,000 and $892,000, respectively. The increase in loan sales in
fiscal 2001 and 1999 as compared to fiscal 2000 relate to the lower level of
interest rates during those periods and the increase in long-term fixed rate
one-to-four family loans originated and sold in the secondary market.

     The Bank almost always retains servicing on loans sold to Freddie Mac. The
Bank generally releases servicing on loans sold to all other secondary market
purchasers. When loans are sold with servicing rights released to the secondary
market purchaser, the Company recognizes current income from receipt of
servicing release fees in addition to receiving a premium or deducting a
discount based on the market value of the loan (which is dependent upon, among
other factors, the interest rate and market conditions at the time the sale
price is locked in with the purchaser). For fiscal years ended June 30, 2001,
2000, and 1999, the Bank's net service fees on loans sold into the secondary
market totaled $76,000, $50,000 and $21,000, respectively. Sales prices for
loans originated for resale are generally locked in with the secondary market
purchasers at the time of origination in order to minimize the Company's
interest rate risk.

     When loans are sold to Freddie Mac with servicing retained, the Company
recognizes additional gains based on the estimated fair value of the servicing
retained. Recognition of such gains creates originated mortgage servicing rights
for the Company, which are capitalized and amortized in proportion to, and over
the period of, the estimated future net servicing income stream of the
underlying mortgage loans. See Note 4 of the Company's Notes to Consolidated
Financial Statements.

     The contractual right to service mortgage loans that have been sold has an
economic value that, in accordance with GAAP, is recognized as an asset on the
Bank's balance sheet. There were no gains on the sales of servicing rights
included in gains on the sale of loans for fiscal 2001, 2000 and 1999. The
mortgage servicing asset created will be amortized against the servicing fee
income stream. The value results from the future income stream of the servicing
fees, the availability of the cash balances associated with escrow funds
collected monthly for real estate taxes and insurance, the availability of the
cash from monthly principal and interest payments from the collection date to
the remittance date, and the ability of the servicer to cross-sell other
products and services. The actual value of a servicing portfolio is dependent
upon such factors as the age, maturity and prepayment rate of the loans in the
portfolio, the average dollar balance of the loans, the location of the
collateral property, the average amount of escrow funds held, the interest rates
and delinquency experience of the loans, the types of loans and other factors.

     The Bank also acts as a conduit for loans sold to WHEDA. For those
borrowers who qualify under WHEDA guidelines, the Bank originates the loan for a
fee equal to 1% of the underlying loan amount and sells the loan to WHEDA, on a
non-recourse basis, servicing released.

  COMMERCIAL LOAN ORIGINATION, SALES AND SERVICING (LEDGER FINANCIAL, INC.)

     During fiscal 2001, the Company leveraged its existing commercial lending
capabilities to include the origination, sale and servicing of commercial real
estate mortgages on a national basis, with primary concentration in the
southwest and western regions of the country. The new commercial mortgage
banking operation, Ledger Financial, Inc. ("LFI"), is a wholly owned subsidiary
of the Company. LFI originates loans from a third party commercial real-estate
broker on a non-exclusive basis and acts as the lender of record until the loan
is sold without recourse, generally within 45 days of the loan closing. LFI
recognizes that the volume of loans originated, sold and serviced will be
dependent on the level of referrals generated by the third party real estate
broker. HFI intends to expand its referral network of real estate brokers in the
future.* LFI intends to retain the servicing rights to these loans and receive a
servicing fee.* The principal sources of revenue from the commercial mortgage
banking operation are expected to be: (i) mortgage loan origination fees, (ii)
interest income earned on mortgage loans pending sale, (iii) mortgage loan
servicing fees and (iv) underwriting and administrative fees.* The primary
benefit of the expansion of the Bank's commercial mortgage banking activities is
to gain economies of scale through the ability to leverage existing staff,
expertise
                                        16
<PAGE>   19

level, overhead and infrastructure in order to increase fee income without a
significant incremental increase in expenses.* For the fiscal year ended June
30, 2001 LFI earned $142,000 in interest income and $20,000 in servicing fees.
Net loss for LFI was ($55,262) for the fiscal year ended June 30, 2001.

     The commercial mortgage loans held for sale by LFI will be carried at the
lower of cost or market, and losses, if any, are recorded on the financial
statements of the Company, irrespective of when the asset is ultimately sold.
Gains, if any, are recognized at the time the loan is sold and funded. Gains or
losses on the sale result primarily from two factors. First, LFI may originate a
loan at a price that is higher or lower than LFI would receive because of
changes in interest rates since the initial rate committed to the borrower.
Second, gains and losses result from the actual number of loans closed being
greater or fewer than anticipated. Changes in interest rates also affect the
value of commitments to sell commercial mortgage loans to secondary market
investors.

     Commercial mortgage loan servicing includes collecting and remitting loan
payments, accounting for principal and interest, administering escrow funds for
payment of mortgage-related expenses such as taxes and insurance, advancing
funds to cover delinquent tax payments, contacting delinquent mortgagors, and
supervising foreclosures and property dispositions in the event of unremedied
defaults. A servicer's obligation to provide mortgage loan servicing and its
right to collect fees are set forth in a servicing contract. Servicing rights
represent a contractual right to fees and not a beneficial ownership in the
underlying mortgage loans.

     LFI intends to retain servicing on the commercial mortgage loans sold to
secondary market investors.* As compensation for providing servicing, LFI will
receive loan servicing fees, which represent the difference between the interest
rate charged the borrower and the rate at which such loans are sold.* The
servicing rate earned by the Company is anticipated to be .25% per annum on the
declining principal balances of the loans.* Servicing fees are collected out of
monthly mortgage payments. Other sources of loan servicing revenue include late
charges, miscellaneous and administrative fees. Servicing portfolios are subject
to reduction by normal amortization, by prepayment or by foreclosure of
delinquent loans. See "-- Sale of Residential Loans" for a discussion of
accounting methods applied to the economic value of the contractual right to
service mortgage loans.

     Loans secured by commercial real estate generally involve a greater degree
of credit risk than one-to-four family mortgage loans and carry larger loan
balances. The degree of credit risk of a servicing portfolio is limited when
loans are sold on a non-recourse basis. See "Lending Activities" for a
discussion on credit risk.

DELINQUENCIES, NON-PERFORMING ASSETS AND CLASSIFIED ASSETS

  DELINQUENT LOANS -- RESIDENTIAL/CONSUMER LOANS

     When a borrower fails to make a required payment by the end of the month in
which the payment is due, the Bank generally initiates collection procedures.
The Bank will send a late notice, and in most cases, delinquencies are cured
promptly; however, if a loan becomes delinquent for more than 60 days, the Bank
contacts the borrower directly, to determine the reason for the delinquency and
to effect a cure, and where it believes appropriate, reviews the condition of
the property and the financial position of the borrower. At that time, the Bank
may: (i) accept a repayment program for the amount past due; (ii) seek evidence
of efforts by the borrower to sell the property; (iii) request a deed in lieu of
foreclosure; or (iv) initiate foreclosure proceedings. When a loan secured by a
mortgage is delinquent for three or more monthly installments, the Bank
generally will initiate foreclosure proceedings. With respect to delinquencies
on Fed or State VA or other governmental loan program mortgages, the Bank
follows the appropriate notification and foreclosure procedures prescribed by
the respective regulatory agencies.

     On mortgage loans or loan participations purchased by the Bank, the Bank
receives monthly reports from its loan servicers and uses those reports to
monitor the loan portfolio. Based upon servicing agreements with the servicers
of a loan, the Bank relies upon the servicer to contact delinquent borrowers,
collect delinquent amounts and to initiate foreclosure proceedings, when
necessary, all in accordance with applicable laws, regulations and the terms of
the servicing agreements between the Bank and its servicing agents.

                                        17
<PAGE>   20

  DELINQUENT LOANS -- COMMERCIAL BUSINESS AND COMMERCIAL REAL ESTATE LOANS

     When a borrower fails to make a required payment, the borrower is typically
contacted if the payment is not received within seven business days of the due
date to collect the payment or determine the reason for the delinquency. Unless
previous arrangements have been made, the Bank will review all necessary steps
or actions to protect its lien or collateral position if two payments are due
and owing. The steps may include, but not be limited to, loan forbearance,
assignment of any rents, enforcement of any loan guarantees, liquidation of any
business collateral, and/or foreclosure of any real estate collateral.

  NON-PERFORMING ASSETS

     Loans are placed on non-accrual status when, in the judgment of Bank
management, the probability of collection of principal or interest is deemed
insufficient to warrant further accrual of interest. The Bank discontinues the
accrual of interest on loans when the borrower is delinquent as to a
contractually due principal or interest payment by 90 days or more. When a loan
is placed on non-accrual status, all of the accrued interest on that loan is
reversed by way of a charge to interest income. Accrual of interest on a non-
accrual loan is resumed when all contractually past due payments are current and
when management believes the outstanding loan principal and contractually due
interest is no longer doubtful of collection. The Bank discontinues the accrual
of interest on loans more than 90 days past due, at which time all accrued but
uncollected interest is reversed by way of a charge to interest income.
Uncollected interest on credit card loans, however, continues to accrue after 90
days of delinquency but is capitalized to the loan balance monthly and reserved
for in the Bank's allowance for loan losses. The non-performing credit card
loans are typically charged off at 120 to 150 days past due.

     Property acquired by the Bank as a result of a foreclosure is classified as
foreclosed properties. Foreclosed properties are recorded at the lower of the
unpaid principal balance of the related loan or fair value, less estimated costs
to sell. The amount by which the recorded loan balance exceeds the fair value at
the time a property is classified a foreclosed property is charged against the
allowance for loan losses. Any subsequent reduction in the fair value of a
foreclosed property, along with expenses incurred to maintain or dispose of a
foreclosed property, is charged against current earnings. The Bank had four
one-to-four family mortgage loans totaling $402,000, one multi-family mortgage
loan with a balance of $140,000 and two commercial real estate loans with a net
balance of $1.1 million in foreclosed properties at June 30, 2001, compared to
two one-to-four family mortgage loans totaling $357,000 and one commercial real
estate loan with a net balance of $756,000 in foreclosed properties at June 30,
2000.

     The increase in the non-accrual mortgage loans 90 days or more past due
primarily relates to the increase in the principal balance of non-accrual
one-to-four family loans. The properties are located both in and outside the
Bank's primary lending area. The increase in the loans 90 days past due and
still accruing is due primarily to the increase in credit card loans 90 days
past due. The increase in the real estate owned and in judgment relates to the
default of three one-to four family mortgage loans, one multi-family mortgage
loan and one commercial real estate loan in fiscal 2000 which were acquired by
the Bank during fiscal 2001. The properties are located in and outside the
Bank's primary lending area.

                                        18
<PAGE>   21

     Non-performing loans include loans placed on non-accrual status and
troubled debt restructuring. Non-performing assets include non-performing loans,
foreclosed properties and investment securities. The following table sets forth
non-performing loans and assets:

<Table>
<Caption>
                                                                          AT JUNE 30,
                                                          --------------------------------------------
                                                           2001      2000      1999      1998     1997
                                                           ----      ----      ----      ----     ----
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                       <C>       <C>       <C>       <C>       <C>
Non-accrual mortgage loans 90 days or more past due...    $2,484    $1,798    $2,118    $1,338    $572
Non-accrual consumer loans 90 days or more past due...         7        54        88        52      20
Non-accrual commercial loans 90 days or more past
  due.................................................     1,824        --        --        --      --
Loans 90 days or more past due and still
  accruing(1).........................................        54        18       219        34      31
Troubled debt restructuring...........................        --        --        --        --      --
                                                          ------    ------    ------    ------    ----
     Total non-performing loans.......................     4,369     1,870     2,425     1,424     623
                                                          ------    ------    ------    ------    ----
Total real estate owned and in judgment, net of
  related allowance for losses........................     1,619     1,114       621        11      20
                                                          ------    ------    ------    ------    ----
Total investment securities, net of related
  discount............................................        --        --       235        --      --
                                                          ------    ------    ------    ------    ----
Total non-performing assets...........................    $5,988    $2,984    $3,281    $1,435    $643
                                                          ======    ======    ======    ======    ====
Total non-performing loans to gross loans
  receivable..........................................      1.20%     0.45%     0.81%     0.49%   0.22%
                                                          ======    ======    ======    ======    ====
Total non-performing assets to total assets...........      1.18%     0.57%     0.70%     0.32%   0.16%
                                                          ======    ======    ======    ======    ====
</Table>

-------------------------
(1) The Bank discontinues the accrual of interest on loans more than 90 days
    past due, at which time all accrued but uncollected interest is reversed by
    way of a charge to interest income. Uncollected interest on credit card
    loans, however, continues to accrue after 90 days of delinquency but is
    capitalized to the loan balance monthly, and reserved for in the Bank's
    allowance for loan losses.

  IMPAIRED LOANS

     Impaired loans consist primarily of commercial and commercial real estate
loans for which, based on current information and events, it is probable that
the Bank will be unable to collect all amounts due according to the contractual
terms of the loan agreement. Management believes that these loans are adequately
collateralized and/or have specific loan loss reserves established that are
adequate to absorb probable losses related to resolution. The increase in
impaired loans is due primarily to two commercial loans to one borrower with an
aggregate balance of $1.8 million.

     The two aforementioned impaired commercial loans are collateralized by
fixtures and equipment of a resort property located outside of the Bank's
primary lending area. The resort is currently operating under the protection of
Chapter 11 of the bankruptcy laws. On January 23, 2001, Debtor in Possession
financing was approved by the bankruptcy court. Loan payments resumed in
February 2001 when the Debtor in Possession financing became available. In July
2001, an acceptable bidder was identified to be presented and approved at the
August 8, 2001 bankruptcy hearing. At this time the bankruptcy court will set
the overbid procedures. The borrower is in negotiation with existing real estate
lenders concerning the allocation of buyer proceeds between equipment loans and
real estate loans should their bid be successful. The closing date is expected
to be September 26, 2001 and sufficient funds are expected to be available to
pay off the loan balances. Management currently believes the underlying value of
the property and the Bank's collateral position is sufficient to cover the
Bank's loan balance. Therefore, the Company has determined that no loss is
probable at this time.

  CLASSIFICATION OF ASSETS

     The FDIC requires each federally insured bank to classify its assets on a
regular basis in accordance with the guidelines set forth in the FDIC Manual of
Examination Policies. In addition, in connection with examinations of insured
banks by the FDIC, FDIC examiners have authority to identify problem assets as

                                        19
<PAGE>   22

Substandard, Doubtful or Loss. Substandard assets have one or more well-defined
weaknesses that jeopardize the liquidation of the debt and are characterized by
the distinct possibility that the bank will sustain some loss if the
deficiencies are not corrected. Doubtful assets have the weaknesses of
Substandard assets, with the additional characteristics that the weaknesses make
collection or liquidation in full, on the basis of currently existing facts,
conditions and values, highly questionable and improbable. An asset classified
as Loss is considered uncollectible and of such little value that continuance as
an asset of the bank is not warranted. At June 30, 2001, the Bank had assets
classified as Substandard of $5,246,000, $40,000 as Doubtful, and none as Loss.
The increase in Substandard classified assets is due primarily to the addition
of $1.7 million in one-to-four family mortgages and $1.8 million in commercial
loans to the substandard classification during fiscal 2001. These additions were
offset by a decrease of $2.0 million in substandard commercial real estate
loans. Management believes that the loan loss reserves established on these
loans is adequate to absorb any probable loss related to its resolution. Assets
that are classified as Loss are charged off. The FDIC examination policies
include a Special Mention category, consisting of assets which currently do not
expose the Bank to a sufficient degree of risk to warrant adverse
classification, but do possess credit deficiencies deserving management's close
attention. At June 30, 2001, none of the Bank's assets were classified as
Special Mention.

  ALLOWANCE FOR LOAN LOSSES

     Under federal regulations, when an insured institution classifies problem
assets as either Substandard or Doubtful, it is required to establish a general
allowance for loan losses in an amount deemed prudent by management. In addition
to general valuation allowances, the Bank may establish specific loss allowances
against specific assets in which a loss may be realized. General allowances
represent loss allowances which have been established to recognize the inherent
risks associated with lending activities, but which, unlike specific allowances,
have not been allocated to recognize probable losses on particular problem
assets. The Bank's determination as to its classification of assets and the
amount of its specific and general valuation allowances are subject to review by
the Commissioner and the FDIC, either one of which can order the establishment
of additional general or specific loss allowances.

     The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and the general economy. Such evaluation, which includes a review of
all loans on which full collectibility may not be reasonably assured, considers,
among other matters, the estimated net realizable value of the underlying
collateral, economic conditions, historical loan loss experience and other
factors that warrant recognition in providing for an adequate loan loss
allowance. Also, management continues to evaluate the allowance for losses on
loans as established by industry peers. During fiscal 2001, the increase in the
level of allowance for losses on loans primarily reflects the lower level of net
loan charge-offs compared against the provision. The Board of Directors of the
Company and the Asset Quality Committee actively monitor the Bank's general and
specific levels of loan loss reserves based on performance of its own portfolio
and the industry standard.

                                        20
<PAGE>   23

     The following table sets forth activity in the Bank's allowance for loan
losses during the fiscal years indicated.

<Table>
<Caption>
                                                                    AT JUNE 30,
                                              --------------------------------------------------------
                                                2001        2000        1999        1998        1997
                                                ----        ----        ----        ----        ----
                                                               (DOLLARS IN THOUSANDS)
<S>                                           <C>         <C>         <C>         <C>         <C>
Balance at beginning of period............    $  3,201    $  2,648    $  2,329    $  1,762    $  1,234
Additions charged to expense:
  One-to-four family......................          --          --          --          --         295
  Multi-family and commercial real
     estate...............................         390         499         310         512         181
  Consumer................................          40         143         120         163         114
  Commercial..............................          --         229          50         125          60
                                              --------    --------    --------    --------    --------
                                                   430         871         480         800         650
                                              --------    --------    --------    --------    --------
Recoveries:
  One-to-four family......................          --          --          --          --           1
  Multi-family and commercial real
     estate...............................          10          --          --          --          --
  Consumer................................          56          22          15          --           5
  Commercial..............................          10          --                      31          --
                                              --------    --------    --------    --------    --------
                                                    76          22          15          31           6
                                              --------    --------    --------    --------    --------
Charge-Offs:
  One-to-four family......................         (91)        (43)        (11)        (69)        (11)
  Multi Family and commercial real
     estate...............................        (143)         (5)        (34)         --          --
  Consumer................................        (122)       (178)       (131)       (195)       (117)
  Commercial..............................          --        (114)         --          --          --
                                              --------    --------    --------    --------    --------
                                                  (356)       (340)       (176)       (264)       (128)
                                              --------    --------    --------    --------    --------
Net charge-offs...........................        (280)       (318)       (161)       (233)       (122)
                                              --------    --------    --------    --------    --------
Balance at end of period..................    $  3,351    $  3,201    $  2,648    $  2,329    $  1,762
                                              ========    ========    ========    ========    ========
Percentage of loans to gross loans
  receivable:
  Mortgage loans..........................       92.63%      93.26%      92.61%      93.20%      96.73%
  Consumer loans..........................        0.76        0.78        1.29        1.73        2.06
  Commercial loans........................        6.61        5.96        6.10        5.07        1.21
Ratio of allowance for loan losses to
  gross loans receivable at the end of
  period..................................        0.92        0.78        0.89        0.81        0.62
Ratio of allowance for losses on loans to
  non-performing loans at the end of
  period..................................       76.70      171.26      109.19      163.14      282.71
Ratio of net charge-offs to average gross
  loans during period.....................        0.07        0.09        0.05        0.08        0.04
Average gross loans outstanding...........    $389,964    $370,602    $296,972    $280,204    $274,056
Gross loans receivable at end of period...    $362,663    $412,585    $298,932    $288,650    $285,851
</Table>

                                        21
<PAGE>   24

     At June 30, 2001, 2000, and 1999, delinquencies in the Bank's loan
portfolio were as follows:
<Table>
<Caption>
                                     AT JUNE 30, 2001                          AT JUNE 30, 2000
                          ---------------------------------------   ---------------------------------------
                                                   90 DAYS OR                                90 DAYS OR
                              60-89 DAYS            MORE(1)             60-89 DAYS            MORE(1)
                          ------------------   ------------------   ------------------   ------------------
                          NUMBER   PRINCIPAL   NUMBER   PRINCIPAL   NUMBER   PRINCIPAL   NUMBER   PRINCIPAL
                            OF      BALANCE      OF      BALANCE      OF      BALANCE      OF      BALANCE
                          LOANS    OF LOANS    LOANS    OF LOANS    LOANS    OF LOANS    LOANS    OF LOANS
                          ------   ---------   ------   ---------   ------   ---------   ------   ---------
                                                       (DOLLARS IN THOUSANDS)
<S>                       <C>      <C>         <C>      <C>         <C>      <C>         <C>      <C>
MORTGAGE LOANS:
  One-to-four family.....    6       $387        31      $2,265        3       $462        26      $1,071
  Residential
    construction.........   --         --        --          --       --         --        --          --
  Home equity............    2         30         8         219        1         20        11         318
  Commercial.............   --         --        --          --        1        470         2         409
                            --       ----        --      ------       --       ----        --      ------
    Total mortgage
      loans..............    8        417        39       2,484        5        952        39       1,798
CONSUMER LOANS...........    4          7        25          61        2          3        10          72
                            --       ----        --      ------       --       ----        --      ------
COMMERCIAL LOANS.........   --         --         2       1,824       --         --        --          --
                            --       ----        --      ------       --       ----        --      ------
    TOTAL................   12       $424        66      $4,369        7       $955        49      $1,870
                            ==       ====        ==      ======       ==       ====        ==      ======
DELINQUENT LOANS TO GROSS
  LOANS..................            0.12%                 1.21%               0.23%                 0.45%
                                     ====                ======                ====                ======

<Caption>
                                      AT JUNE 30, 1999
                           ---------------------------------------
                                                    90 DAYS OR
                               60-89 DAYS            MORE(1)
                           ------------------   ------------------
                           NUMBER   PRINCIPAL   NUMBER   PRINCIPAL
                             OF      BALANCE      OF      BALANCE
                           LOANS    OF LOANS    LOANS    OF LOANS
                           ------   ---------   ------   ---------
                                   (DOLLARS IN THOUSANDS)
<S>                        <C>      <C>         <C>      <C>
MORTGAGE LOANS:
  One-to-four family.....     6      $  284       17      $1,125
  Residential
    construction.........    --          --       --          --
  Home equity............     9         209        5          80
  Commercial.............     1         688        1       1,072
                             --      ------       --      ------
    Total mortgage
      loans..............    16       1,181       23       2,277
CONSUMER LOANS...........     9          16       26         148
                             --      ------       --      ------
COMMERCIAL LOANS.........    --          --       --          --
                             --      ------       --      ------
    TOTAL................    25      $1,197       49      $2,425
                             ==      ======       ==      ======
DELINQUENT LOANS TO GROSS
  LOANS..................              0.40%                0.81%
                                     ======               ======
</Table>

-------------------------
(1) The Bank discontinues the accrual of interest on loans when the borrower is
    delinquent as to a contractually due principal or interest payment by more
    than 90 days.

     The following table shows the Bank's allowance for loan losses and the
allocation to the various categories of loans held for investment at the dates
indicated. Allocations to a particular category do not restrict the Bank's
ability to use such allowance in any other category.

<Table>
<Caption>
                                                                          AT JUNE 30,
                              ---------------------------------------------------------------------------------------------------
                                           2001                              2000                              1999
                              -------------------------------   -------------------------------   -------------------------------
                                         % OF     % OF LOANS               % OF     % OF LOANS               % OF     % OF LOANS
                                        TOTAL     IN CATEGORY             TOTAL     IN CATEGORY             TOTAL     IN CATEGORY
                                        LOANS      TO TOTAL               LOANS      TO TOTAL               LOANS      TO TOTAL
                                          BY      OUTSTANDING               BY      OUTSTANDING               BY      OUTSTANDING
                              AMOUNT   CATEGORY      LOANS      AMOUNT   CATEGORY      LOANS      AMOUNT   CATEGORY      LOANS
                              ------   --------   -----------   ------   --------   -----------   ------   --------   -----------
                                                                    (DOLLARS IN THOUSANDS)
<S>                           <C>      <C>        <C>           <C>      <C>        <C>           <C>      <C>        <C>
Breakdown of Allowance:
  Mortgage loans:
    One-to-four family......  $ 834      0.54%       42.36%     $ 719      0.39%       45.15%     $ 613      0.42%       49.50%
    Home equity.............    256      1.19         5.92        243      1.12         5.27        240      1.15         6.84
    Multi-family............    377      0.80        13.01        331      0.79        10.12        296      0.82        12.15
Commercial/nonresidential...  1,162      1.41        22.69      1,125      1.30        20.97        935      1.93        14.17
    One-to-four family
      construction..........      8      0.32         0.70         13      0.13         2.28         13      0.33         1.32
    Multi-family
      construction..........     16      0.41         1.10         57      0.48         2.88         17      0.82         2.92
    Other construction and
      land..................    214      0.86         6.85        214      0.79         6.59        135      1.36         5.71
                              ------                ------      ------                ------      ------                ------
      Total mortgage
        loans...............  2,867                  92.63      2,702                  93.26      2,249                  92.61
                              ------                ------      ------                ------      ------                ------
  Consumer loans............    123      4.47         0.76        148      4.60         0.78        164      4.28         1.29
                              ------                ------      ------                ------      ------                ------
  Commercial loans..........    361      1.51         6.61        351      1.43         5.96        235      1.29         6.10
                              ------                ------      ------                ------      ------                ------
    Total allowance for loan
      losses................  $3,351                100.00%     $3,201                100.00%     $2,648                100.00%
                              ======                ======      ======                ======      ======                ======
</Table>

                                        22
<PAGE>   25

<Table>
<Caption>
                                                                                   AT JUNE 30,
                                                        -----------------------------------------------------------------
                                                                     1998                              1997
                                                        -------------------------------   -------------------------------
                                                                   % OF     % OF LOANS               % OF     % OF LOANS
                                                                  TOTAL     IN CATEGORY             TOTAL     IN CATEGORY
                                                                  LOANS      TO TOTAL               LOANS      TO TOTAL
                                                                    BY      OUTSTANDING               BY      OUTSTANDING
                                                        AMOUNT   CATEGORY      LOANS      AMOUNT   CATEGORY      LOANS
                                                        ------   --------   -----------   ------   --------   -----------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                                     <C>      <C>        <C>           <C>      <C>        <C>
Breakdown of Allowance:
  Mortgage loans:
    One-to-four family................................  $ 585      0.38%       53.73%     $ 685      0.41%       58.60%
    Home equity.......................................    342      1.36         8.69        253      1.00         8.85
    Multi-family......................................    242      0.72        11.61        190      0.69         9.66
    Commercial/nonresidential.........................    600      1.73        11.99        198      0.91         7.59
    One-to-four-family construction...................     11      0.30         1.29         69      0.40         6.08
    Multi-family construction.........................     23      0.74         1.08         72      0.75         3.37
    Other construction and land.......................    181      1.30         4.81         74      1.00         2.58
                                                        ------                ------      ------                ------
      Total mortgage loans............................  1,984                  93.20      1,541                  96.73
                                                        ------                ------      ------                ------
  Consumer loans......................................    160      3.19         1.73        161      2.74         2.06
                                                        ------                ------      ------                ------
  Commercial loans....................................    185      1.26         5.07         60      1.73         1.21
                                                        ------                ------      ------                ------
    Total allowance for loan losses...................  $2,329                100.00%     $1,762                100.00%
                                                        ======                ======      ======                ======
</Table>

INVESTMENT ACTIVITIES

  GENERAL

     The investment policy of the Bank, which is established by the Board of
Directors and implemented by the Bank's President/Chief Executive Officer,
Executive Vice President and Senior Vice President-Finance, is designed to
provide a required level of liquidity and minimize potential losses due to
interest rate fluctuations without incurring undue credit risk. The Bank is
authorized by regulation to invest in various types of liquid assets, including
United States Treasury obligations, securities issued by various federal
agencies and state and municipal governments, deposits at the FHLB-Chicago,
certain certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds. The Bank also invests in mortgage-backed
and related securities, securities that are either of investment grade or issued
or guaranteed by FHLMC, Fannie Mae or the Government National Mortgage
Association ("GNMA"), investment-grade corporate debt, non-rated trust preferred
securities issued by other financial institutions and mortgage mutual funds.

     The Bank categorizes the securities it purchases into a "Held-To-Maturity,"
"Trading Account" or "Available-For-Sale" portfolio as follows:

          1. Securities Held-to-Maturity. The Company has the ability and intent
     to hold these assets to maturity. Upon acquisition, securities are
     classified as to the Bank's intent and only under remote situations could a
     sale from this portfolio be effected. The held-to-maturity portfolio is not
     used for speculative purposes and is carried at amortized cost. Should the
     intent change, these assets would be classified as available-for-sale.

          2. Trading Securities. This portfolio includes securities acquired to
     make a profit from short-term movements in market prices. Securities
     purchased for trading purposes are carried at fair value, with unrelated
     holding gains and losses included in earnings.

          3. Securities Available-for-Sale. This is a portfolio for securities
     not classified as either Held-to-Maturity or Trading. This portion of the
     securities portfolio is designed to meet anticipated loan demand and
     deposit runoff. Securities classified as available-for-sale are carried at
     fair value, with unrealized holding gains and losses reported as a separate
     component of shareholders' equity and are not reported in earnings until a
     decline in fair value below cost is deemed to be other-than-temporary.

                                        23
<PAGE>   26

     The investment activities of the Bank consist primarily of investments in
mortgage-backed and related securities and other investment securities,
consisting primarily of securities issued or guaranteed by the United States
Government or agencies thereof and corporate obligations. Typical investments
include federally sponsored agency mortgage pass-through, private issue and
senior-subordinated pass-through, and federally sponsored agency and
mortgage-related securities. Investment and aggregate investment limitations and
credit quality parameters of each class of investment are prescribed in the
Bank's investment policy. The Bank performs analyses on mortgage-related
securities prior to purchase and on an ongoing basis to determine the impact on
earnings and market value under various interest rate and prepayment conditions.

  INVESTMENT SECURITIES

     The Bank invests in various types of liquid assets that are permissible
investments for state-chartered savings banks, including United States Treasury
obligations, securities of various federal agencies, certain certificates of
deposit of federally insured banks and savings institutions and federal funds.
The Bank also invests its assets in commercial paper and mutual funds, the
assets of which conform to the investments that a Wisconsin-chartered savings
association is otherwise authorized to make directly. The Bank also invests in
trust preferred securities issued by other financial institutions. Trust
preferred securities are a form of preferred stock issued to increase the Tier I
capital of the issuing financial institution. The Bank generally purchases up to
$500,000 with any one issuer that is considered, at minimum, "well capitalized"
by the FDIC. The Bank's current investment policy permits purchases only of
investments rated "investment grade" by a nationally recognized rating agency
and does not permit purchases of securities of non-investment grade quality;
provided however, the investment policy does permit purchases of investments in
non-rated trust preferred securities up to 15% of the Bank's equity capital.

  MORTGAGE-BACKED SECURITIES

     Mortgage-backed securities represent a participation interest in a pool of
single-family or multi-family mortgages, the principal and interest payments on
which are passed from the mortgage originators through intermediaries
(federal-government sponsored enterprises or private entities) that pool and
repackage the participation interest in the form of securities to investors such
as the Bank. The underlying pool of mortgages can be composed of either
fixed-rate mortgages or ARM loans. Mortgage-backed securities commonly are
referred to as mortgage participation certificates or pass-through certificates.
As a result, the interest rate risk characteristics of the underlying pool of
mortgages, i.e., fixed rate or adjustable rate, as well as the prepayment risk,
are passed on to the certificate holder.

     When the intermediary is a quasi-governmental agency such as FHLMC, Fannie
Mae and GNMA, timely payment of principal and interest is guaranteed to
investors by such agency and the loans that back such securities are conforming
loans (meaning they are underwritten to certain standards and are subject to
certain size limitations). When the intermediary is a private entity, neither
the principal nor the interest on such securities is guaranteed. In addition,
the loans that back private mortgage-backed securities generally are
non-conforming loans and consequently have a greater amount of credit risk.
Mortgage-backed securities issued by quasi-governmental agencies generally
increase the quality of the Bank's assets by virtue of the guarantees that back
them. In addition, mortgage-backed securities generally are more liquid than
individual mortgage loans and may be used to collateralize borrowings or other
obligations of the Bank.

     The life of a mortgage-backed pass-through security is equal to the life of
the underlying mortgages. The actual maturity of a mortgage-backed security
varies, however, depending on when the mortgagors prepay or repay the underlying
mortgages. Prepayments of the underlying mortgages may shorten the life of the
investment, thereby adversely affecting its yield to maturity and the related
market value of the mortgage-backed security. The yield is based upon the
interest income and the amortization of the premium or accretion of the discount
related to the mortgage-backed security. Premiums and discounts on
mortgage-backed securities are amortized or accreted over the estimated term of
the securities using a level yield method. The prepayment assumptions used to
determine the amortization period for premiums and discounts can significantly
affect the yield of the mortgage-backed security and these assumptions are
reviewed periodically to reflect the actual prepayment. The actual prepayments
of the underlying mortgages depend on many
                                        24
<PAGE>   27

factors, including type of mortgages, the coupon rate, the age of the mortgages,
the geographical location of the real estate collateralizing the mortgages and
general levels of market interest rates. The difference between the interest
rates on the underlying mortgages and the prevailing mortgage interest rates is
an important determinant in the rate of prepayments. During periods of falling
mortgage interest rates, prepayments generally increase. If the coupon rate of
the underlying mortgages significantly exceeds the prevailing market interest
rates offered for mortgage loans, refinancing generally increases and
accelerates the prepayment of the underlying mortgages. Prepayment experience is
more difficult to estimate for adjustable rate mortgage-backed securities.

     A senior-subordinated structure often is used with mortgage-backed
securities to provide credit enhancement for pass-through securities when the
underlying collateral is not guaranteed by an agency of the U.S. Government.
These structures divide mortgage pools into two risk classes: a senior class and
one or more subordinated classes. The subordinated classes provide protection to
the senior classes. When cash flow is impaired, debt service goes first to the
holders of senior class securities. In addition, incoming cash flows also may go
into a reserve fund to meet any future shortfalls of cash flow to senior
noteholders. The subordinated noteholder may not receive any funds until the
senior note holders have been paid and, when appropriate, until a specified
level of funds has been contributed to the reserve fund. It is the policy of the
Bank to purchase only investment-grade, non-agency-backed, mortgage-backed
securities.

  MORTGAGE-RELATED SECURITIES

     REMICs and CMOs are typically issued by a special purpose entity, which may
be organized in a variety of legal forms, such as a trust, a corporation or a
partnership. The entity aggregates pools of pass-through securities, which are
used to collateralize the mortgage-related securities. Once combined, the cash
flows can be divided into "tranches" or "classes" of individual securities,
thereby creating more predictable average lives for each security than the
underlying pass-through pools. Accordingly, under this security structure all
principal paydowns from the various mortgage pools are allocated to a
mortgage-related securities class or classes structured to have priority until
it has been paid off. Thus, these securities are intended to address the
reinvestment concerns associated with mortgage-backed security pass-through,
namely that they tend to pay off when interest rates fall. Bank management
believes these securities represent attractive alternatives relative to other
investments due to the wide variety of maturity and repayment options available
through such investments and due to the limited prepayment risk associated with
such investments. The Bank has not purchased and does not intend to purchase
higher risk CMO residuals or stripped mortgage securities for its investment
securities portfolio. The Bank's investment in REMICs/CMOs is primarily in
floating-rate or short- and intermediate-term (1-5 years) fixed-rate tranche
securities.

     The Bank has experienced a decrease in the level of principal repayments on
mortgage-backed securities and mortgage-related securities to $16.9 million
during the fiscal year ended June 30, 2001, from $32.0 million in fiscal year
2000. The decrease in principal repayments during fiscal 2001 is primarily
related to the decrease in average portfolio balances during fiscal year 2001 as
compared to fiscal years 2000 and 1999. The significant decrease in the level of
interest rates during the second half should increase principal repayments on
mortgage-backed and mortgage-related securities in fiscal 2002.*

  COMPOSITION OF SECURITIES HELD-TO-MATURITY

     Mortgage-Backed and Mortgage-Related Securities. At June 30, 2001, the
Company held $10.6 million in its mortgage-backed and mortgage-related
securities portfolio as compared to $15.0 million and $54.6 million at June 30,
2000 and 1999, respectively. Of this amount, fixed-rate securities and
adjustable-rate securities were $10.6 million and $0; $15.0 million and $0; and
$11.4 million and $43.2 million at June 30, 2001, 2000 and 1999, respectively.
The decrease in fiscal 2001 is primarily due to the decision of the Company to
purchase securities available-for-sale. The estimated market value of these
securities at June 30, 2001 was $10.7 million as compared to $14.7 million and
$54.9 million at June 30, 2000 and 1999, respectively. At June 30, 2001, the
mortgage-backed and mortgage-related securities portfolio represented 2.1% of
the Company's total assets as compared to 2.9% and 11.6% at June 30, 2000 and
1999, respectively. Included in the mortgage-backed and mortgage-related
securities portfolio were federal agency backed and private-issue
                                        25
<PAGE>   28

pass-through securities totaling $2.7 million and $7.9 million; $4.3 million and
$10.7 million; $35.1 million and $19.5 million at June 30, 2001, 2000 and 1999,
respectively. Of the $10.7 million in private-issue securities at June 30, 2000,
all were fixed-rate securities and carried a minimum credit rating of AA at the
time of purchase and such ratings have not been downgraded since the time of
purchase.

     Mortgage-related securities, which primarily consisted of real estate
mortgage investment conduit securities ("REMICs"), totaled $10.1 million, $13.6
million and $43.4 million at June 30, 2001, 2000 and 1999, respectively.

     Other Investment Securities. Other investments consisted primarily of
overnight deposits, certificates of deposit and bankers' acceptances which
totaled $20.0 million, $13.8 million and $5.0 million at June 30, 2001, 2000 and
1999, respectively. The market value of these securities were $20.0 million,
$13.8 million and $5.0 million at June 30, 2001, 2000 and 1999, respectively.

  COMPOSITION OF SECURITIES AVAILABLE-FOR-SALE

     Mortgage-Backed Securities and Mortgage-Related Securities. At June 30,
2001, the Company held mortgage-backed and related securities available-for-sale
with a carrying and market value of $51.0 million as compared to $35.9 million
and $55.6 million at June 30, 2000 and 1999, respectively. Of this amount at
June 30, 2001, $8.0 million of the securities are mortgage-backed securities and
$43.0 million REMIC securities. Included in the mortgage-backed and
mortgage-related securities were federal-agency-backed and private-issue
securities totaling $15.7 million and $35.3 million, respectively. Of the $51.0
million in mortgage-backed and mortgage-related securities available-for-sale at
June 30, 2001, fixed-rate securities and adjustable-rate securities were $37.2
million and $13.8 million, respectively. The Company carries such investments at
fair value.

     Other Investment Securities. The Company's other investment securities
available-for-sale include U.S. Government and agency obligations and ARM Mutual
Funds totaling $35.3 million and $1.0 million; $32.8 million and $1.0 million;
and $38.7 million and $1.0 million at June 30, 2001, 2000 and 1999,
respectively. The Company had trust-preferred securities and municipal bonds
with a carrying and market value of $5.4 million and $300,000; $4.3 million and
$274,000; and $4.8 million and $439,000 at June 30, 2001, 2000 and 1999,
respectively. The Company carries such investments at fair value.

                                        26
<PAGE>   29

     The tables below sets forth certain information regarding the carrying
value, composition and market value of the Company's available-for-sale and
held-to-maturity securities at June 30, 2001, 2000 and 1999.

<Table>
<Caption>
                                                                        JUNE 30, 2001
                                                                -----------------------------
                                                                CARRYING     % OF     MARKET
                                                                 VALUE      TOTAL      VALUE
                                                                --------    -----     ------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>       <C>
SECURITIES AVAILABLE-FOR-SALE:
  U.S. government securities................................    $35,319      37.99%   $35,319
  Mortgage-backed securities................................      8,019       8.62      8,019
  Mortgage-related securities (REMICs)......................     42,953      46.20     42,953
  ARM loan mutual funds.....................................        968       1.04        968
  Trust preferred securities................................      5,420       5.83      5,420
  Municipal bonds/other.....................................        300        .32        300
                                                                -------     ------    -------
     Total securities available-for-sale....................    $92,979     100.00%   $92,979
                                                                =======     ======    =======
SECURITIES HELD-TO-MATURITY:
  Demand deposits in other financial institutions...........    $19,515      97.72    $19,515
  Time deposits in other financial institutions.............        455       2.28        455
                                                                -------     ------    -------
     Total securities held-to-maturity......................    $19,970     100.00%   $19,970
                                                                =======     ======    =======
MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY:
  GNMA......................................................    $    --       0.00%   $    --
  FHLMC.....................................................        237      45.06        240
  FNMA......................................................        289      54.94        291
  Other participation certificates..........................         --         --         --
                                                                -------     ------    -------
     Total mortgage-backed securities held-to-maturity......    $   526     100.00    $   531
                                                                =======     ======    =======
MORTGAGE-RELATED SECURITIES HELD-TO-MATURITY:
  CMOs......................................................    $    --         --    $    --
  REMICs....................................................     10,093     100.00     10,177
                                                                -------     ------    -------
     Total mortgage-related securities held-to-maturity.....    $10,093     100.00%   $10,177
                                                                =======     ======    =======
</Table>

<Table>
<Caption>
                                                                        JUNE 30, 2000
                                                                -----------------------------
                                                                CARRYING     % OF     MARKET
                                                                 VALUE      TOTAL      VALUE
                                                                --------    -----     ------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>       <C>
SECURITIES AVAILABLE-FOR-SALE:
  U.S. government securities................................    $32,758      44.11%   $32,758
  Mortgage-backed securities................................     12,706      17.11     12,706
  Mortgage-related securities (REMICs)......................     23,238      31.29     23,238
  ARM loan mutual funds.....................................        958       1.29        958
  Trust preferred securities................................      4,325       5.82      4,325
  Municipal bonds/other.....................................        274       0.38        274
                                                                -------     ------    -------
     Total securities available-for-sale....................    $74,259     100.00%   $74,259
                                                                =======     ======    =======
SECURITIES HELD-TO-MATURITY:
  Demand deposits in other financial institutions...........    $13,777     100.00    $13,777
                                                                -------     ------    -------
     Total securities held-to-maturity......................    $13,777     100.00%   $13,777
                                                                =======     ======    =======
MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY:
  GNMA......................................................    $    --       0.00%   $    --
  FHLMC.....................................................        405      29.14        400
  FNMA......................................................        985      70.86        963
  Other participation certificates..........................         --         --         --
                                                                -------     ------    -------
     Total mortgage-backed securities held-to-maturity......    $ 1,390     100.00%   $ 1,390
                                                                =======     ======    =======
MORTGAGE-RELATED SECURITIES HELD-TO-MATURITY:
  CMOs......................................................    $    --         --    $    --
  REMICs....................................................     13,627     100.00     13,322
                                                                -------     ------    -------
     Total mortgage-related securities held-to-maturity.....    $13,627     100.00%   $13,322
                                                                =======     ======    =======
</Table>

                                        27
<PAGE>   30

<Table>
<Caption>
                                                                        JUNE 30, 1999
                                                                ------------------------------
                                                                CARRYING     % OF      MARKET
                                                                 VALUE      TOTAL      VALUE
                                                                --------    -----      ------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>       <C>
SECURITIES AVAILABLE-FOR-SALE:
  U.S. government securities................................    $ 38,702     38.52%   $ 38,702
  Mortgage-backed securities................................      16,943     16.86      16,943
  Mortgage-related securities (REMICs)......................      38,623     38.44      38,623
  ARM loan mutual funds.....................................         964      0.96         964
  Trust preferred securities................................       4,797      4.78       4,797
  Municipal bonds...........................................         439      0.44         439
                                                                --------    ------    --------
     Total securities available-for-sale....................    $100,468    100.00%   $100,468
                                                                ========    ======    ========
SECURITIES HELD-TO-MATURITY:
  Demand deposits in other financial institutions...........    $  5,017    100.00    $  5,017
                                                                --------    ------    --------
     Total securities held-to-maturity......................    $  5,017    100.00%   $  5,017
                                                                ========    ======    ========
MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY:
  GNMA......................................................    $    571      5.07%   $    595
  FHLMC.....................................................       2,302     20.45       2,311
  FNMA......................................................       6,292     55.88       6,301
  Other participation certificates..........................       2,094     18.60       2,090
                                                                --------    ------    --------
     Total mortgage-backed securities held-to-maturity......    $ 11,259    100.00%   $ 11,297
                                                                ========    ======    ========
MORTGAGE-RELATED SECURITIES HELD-TO-MATURITY:
  CMOs......................................................    $     --        --    $     --
  REMICs....................................................      43,359    100.00      43,359
                                                                --------    ------    --------
     Total mortgage-related securities held-to-maturity.....    $ 43,359    100.00%   $ 43,359
                                                                ========    ======    ========
</Table>

     The composition and contractual maturities of securities held-to-maturity,
excluding FHLB-Chicago stock, is indicated in the following table.

<Table>
<Caption>
                                                                            AT JUNE 30, 2001
                                                              ---------------------------------------------
                                                                                                   TOTAL
                                                              LESS THAN    1 TO 10    OVER 10    INVESTMENT
                                                               1 YEAR       YEARS      YEARS     SECURITIES
                                                              ---------    -------    -------    ----------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>        <C>        <C>
SECURITIES HELD-TO-MATURITY:
  Demand deposits in other financial institutions.........     $19,515        --         --       $19,515
  Time deposits in other financial institutions...........         200       160         95           455
                                                               -------      ----       ----       -------
     Total securities held-to-maturity....................     $19,715       160         95       $19,970
                                                               =======      ====       ====       =======
Weighted average yield....................................        4.03%     7.30%      7.00%         4.06%
                                                               =======      ====       ====       =======
</Table>

                                        28
<PAGE>   31

     The following table shows the maturity or period to repricing of the
Company's securities available-for-sale at June 30, 2001.
<Table>
<Caption>
                                                                    AT JUNE 30, 2001
                                  -------------------------------------------------------------------------------------
                                      FIXED-RATE            FIXED-RATE          ADJUSTABLE-RATE         FIXED-RATE
                                    U.S. GOVERNMENT       MORTGAGE-BACKED       MORTGAGE-BACKED          CMOS AND
                                      SECURITIES            SECURITIES            SECURITIES              REMICS
                                  -------------------   -------------------   -------------------   -------------------
                                             WEIGHTED              WEIGHTED              WEIGHTED              WEIGHTED
                                  CARRYING   AVERAGE    CARRYING   AVERAGE    CARRYING   AVERAGE    CARRYING   AVERAGE
                                   VALUE      YIELD      VALUE      YIELD      VALUE      YIELD      VALUE      YIELD
                                  --------   --------   --------   --------   --------   --------   --------   --------
                                                                 (DOLLARS IN THOUSANDS)
<S>                               <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
AMOUNTS DUE OR REPRICING:
  Within one year...............  $    --        --%     $   --        --%     $4,035      7.15%    $    --        --%
AFTER ONE YEAR:
  One to three years............    4,983      4.75          --        --          --        --          --        --
  Three to five years...........    6,219      5.75          --        --          --        --          --        --
  Five to ten years.............    4,393      6.64          39      8.00                    --         404      6.98
  Ten to 20 years...............   19,724      6.95       3,945      6.28          --        --       5,729      6.39
  Over 20 years.................       --        --          --        --          --        --      27,040      6.61
                                  -------      ----      ------      ----      ------      ----     -------      ----
      Total due or repricing
        after one year..........   35,319      6.39       3,984      6.30          --        --      33,173      6.58
                                  -------      ----      ------      ----      ------      ----     -------      ----
      Total amount due or
        repricing...............   35,319      6.39%      3,984      6.30%      4,035      7.15%     33,173      6.58%
      Less unearned discounts
        and premiums, net.......       --                    --                    --                    --
      Total.....................  $35,319                $3,984                $4,035               $33,173
                                  =======                ======                ======               =======
Average remaining years to
  maturity......................      9.9                  17.3                  20.3                  25.7

<Caption>
                                                                     AT JUNE 30, 2001
                                  ---------------------------------------------------------------------------------------
                                                        TRUST PREFERRED SEC/        FIXED-RATE
                                    ADJUSTABLE-RATE        ADJUSTABLE-RATE           MUNICIPAL
                                        REMICS              MUTUAL FUNDS               BONDS                 TOTAL
                                  -------------------   ---------------------   -------------------   -------------------
                                             WEIGHTED               WEIGHTED               WEIGHTED              WEIGHTED
                                  CARRYING   AVERAGE    CARRYING     AVERAGE    CARRYING   AVERAGE    CARRYING   AVERAGE
                                   VALUE      YIELD       VALUE       YIELD      VALUE      YIELD      VALUE      YIELD
                                  --------   --------   --------    --------    --------   --------   --------   --------
                                                                  (DOLLARS IN THOUSANDS)
<S>                               <C>        <C>        <C>         <C>         <C>        <C>        <C>        <C>
AMOUNTS DUE OR REPRICING:
  Within one year...............   $9,780      7.28%     $1,468       5.73%       $ --         --%    $15,283      7.10%
AFTER ONE YEAR:
  One to three years............       --        --          --         --          --         --       4,983      4.75
  Three to five years...........       --        --          --         --          --         --       6,219      5.75
  Five to ten years.............       --        --          --         --         300       5.49       5,136      6.61
  Ten to 20 years...............       --        --          --         --          --         --      29,398      6.75
  Over 20 years.................       --        --       4,920       9.48          --         --      31,960      7.05
                                   ------      ----      ------       ----        ----       ----     -------      ----
      Total due or repricing
        after one year..........       --                 4,920       9.48         300       5.49      77,696      6.74
                                   ------      ----      ------       ----        ----       ----     -------      ----
      Total amount due or
        repricing...............    9,780      7.28%      6,388       8.62%        300       5.49%     92,979      6.80%
      Less unearned discounts
        and premiums, net.......       --                    --                     --                     --
      Total.....................   $9,780                $6,388                   $300                $92,979
                                   ======                ======                   ====                =======
Average remaining years to
  maturity......................     25.4                   0.0                    5.9                   18.5
</Table>

                                        29
<PAGE>   32

     The following table shows the maturity or period to repricing of the
Company's mortgage-backed and mortgage-related securities portfolio
held-to-maturity at June 30, 2001.

<Table>
<Caption>
                                                                   AT JUNE 30, 2001
                                            ---------------------------------------------------------------
                                                FIXED-RATE            FIXED-RATE
                                              MORTGAGE-BACKED          CMOS AND
                                                SECURITIES              REMICS                 TOTAL
                                            -------------------   -------------------   -------------------
                                                       WEIGHTED              WEIGHTED              WEIGHTED
                                            CARRYING   AVERAGE    CARRYING   AVERAGE    CARRYING   AVERAGE
                                             VALUE      YIELD      VALUE      YIELD      VALUE      YIELD
                                            --------   --------   --------   --------   --------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>
AMOUNTS DUE OR REPRICING:
  Within one year.........................    $ --         --%    $    --        --%    $    --        --%
AFTER ONE YEAR:
  One to three years......................     522       6.10          --        --         522      6.10
  Three to five years.....................      --         --          --        --          --
  Five to ten years.......................      --         --         171      5.49         171      5.49
  Ten to 20 years.........................      --         --       1,565      6.75       1,565      6.75
  Over 20 years...........................      --         --       8,375      6.79       8,375      6.79
                                              ----       ----     -------      ----     -------      ----
       Total due or repricing after one
          year............................     522       6.10      10,111      6.76      10,633      6.73
                                              ----       ----     -------      ----     -------      ----
       Total amounts due or repricing.....     522       6.10%     10,111      6.76%     10,633      6.73%
Less unearned discounts and premiums,
  net.....................................       4                    (18)                  (14)
                                              ----                -------               -------
Mortgage-backed and related securities,
  net.....................................    $526                $10,093               $10,619
                                              ====                =======               =======
Average remaining years to maturity.......     2.2                   25.2                  23.8
</Table>

SOURCES OF FUNDS

  GENERAL

     The Company's primary sources of funds for use in lending, investing and
for other general purposes are deposits, proceeds from principal and interest
payments on loans, mortgage-backed and mortgage-related securities and
investment securities, FHLB advances and reverse repurchase agreements.
Contractual loan payments are a relatively stable source of funds, while deposit
inflows and outflows and loan prepayments are significantly influenced by
general market interest rates and economic conditions. Borrowings are used to
support expanded lending or investment activities. The Company utilizes advances
from the FHLB-Chicago and reverse repurchase agreements as sources for its
borrowings. At June 30, 2001, the Company had advances from the FHLB-Chicago
totaling $129.5 million or 25.6% of total assets as compared to $112.5 million
or 21.7% of total assets and $120.0 million or 25.6% of total assets as of June
30, 2000 and 1999, respectively. At June 30, 2001, the Company had $9.2 million
in reverse repurchase agreements as compared to $18.5 million and $9.5 million
at June 30, 2000 and 1999, respectively. The Bank has continued to use
FHLB-Chicago advances as a funding source due to the attractive rates offered on
advances in relation to deposit funds obtainable in the Company's local market.
Also see, "Borrowings and Other Financing Transactions." Of the Company's
outstanding FHLB-Chicago advances at June 30, 2001, $5.0 million will mature
before June 30, 2002. In June of 2000, the Company obtained a line of credit
facility with a third-party bank for the primary purpose of funding the
Company's commercial mortgage banking activities and for providing capital
investment into the Bank from the Company. The third-party line of credit
facility totals $12.0 million and had an outstanding balance of $2.4 million at
June 30, 2001. For a further discussion of the Company's funding strategy, see
Part II, Item 7 of the Company's Annual Report on Form 10-K, "Financial
Condition," "Liquidity and Capital Resources" and "Asset/Liability Management."

  DEPOSITS

     The Company offers a variety of deposit accounts having a range of interest
rates and terms. The Company's deposits principally consist of non-interest
bearing checking, NOW, money-market deposit and

                                        30
<PAGE>   33

passbook accounts and certificates of deposit. The flow of deposits is
influenced significantly by general economic conditions, changes in prevailing
interest rates and competition. The Company's deposits are obtained from the
areas in which its branches are located, and more recently from national
wholesale certificate of deposit sources. Various types of advertising and
promotion to attract and retain deposit accounts also are used. Management
monitors the Bank's certificates of deposit and, based on historical experience,
management believes it will retain a large portion of such accounts upon
maturity. Management considers Company profitability, the matching of term
lengths with assets, the attractiveness to customers and rates offered by
competitors in considering its deposit offerings and promotions. The Company
believes it has been competitive in the types of accounts and interest rates it
has offered on its deposit products. The Company intends to continue its efforts
to attract deposits as a primary source of funds for supporting its lending and
investing activities.* The Company has maintained competitive rates on its local
market deposit accounts over the last year as interest rates declined.

     The following table presents the deposit activity of the Company for the
periods indicated.

<Table>
<Caption>
                                                                      YEAR ENDED JUNE 30,
                                                                --------------------------------
                                                                  2001        2000        1999
                                                                  ----        ----        ----
                                                                         (IN THOUSANDS)
<S>                                                             <C>         <C>         <C>
Deposits....................................................    $815,303    $875,389    $691,858
Withdrawals.................................................     856,393     829,164     682,088
                                                                --------    --------    --------
Net deposits/withdrawals....................................     (41,090)     46,225       9,770
Interest credited on deposits...............................      15,584      10,379       7,325
                                                                --------    --------    --------
       Total increase (decrease) in deposits................    $(25,506)   $ 56,604    $ 17,095
                                                                ========    ========    ========
</Table>

     The Company attributes the decrease in deposits before interest credited on
deposits during fiscal 2001 primarily to the decrease in wholesale brokered and
non-brokered certificates of deposit. Management believes the likelihood for
retention of brokered certificates of deposit is more a function of the rate
paid on such accounts as compared to retail deposits which may be established
due to Bank location or other intangible reasons. Brokered deposits totaled
$166.9 million at June 30, 2001 (or approximately 52.2% of total deposits at
June 30, 2001), as compared to $216.2 million at June 30, 2000 (or 62.6% of
total deposits at June 30, 2000). The decrease in brokered deposits is due to a
lower level of funding needed for the loan portfolio. This lower level of
funding was due to a greater number of refinancings related to the decreasing
interest rates in the second half of fiscal 2001. The average maturity of
brokered deposits at June 30, 2001 was fifteen months as compared to four months
at June 30, 2000. The increase in the average maturity of brokered deposits was
due to a management decision to decrease the Company's negative interest rate
gap by lengthening the maturities of wholesale deposits The average rate paid on
brokered deposits for the fiscal year ended June 30, 2001 was 6.56% as compared
to 6.03% for the fiscal year ended June 30, 2000. It is anticipated that the
significant decrease in interest rates during the second half of fiscal 2001
will decrease the average rate paid on brokered deposits in fiscal 2002, due to
the lagged repricing of such certificate of deposit accounts.*

     At June 30, 2001, the Company had outstanding $173.8 million in
certificates of deposit in amounts of $100,000 or more maturing as follows:

<Table>
<Caption>
                                                                  AMOUNT AT
                                                                JUNE 30, 2001
                                                                -------------
                                                                (IN THOUSANDS)
<S>                                                             <C>
Three months or less........................................       $ 75,843
Over three through six months...............................         31,068
Over six through twelve months..............................          4,832
Over twelve months..........................................         62,073
                                                                   --------
     Total..................................................       $173,816
                                                                   ========
</Table>

                                        31
<PAGE>   34

     The following table sets forth the distribution of the Company's demand
deposits and certificate accounts at the dates indicated and the
weighted-average nominal interest rates on each category of deposits presented.
Management does not believe that the use of year end balances instead of average
balances in calculating weighted average nominal interest rates resulted in any
material difference in the information presented. The jumbo certificates of
deposit in the following table contain $166.9 million of brokered certificates
of deposit at June 30, 2001, which represent all of the Company's brokered
deposits at June 30, 2001.

<Table>
<Caption>
                                                                           AT JUNE 30,
                              ------------------------------------------------------------------------------------------------------
                                            2001                               2000                               1999
                              --------------------------------   --------------------------------   --------------------------------
                                                      WEIGHTED                           WEIGHTED                           WEIGHTED
                                         PERCENT OF   AVERAGE               PERCENT OF   AVERAGE               PERCENT OF   AVERAGE
                                           TOTAL      NOMINAL                 TOTAL      NOMINAL                 TOTAL      NOMINAL
                               AMOUNT     DEPOSITS      RATE      AMOUNT     DEPOSITS      RATE      AMOUNT     DEPOSITS      RATE
                               ------    ----------   --------    ------    ----------   --------    ------    ----------   --------
                                                                      (DOLLARS IN THOUSANDS)
<S>                           <C>        <C>          <C>        <C>        <C>          <C>        <C>        <C>          <C>
DEMAND DEPOSITS:
  Non-interest-bearing......  $ 18,397       5.75%        --%    $  8,400       2.43%        --%    $  9,006       3.12%        --%
  NOW.......................     3,872       1.21       0.89        3,147       0.91       0.76        2,789       0.97       1.75
  Money market..............    41,122      12.86       3.71       27,398       7.94       4.95       35,495      12.29       4.37
  Passbook..................    14,701       4.60       2.89       18,373       5.32       2.92       20,962       7.26       2.92
                              --------     ------                --------     ------                --------     ------
      Total.................    78,092      24.42       2.54       57,318      16.60       3.34       68,252      23.64       3.24
CERTIFICATE ACCOUNTS (TERM):
  One to nine months........    54,381      17.00       5.47       42,420      12.28       5.53       51,931      17.98       5.06
  12 to 20 months...........    10,851       3.39       5.26       10,159       2.94       5.88        7,759       2.69       5.08
  24 to 36 months...........     1,426       0.45       5.18        2,999       0.87       5.93        1,522       0.53       5.55
  38 to 60 months...........     2,215       0.69       5.92        1,935       0.56       5.38        2,868       0.99       5.62
  66 to 96 months...........        --         --         --           --         --         --           --         --         --
  Wholesale(1)..............   172,847      54.05       5.20      230,487      66.75       6.46      156,382      54.17       5.32
                              --------     ------                --------     ------                --------     ------
      Total certificates....   241,720      75.58       5.27      288,000      83.40       6.29      220,462      76.36       5.26
                              --------     ------                --------     ------                --------     ------
      Total deposits........  $319,812     100.00%      4.60%    $345,318     100.00%      5.80%    $288,714     100.00%      4.78%
                              ========     ======                ========     ======                ========     ======
</Table>

-------------------------
(1) Wholesale certificates of deposit have an average maturity of 15.1 months,
    4.3 months and 4.3 months at June 30, 2001, 2000 and 1999, respectively.

     The following table presents, by various rate categories, the amount of
certificates of deposit outstanding at June 30, 2001, 2000 and 1999, and the
periods to maturity of the certificate accounts outstanding at June 30, 2001. At
June 30, 2001, brokered certificates of deposit totaled $166.9 million with an
average rate of 6.56%.

<Table>
<Caption>
                                                                    PERIOD TO MATURITY FROM JUNE 30, 2001
                                                                ---------------------------------------------
                                      AT JUNE 30,                WITHIN     ONE TO
                            --------------------------------      ONE        THREE
                              2001        2000        1999        YEAR       YEARS     THEREAFTER     TOTAL
                              ----        ----        ----       ------     ------     ----------     -----
                                                             (IN THOUSANDS)
<S>                         <C>         <C>         <C>         <C>         <C>        <C>           <C>
CERTIFICATES OF DEPOSIT:
  4.99% and less........    $ 89,769    $ 14,244    $ 36,190    $ 80,102    $ 9,469     $   198      $ 89,769
  5.00% to 5.99%........     105,128      42,276     162,753      42,909     36,652      25,567       105,128
  6.00% to 6.99%........      35,882     194,518      21,057      31,035      3,761       1,086        35,882
  7.00% to 7.99%........      10,790      36,813         314       9,065      1,609         116        10,790
  8.00% to 8.99%........         151         149         148          --        151          --           151
                            --------    --------    --------    --------    -------     -------      --------
       Total............    $241,720    $288,000    $220,462    $163,111    $51,642     $26,967      $241,720
                            ========    ========    ========    ========    =======     =======      ========
</Table>

                                        32
<PAGE>   35

  BORROWINGS AND OTHER FINANCING TRANSACTIONS

     Although deposits are the Company's primary source of funds, the Company's
policy has been to utilize borrowings as an alternative or less costly source of
funds. The Company utilizes borrowings as part of its asset/liability management
strategy. Borrowings are secured when management believes it can profitably
reinvest those funds for the benefit of the Company. The Company's primary form
of borrowing consists of advances from the FHLB-Chicago. These advances are
collateralized by the capital stock of the FHLB-Chicago held by the Company and
certain of its mortgage loans and mortgage-backed and related securities. Such
advances are made pursuant to several different credit programs, each of which
has its own interest rate and range of maturities. The maximum amount the
FHLB-Chicago will advance to member institutions, including the Company, for
purposes other than meeting withdrawals fluctuates from time to time in
accordance with policies of the FHLB-Chicago. At June 30, 2001, the Bank's
FHLB-Chicago advances totaled $129.5 million, representing 27.5% of total
liabilities, an increase from the $112.5 million outstanding at June 30, 2000.
For a further discussion of the Company's funding strategy, see Part II, Item 7
of the Company's Annual Report on Form 10-K, "Financial Condition," "Liquidity
and Capital Resources" and "Asset/Liability Management."

     The Company's borrowings from time to time include reverse repurchase
agreements. The form of reverse repurchase agreement used by the Company
involves the sale of securities owned by the Company with a commitment to
repurchase the same or substantially the same securities at a predetermined
price at a future date, typically within 30 days to six months. These
transactions are treated as borrowings collateralized by the securities sold and
are therefore included as other borrowings in the Company's Consolidated
Financial Statements. These transactions are authorized by the Company's
Investment Policy and are governed by agreements with primary government dealers
under Public Securities Association Master Repurchase Agreements. At June 30,
2001, reverse repurchase agreements totaled $9.2 million, representing 2.0% of
total liabilities, a decrease from the $18.5 million outstanding at June 30,
2000. The Bank has decreased its use of reverse repurchase agreements as a
funding source due to the increased use of longer term FHLB-Chicago advances to
decrease the Company's negative interest rate gap position.

     The Company has a line of credit facility with a third-party bank for the
primary purpose of funding the Company's commercial mortgage banking activities
and for providing capital investment into the Bank from the Company. The
third-party line of credit facility is secured by the Company's investment in
the Bank. The Company's commercial mortgage banking subsidiary utilizes the line
of credit facility from time to time to fund its pipeline of commercial real
estate loans that are pre-committed for sale. Also, the line of credit facility
can be used by the Company to increase its investment in the Bank. The line of
credit facility totals $12.0 million and had an outstanding balance at June 30,
2001 of $2.4 million, representing 0.5% of total liabilities, an increase from
the $1.0 million outstanding at June 30, 2000. The line of credit facility has
an adjustable interest rate that resets off of the Federal Funds Rate and has a
term of one year.

     While increases in borrowings and changes in the collateralization levels
due to market interest rate changes could require the Bank to add collateral to
secure its borrowings, the Company does not anticipate having a shortage of
qualified collateral to pledge against its borrowings.* The following table sets
forth certain

                                        33
<PAGE>   36

information regarding the Bank's FHLB-Chicago advances, borrowed funds and
reverse repurchase agreements at or for the periods ended on the dates
indicated.

<Table>
<Caption>
                                                                         AT OR FOR THE
                                                                   FISCAL YEAR ENDED JUNE 30,
                                                                --------------------------------
                                                                  2001        2000        1999
                                                                  ----        ----        ----
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>         <C>
FHLB-CHICAGO ADVANCES:
  Average balance outstanding...............................    $126,696    $133,519    $126,518
  Maximum amount outstanding at any month-end during the
     period.................................................     134,430     148,244     132,059
  Balance outstanding at end of period......................     129,518     112,530     120,044
  Weighted average interest rate during the period(1).......        6.14%       5.76%       5.81%
  Weighted average interest rate at end of period...........        6.10        5.84        5.58
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS:
  Average balance outstanding...............................    $ 13,133    $ 22,539    $  4,414
  Maximum amount outstanding at any month-end during the
     period.................................................      14,940      28,350      18,289
  Balance outstanding at end of period......................      11,590      19,510       9,475
  Weighted average interest rate during the period(1).......        6.43%       5.68%       5.12%
  Weighted average interest rate at end of period...........        5.83        6.38        5.25
TOTAL ADVANCES REVERSE REPURCHASE AGREEMENTS AND OTHER
  BORROWINGS:
  Average balance outstanding...............................    $139,829    $156,058    $130,932
  Maximum amount outstanding at any month-end during the
     period.................................................     149,370     179,594     150,348
  Balance outstanding at end of period......................     141,108     132,040     129,519
  Weighted average interest rate during the period(1).......        6.17%       5.75%       5.78%
  Weighted average interest rate at end of period...........        6.08        5.92        5.55
</Table>

-------------------------
(1) Computed on the basis of average monthly balances.

COMPETITION

     The Bank has significant competition in its mortgage, consumer and
commercial lending business, as well as in attracting deposits. The Bank's
primary competitors for loans are savings banks, thrifts, mortgage banking
companies, insurance companies and commercial banks on a local and national
basis. Its most direct competition for deposits are savings banks, thrifts,
commercial banks and credit unions. Because of the large industrial base in West
Allis and surrounding areas, credit unions, formerly affiliated with industry,
present formidable competition. These credit unions have obtained community
charters, enabling them to attract business from the community at large, rather
than just the associated industry. Additionally, these credit unions have
certain tax advantages, and, consequently, are able to offer competitive rates.
The Bank faces additional competition for funds from a number of institutions,
including short-term money-market funds and other corporate and government
securities funds offered by other financial service companies, such as
securities brokerage firms and insurance companies. The Bank also is
experiencing increased competition from national and regional banks and savings
banks as well as national credit card companies as it focuses on obtaining
wholesale funding from sources beyond its primary market area.

SUBSIDIARY ACTIVITIES

     The Bank's wholly owned subsidiary, Ledger Investments, Inc. ("LII"), was
organized as a Wisconsin corporation in 1978. During the fiscal year ended June
30, 2001, LII was engaged primarily in the sale of annuity and mutual fund
products. The Bank has a management agreement with LII whereby LII reimburses
the Bank for certain services it performs and pays rent for occupancy in the
West Allis branch office. Net loss for LII was ($14,703) and ($3,238) for the
fiscal years ended June 30, 2001 and 2000, respectively.

     The Bank organized a wholly owned subsidiary located in Nevada in September
1994 named Ledger Investment Corp ("LIC"). The purpose of this subsidiary is to
manage a portion of the Bank's investment

                                        34
<PAGE>   37

portfolio. Net income for LIC was $3,898,838 and $3,367,229 for the fiscal years
ended June 30, 2001 and 2000, respectively.

     The Company's wholly owned subsidiary, Ledger Financial, Inc. ("LFI"), was
organized during fiscal 1999 to provide subprime lending activities. During the
fourth quarter of fiscal 2000, the Company discontinued its subprime lending
activities through LFI.

PERSONNEL

     At June 30, 2001, the Bank had 74 full-time employees and 18 part-time
employees. The employees of the Bank are not represented by a collective
bargaining unit and the Bank believes its relationship with its employees to be
good.

FEDERAL TAXATION

  GENERAL

     The following discussion of tax matters is intended to be a summary of the
material tax rules applicable to the Bank and does not purport to be a
comprehensive description of all applicable tax rules.

     For federal income tax purposes, the Bank reported its income and expenses
primarily on the hybrid method of accounting (i.e., a method that incorporated
more than one type of accounting method in determining taxable income) and filed
its consolidated federal income tax returns on this basis through June 30, 1987.
Beginning with its taxable year ended June 30, 1988, the Bank has adopted an
accrual method of accounting. Both before and after the Conversion, the Bank, as
a general matter, is and will be subject to the rules of federal income taxation
applicable to corporations. Generally, the Internal Revenue Code requires that
all corporations, including the Bank, compute taxable income under the accrual
method of accounting. For its taxable year ended June 30, 2001, the Bank was
subject to a maximum federal income tax rate of 34%.

  BAD DEBT RESERVES

     Savings banks, such as the Bank, which meet certain definitional tests
primarily relating to their assets and the nature of their business ("qualifying
thrifts"), were permitted for tax years beginning prior to December 31, 1995 to
establish a reserve for bad debts and to make annual additions thereto, which
additions may, within specified formula limits, be deducted in arriving at their
taxable income. Such additions were computed using one of two allowable methods.
Each year, the Bank has used the method that allows the largest addition, and
thus, the greater deduction for tax purposes.

     The Small Business Job Protection Act of 1996 ("the Act") repealed the
reserve method of accounting for bad debts by thrift institutions, effective for
taxable years beginning after December 31, 1995. Thrift institutions such as the
Bank with less than $500 million in assets are now required to use the
experience method. The Act also grants partial relief from the bad debt reserve
"recapture" which occurs in connection with the change in method of accounting.
The pre-1988 reserves are not required to be included in income in connection
with the change in method of accounting. In addition, the Act suspends recapture
of post-1987 reserves for a period of two years, conditioned on the
institution's compliance with certain residential loan requirements.
Institutions can meet this residential loan requirement if the principal amount
of residential loans made during a taxable year was not less than the "base
amount" for such year. The base amount is determined on an
institution-by-institution basis, and constitutes the average of the principal
amounts of residential loans made by an institution during the six most recent
taxable years. Notwithstanding the foregoing, institutions will be required to
pay for recaptured post-1987 bad debt reserves ratably over a six-year period
starting in 1998. Since provisions for deferred income tax have been provided
for on post-1987 bad debt reserves, there will not be any additional income tax
expense to the Bank on recapture.

     Earnings appropriated for bad debt reserves and deducted for federal income
tax purposes cannot be used by the Bank to pay cash dividends or distributions
to the Holding Company without the Bank including the amount in taxable income,
together with an amount deemed necessary to pay the resulting income tax. Thus,
any dividends to the Holding Company that would reduce amounts appropriated to
the Bank's bad debt
                                        35
<PAGE>   38

reserves and deducted for federal income tax purposes could create a tax
liability for the Bank. The Bank does not intend to pay dividends that would
result in a recapture of its bad debt reserves.

  CORPORATE ALTERNATIVE MINIMUM TAX

     For taxable years beginning after December 31, 1986, the Internal Revenue
Code imposes an alternative minimum tax ("AMT") of 20% on alternative minimum
taxable income ("AMTI"). Only 90% of AMTI can be offset by net operating losses.
For taxable years beginning after December 31, 1989, the adjustment to AMTI
based on book income will be an amount equal to 75% of the amount by which a
corporation's adjusted current earnings exceeds its AMTI (prior to reduction for
net operating losses). In addition, for taxable years beginning after December
31, 1986, and before January 1, 1996, an environmental tax of 0.12% of the
excess of AMTI (with certain modifications) over $2.0 million was imposed on
corporations, including the Bank, whether or not AMT is paid. The Bank does not
expect to be subject to AMT in the future, although no assurance can be made
that it will not.

  DISTRIBUTIONS

     To the extent that the Bank makes "non-dividend distributions" to
shareholders that are considered to result in distributions from (i) the Bank's
reserve for losses on qualifying real property loans that exceeds the amount
that would have been allowed under an experience method or (ii) the supplemental
reserve for losses on loans ("Excess Distributions"), then an amount equal to
such Excess Distributions must be included in the Bank's taxable income.
Non-dividend distributions include distributions in excess of the Bank's current
and accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation. In contrast, distributions
made from the Bank's current or accumulated earnings and profits, as calculated
for federal income tax purposes, rather than the Bank's bad debt reserves are
generally considered dividends for federal income tax purposes and therefore
would not be included in the Bank's taxable income. Further, under certain
circumstances, such as tax-free reorganizations, non-dividend distributions may
not be required to be included in the Bank's taxable income.

     The amount of additional taxable income created from an Excess Distribution
is an amount that, when reduced by the tax attributable to the income, is equal
to the amount of the distribution. Thus, if after the Conversion, certain
portions of the Bank's accumulated tax bad debt reserve are used for any purpose
other than to absorb qualified bad debt loans, such as for the payment of
dividends or other distributions with respect to the Bank's capital stock
(including distributions upon redemption or liquidation) and such payment or
other distribution is not otherwise excluded from the provisions generally
applicable to Excess Distributions, approximately one and one-half times the
amount so used would be includable in gross income for federal income tax
purposes, assuming a 34% corporate income tax rate (exclusive of state taxes).
See "Regulation" and "Dividend Policy" for limits on the payment of dividends of
the Bank.

     Under provisions of the Revenue Reconciliation Act of 1993 ("RRA"), enacted
on August 10, 1993, the maximum federal corporate income tax rate was increased
from 34% to 35% for taxable income over $10.0 million, with a 3% surtax imposed
on taxable income over $15.0 million.

STATE TAXATION

     The State of Wisconsin imposes a tax on the Wisconsin taxable income of
corporations, including savings banks, at the rate of 7.9%. Wisconsin taxable
income is generally similar to federal taxable income except that interest from
state and municipal obligations is taxable, no deduction is allowed for state
income taxes and net operating losses may be carried forward but not back.
Wisconsin law does not provide for filing of consolidated state income tax
returns. In fiscal 1998, the Bank received refunds from the Wisconsin Department
of Revenue totaling $177,000 related to audit assessments which had previously
been taken into account in calculating tax expense.

                                        36
<PAGE>   39

                                   REGULATION

     The following discussion is intended to be a summary of regulatory issues
and not a comprehensive description of all applicable regulations.

     The Bank is a Wisconsin-chartered stock savings bank and its deposit
accounts are insured up to applicable limits by the Federal Deposit Insurance
Corporation ("FDIC") under the Savings Association Insurance Fund ("SAIF"). The
Bank is subject to extensive regulation by the Wisconsin Department of Financial
Institutions, Division of Savings Institutions ("DFI"), as its chartering
agency, and by the FDIC, as its deposit insurer and principal federal regulator.
The lending and investment authority of the Bank is prescribed by Wisconsin law
and regulations, as well as applicable federal law and regulations, and the Bank
is prohibited from engaging in any activities not permitted by such law and
regulations. The Company is a bank holding company subject to regulatory
oversight by the Board of Governors of the Federal Reserve System (the "FRB"),
the DFI and the Securities and Exchange Commission ("SEC").

WISCONSIN SAVINGS BANK REGULATION

     Regulations adopted by the DFI govern various aspects of the activities and
operation of Wisconsin-chartered savings banks.

  EXAMINATIONS AND ASSESSMENTS

     The Bank is required to file periodic reports with and is subject to
periodic examinations by the DFI. Savings banks are required to pay examination
fees and annual assessments to fund the supervisory operations of the DFI. Based
on the assessment rates published by the DFI and the Bank's total assets of
approximately $505.7 million at March 31, 2001, the Bank paid $14,970 in
assessments in the fiscal year ended June 30, 2001.

  LOANS AND INVESTMENTS

     The Bank is authorized to make, invest in, sell, purchase, participate or
otherwise deal in mortgage loans or interests in mortgage loans without
geographic restriction, including loans made on the security of residential and
commercial property. Savings banks also may lend funds on a secured or unsecured
basis for business, corporate commercial or agricultural purposes, provided the
total of all such loans does not exceed 10% of the Bank's total assets unless
the DFI authorizes a greater amount. Loans are subject to certain limitations,
including percentage restrictions based on the Bank's total assets.

     Under regulations established for state savings banks by the DFI and
implemented by the Administrator of the DFI, the Bank is limited in the amount
of commercial real estate and commercial business loans it can hold in its loan
portfolio. The DFI approved limit for the Bank was 30% of the Bank's total asset
base at June 30, 2001 and June 30, 2000. At June 30, 2001, the Bank had $131.1
million of such loans in its portfolio, which represents 25.8% of the Bank's
asset base of $507.4 million.

     Savings banks may invest funds in certain types of debt and equity
securities, including obligations of federal, state and local governments and
agencies. Subject to prior approval of the DFI, compliance with capital
requirements and certain other restrictions, savings banks may invest in
residential housing development projects. Savings banks may invest in service
corporations or subsidiaries with the prior approval of the DFI, subject to
certain restrictions.

     The lending and investment powers of Wisconsin savings banks also are
limited by FDIC regulations and other federal law and regulations. Operations
and investments of the Company are regulated by the FRB. See "Holding Company
Regulation." At June 30, 2001 neither the Bank or Company were under any DFI,
FRB or FDIC order to divest or terminate any investment or activity.

                                        37
<PAGE>   40

  LOANS TO ONE BORROWER

     Savings banks may make loans and extensions of credit, both direct and
indirect, to one borrower in amounts up to 15% of capital plus an additional 10%
for loans fully secured by readily marketable collateral. In addition, savings
banks may make loans to one borrower for any purpose in an amount not to exceed
$500,000, or to develop domestic residential housing units in an amount not to
exceed the lesser of $30 million or 30% of capital, subject to certain
conditions. At June 30, 2001, the Bank did not have any loans which exceeded the
loans-to-one borrower limitations.

  QUALIFIED THRIFT LENDER REQUIREMENT

     The Bank must qualify for and maintain a level of qualified thrift
investments equal to 60% of its assets as prescribed in Section 7701(a)(19) of
the Internal Revenue Code of 1986, as amended. A savings bank that fails to meet
the qualified thrift lender test becomes subject to certain operating
restrictions otherwise applicable only to commercial banks. At June 30, 2001,
the Bank maintained 61.10% of its assets in qualified thrift investments and
therefore met the qualified thrift lender requirement.

  DIVIDEND LIMITATIONS

     A savings bank which meets its regulatory capital requirement may declare
dividends on capital stock based upon net profits, provided that its paid-in
surplus equals its capital stock. If the paid-in surplus of the savings bank
does not equal its capital stock, the board of directors may not declare a
dividend unless at least 10% of the net profits of the preceding half year, in
the case of quarterly or semi-annual dividends, or 10% of the net profits of the
preceding year, in the case of annual dividends, has been transferred to paid-in
surplus. In addition, prior DFI approval is required before dividends exceeding
50% of profits for any calendar year may be declared and before a dividend may
be declared out of retained earnings. Under DFI regulations, a savings bank
which has converted from mutual to stock form also would be prohibited from
paying a dividend on its capital stock if the payment would cause the regulatory
capital of the savings bank to be reduced below the amount required for its
liquidation account.

  LIQUIDITY

     Savings banks are required to maintain an average daily balance of liquid
assets of not less than 8% of the average daily balance of net withdrawable
accounts plus short-term borrowings. Also required is a "primary liquid assets"
ratio of at least 4% of average daily withdrawable accounts and short-term
borrowings. Primary liquid assets are defined as primarily short-term liquid
assets and U.S. government and U.S. government agency securities. At June 30,
2001, the Bank's daily liquidity ratio was 15.52%.

RESTRICTIONS ON LOANS TO AND TRANSACTIONS WITH INSIDERS AND AFFILIATES

     FRB regulations limit the total amount a savings bank may lend to its
executive officers, directors, principal shareholders, and their related
interests. Generally, an affiliated person may borrow an aggregate amount not
exceeding 15% of a savings bank's unimpaired capital and unimpaired surplus on
an unsecured basis and an additional 10% on a secured basis. The regulations
limit, with certain exceptions, the aggregate amount a depository institution
may lend to affiliated persons as a class to an amount not exceeding the
institution's unimpaired capital and unimpaired surplus.

     In addition, FRB regulations provide certain restrictions and limits on
loans and other transactions with the Bank's affiliated persons to ensure that
such loans and transactions are (i) on terms which would be available to members
of the general public for similar credit extensions, or (ii) only under the
terms of a benefit or compensation plan which is generally available to
employees of the Bank and its affiliates and does not give preference to or
otherwise distinguish between such employees.

     The Bank also must comply with Sections 23A and 23B of the Federal Reserve
Act relative to transactions with affiliates in the same manner and to the same
extent as if the Bank were a Federal Reserve member bank. Generally, Sections
23A and 23B limit the extent to which an insured institution or its

                                        38
<PAGE>   41

subsidiaries may engage in certain covered transactions with an affiliate to an
amount equal to 10% of such institution's capital and surplus, plus an aggregate
limit on all such transactions with affiliates to an amount equal to 20% of such
capital and surplus, and require that all transactions be on terms substantially
the same, or at least as favorable to the institution or subsidiary, as those
provided to a non-affiliate. The term "covered transaction" includes the making
of loans, the purchase of assets, issuance of a guaranty and similar other types
of transactions. The DFI may, for safety and soundness reasons, impose more
stringent restrictions on savings banks but may not exempt transactions from or
otherwise abridge Sections 23A and 23B.

     Unless prior approval of the DFI is obtained, a savings bank may not
purchase, lease or acquire a site for an office building or an interest in real
estate from an affiliated person, including a stockholder owning more than 10%
of its capital stock, or from any firm, corporation, entity or family in which
an affiliated person or 10% stockholder has a direct or indirect interest.

     The Bank has not been significantly affected by the applicable restrictions
on loans to and transactions with affiliates.

INSURANCE OF DEPOSITS

     The Bank's deposits are insured to applicable limits under the Savings
Association Insurance Fund ("SAIF") of the FDIC. The FDIC regulations assign
institutions to a particular capital group based on the level of an
institution's capital -- "well capitalized," "adequately capitalized," or
"undercapitalized." These three groups are then divided into three subgroups
which reflect varying levels of supervisory concern, from those which are
considered to be healthy to those which are considered to be of substantial
supervisory concern. This matrix results in nine assessment risk
classifications, with reduced insurance rates paid by well-capitalized,
financially sound institutions and higher rates paid by undercapitalized
institutions that are deemed to pose a substantial risk of loss to the insurance
fund unless effective corrective action is taken.

     Deposit insurance premiums for the Bank are currently assessed at the rate
of 1.9 cents per $100 of deposits. The Bank's expense related to FDIC premiums
was $66,801, $121,890 and $172,355 for the fiscal years ended June 30, 2001,
2000 and 1999, respectively. Deposit premium levels are set in order to permit
the SAIF to achieve a ratio of reserves to insured deposits of 1.25%, and the
FDIC may adjust assessment rates to maintain the target ratio. While an increase
in premiums for the Bank could have an adverse effect on earnings, a decrease in
premiums could have a positive impact on earnings. The Bank does not expect any
increase in the insurance premium in the foreseeable future.

     The FDIC insures commercial bank deposits through a separate fund, the Bank
Insurance Fund ("BIF"). During 1995, BIF assessment rates were reduced and as a
result, BIF member institutions were paying lower deposit insurance premiums
than SAIF-member institutions. Legislation passed during 1996 addressed the
BIF/SAIF premium disparity and other matters related to deposit insurance
obligations. See "Regulatory Legislation Affecting Deposit Insurance."

     Under the FDIC Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
Management of the Company does not know of any practice, condition or violation
that might lead to the termination of deposit insurance for the Bank.

CERTAIN FEDERAL REGULATIONS

     Provisions of federal law address risk reduction and the promotion of
standards of safety and soundness for insured depository institutions.

  EXAMINATIONS AND AUDITS

     Federal regulations require annual on-site examinations for all depository
institutions except those well-capitalized institutions with assets of less than
$100 million; annual audits by independent public accountants for all insured
institutions with assets in excess of $500 million; the formation of independent
audit committees
                                        39
<PAGE>   42

of the boards of directors of insured depository institutions for institutions
with assets equal to or in excess of $500 million; and management of depository
institutions to prepare certain financial reports annually and to establish
internal compliance procedures.

  PROMPT CORRECTIVE REGULATORY ACTION

     Federal bank regulators are required to take certain supervisory actions
with respect to undercapitalized institutions, the severity of which depend upon
the institution's degree of capitalization. The regulations provide that an
insured institution that has a ratio of total capital to risk-based assets of
less than 8.0%, core capital to risk-based assets of less than 4.0% or a
leverage ratio that is less than 4.0%, would be considered "undercapitalized."
An insured institution that has a ratio of total capital to risk-based assets of
less than 6.0%, core capital to risk-based assets of less than 3.0% or a
leverage ratio that is less than 3.0%, would be considered "significantly
undercapitalized" and an insured institution that has tangible capital to assets
ratio equal to or less than 2.0% would be deemed "critically undercapitalized."

     Subject to limited exceptions, insured institutions in any of the
undercapitalized categories are prohibited from declaring dividends, making any
other capital distribution or paying a management fee to a controlling person or
entity. Undercapitalized and significantly undercapitalized institutions face
more severe restrictions. The Bank currently exceeds all applicable regulatory
capital requirements and, therefore, is not subject to prompt correctional
action.

  BROKERED DEPOSITS

     FDIC regulations govern the acceptance of brokered deposits by insured
depository institutions. The capital position of an institution determines
whether and with what limitations an institution may accept brokered deposits. A
"well-capitalized" institution (one that significantly exceeds specified capital
ratios) may accept brokered deposits without restriction. "Undercapitalized"
institutions (those that fail to meet minimum regulatory capital requirements)
may not accept brokered deposits and "adequately capitalized" institutions
(those that are not "well-capitalized" or "undercapitalized") may only accept
such deposits with the consent of the FDIC. (The definitions of
"well-capitalized", "adequately capitalized" and "undercapitalized" governing
the acceptance of brokered deposits conform to the definitions used in the
regulations implementing the prompt corrective action provisions of the FDICIA.)
The Bank is a "well-capitalized" institution and therefore may accept brokered
deposits without restriction. At June 30, 2001, the Bank had $166.9 million in
brokered deposits.

  UNIFORM LENDING STANDARDS

     Savings institutions must adopt and maintain written policies that
establish appropriate limits and standards for extensions of credit that are
secured by liens or interests in real estate or are made for the purpose of
financing permanent improvements to real estate. These policies must establish
loan portfolio diversification standards, prudent underwriting standards
(including loan-to-value limits) that are clear and measurable, as well as loan
administration procedures and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of the
Interagency Guidelines for Real Estate Lending Policies that have been adopted
by federal bank regulators. The Bank has adopted and maintains such policies.

  STANDARDS FOR SAFETY AND SOUNDNESS

     On July 10, 1995, federal bank regulators adopted Interagency Guidelines
Establishing Standards for Safety and Soundness (the "Guidelines") and also
adopted a final rule establishing deadlines for submission and review of safety
and soundness compliance plans and operational and managerial standards for all
insured depository institutions relating to internal controls, information
systems and audit systems; loan documentation; credit underwriting; interest
rate risk exposure; asset growth; and compensation fees and benefits. The
compensation standards prohibit employment contracts, compensation or benefit
arrangements, stock option plans, fee arrangements or other compensatory
arrangements that would provide excessive compensation, fees

                                        40
<PAGE>   43

or benefits or could lead to material financial loss. Federal bank regulators
are authorized, but not required, to request a compliance plan for failure to
satisfy safety and soundness standards set out in the Guidelines.

     The Bank believes its operational and managerial standards substantially
comply with the standards in the Guidelines and that compliance with the
Guidelines will therefore not impose a significant burden on Bank operations.

  RESTRICTIONS UPON STATE-CHARTERED BANKS

     FDIC regulations governing the equity investments of the Bank prohibit
certain equity investments and generally limit equity investments to those
permissible for federally-chartered banks and their subsidiaries. Banks holding
impermissible equity investments that do not receive FDIC approval must submit
to the FDIC a plan for divesting such investments. The Bank does not hold any
impermissible equity investments.

     Under FDIC regulations, the Bank must obtain prior FDIC approval before
directly, or indirectly through a majority-owned subsidiary, engaging "as
principal" in any activity that is not permissible for a national bank unless
certain exceptions apply. The activity regulations provide that state banks
which meet applicable minimum capital requirements would be permitted to engage
in certain activities that are not permissible for national banks, including
guaranteeing obligations of others, activities which the FRB has found to be
closely related to banking and certain securities activities conducted through
subsidiaries. The FDIC will not approve an activity that it determines presents
a significant risk to the FDIC insurance funds. As a SAIF-insured,
state-chartered savings bank that was formerly a state-chartered savings
association, the Bank continues to be subject to certain restrictions imposed by
federal law on state-chartered savings associations. The activities of the Bank
and its subsidiary are permissible under applicable federal regulations.

CAPITAL MAINTENANCE

  FDIC REGULATION

     FDIC-insured institutions are required to follow certain capital adequacy
guidelines which prescribe minimum levels of capital and require that
institutions meet certain risk-based capital requirements. The Bank is required
to meet the following capital standards to remain adequately capitalized and not
be subject to corrective action: (i) "Tier 1 capital" in an amount not less than
3% of total assets; (ii) "Tier 1 capital" in an amount not less than 4% of
risk-weighted assets; and (iii) "total capital" in an amount not less than 8% of
risk-weighted assets.

     FDIC-insured institutions in the strongest financial and managerial
condition (with a composite rating of "1" under the Uniform Financial
Institutions Rating System established by the Federal Financial Institutions
Examination Council) are also required to maintain "Tier 1 capital" equal to at
least 3% of total assets (the "leverage capital" requirement). Tier 1 capital is
defined to include the sum of common shareholders' equity, noncumulative
perpetual preferred stock (including any related surplus), and minority
interests in consolidated subsidiaries, minus all intangible assets (with
certain exceptions), identified losses, and qualifying investments in securities
subsidiaries. An institution that fails to meet the minimum leverage limit
requirement must file a capital restoration plan with the appropriate FDIC
regional director. At June 30, 2001, the Bank's ratio of Tier 1 capital to total
average assets was 7.39%, or 4.39 percentage points in excess of the minimum
leverage capital requirement, the Bank's Tier 1 capital to risk-weighted assets
was 10.62%, or 6.62 percentage points in excess of the FDIC requirement, and the
Bank's total capital to risk-weighted assets was 11.58%, or 3.58 percentage
points in excess of the FDIC requirement.

  WISCONSIN REGULATION

     Wisconsin-chartered savings banks are required to maintain a minimum
capital to assets ratio of 6% and must maintain total capital necessary to
ensure the continuation of insurance of deposit accounts by the FDIC. If the DFI
determines that the financial condition, history, management or earning
prospects of a savings bank are not adequate, the DFI may require a higher
minimum capital level for the savings bank. If a savings bank's capital ratio
falls below the required level, the DFI may direct the savings bank to adhere to
a specific written

                                        41
<PAGE>   44

plan established by the DFI to correct the savings bank's capital deficiency, as
well as a number of other restrictions on the savings bank's operations,
including a prohibition on the declaration of dividends. At June 30, 2001, the
Bank's total capital, as calculated under Wisconsin law, was $40.3 million, or
7.89% of total assets, which was 1.89% in excess of the required amount.

COMMUNITY REINVESTMENT ACT

     Under the Community Reinvestment Act of 1977, as amended (the "CRA"), as
implemented by FDIC regulations, the Bank has a continuing and affirmative
obligation consistent with its safe and sound operation to help meet the credit
needs of its entire community, including low and moderate income neighborhoods.
The CRA does not establish specific lending requirements or programs for
financial institutions nor does it limit an institution's discretion to develop
the types of products and services it believes are best suited to its particular
community. The CRA requires the FDIC, in connection with its examination of a
bank, to assess the institution's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications by such institution. The law requires public disclosure of an
institution's CRA rating and also requires the primary regulator to provide a
written evaluation of an institution's CRA performance. The Bank's latest CRA
rating, received on February 23, 1999, was "satisfactory."

FEDERAL RESERVE SYSTEM

     Regulation D, promulgated by the FRB, imposes reserve requirements on all
depository institutions which maintain transaction accounts or non-personal time
deposits. Checking accounts, NOW accounts and certain other types of accounts
that permit payments or transfers to third parties fall within the definition of
transaction accounts and are subject to Regulation D reserve requirements, as
are any non-personal time deposits (including certain money market deposit
accounts) at a savings institution. For 1997, a depository institution must
maintain average daily reserves equal to 3% on the first $49.3 million of
transaction accounts and an initial reserve of $1.5 million, plus 10% of that
portion of total transaction accounts in excess of $49.3 million. The first $4.4
million of otherwise reservable balances (subject to adjustment by the FRB) are
exempt from the reserve requirements. These percentages and threshold limits are
subject to adjustment by the FRB. As of June 30, 2001, the Bank met its
Regulation D reserve requirements.

     Thrift institutions also have authority to borrow from the Federal Reserve
Bank "discount window," but FRB policy generally requires thrift institutions to
exhaust all FHLB sources before borrowing from the Federal Reserve System. The
Bank had no discount window borrowings as of June 30, 2000.

FEDERAL HOME LOAN BANK SYSTEM

     The Federal Home Loan Bank System, consisting of twelve FHLBs, is under the
jurisdiction of the Federal Housing Finance Board ("FHFB"). The designated
duties of the FHFB are to supervise the FHLBs; ensure that the FHLBs carry out
their housing finance mission; ensure that the FHLBs remain adequately
capitalized and able to raise funds in the capital markets; and ensure that the
FHLBs operate in a safe and sound manner.

     The Bank, as a member of the FHLB-Chicago, is required to acquire and hold
shares of capital stock in the FHLB-Chicago in an amount equal to the greater of
(i) 1% of the aggregate outstanding principal amount of residential mortgage
loans, home purchase contracts and similar obligations at the beginning of each
year, or (ii) 0.3% of total assets. The Bank is in compliance with this
requirement with an investment in FHLB-Chicago stock of $8.4 million at June 30,
2001.

     Among other benefits, the FHLBs provide a central credit facility primarily
for member institutions. It is funded primarily from proceeds derived from the
sale of consolidated obligations of the FHLB System. It makes advances to
members in accordance with policies and procedures established by the FHFB and
the Board of Directors of the FHLB-Chicago. At June 30, 2001, the Bank had
$129.5 million in advances from the FHLB-Chicago.

                                        42
<PAGE>   45

HOLDING COMPANY REGULATION

  FEDERAL REGULATION

     The Company is a registered bank holding company pursuant to the Bank
Holding Company Act of 1956, as amended (the "BHCA"). As such, the Company is
subject to examination, regulation and periodic reporting under the BHCA, as
administered by the FRB. The FRB has adopted capital adequacy guidelines for
bank holding companies (on a consolidated basis) substantially similar to those
of the FDIC for the Bank. Failure to meet the capital adequacy requirements may
result in supervisory or enforcement action by the FRB. The Company's pro forma
total and Tier 1 capital significantly exceed such capital adequacy
requirements.

     The Company is required to obtain the prior approval of the FRB to acquire
all, or substantially all, of the assets of any bank or bank holding company.
Prior FRB approval is required for the Company to acquire direct or indirect
ownership or control of any voting securities of any bank or bank holding
company if, after giving effect to such acquisition, it would, directly or
indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company. The BHCA also prohibits the acquisition by the
Company of more than 5% of the voting shares of a bank located outside the State
of Wisconsin or of substantially all of the assets of such a bank, unless such
an acquisition is specifically authorized by the laws of the state in which such
bank is located.

     FRB regulations govern a variety of bank holding company matters, including
redemption of outstanding equity securities and a bank holding company engaging
in non-banking activities. Pursuant to FRB policy, dividends should be paid only
out of current earnings and only if the prospective rate of earnings retention
by the bank holding company appears consistent with its capital needs, asset
quality and overall financial condition. The FRB policy also requires that a
bank holding company serve as a source of financial strength to its subsidiary
banks by standing ready to use available resources to provide adequate capital
funds to those banks during periods of financial stress or adversity. These
policies could affect the ability of the Holding Company to pay cash dividends.

     Subsidiary banks of a bank holding company are subject to certain
quantitative and qualitative restrictions imposed by the Federal Reserve Act on
any extension of credit to, or purchase of assets from, or letter of credit on
behalf of, the bank holding company or its subsidiaries, and on the investment
in or acceptance of stocks or securities of such holding company or its
subsidiaries as collateral for loans. In addition, provisions of the Federal
Reserve Act and FRB regulations limit the amounts of, and establish required
procedures and credit standards with respect to, loans and other extensions of
credit to officers, directors and principal shareholders of the Bank, the
Company, any subsidiary of the Company and related interests of such persons.
See "-- Restrictions on Loans to and Transactions with Affiliates." Moreover,
subsidiaries of bank holding companies are prohibited from engaging in certain
tie-in arrangements (with the Company or any of its subsidiaries) in connection
with any extension of credit, lease or sale of property or furnishing of
services.

     The Company and its subsidiary, the Bank, are affected by the monetary and
fiscal policies of various agencies of the United States Government, including
the Federal Reserve System. In view of changing conditions in the national
economy and in the money markets, it is impossible for management of the Company
to accurately predict future changes in monetary policy or the effect of such
changes on the business or financial condition of the Company.

  STATE SAVINGS BANK HOLDING COMPANY REGULATION

     In addition to the FRB bank holding company regulations, a bank holding
company that owns or controls, directly or indirectly, more than 25% of the
voting securities of a state savings bank also is subject to regulation as a
savings bank holding company by the DFI. The DFI has not yet issued proposed
regulations governing savings bank holding companies.

                                        43
<PAGE>   46

ACQUISITION OF THE COMPANY

     Under the federal Change in Bank Control Act of 1978, as amended (the
"CBCA"), a notice must be submitted to the FRB if any person (including a
company), or group acting in concert, seeks to acquire 10% or more of the
Company's shares of Common Stock outstanding, unless the FRB has found that the
acquisition will not result in a change in control of the Company. Under the
CBCA, the FRB has 60 days within which to act on such notices, taking into
consideration certain factors, including the financial and managerial resources
of the acquiror, the convenience and needs of the communities served by the
Company and the Bank, and the anti-trust effects of the acquisition. Under the
BHCA, any company would be required to obtain prior approval from the FRB before
it could obtain "control" of the Company within the meaning of the BHCA. Control
is generally defined to mean ownership or power to vote 25 percent or more of
any class of voting securities of the Company or the ability to control in any
manner the election of a majority of the Company's directors. In addition, the
BHCA prohibits the acquisition of the Company by a bank holding company located
outside the State of Wisconsin, unless such acquisition is specifically
authorized by Wisconsin law. See "Holding Company Regulation."

FEDERAL SECURITIES LAWS

     The Company filed with the Commission a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of the Common Stock issued pursuant to the Conversion. Upon completion of the
Conversion, the Company's Common Stock was registered with the Commission under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements under the Exchange Act.

     The registration under the Securities Act of the shares of the Common Stock
does not cover the resale of such shares. Shares of Common Stock purchased by
persons who are not affiliates of the Company may be resold without
registration. Shares purchased by an affiliate of the Holding Company will be
subject to the resale restrictions of Rule 144 under the Securities Act. If the
Company meets the current public information requirements of Rule 144 under the
Securities Act, each affiliate of the Company who complies with the other
conditions of Rule 144 (including those that require the affiliate's sale to be
aggregated with those of certain other persons) would be able to sell in the
public market, without registration, a number of shares not to exceed, in any
three-month period, the greater of (i) 1% of the outstanding shares of the
Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.

REGULATORY LEGISLATION AFFECTING DEPOSIT INSURANCE

     Deposits of the Bank currently are insured to applicable limits by the FDIC
under the Savings Associations Insurance Fund ("SAIF"). The FDIC also insures
commercial bank deposits under the Bank Insurance Fund ("BIF"). Premium levels
are set in order to permit the funds to be capitalized at a level equal to 1.25%
of total fund deposits. Assessment rate changes made in 1995 created a deposit
insurance premium disparity between the two funds; while most BIF members were
paying only a nominal $2,000 annual premium, SAIF members were paying average
rates of 23.4 basis points of deposits.

     On September 30, 1996, Congress passed the "Deposit Insurance Funds Act of
1996" (the "DIF Act") to address the deposit insurance premium disparity. The
FDIC published a final rule under the DIF Act on December 24, 1996, establishing
a permanent base assessment schedule for the SAIF and setting assessment rates
at a range of 4 to 31 basis points. The rule provides for an adjusted assessment
schedule reducing these rates by 4 basis points to reflect current conditions,
producing an effective SAIF assessment range of 0 to 27 basis points beginning
October 1, 1996. This assessment range, which applies to all SAIF institutions
other than SAIF member savings associations, is comparable to the current
schedule for BIF-institutions. A special interim rate schedule ranging from 16
to 27 basis points applied to SAIF-member savings associations for the last
quarter of 1996, reflecting the fact that assessments related to certain bond
obligations of the Financial

                                        44
<PAGE>   47

Corporation ("FICO"), which were issued to resolve the savings and loan crisis
in the 1980's, will be included in the SAIF rates for these institutions during
that period. Because the Bank is a "Sasser bank" (a bank that converted its
charter from a savings association to a state savings bank charter, yet remains
a SAIF member in accordance with the so-called "Sasser Amendment"), it was not
assessed this interim rate and received a credit in January 1997 for its entire
FDIC premium for the quarter ended December 31, 1996.

     The DIF Act addressed other matters which will affect the Bank. Certain
bond obligations of the Financial Corporation ("FICO"), which were issued to
resolve the savings and loan crisis in the 1980's, are being shared by all
insured depository institutions beginning after December 31, 1996. While BIF and
SAIF members have previously paid different annual assessments to fund repayment
of the FICO bonds, after January 1, 2000, they share the FICO payments on a
pro-rata basis, which is assessed at 2.4 basis points until the bonds mature in
2017.

     The DIF Act provided for the merger of BIF and SAIF into a single Deposit
Insurance Fund, which was to be effective January 1, 1999, if no insured
depository institution was a savings association on that date. While this
legislation contemplated that the savings association charter would be phased
out over that period of time, that has not occurred and both BIF and SAIF
continue in existence.

GRAMM-LEACH-BLILEY ACT

     The laws and regulations to which the Bank and Company are subject are
under constant review by Congress, state legislatures, and state and federal
regulators. On November 12, 1999, comprehensive federal legislation, referred to
as the Gramm-Leach-Bliley Act (the "GLBA"), was signed into law eliminating many
of the Depression-era restrictions on affiliations between banks, securities
firms, insurance companies, and other financial services organizations. The GLBA
provides for a new type of "financial holding company" structure under which
affiliations among these entities may occur, subject to regulation of financial
holding companies by the Federal Reserve Board and of their affiliates by the
appropriate functional regulator, including the Securities and Exchange
Commission and state insurance regulators. In addition, the GLBA permits certain
non-banking financial and financially related activities to be conducted by
operating subsidiaries of a national bank. Under the GLBA, a bank holding
company may become certified as a financial holding company by filing a notice
with the Federal Reserve Board, together with a certification that the bank
holding company meets certain criteria, including capital, management and
Community Reinvestment Act requirements. The GLBA contains a number of
provisions allocating regulatory authority among the Federal Reserve Board,
other banking regulators, the Securities and Exchange Commission and state
insurance regulators. In addition, the GLBA imposes strict new privacy
disclosure and "opt-out" requirements regarding the ability of financial
institutions to share personal non-public customer information with third
parties.

     Other important provisions of the GLBA permit merchant banking and venture
capital activities, and insurance underwriting, to be conducted by a subsidiary
of a financial holding company, and municipal securities underwriting activities
to be conducted directly by a national bank or its subsidiary. Under the GLBA, a
financial holding company may engage in a broad list of "financial activities",
as well as in any non-financial activity that the Federal Reserve Board
determines is "complimentary" to a financial activity and poses no substantial
risk to the safety and soundness of depository institutions or the financial
system.

     While certain provisions of the GLBA became effective on November 12, 1999,
other provisions are subject to delayed effective dates and, in some cases, will
be implemented only upon adoption by federal regulatory agencies of rules
prescribed by the GLBA. Certain of the authorities provided under the GLBA may
require action by the DFI or Wisconsin legislature before becoming available to
Wisconsin-chartered insured institutions such as the Bank.

                                        45
<PAGE>   48

ITEM 2. PROPERTIES

     The Bank conducts its business through four full-service office locations
and one limited-service location. In May 1996, the Bank opened a limited-service
office inside of a new senior community residence in West Allis. Library Square,
the senior community, is located at 1820 South 75th Street and contains 118
apartments for independent living. The Bank conducts business at Library Square
two days a week and leases the space that it occupies there. Three of the
full-service branch offices are located in Milwaukee county (the West Allis,
Greenfield and Glendale locations) and one is located in Waukesha County (the
New Berlin location). The Bank owns all of the properties on which its
full-service offices are located. Management believes the Bank's current
facilities are adequate to meet present and immediately foreseeable needs of the
Bank and the Holding Company.

     The Bank opened its facility at the Glendale, Wisconsin location in fiscal
2000. The Bank currently leases a portion of the Glendale facility to various
tenants and operates certain administrative functions and a full-service banking
operation out of the remaining portion of the facility.

     A list of the Bank's administrative and full-service offices is as follows:

<Table>
<Caption>
                                                                      NET BOOK VALUE
                                                                     OF PROPERTIES AND
                                                            YEAR      IMPROVEMENTS AT
                    OFFICE LOCATION                        OPENED      JUNE 30, 2001
                    ---------------                        ------    -----------------
<S>                                                        <C>       <C>
West Allis/Home Office.................................     1919        $  220,000
7401 West Greenfield Avenue
West Allis, WI 53214

New Berlin Office......................................     1989           901,000
15600 West Cleveland Avenue
New Berlin, WI 53151

Greenfield Office......................................     1988           951,000
5101 South 27th Street
Greenfield, WI 53221

Glendale Office........................................     1998         2,905,000
5555 N. Port Washington Road
Glendale, WI 53217
                                                                        ----------
Net Book Value:..................................................       $4,977,000
                                                                        ==========
</Table>

     In addition to the properties described above, in January, 1991, the Bank
entered into a purchase contract with two companies (the "Sellers") for the
purchase of certain real estate located in Wauwatosa, Wisconsin. The Bank sought
to acquire the real estate as a location for a Wauwatosa branch office. The
purchase contract required the Sellers, at their cost and expense, to take all
steps necessary to remove all hazardous substances and underground storage
tanks, pipes, and related appurtenances from the property. As a result of
Sellers' failure to remove the hazardous substances from the property, the Bank
instituted suit in August 1992 for specific performance of the purchase
contract, alleging Sellers' failure to clean up the property and the Bank's
entitlement to have the purchase contract enforced by requiring the Sellers to
complete the agreed-upon clean-up of the property.

     In March 1993, the Bank recognized losses of $250,000 to provide an
allowance for capitalized real estate taxes, legal fees and other expenses
related to the attempted acquisition of the property. During fiscal 1999,
Milwaukee County foreclosed on the property, which terminated the Bank's
interest in the property, if any. The Bank believes its current position does
not expose it to liability in connection with clean-up expenses or other
expenses related to the property, including without limitation liabilities
arising under the Comprehensive Environmental Response, Compensation and
Liability Act.*

                                        46
<PAGE>   49

ITEM 3. LEGAL PROCEEDINGS

     The Company and the Bank are involved as a plaintiff or defendant in
various legal actions arising in the normal course of its business. While the
ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal
actions should not have a material effect on the Company's consolidated
financial condition or results of operations.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 2001.

  EXECUTIVE OFFICERS OF THE REGISTRANT

     The following information as to the business experience is supplied with
respect to executive officers of the Company who, with the exception of Messrs.
James D. Smessaert and Peter A. Gilbert, do not serve on the Company's Board of
Directors. There are no arrangements or understandings between the persons named
and any one person pursuant to which such officers were selected, nor are there
any family relationships among them.

     JAMES D. SMESSAERT, age 63, is President, Chief Executive Officer and
Chairman of the Board of the Company, has been President, Chief Executive
Officer and a director of the Bank since 1983, and became Chairman of the Board
effective July 1, 1993. Prior to joining the Bank, Mr. Smessaert was Executive
Vice President of Advantage Bank, formerly Kenosha Savings and Loan Association.
Mr. Smessaert is past President of the Milwaukee Council of the Wisconsin League
of Financial Institutions. He currently serves as Secretary and as a member of
the Legislative and Executive Committees of the Wisconsin League of Financial
Institutions. Mr. Smessaert also is immediate past Chairman of the West Allis
Chamber of Commerce and past Chairman of the West Allis Business Expo.

     PETER A. GILBERT, age 53, is Corporate Secretary and Executive Vice
President, Chief Operating Officer and a director of the Bank effective August
1, 1995, and a director of the Company effective August 22, 1995. Prior to
joining the Bank, Mr. Gilbert was President and CEO of Valley Real Estate
Services Corp., a mortgage banking subsidiary of Valley Bancorporation located
in Sheboygan, Wisconsin, from 1992 to 1994, and Managing Director of Gilbert and
Associates, a financial services consulting firm located in Encinitas,
California, from 1988 to 1992.

     ARTHUR E. THOMPSON, age 41, is Chief Financial Officer and Treasurer of the
Company and has been Senior Vice President of the Bank since March 1993. Mr.
Thompson joined the Bank in 1985 as the Controller and served as Vice President
and Treasurer from 1987 to March 1993. Mr. Thompson also is a director of the
Bank's subsidiary, Ledger Investment Corp. Prior to joining the Bank, Mr.
Thompson was an accountant at Hopkins Savings & Loan Association from 1984 to
1985 and Assistant Controller at West Bend Savings & Loan Association from 1983
to 1984. Mr. Thompson is a Certified Public Accountant.

     ELIZABETH S. BORST, age 39, is Senior Vice President of the Company and has
been Senior Vice President of Sales and Marketing of the Bank since November
1995. Ms. Borst served as Vice President-Marketing from 1993 to 1995. Ms. Borst
also is a director of the Bank's subsidiary, Ledger Planning Services, Inc.

                                        47
<PAGE>   50

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS

  SHAREHOLDERS/SHARES OUTSTANDING

     The Company's common stock is currently being traded on the National
Association of Securities Dealers Automated Quotation (Nasdaq) National Market
System over-the-counter exchange under the symbol of "LEDG." Information
required by this item is incorporated by reference to the table "Market
Information" as part of the "Quarterly Financial Information (Unaudited)" shown
in Note 16 to Notes to Consolidated Financial Statements and the "Earnings Per
Share" Note 1 to Notes to Consolidated Financial Statements included under Item
8 of this Annual Report on Form 10-K.

     As of September 10, 2001, there were 268 holders of record and an estimated
800 beneficial holders owning a total of 2,437,141 voting shares of the
Company's common stock.

     Payment of future dividends is within the discretion of the Corporation's
Board of Directors and will depend among other factors, on earnings, capital
requirements, and the operating and financial condition of the Corporation. At
the present time, the Corporation expects that dividends will continue to be
paid in the future. See Item 6 of this document for information on dividends.

                                        48
<PAGE>   51

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (Five-Year Summary)

     Set forth below are selected consolidated financial and other data of the
Company. The financial data is derived in part from, and should be read in
conjunction with, the Consolidated Financial Statements of the Company and Notes
thereto presented elsewhere in this report.

<Table>
<Caption>
                                                                    AT JUNE 30,
                                                ----------------------------------------------------
                                                  2001       2000       1999       1998       1997
                                                  ----       ----       ----       ----       ----
                                                                   (IN THOUSANDS)
<S>                                             <C>        <C>        <C>        <C>        <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets.................................   $506,920   $519,971   $469,659   $438,374   $409,820
Loans receivable, net........................    352,672    392,306    281,120    280,889    273,556
Cash and cash equivalents....................     22,926     16,559      8,599      8,184      8,755
Securities available-for-sale................     92,979     74,259    100,468     66,445     29,518
Investment securities and certificates of
  deposit....................................        455         --         --        388        780
Mortgage-backed and related securities.......     10,619     15,017     54,618     65,282     85,430
Deposits.....................................    319,812    345,318    288,714    271,619    281,512
FHLB advances and other borrowings...........    141,108    132,040    129,519    117,059     92,073
Shareholders' equity.........................     36,208     33,596     34,496     33,453     29,672
</Table>

<Table>
<Caption>
                                                               FISCAL YEAR ENDED JUNE 30,
                                                   ---------------------------------------------------
                                                    2001       2000       1999       1998       1997
                                                    ----       ----       ----       ----       ----
                                                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                <C>        <C>        <C>        <C>        <C>
SELECTED OPERATIONS DATA:
Total interest income..........................    $39,260    $38,982    $34,298    $32,227    $29,823
Total interest expense.........................     27,674     26,023     22,814     21,586     20,210
                                                   -------    -------    -------    -------    -------
  Net interest income..........................     11,586     12,959     11,484     10,641      9,613
Provision for loan losses......................        430        871        480        800        650
                                                   -------    -------    -------    -------    -------
  Net interest income after provision for loan
     losses....................................     11,156     12,088     11,004      9,841      8,963
Non-interest income:
  Loan servicing and loan-related fees.........        382        350        355        349        251
  Depository fees and service charges..........        423        457        451        429        478
  Gain on sale of loans........................        988          9        892        297         95
  Gain (loss) on sale of securities and
     mortgage-backed and related securities,
     net.......................................         49         48         68         (8)         7
  Other non-interest income....................        268        367        316        141        197
                                                   -------    -------    -------    -------    -------
Total non-interest income......................      2,110      1,231      2,082      1,208      1,028
Total non-interest expense.....................      9,783      8,537      8,451      6,847      7,046
                                                   -------    -------    -------    -------    -------
Income before income tax expense...............      3,483      4,782      4,635      4,202      2,945
Income tax expense.............................      1,209      1,537      1,505      1,403      1,026
                                                   -------    -------    -------    -------    -------
     Net income................................    $ 2,274    $ 3,245    $ 3,130    $ 2,799    $ 1,919
                                                   =======    =======    =======    =======    =======
     Earnings per share (basic)................    $  0.95    $  1.27    $  1.13    $  1.01    $  0.71
                                                   =======    =======    =======    =======    =======
     Earnings per share (diluted)..............    $  0.92    $  1.23    $  1.10    $  0.97    $  0.68
                                                   =======    =======    =======    =======    =======
     Cash dividends per share..................    $  0.20    $  0.15    $  0.00    $  0.00    $  0.00
                                                   =======    =======    =======    =======    =======
</Table>

                                        49
<PAGE>   52
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA -- (CONTINUED)

<Table>
<Caption>
                                                      AT OR FOR THE FISCAL YEAR ENDED JUNE 30,
                                              --------------------------------------------------------
                                                2001        2000        1999        1998        1997
                                                ----        ----        ----        ----        ----
                                                               (DOLLARS IN THOUSANDS)
<S>                                           <C>         <C>         <C>         <C>         <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
PERFORMANCE RATIOS
Return on average assets..................        0.45%       0.63%       0.67%       0.67%       0.48%
Return on average equity..................        6.50        9.61        9.08        8.89        6.83
Interest rate spread during period(1).....        1.89        2.30        2.13        2.22        2.06
Net interest margin(1)....................        2.35        2.60        2.52        2.63        2.48
Non-interest expense to average assets....        1.94        1.62        1.81        1.64        1.77
Non-interest income to average assets.....        0.42        0.24        0.44        0.29        0.26
Average interest-earning assets to average
  interest-bearing liabilities............        1.08x       1.06x       1.08x       1.08x       1.08x
ASSET QUALITY RATIOS
Non-performing loans to gross loans(2)....        1.20%       0.45%       0.81%       0.49%       0.22%
Non-performing assets to total
  assets(2)...............................        1.18        0.57        0.70        0.32        0.16
Allowance for loan losses to
  non-performing loans....................       76.70      171.26      109.19      163.14      282.71
Ratio of allowance for loan losses to
  gross loans.............................        0.92        0.78        0.89        0.81        0.62
Net charge-offs to average gross loans....        0.07        0.09        0.05        0.08        0.04
CAPITAL RATIOS(3)
Average shareholders' equity to average
  assets..................................        6.93        6.54        7.36        7.54        7.07
Shareholders' equity to total assets at
  end of period...........................        7.14        6.46        7.34        7.63        7.24
OTHER DATA
Number of deposit accounts................      14,269      14,102      15,441      16,814      18,061
Number of real estate loans outstanding...       3,632       4,040       3,306       3,620       3,824
Number of real estate loans serviced......       3,918       4,377       3,687       4,063       4,360
Number of consumer loans outstanding......       2,112       2,188       3,011       3,229       3,310
Number of commercial loans outstanding....         112         110         129         103          28
Loan originations/purchases...............    $175,802    $259,338    $258,960    $163,433    $118,108
Full-service facilities...................           4           3           3           3           3
</Table>

-------------------------
(1) Interest rate spread represents the difference between the average yield on
    interest-earning assets and the average cost of interest-bearing
    liabilities. Net interest margin represents net interest income as a
    percentage of average interest-earning assets.

(2) Non-performing loans consist of non-accrual loans, accruing loans 90 days or
    more past due and troubled debt restructurings. Non-performing assets
    consist of non-performing loans and foreclosed properties, which consist of
    real estate acquired by foreclosure or deed-in-lieu thereof, real estate in
    judgment and loans which are deemed in-substance foreclosed.

(3) For a discussion of the Bank's regulatory capital ratios, see Note 9 of
    Notes to Consolidated Financial Statements.

                                        50
<PAGE>   53

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

FORWARD LOOKING STATEMENTS

     When used in this Annual Report on Form 10-K or future filings with the
Securities and Exchange Commission, in quarterly reports or press releases or
other public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, various words or phrases are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements include words and phrases such as "will likely result," "are expected
to," "will continue," "is anticipated," "estimate," "project," "intend" or
similar expressions and various other statements indicated herein with an
asterisk after such statements. Ledger Capital Corp. (the "Company") wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and to advise readers that
various factors could affect the Company's financial performance and could cause
actual results for future periods to differ materially from those anticipated or
projected. Such factors include, but are not limited to: (i) general market
interest rates; (ii) general economic conditions; (iii) legislative/regulatory
changes; (iv) monetary and fiscal policies of the U.S. Treasury and Federal
Reserve; (v) changes in the quality or composition of the Company's loan and
investment portfolios; (vi) demand for loan products; (vii) deposit flows;
(viii) competition; (ix) demand for financial services in the Company's markets;
and (x) changes in accounting principles, policies or guidelines.

     The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.

     ON SEPTEMBER 11, 2001, THERE WERE TERRORIST ATTACKS ON THE UNITED STATES.
THE COMPANY IS UNAWARE OF ANY DIRECT IMPACT THIS TRAGEDY WILL HAVE ON THE
FINANCIAL POSITION OR RESULTS OF OPERATIONS OF THE COMPANY. FURTHERMORE, IT IS
UNKNOWN AS TO WHETHER OR TO WHAT EXTENT THESE TRAGIC EVENTS WILL HAVE DIRECTLY
OR INDIRECTLY ON THE COMPANY'S FINANCIAL POSITION AND RESULTS OF OPERATIONS IN
THE FUTURE.

GENERAL

     Ledger Capital Corp. (the "Company") is a holding company incorporated
under the laws of the State of Wisconsin and is engaged in the financial
services business through its wholly owned subsidiary, Ledger Bank S.S.B. (the
"Bank"), a Wisconsin state-chartered stock savings bank headquartered in
Milwaukee, Wisconsin. The Company's initial public offering was consummated in
December 1993, and the Company acquired all of the outstanding common stock of
the Bank issued in the mutual to stock conversion of the Bank (the "Conversion")
on December 30, 1993.

     On June 15, 2001, the Company announced that it had entered into a
definitive agreement with Anchor BanCorp Wisconsin, Inc. ("Anchor") (Nasdaq:
"ABCW"), headquartered in Madison, Wisconsin, providing for the merger of the
Company with and into Anchor (the "Merger"). Anchor is the parent holding
company for Anchor Bank, fsb, a $3.13 billion financial institution with 49
full-service offices and three lending-only facilities in 37 Wisconsin cities.
Completion of the Merger is subject to certain conditions, including approval by
shareholders of the Company. The Merger currently is expected to be completed
during the fourth calendar quarter of 2001. The Company filed a Current Report
on Form 8-K, dated June 15, 2001, with the Securities and Exchange Commission,
in connection with its announcement of the Merger.

     The Company's primary strategy since the Conversion through fiscal 2001 has
been to focus on effectively utilizing the capital acquired in the Conversion to
fund asset growth and asset portfolio diversification into higher-yielding
assets. This strategy resulted in an increase in the Company's asset size from
$179.6 million at June 30, 1994 to $506.9 million at June 30, 2001. The
Company's asset growth has come primarily through (i) the origination and
purchase of mortgage loans (principally loans secured by one-to-four family
owner-occupied homes) within and outside of the Company's primary lending area,
(ii) the purchase of mortgage-backed and related securities, and (iii) the
origination and purchase of commercial real-estate and business loans within and
outside of the Company's primary lending area. This asset growth was funded
through

                                        51
<PAGE>   54

significant increases in Federal Home Loan Bank ("FHLB") advances and other
borrowings, and increases in deposits consisting primarily of brokered and
non-brokered wholesale deposits.

     The Company's asset portfolio diversification has been achieved by altering
the composition of loans and securities originated, purchased, sold and held in
the total asset portfolio. In particular, the Company has focused on originating
and purchasing higher-yielding non-conforming one-to-four family, multi-family,
commercial real estate and commercial business loans secured by properties or
assets located within the Company's primary lending area (as defined herein) and
outside of the Company's primary lending area, to either replace or supplement
lower-yielding one-to-four family mortgage loans and principal run-off from the
mortgage securities portfolio. In fiscal 2001, the Company originated and
purchased loans or participation interests (loan production) totaling $147.8
million and $28.0 million, respectively, (total loan production of $175.8
million) as compared to fiscal 2000 when originated and purchased loans and
participation interests totaled $140.4 million and $118.9 million, respectively
(total loan production of $259.3 million). Approximately $31.4 million and
$132.4 million of the Company's total loan production related to properties or
business assets located outside of the Company's primary lending area in fiscal
2001 and 2000, respectively (representing 8.66% and 32.09% of gross loans at
June 30, 2001 and 2000, respectively). A significant portion of the Company's
loan production in 2001 related to one-to-four family mortgage loan originations
and commercial business loans. The Company had a decrease in the level of
purchased loans due to the lack of availability of such loans that would have
met the Bank's underwriting requirements.

     Under regulations established for state savings banks by the Wisconsin
Department of Financial Institutions ("DFI"), the Bank is limited in the amount
of commercial real estate and commercial business loans it can hold in its loan
portfolio. The DFI approved limit for the Bank was 30% of the Bank's total asset
base at June 30, 2001 and June 30, 2000. At June 30, 2001, the Bank had $131.1
million of such loans in its portfolio, representing 25.8% of the Bank's total
asset base of $507.4 million. At June 30, 2000, the Bank had $138.3 million of
such loans in its portfolio, representing 26.6% of the Bank's asset base of
$520.0 million. The Company projects that the percentage of total assets
represented by commercial real estate and commercial business loans will remain
the same in fiscal 2002 as in fiscal 2001, since a substantial portion of these
new originations and purchases are expected to be sold in the secondary market.*

     The Company began the process of increasing the level of core retail
deposits relative to brokered and non-brokered wholesale deposits in fiscal
2001, which is expected to reduce the overall cost of liabilities for the
Company.* This process started through the use of several different strategies,
including changing the bank name from West Allis Savings Bank to Ledger Bank,
S.S.B., opening a new full-service banking center in Glendale, Wisconsin and
implementing a proactive internal sales culture. The new full-service banking
center in Glendale, Wisconsin began operations during the third quarter of
fiscal 2001. This location currently serves as the executive and administrative
headquarters for the Company and Bank. Location-specific market research was
conducted during fiscal 2000 by a third-party company, and this site was ranked
by that market research company as one of the top five locations for attracting
core deposit balances in Milwaukee County. The full-service banking center
offers traditional deposit products and services, discount brokerage services,
and mortgage, consumer and commercial business lending services.

COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED JUNE 30, 2001 AND
2000

  GENERAL

     Net income for the fiscal year ended June 30, 2001 decreased 29.9% to $2.3
million from $3.2 million for fiscal 2000. The decrease in net income was
primarily attributable to a decrease in net interest income before the provision
for losses on loans to $11.6 million for the fiscal year ended June 30, 2001
from $13.0 million for fiscal 2000, primarily as a result of a lower interest
rate spread and lower average interest-earning assets during fiscal 2001 as
compared to fiscal 2000, and an increase in non-interest expense offset by a
increase in non-interest income and a decrease in the provision for losses on
loans. Non-interest income increased by $879,000 to $2.1 million for fiscal 2001
from $1.2 million for fiscal 2000. The increase in non-interest income was
primarily due to an increase in gain on the sale of loans which increased
$979,000 to $988,000 for fiscal 2001 from $9,000 for fiscal 2000, an increase in
loan servicing fees of $26,000 to $76,000 for fiscal 2001 from

                                        52
<PAGE>   55

$50,000 for fiscal 2000, an increase in service charges on loans of $6,000 to
$306,000 for fiscal 2001 from $300,000 for fiscal 2000, and an increase in gains
on the sale of securities available-for-sale and mortgage-backed and related
securities available-for-sale of $1,000 to $49,000 for fiscal 2001 from $48,000
for fiscal 2000. The increases were partially offset by a decrease in insurance
commissions of $30,000 to $95,000 for fiscal 2001 from $125,000 for fiscal 2000,
a decrease in service charges on deposit accounts of $34,000 to $423,000 for
fiscal 2001 from $457,000 for fiscal 2000, and a decrease in other non-interest
income of $69,000 to $173,000 for fiscal 2001 from $242,000 for fiscal 2000.
Non-interest expense increased $1.3 million to $9.8 million for fiscal 2001 from
$8.5 million for fiscal 2000, primarily as a result of an increase in
compensation and benefits expense of $964,000 to $6.0 million for fiscal 2001
from $5.0 million for fiscal 2000, an increase marketing expense of $113,000 to
$479,000 for fiscal 2001 from $366,000 for fiscal 2000, an increase in occupancy
and equipment of $215,000 to $1.3 million for fiscal 2001 from $1.1 million for
fiscal 2000, and an increase in other non-interest expense of $37,000 to $1.606
million for fiscal 2001 from $1.569 million for fiscal 2000. Offsetting the
increases was a decrease in deposit insurance expense of $55,000 to $67,000 for
fiscal 2001 from $122,000 for fiscal 2000, and a decrease in data processing
expense of $28,000 to $349,000 for fiscal 2001 from $377,000 for fiscal 2000.
Also offsetting the decreases to net income was a decrease in the provision for
losses on loans of $441,000 to $430,000 for fiscal 2001 from $871,000 for fiscal
2000.

     Return on average equity decreased to 6.50% for fiscal 2001 from 9.61% for
fiscal 2000. Return on average assets decreased to 0.45% for fiscal 2001 from
0.63% for fiscal 2000. The decrease in return on average equity was primarily
due to a lower interest rate spread and lower average interest-earning assets
during fiscal 2001 as compared to fiscal 2000 and an increase in non-interest
expense offset by an increase in non-interest income and a decrease in the
provision for losses on loans. The Company's principal investment focus during
fiscal 2001 was the origination of mortgage and commercial loans. The asset
growth primarily was funded through increases in local market retail deposits
and borrowings.

  NET INTEREST INCOME

     Net interest income decreased 10.6% to $11.6 million for fiscal 2001 from
$13.0 million for fiscal 2000. Interest income increased $278,000 in fiscal
2001, while interest expense increased $1.7 million. The level of net interest
income primarily reflects a decrease in interest rate spread to 1.89% for fiscal
2001 from 2.30% for fiscal 2000, and a 1.1% decrease in average interest-earning
assets during fiscal 2001, partially offset by a 39.9% increase in the excess of
the Company's average interest-earning assets over average interest-bearing
liabilities to $38.1 million for fiscal 2001 from $27.4 million for fiscal 2000.
The decreased interest rate spread for fiscal 2001 is primarily a result of the
increased interest rate environment in the first half of fiscal 2001 and the
Company's negative interest rate gap.

  INTEREST INCOME

     Interest income increased 0.7% to $39.3 million for fiscal year 2001 from
$39.0 million for fiscal 2000. The increase in interest income was the result of
an increase in the yield on interest-earning assets to 7.98% for fiscal 2001
from 7.83% for fiscal 2000, offset by a decrease in average interest-earning
assets of 1.1% to $492.2 million for fiscal 2001 from $497.6 million for fiscal
2000. Interest income on loans increased 7.7% to $31.6 million for fiscal 2001
from $29.4 million for fiscal 2000. The increase was primarily the result of an
increase in average gross loans of 7.9% to $380.8 million for fiscal 2001 from
$353.1 million for fiscal 2000, offset by a decrease in average yield to 8.30%
for fiscal 2001 from 8.31% for fiscal 2000. Gross loans increased primarily as a
result of the Company originating more loans, purchasing loans in the secondary
market, retaining substantially all of its adjustable and short-term fixed-rate
loan originations and increases in multi-family and commercial components of the
portfolio. Interest income on mortgage-backed securities decreased 83.1% to
$58,000 for fiscal 2001 from $343,000 for fiscal 2000. The decrease was
primarily due to a decrease in average balances to $1.0 million for fiscal 2001
from $5.5 million for fiscal 2000 and by a decrease in average yield to 5.56%
for the 2001 period from 6.23% for the 2000 period. Interest income on
mortgage-related securities decreased 56.2% to $841,000 for fiscal 2001 from
$1.9 million for fiscal 2000. The decrease was primarily due to a decrease in
average balances to $12.4 million for fiscal 2001 from $29.2 million for fiscal
2000, offset by an increase in average yield to 6.80% for fiscal 2001 from 6.57%
for fiscal 2000. The decrease in
                                        53
<PAGE>   56

average yield on mortgage-backed securities was primarily due to the higher
level of repayments on the higher coupon rate securities portion of this
portfolio. The decline in average balances of mortgage-backed and related
securities and is due to management's decision not to reinvest the repayments on
mortgage-backed and related securities into the loan portfolio. Interest income
on investment securities and securities available-for-sale decreased 9.8% to
$6.2 million for fiscal 2001 from $6.8 million for fiscal 2000. The decrease was
primarily due to a decrease in average balances to $89.9 million for fiscal 2001
from $102.4 million for fiscal 2000, offset by an increase in average yield to
6.86% for fiscal 2001 from 6.68% for fiscal 2000. The higher average yield was
primarily attributable to the increased interest rate environment during the
first half of fiscal 2001.

  INTEREST EXPENSE

     Interest expense increased 6.3% to $27.7 million for fiscal 2001 from $26.0
million for fiscal 2000. The increase was primarily the result of a 56 basis
point increase in the average rate paid on interest-bearing liabilities to 6.09%
for fiscal 2001 from 5.53% for fiscal 2000, offset by a 3.4% decrease in the
average amount of interest-bearing liabilities to $454.2 million for fiscal 2001
compared to $470.2 million for fiscal 2000. The increased balances of
certificates of deposit (including brokered deposits) and borrowings at higher
average interest rates was the primary reason for the increase in the average
rate paid on the interest-bearing liabilities for fiscal 2001 as compared to
fiscal 2000. Interest expense on deposits increased 11.7% to $19.0 million for
fiscal 2001 from $17.0 million for fiscal 2000. The increase was the result of
an increase in the average rate paid to 6.11% for fiscal 2001 from 5.46% for
fiscal 2000, offset by a decrease in average balances of 0.1% to $310.6 million
for fiscal 2001 from $311.0 million for fiscal 2000. The decrease in deposits
was primarily due to a decrease of 19.8% in passbook accounts to $15.9 million
for fiscal 2001 from $19.9 million for fiscal 2000 and by a decrease in the
average rate paid on such deposits to 2.83% for fiscal 2001 from 2.92% for
fiscal 2000. Offsetting the decrease in deposits was an increase in NOW accounts
of 21.9% to $3.5 million for fiscal 2001 from $2.9 million for fiscal 2000,
offset by a decrease in average rate paid to 0.86% for fiscal 2001 from 1.65%
for fiscal 2000. Money market deposit accounts increased 8.9% to $34.0 million
for fiscal 2001 from $31.2 million for fiscal 2000 and by an increase in the
average rate paid on such deposits to 5.04% for fiscal 2001 from 4.52% for
fiscal 2000. Money market deposit accounts increased primarily due to aggressive
competitive rates offered in the Bank's market during fiscal 2001. Certificates
of deposits increased 0.1% to $257.2 million for fiscal 2001 from $257.0 million
for fiscal 2000 and by an increase in the average rate paid on such deposits to
6.52% for fiscal 2001 from 5.82% for fiscal 2000. Of the $257.2 million in the
average balance of certificates of deposit for fiscal 2001, $189.8 million, or
73.8%, represented brokered certificates of deposit compared to $166.7 million,
or 64.9%, for fiscal 2000. The average rate paid on brokered certificates of
deposit increased to 6.56% for fiscal 2001 from 6.03% for fiscal 2000. The
increase was primarily due to the increasing interest rate environment during
the first half of fiscal 2001. Interest on borrowings (FHLB advances and reverse
repurchase agreements) decreased 3.8% to $8.6 million for fiscal 2001 from $9.0
million for fiscal 2000. The decrease was primarily due to the decrease in
average balance to $139.8 million for fiscal 2001 from $156.1 million for fiscal
2000, partially offset by an increase in average rate paid to 6.17% for fiscal
2001 from 5.75% for fiscal 2000.

  PROVISION FOR LOSSES ON LOANS

     The provision for losses on loans decreased to $430,000 for fiscal 2001
from $871,000 for fiscal 2000. The level of allowances for losses on loans
generally is determined by the Bank's historical loan loss experience, the
condition and composition of the Bank's loan portfolio and general economic
conditions. Management anticipates that should the Company's volume of
multi-family and commercial/non-residential real estate lending activity
continues to increase, the Company will continue to build a higher level of
allowance for loan losses established through a provision for loan losses.*
Based on management's evaluation of the loan portfolio and the decrease in gross
loans during fiscal 2001, the allowance for losses on loans increased 4.7% to
$3.4 million at June 30, 2001 compared to $3.2 million at June 30, 2000. The
lower provision for losses on loans during the year reflects the lower loan
balances and lower net charge-offs during the year as well as management's
evaluation of the loan portfolio at June 30, 2001. The ratio of allowance for
loan losses to gross loans increased to 0.92% at June 30, 2001 from 0.76% at
June 30, 2000. The increase in the allowance as a
                                        54
<PAGE>   57

percentage of loans is due to a higher level of non-performing loans at June 30,
2001. The amount of non-performing loans at June 30, 2001 was $4.4 million or
1.20% of gross loans, compared to $1.9 million or 0.45% of gross loans at June
30, 2000.

  NON-INTEREST INCOME

     Non-interest income increased 71.4% to $2.1 million for fiscal 2001 from
$1.2 million for fiscal 2000. The largest components of the increase were an
increase in gains on the sale of loans of $979,000 to $988,000 for fiscal 2001
from $9,000 for fiscal 2000, an increase in loan servicing fees of $26,000 to
$76,000 for fiscal 2001 from $50,000 for fiscal 2000, an increase in service
charges on loans of $6,000 to $306,000 for fiscal 2001 from $300,000 for fiscal
2000 and a increase in gains on the sale of securities and mortgage-backed and
related securities of $1,000 to $49,000 for fiscal 2001 from $48,000 for fiscal
2000. The increases were partially offset by a decrease in insurance commissions
of $30,000 to $95,000 for fiscal 2001 from $125,000 for fiscal 2000, a decrease
in service charges on deposit accounts of $34,000 to $423,000 for fiscal 2001
from $457,000 for fiscal 2000 and a decrease in other non-interest income of
$69,000 to $173,000 for fiscal 2001 from $242,000 for fiscal 2000. The increase
in gains on the sale of loans reflects the increase in loans originated in the
Bank's primary lending area that were sold in the secondary market.

  NON-INTEREST EXPENSE

     Non-interest expense increased 14.6% to $9.8 million for fiscal 2001 from
$8.5 million for fiscal 2000. The increase was primarily due to an increase in
compensation and benefits expense of $964,000 to $6.0 million for fiscal 2001
from $5.0 million for fiscal 2000, an increase in occupancy and equipment
expense of $215,000 to $1.3 million for fiscal 2001 from $1.1 million for fiscal
2000, an increase in marketing expense of $113,000 to $479,000 for fiscal 2001
from $366,000 for fiscal 2000, and an increase in other non-interest expense of
$37,000 to $1.606 million for fiscal 2001 from $1.569 million for fiscal 2000.
The increases in non-interest expense were offset by a decrease in deposit
insurance premiums of $55,000 to $67,000 for fiscal 2001 from $122,000 for
fiscal 2000, and a decrease in data processing expense of $28,000 to $349,000
for fiscal 2001 from $377,000 for fiscal 2000. The increase in compensation and
benefits expense primarily relates to an increase in incentive compensation paid
due to the increase sale of mortgage loans into the secondary market, increased
salaries of staff to operate the new Glendale banking center and an increase in
salaries and benefits. The increase in marketing and occupancy and equipment
expense primarily relates to the marketing and remodeling expenses to open the
new Glendale retail banking center. The decrease in deposit insurance premiums
relates to a decreased premium rate charged by the FDIC for deposit insurance in
fiscal 2001. The increase in other non-interest expense is primarily due to
general increases in printing, office supplies, organization dues, legal and
other miscellaneous expenses.

  INCOME TAX EXPENSE

     Income tax expense decreased to $1.2 million for fiscal 2001 from $1.5
million for fiscal 2000. The decrease was primarily a result of lower income
before income taxes.

COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED JUNE 30, 2000 AND
1999

  GENERAL

     Net income for the fiscal year ended June 30, 2000 increased 3.7% to $3.2
million from $3.1 million for fiscal 1999. The increase in net income was
primarily attributable to an increase in net interest income before the
provision for losses on loans to $13.0 million for fiscal 2000 from $11.5
million for fiscal 1999, primarily as a result of higher average
interest-earning assets and an increased interest rate spread during fiscal 2000
as compared to fiscal 1999, offset by a decrease in non-interest income and an
increase in the provision for losses on loans. Non-interest income decreased by
$851,000 to $1.2 million for fiscal 2000 from $2.1 million for fiscal 1999. The
decrease in non-interest income was primarily due to a decrease in gain on the
sale of loans, which decreased $883,000 to $9,000 for fiscal 2000 from $892,000
for fiscal 1999, a decrease in service charges on loans of $34,000 to $300,000
for fiscal 2000 from $334,000 for fiscal 1999, and a decrease in gains on the
sale

                                        55
<PAGE>   58

of securities available-for-sale and mortgage-backed and related securities
available-for-sale of $20,000 to $48,000 for fiscal 2000 from $68,000 for fiscal
1999. The decreases were partially offset by an increase in insurance
commissions of $35,000 to $125,000 for fiscal 2000 from $90,000 for fiscal 1999,
an increase in service charges on deposit accounts of $6,000 to $457,000 for
fiscal 2000 from $451,000 for fiscal 1999, an increase in loan servicing fees of
$29,000 to $50,000 for fiscal 2000 from $21,000 for fiscal 1999, and an increase
in other non-interest income of $16,000 to $242,000 for fiscal 2000 from
$226,000 for fiscal 1999. Non-interest expense increased $86,000 to $8.537
million for fiscal 2000 from $8.451 million for fiscal 1999, primarily as a
result of an increase in other non-interest expense of $269,000 to $1.6 million
for fiscal 2000 from $1.3 million for fiscal 1999 and by an increase in
marketing expense of $14,000 to $366,000 for fiscal 2000 from $352,000 for
fiscal 1999. Offsetting the increases was a decrease in compensation and
benefits expense of $14,000 to $5.007 million for fiscal 2000 from $5.021
million for fiscal 1999, a decrease in occupancy and equipment of $78,000 to
$1.1 million for fiscal 2000 from $1.2 million for fiscal 1999, a decrease in
deposit insurance expense of $51,000 to $122,000 for fiscal 2000 from $173,000
for fiscal 1999, and a decrease in data processing expense of $54,000 to
$377,000 for fiscal 2000 from $431,000 for fiscal 1999. Net income also was
decreased by an increase in the provision for losses on loans of $391,000 to
$871,000 for fiscal 2000 from $480,000 for fiscal 1999.

     Return on average equity increased to 9.61% for fiscal 2000 from 9.08% for
fiscal 1999. Return on average assets decreased to 0.63% for fiscal 2000 from
0.67% for fiscal 1999. The increase in return on average equity was primarily
due to an increase in net interest income before the provision for losses on
loans, primarily as a result of higher average interest-earning assets and an
increased interest rate spread during fiscal 2000 as compared to fiscal 1999,
offset by a decrease in gains on the sale of loans and increase in the provision
for losses on loans. The Company's principal investment focus during fiscal 2000
was the origination and purchase of mortgage and commercial loans. The asset
growth primarily was funded through increases in brokered certificates of
deposit and securities sold under agreements to repurchase.

  NET INTEREST INCOME

     Net interest income increased 12.8% to $12.9 million for fiscal 2000 from
$11.5 million for fiscal 1999. Interest income increased $4.7 million in fiscal
2000, while interest expense increased $3.2 million. The level of net interest
income primarily reflects a 9.4% increase in average interest-earning assets
during fiscal 2000 and an increase in interest rate spread to 2.30% for fiscal
2000 from 2.13% for fiscal 1999, partially offset by a 18.4% decrease in the
excess of the Company's average interest-earning assets over average
interest-bearing liabilities to $27.4 million for fiscal 2000 from $33.6 million
for fiscal 1999. The increased interest rate spread for fiscal 2000 is primarily
a result of the Company's reallocation to higher yielding loans and a decreased
level of lower yielding investment securities.

  INTEREST INCOME

     Interest income increased 13.7% to $39.0 million for fiscal year 2000 from
$34.3 million for fiscal 1999. The increase in interest income was the result of
an increase in average interest-earning assets of 9.4% to $497.6 million for
fiscal 2000 from $455.1 million for fiscal 1999 and by an increase of 29 basis
points in the yield on interest-earning assets to 7.83% for fiscal 2000 from
7.54% for fiscal 1999. Interest income on loans increased 24.7% to $29.4 million
for fiscal 2000 from $23.5 million for fiscal 1999. The increase was the result
of an increase in average gross loans of 22.7% to $353.1 million for fiscal 2000
from $287.8 million for fiscal 1999 and by an increase in average yield to 8.31%
for fiscal 2000 from 8.18% for fiscal 1999. Gross loans increased primarily as a
result of the Company purchasing more loans in the secondary market, retaining
substantially all of its adjustable and short-term fixed-rate loan originations
and increases in multi-family and commercial components of the portfolio. The
increase in yield is attributable to the increase in loans originated and
purchased at higher interest rates and the increase in adjustable rate loans in
the first half of fiscal 2000. Interest income on mortgage-backed securities
decreased 66.8% to $343,000 for fiscal 2000 from $1.0 million for fiscal 1999.
The decrease was primarily due to a decrease in average balances to $5.5 million
for fiscal 2000 from $14.6 million for fiscal 1999 and by a decrease in average
yield to 6.23% for fiscal 2000 from 7.08% for fiscal 1999. Interest income on
mortgage-related securities decreased 32.3% to $1.9 million for fiscal 2000 from
$2.8 million for fiscal 1999. The decrease was primarily due to a decrease in
average balances to
                                        56
<PAGE>   59

$29.2 million for fiscal 2000 from $43.0 million for fiscal 1999 and by a
decrease in average yield to 6.57% for the 2000 period from 6.59% for the 1999
period. The decrease in average yield on mortgage-backed and related securities
was primarily due to the higher level of repayments on the higher coupon rate
securities portion of this portfolio. The decline in average balances of
mortgage-backed and related securities and is due to management's decision to
transfer $37.9 million in securities from this portfolio to the trading and
available-for-sale portfolio during fiscal 2000. Interest income on investment
securities and securities available-for-sale increased 5.9% to $6.8 million for
fiscal 2000 from $6.5 million for fiscal 1999. The increase was primarily due to
an increase in average yield to 6.68% for fiscal 2000 from 6.25% for fiscal
1999, offset by a decrease in average balances to $102.4 million for fiscal 2000
from $103.2 million for fiscal 1999. The higher average yield was primarily
attributable to the increasing interest rate environment during fiscal 2000 as
compared to fiscal 1999.

  INTEREST EXPENSE

     Interest expense increased 14.1% to $26.0 million for fiscal 2000 from
$22.8 million for fiscal 1999. The increase was primarily the result of an 11.6%
increase in the average amount of interest-bearing liabilities to $470.2 million
for fiscal 2000 compared to $421.5 million for fiscal 1999 and by an increase in
the average rate paid on interest-bearing liabilities to 5.53% for fiscal 2000
from 5.41% for fiscal 1999. The increased balances of certificates of deposit
(including brokered deposits) and borrowings at higher average interest rates
was the primary reason for the increase in the average rate paid on the
interest-bearing liabilities for fiscal 2000 as compared to fiscal 1999.
Interest expense on deposits increased 12.0% to $17.0 million for fiscal 2000
from $15.2 million for fiscal 1999. The increase was the result of an increase
in average balances of 8.2% to $311.0 million for fiscal 2000 from $287.4
million for fiscal 1999 and by an increase in the average rate paid to 5.46% for
fiscal 2000 from 5.28% for fiscal 1999. The increase in deposits was primarily
due to an increase of 12.7% in certificates of deposit (including brokered
deposits) to $257.0 million for fiscal 2000 from $228.0 million for fiscal 1999
and an increase in the average rate paid on such deposits to 5.82% for fiscal
2000 from 5.60% for fiscal 1999. NOW accounts increased 3.5% to $2.9 million for
fiscal 2000 from $2.8 million for fiscal 1999, offset by a decrease in average
rate paid to 1.65% for fiscal 2000 from 1.74% for fiscal 1999. Offsetting the
increase in deposits was a decrease in money market deposit accounts of 12.3% to
$31.2 million for fiscal 2000 from $35.6 million for fiscal 1999, with a
decrease in the average rate paid on such deposits to 4.52% for fiscal 2000 from
4.88% for fiscal 1999. Money market deposit accounts decreased primarily due to
aggressive competitive rates offered in the Bank's market during fiscal 2000.
The Company's increase in certificates of deposit was the result of aggressively
marketing and pricing and the use of brokered certificates of deposit. Of the
$257.0 million in the average balance of certificates of deposit for fiscal
2000, $166.7 million, or 64.9%, represented brokered certificates of deposit
compared to $101.5 million, or 44.5%, for fiscal 1999. The average rate paid on
brokered certificates of deposit increased to 6.03% for fiscal 2000 from 5.63%
for fiscal 1999. The increase was primarily due to the increasing interest rate
environment during fiscal 2000 as compared to fiscal 1999. Interest on
borrowings (FHLB advances and reverse repurchase agreements) increased 18.4% to
$9.0 million for fiscal 2000 from $7.6 million for fiscal 1999. The increase was
primarily due to the increase in average balance to $156.1 million for fiscal
2000 from $131.2 million for fiscal 1999, partially offset by a decrease in
average rate paid to 5.75% for fiscal 2000 from 5.78% for fiscal 1999.

  PROVISION FOR LOSSES ON LOANS

     The provision for losses on loans increased to $871,000 for fiscal 2000
from $480,000 for fiscal 1999. The provision for losses on loans increased as a
result of growth in the loan portfolio and higher net charge-offs in fiscal
2000. The level of allowance for losses on loans generally is determined by the
Bank's historical loan loss experience, the condition and composition of the
Bank's loan portfolio and general economic conditions. Based on management's
evaluation of the loan portfolio and the increase in gross loans during fiscal
2000, the allowance for losses on loans increased 20.9% to $3.2 million at June
30, 2000 compared to $2.6 million at June 30, 1999. This increase was primarily
the result of the increase in the multi-family, multi-family construction,
commercial real estate and commercial loan components of the gross loan
portfolio which carry a greater degree of inherent credit risk as compared to
one-to-four family mortgage lending. The ratio of allowance for loan losses to
gross loans decreased to 0.78% at June 30, 2000 from 0.89% at June 30, 1999. The
                                        57
<PAGE>   60

amount of non-performing loans at June 30, 2000 was $1.9 million or 0.45% of
gross loans, compared to $2.4 million or 0.81% of gross loans at June 30, 1999.

  NON-INTEREST INCOME

     Non-interest income decreased 40.9% to $1.2 million for fiscal 2000 from
$2.1 million for fiscal 1999. The largest components of the decrease were a
decrease in gains on the sale of loans of $883,000 to $9,000 for fiscal 2000
from $892,000 for fiscal 1999, a decrease in service charges on loans of $34,000
to $300,000 for fiscal 2000 from $334,000 for fiscal 1999, and a decrease in
gains on the sale of securities and mortgage-backed and related securities of
$20,000 to $48,000 for fiscal 2000 from $68,000 for fiscal 1999. The decreases
were partially offset by an increase in insurance commissions of $35,000 to
$125,000 for fiscal 2000 from $90,000 for fiscal 1999, an increase in service
charges on deposit accounts of $6,000 to $457,000 for fiscal 2000 from $451,000
for fiscal 1999, an increase in loan servicing fees of $29,000 to $50,000 for
fiscal 2000 from $21,000 for fiscal 1999, and an increase in other non-interest
income of $16,000 to $242,000 for fiscal 2000 from $226,000 for fiscal 1999. The
decrease in gains on the sale of loans reflects the increase in interest rates
during fiscal 2000 that decreased the level of refinanced loans. Also, the
decrease in gains on the sale of loans reflects the write-down to market value
of certain loans held-for-sale. Such write-downs are due to increasing interest
rates on similar loans.

  NON-INTEREST EXPENSE

     Non-interest expense increased 1.0% to $8.537 million for fiscal 2000 from
$8.451 million for fiscal 1999. The increase was primarily due to an increase in
other non-interest expense of $269,000 to $1.6 million for fiscal 2000 from $1.3
million for fiscal 1999, and an increase in marketing expense of $14,000 to
$366,000 for fiscal 2000 from $352,000 for fiscal 1999. The increases in
non-interest expense were offset by a decrease in compensation and benefits
expense of $14,000 to $5.007 million for fiscal 2000 from $5.021 million for
fiscal 1999, a decrease in occupancy and equipment expense of $78,000 to $1.1
million for fiscal 2000 from $1.2 million for fiscal 1999, a decrease in deposit
insurance premiums of $51,000 to $122,000 for fiscal 2000 from $173,000 for
fiscal 1999, and a decrease in data processing expense of $54,000 to $377,000
for fiscal 2000 from $431,000 for fiscal 1999. The decrease in compensation and
benefits expense primarily relates to a decrease in the accrual for incentive
compensation and a lower average number of full-time equivalent employees. The
decrease in occupancy and equipment expense primarily relates to a refund credit
received on telecommunications equipment and a lower level of general equipment
expenditures in fiscal 2000. The increase in other non-interest expense is
primarily due to the write-off of an equity investment in a low income housing
partnership and to general increases in printing, office supplies, organization
dues, legal and other miscellaneous expenses.

  INCOME TAX EXPENSE

     Income tax expense increased to $1.537 million for fiscal 2000 from $1.505
million for fiscal 1999. The increase was primarily a result of higher income
before income taxes.

AVERAGE BALANCE SHEET

     The following table sets forth certain information relating to the
Company's consolidated average statements of financial condition and the
consolidated statements of income at and for the fiscal years ended June 30,
2001, 2000 and 1999, and reflects the average yields on interest-earning assets
and average rates on interest-bearing liabilities for the periods indicated.
Such yields and rates are derived by dividing income or expense by the average
balance of interest-earning assets or interest-bearing liabilities,
respectively, for the periods shown. Average balances are derived principally
from average monthly balances and include non-accruing loans. The average yields
and rates include loan fees which are considered adjustments to loan yield. The
amount of interest income resulting from the recognition of loan fees was
$284,000, $328,000 and $312,000 for the fiscal years ended June 30, 2001, 2000
and 1999, respectively. The decrease in the amount of loan fees recognized in
interest income for 2001 as compared to 2000 and 1999 primarily resulted from
the decrease in loans originated and held in the loan portfolio during fiscal
2001. Interest income on non-accrual loans is reflected in the period it is
collected and not in the period it is earned. Such amounts are not material
                                        58
<PAGE>   61

to net interest income or net change in net interest income in any period.
Non-accruing loans are included in the average balances and do not have a
material effect on the average yield.

                      CONSOLIDATED AVERAGE BALANCE SHEETS
                           FISCAL YEAR ENDED JUNE 30,
<Table>
<Caption>
                                                      2001                               2000
                                        --------------------------------   --------------------------------
                                          AVERAGE     INTEREST   AVERAGE     AVERAGE     INTEREST   AVERAGE
                                        OUTSTANDING   EARNED/    YIELD/    OUTSTANDING   EARNED/    YIELD/
                                          BALANCE       PAID      RATE       BALANCE       PAID      RATE
                                        -----------   --------   -------   -----------   --------   -------
                                                              (DOLLARS IN THOUSANDS)
<S>                                     <C>           <C>        <C>       <C>           <C>        <C>
ASSETS:
 Interest-earning assets:
   Mortgage loans.....................   $352,289     $28,877      8.20%    $327,445     $26,612      8.13%
   Consumer loans.....................      2,895         389     13.44        3,405         461     13.54
   Commercial loans...................     22,070       2,187      9.91       21,881       2,264     10.35
   Loans held for sale................      3,575         150      4.20          347          19      5.48
                                         --------     -------               --------     -------
     Total loans......................    380,829      31,603      8.30      353,078      29,356      8.31
   Mortgage-backed securities.........      1,043          58      5.56        5,509         343      6.23
   Mortgage derivative securities.....     12,361         841      6.80       29,217       1,920      6.57
                                         --------     -------               --------     -------
     Total mortgage-backed and related
       securities.....................     13,404         899      6.71       34,726       2,263      6.52
   Investment and other securities....     14,551         785      5.39        9,163         521      5.69
   Securities available for sale......     75,347       5,382      7.14       93,258       6,317      6.77
   Federal Home Loan Bank stock.......      8,107         591      7.29        7,371         525      7.12
                                         --------     -------               --------     -------
     Total interest-earning
       assets(1)......................    492,238      39,260      7.98      497,596      38,982      7.83
                                                      -------     -----                  -------     -----
 Non-interest earning assets..........     12,022                             19,514
                                         --------                           --------
     Total assets.....................   $504,260                           $517,110
                                         ========                           ========
LIABILITIES AND RETAINED EARNINGS:
 Deposits:
   NOW accounts.......................   $  3,478          30      0.86     $  2,854          47      1.65
   Money market deposit accounts......     33,990       1,712      5.04       31,205       1,409      4.52
   Passbook...........................     15,925         450      2.83       19,857         580      2.92
   Certificates of deposit............    257,178      16,777      6.52      257,043      14,948      5.82
                                         --------     -------               --------     -------
     Total deposits...................    310,571      18,969      6.11      310,959      16,984      5.46
 Advance payments by borrowers for
   taxes and insurance................      3,776          79      2.09        3,169          71      2.24
 Borrowings...........................    139,829       8,626      6.17      156,058       8,968      5.75
                                         --------     -------               --------     -------
     Total interest-bearing
       liabilities....................    454,176      27,674      6.09      470,186      26,023      5.53
                                                      -------     -----                  -------     -----
 Other liabilities (Incl. non-interest
   bearing demand deposits)...........     15,123                             13,146
 Retained earnings....................     34,961                             33,778
                                         --------                           --------
     Total liabilities and retained
       earnings.......................   $504,260                           $517,110
                                         ========                           ========
Net interest income/interest rate
 spread(2)............................                $11,586      1.89%                 $12,959      2.30%
                                                      =======     =====                  =======     =====
Net earning assets/net interest
 margin(3)............................   $ 38,062                  2.35%    $ 27,410                  2.60%
                                         ========                 =====     ========                 =====
Average interest-earning assets to
 average interest-bearing
 liabilities..........................                  1.08x                              1.06x
                                                      =======                            =======

<Caption>
                                                      1999
                                        --------------------------------
                                          AVERAGE     INTEREST   AVERAGE
                                        OUTSTANDING   EARNED/    YIELD/
                                          BALANCE       PAID      RATE
                                        -----------   --------   -------
                                             (DOLLARS IN THOUSANDS)
<S>                                     <C>           <C>        <C>
ASSETS:
 Interest-earning assets:
   Mortgage loans.....................   $265,438     $21,455      8.08%
   Consumer loans.....................      4,157         572     13.76
   Commercial loans...................     15,081       1,368      9.07
   Loans held for sale................      3,076         152      4.94
                                         --------     -------
     Total loans......................    287,752      23,547      8.18
   Mortgage-backed securities.........     14,603       1,034      7.08
   Mortgage derivative securities.....     43,009       2,835      6.59
                                         --------     -------
     Total mortgage-backed and related
       securities.....................     57,612       3,869      6.72
   Investment and other securities....     14,550         775      5.33
   Securities available for sale......     88,650       5,680      6.41
   Federal Home Loan Bank stock.......      6,505         427      6.56
                                         --------     -------
     Total interest-earning
       assets(1)......................    455,069      34,298      7.54
                                                      -------     -----
 Non-interest earning assets..........     13,050
                                         --------
     Total assets.....................   $468,119
                                         ========
LIABILITIES AND RETAINED EARNINGS:
 Deposits:
   NOW accounts.......................   $  2,757          48      1.74
   Money market deposit accounts......     35,563       1,736      4.88
   Passbook...........................     21,107         613      2.90
   Certificates of deposit............    227,979      12,766      5.60
                                         --------     -------
     Total deposits...................    287,406      15,163      5.28
 Advance payments by borrowers for
   taxes and insurance................      2,927          75      2.56
 Borrowings...........................    131,164       7,576      5.78
                                         --------     -------
     Total interest-bearing
       liabilities....................    421,497      22,814      5.41
                                                      -------     -----
 Other liabilities (Incl. non-interest
   bearing demand deposits)...........     12,167
 Retained earnings....................     34,455
                                         --------
     Total liabilities and retained
       earnings.......................   $468,119
                                         ========
Net interest income/interest rate
 spread(2)............................                $11,484      2.13%
                                                      =======     =====
Net earning assets/net interest
 margin(3)............................   $ 33,572                  2.52%
                                         ========                 =====
Average interest-earning assets to
 average interest-bearing
 liabilities..........................                  1.08x
                                                      =======
</Table>

-------------------------
(1) Calculated net of deferred loans fees, loan discounts, loans in process and
    allowance for loan losses.

(2) Interest rate spread represents the difference between the average yield on
    interest-earning assets and the average rate on interest-bearing
    liabilities.

(3) Net interest margin represents net interest income divided by average
    interest-earning assets.

                                        59
<PAGE>   62

RATE/VOLUME ANALYSIS

     The most significant impact on the Company's net interest income between
periods is derived from the interaction of changes in the volume of, and rates
earned or paid on, interest-earning assets and interest-bearing liabilities. The
volume of earning dollars in loans and investments, compared to the volume of
interest-bearing liabilities represented by deposits and borrowings, combined
with the spread, produces the changes in net interest income between periods.
The following table shows the interest income for periods indicated. Information
is provided with respect to (i) effects on interest income attributable to
changes in rate (changes in rate multiplied by prior volume), (ii) effects on
interest income attributable to changes in volume (changes in volume multiplied
by prior rate), and (iii) changes in rate/volume (changes in rate multiplied by
changes in volume).

<Table>
<Caption>
                                          FISCAL YEAR ENDED JUNE 30, 2001          FISCAL YEAR ENDED JUNE 30, 2000
                                                    COMPARED TO                              COMPARED TO
                                          FISCAL YEAR ENDED JUNE 30, 2000          FISCAL YEAR ENDED JUNE 30, 1999
                                      ---------------------------------------    -----------------------------------
                                                INCREASE (DECREASE)                      INCREASE (DECREASE)
                                                      DUE TO                                   DUE TO
                                      ---------------------------------------    -----------------------------------
                                                            RATE/                                   RATE/
                                       RATE      VOLUME     VOLUME      NET      RATE     VOLUME    VOLUME     NET
                                       ----      ------     ------      ---      ----     ------    ------     ---
                                                                      (IN THOUSANDS)
<S>                                   <C>        <C>        <C>       <C>        <C>      <C>       <C>       <C>
Interest-earning assets:
  Mortgage loans..................    $   229    $ 2,019    $  17     $ 2,265    $ 118    $5,012     $ 27     $5,157
  Consumer loans..................         (3)       (69)      --         (72)      (9)     (103)       1       (111)
  Commercial loans................        (96)        20       (1)        (77)     192       617       87        896
  Loans held for sale.............         (4)       177      (42)        131       16      (135)     (14)      (133)
  Mortgage-backed securities......        (37)      (278)      30        (285)    (125)     (644)      78       (691)
  Mortgage-derivative
    securities....................         68     (1,108)     (39)     (1,079)      (9)     (909)       3       (915)
  Investment and other
    securities....................        (27)       306      (15)        264       52      (287)     (19)      (254)
  Securities available for sale...        344     (1,213)     (66)       (935)     325       295       17        637
  Federal Home Loan Bank stock....         12         52        2          66       36        57        5         98
                                      -------    -------    -----     -------    -----    ------     ----     ------
    Total.........................        486        (94)    (114)        278      596     3,903      185      4,684
                                      -------    -------    -----     -------    -----    ------     ----     ------
Interest-bearing liabilities:
  NOW accounts....................        (22)        10       (5)        (17)      (3)        2       --         (1)
  Money market demand accounts....        163        126       14         303     (130)     (213)      16       (327)
  Passbook accounts...............        (19)      (115)       4        (130)       4       (36)      (1)       (33)
  Certificates of deposit.........      1,820          8        1       1,829      492     1,627       63      2,182
  Advance payments by borrowers
    for taxes and insurance.......         (5)        14       (1)          8       (9)        6       (1)        (4)
  Borrowings......................        659       (933)     (68)       (342)     (39)    1,438       (7)     1,392
                                      -------    -------    -----     -------    -----    ------     ----     ------
    Total.........................      2,596       (890)     (55)      1,651      315     2,824       70      3,209
                                      -------    -------    -----     -------    -----    ------     ----     ------
Net change in net interest
  income..........................    $(2,110)   $   796    $ (59)    $(1,373)   $ 281    $1,079     $115     $1,475
                                      =======    =======    =====     =======    =====    ======     ====     ======
</Table>

FINANCIAL CONDITION

     Total assets decreased $13.1 million or 2.5%, from $520.0 million at June
30, 2000 to $506.9 million at June 30, 2001. This decrease is primarily
reflected in a decrease in loans receivable, mortgage-backed and related
securities held-to-maturity and deposits.

     Cash and cash equivalents increased 38.5% to $22.9 million at June 30, 2001
compared to $16.6 million at June 30, 2000. The increase is largely attributable
to the increase in borrowings and decreases in loans receivable and
mortgage-backed and related securities held-to-maturity.

     Securities available-for-sale decreased to $93.0 million at June 30, 2001
compared to $74.3 million at June 30, 2000. The increase is the result of
management's decision to increase it's investment in such securities until loan
demand is sufficient to offset loan repayments. At June 30, 2001, the securities
available-for-sale portfolio contained $35.3 million of fixed-rate U.S.
government agency securities, $4.0 million of

                                        60
<PAGE>   63

agency and private-issue fixed-rate mortgage-backed securities with a minimum
investment rating of AA, $4.0 million of private-issue adjustable-rate
mortgage-backed securities with a minimum investment rating of AA, $33.2 million
of fixed-rate intermediate-term tranche CMOs with a minimum investment rating of
AAA, $9.8 million of floating-rate tranche CMOs with a minimum investment rating
of AA, $5.4 million in trust preferred securities, $1.0 million of
adjustable-rate mortgage mutual funds and $250,000 of municipal bonds.

     Securities held-to-maturity decreased to $11.1 million at June 30, 2001
compared to $15.0 million at June 30, 2000. The decrease is the result of
management's decision to decrease its investment in mortgage-backed and related
securities held-to-maturity and provide funding for purchases of securities
available-for-sale. Of the $11.1 million in securities held-to-maturity at June
30, 2001, all were fixed-rate securities. At June 30, 2001, $7.9 million of the
mortgage-backed and related securities portfolio consisted of private-issue
mortgage-backed and related securities, each issue of which carried a minimum
investment rating of AA at the time of purchase and at June 30, 2001.

     Loans receivable decreased to $352.7 million at June 30, 2001 compared to
$392.3 million at June 30, 2000. The decrease at June 30, 2001 compared to the
prior fiscal year end is primarily the result of the lower interest rate
environment that increased the level of loans refinanced. Total mortgage loans
originated and purchased amounted to $132.8 million and $205.9 million for
fiscal 2001 and 2000, respectively, while sales of fixed-rate mortgage loans
totaled $73.6 million and $33.9 million for fiscal 2001 and 2000, respectively.
The increase in fixed-rate mortgage loan sales is primarily attributable to the
decreased interest rate environment during fiscal 2001 that increased the level
of loans refinanced. During fiscal 2001, the Company originated and purchased
loans totaling $147.8 million and $28.0 million, respectively. Of the $28.0
million in purchased loans, the Company purchased $27.7 million outside of its
primary lending area, whereby management of the Company has applied underwriting
guidelines that are at least as strict as those applicable to the origination of
similar loans within its primary lending area.

     Deposits decreased $25.5 million to $319.8 million at June 30, 2001 from
$345.3 million at June 30, 2000. The decrease in deposits was primarily due to a
decrease in the use of wholesale brokered and non-brokered deposits during
fiscal 2001. Brokered deposits totaled $166.9 million at June 30, 2001,
representing 52.2% of total deposits as compared to $216.2 million, or 62.6% of
total deposits, at June 30, 2000. The significant decrease in brokered deposits
is due to the increase in local market deposits and the increased use of
borrowings as a funding source. The average maturity of brokered deposits was
fifteen and four months at June 30, 2001 and June 30, 2000, respectively.
Non-brokered wholesale deposits totaled $5.8 million at June 30, 2001,
representing 1.8% of total deposits, as compared to $14.2 million, or 4.1% of
total deposits, at June 30, 2000. Deposits are the Company's primary source of
externally generated funds. The level of deposits is heavily influenced by such
factors as the general level of short- and long-term interest rates as well as
alternative yields that investors may obtain on competing investment securities
such as money market mutual funds.

     FHLB-Chicago advances and other borrowings increased to $141.1 million at
June 30, 2001 compared to $132.0 million at June 30, 2000. At June 30, 2001,
FHLB advances were $129.5 million, or 27.5% of total liabilities, compared to
$112.5 million, or 23.1% of total liabilities at June 30, 2000. Borrowings under
reverse repurchase agreements decreased to $9.2 million at June 30, 2001 from
$18.5 million at June 30, 2000. The Company has increasingly used FHLB-Chicago
advances and securities sold under agreements to repurchase as a funding source
due to attractive rates offered on advances in relation to deposit funds
obtainable in the Company's local market. The Company uses borrowings from the
FHLB-Chicago and securities sold under agreements to repurchase to manage the
total asset/liability portfolio of the Company. For a further discussion of FHLB
borrowings and securities sold under agreements to repurchase, see Note 8 to
Notes to Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funds are retail and wholesale brokered
deposits, proceeds from principal and interest payments on loans, principal and
interest payments on mortgage-backed and related securities and FHLB-Chicago
advances. Alternative funding sources are evaluated and utilized based upon

                                        61
<PAGE>   64

factors such as interest rates, availability, maturity, administrative costs and
retention capability. Although maturity and scheduled amortization of loans are
predictable sources of funds, deposit flows, mortgage prepayments and
prepayments on mortgage-backed and related securities are influenced
significantly by general interest rates, economic conditions and competition.
During fiscal 2000 mortgage loans and mortgage securities prepayments decreased
as interest rates increased as compared to fiscal 1999 and 1998 when mortgage
loans and mortgage securities prepayments increased as interest rates declined.
During fiscal 2001 mortgage loans and mortgage securities prepayments increased
as interest rates declined significantly in the second half of the fiscal year.

     The primary investing activity of the Company is the origination and
purchase of loans and the purchase of mortgage-backed and related securities.
For fiscal 2001, the Company originated and purchased loans totaling $147.8
million and $28.0 million, respectively, as compared to fiscal 2000 when
originated and purchased loans totaled $140.4 million and $118.9 million,
respectively. The Company purchased mortgage-backed and related securities in
the amount of $8.1 million in fiscal 2000. The Company did not purchase
mortgage-backed and related securities during fiscal 2001. The Company also
purchased investment securities in the amount of $2.1 million during fiscal
2001. The Company did not purchase investment securities during fiscal 2000. For
fiscal 2001 and 2000, these activities were funded primarily by principal
repayments on loans of $151.5 million and $110.3 million, respectively;
principal repayments on mortgage-backed and related securities of $16.9 million
and $32.0 million, respectively; proceeds from the sale of mortgage loans of
$73.6 million and $33.9 million, respectively; proceeds from the maturity of
investment securities of $1.6 million and $0, respectively; proceeds from notes
payable to the FHLB-Chicago of $47.0 million and $104.0 million, respectively;
and a net increase in deposits of $56.6 million in fiscal 2000. Purchases of
securities available-for-sale totaled $46.4 million and sales were $3.5 million
for fiscal 2001, compared to purchases of $34.7 million and sales of $45.2
million for fiscal 2000.

     During fiscal 2001, the Company has found wholesale brokered and
non-brokered deposits to be an efficient source and a cost-effective method,
relative to local retail market deposits, of meeting the Bank's funding needs.
In fiscal 2001, pricing of wholesale brokered deposits ranged from 50 to 75
basis points above comparable term U.S. Treasury securities. At June 30, 2001,
the average rate of the wholesale brokered deposits and retail certificates of
deposit accepted by the Company was 5.44%. Management believes that the strategy
of leveraging the capital acquired in the Conversion to achieve the targeted
asset size established by the Board of Directors within a three-to-five year
period following the Conversion, could not have been achieved solely through the
use of retail deposits from the local market. Management also believes that the
costs, overhead and interest expense of achieving comparable retail deposit
growth would have exceeded the costs related to the use of wholesale brokered
deposits as a funding source. However, management recognizes that the likelihood
for retention of brokered certificates of deposit is more a function of the rate
paid on such accounts as compared to retail deposits that may be established due
to Bank location or other intangible reasons. During fiscal 2000, the Company
maintained a total of $20.0 million in federal fund lines with two large
correspondent banks. These lines are to be used as backup credit facilities for
contingency purposes to replace funds from wholesale brokered deposits should
retention of those deposits diminish due to extraordinary events in the
financial markets. The Company's overall cost of funds has increased in recent
years due primarily to a much greater percentage of the deposits being in
certificates, both wholesale brokered and retail, as opposed to passbooks, money
market accounts and checking accounts. Management believes that a significant
portion of its retail deposits will remain with the Company and, in the case of
wholesale brokered deposits, may be replaced with similar type accounts even
should the level of interest rates change. However, in the event of a
significant increase in market interest rates, the cost of obtaining replacement
brokered deposits would increase as well.

     The Bank's Board of Directors has set a maximum limitation of total
borrowings equal to 32% of total assets. This internal limit is 3% below the
allowable borrowing limit (for all borrowings including FHLB advances and
reverse repurchase agreements) of 35% of total assets established by the
FHLB-Chicago. At June 30, 2001, FHLB advances and borrowings under reverse
repurchase agreements totaled $141.1 million, or 25.4% of the Bank's total
assets. At June 30, 2000, the Bank had unused borrowing authority under the
borrowing limitations established by the Board of Directors of $34.2 million and
$49.8 million under the

                                        62
<PAGE>   65

FHLB total asset limitation. The Bank intends to fund asset growth in fiscal
2001 through modest increases in FHLB advances, and to maintain the 3% excess
borrowing capacity with the FHLB as a contingent source of funds to meet
liquidity needs as deemed necessary by the Board of Directors of the Bank.*

     During fiscal 2001, management extended the maturities of both its
wholesale brokered certificates of deposits and the FHLB borrowings to decrease
the Company's negative interest rate gap. As of June 30, 2001, the average
maturity of the wholesale brokered certificates of deposit was fifteen months
compared to four months in fiscal 2000 and compared to a nine-month maturity for
retail certificates of deposits as of June 30, 2001.

     The Company is required to maintain minimum levels of liquid assets under
the regulations of the Department of Financial Institutions, Division of Savings
and Loan for state-chartered savings banks. Savings banks are required to
maintain an average daily balance of liquid assets (including cash, certain time
deposits, certain bankers acceptances, certain corporate debt securities,
securities of certain mutual funds and specified United States government, state
or federal agency obligations) of not less than 8.0% since April 1, 1996 and
5.0% prior to that date. The Company's liquidity ratios were 15.52% and 10.29%
at June 30, 2001 and 2000, respectively. The Company adjusts its liquidity
levels to meet various funding needs and to meet its asset and liability
management objectives.

     The Company's most liquid assets are cash and cash equivalents, which
include investments in highly liquid, short-term investments. The levels of
these assets are dependent on the Company's operating, financing, lending and
investing activities during any given period. Cash and cash equivalents were
$22.9 million and $16.6 million at June 30, 2001 and 2000, respectively. The
increase in cash and cash equivalents in fiscal 2001 resulted primarily from an
decrease in loans.

     Liquidity management for the Company is both an ongoing and long-term
function of the Company's asset/liability management strategy. Excess funds
generally are invested in short-term investments such as federal funds or
overnight deposits at the FHLB-Chicago. Whenever the Company requires funds
beyond its ability to generate them internally, additional sources of funds are
available and obtained from the wholesale brokered and non-brokered market as
well as the unused credit line from the FHLB-Chicago (subject to the
Board-imposed and regulatory limitations discussed herein), and funds also may
be available through reverse repurchase agreements wherein the Company pledges
investment, mortgage-backed or related securities. The Company maintains a
federal funds open line of credit in the amount of $10.0 million with a
correspondent bank which does not require the direct pledging of any assets and
could be used to replace a portion of its interest rate sensitive liabilities
such as borrowings and deposits should such funding sources become difficult to
obtain or retain due to an adverse interest rate environment. In addition, the
Company maintains a relatively high level of liquid assets, such as investment
securities and mortgage-backed and related securities available-for-sale, in
order to insure sufficient sources of funds are available to meet the Company's
liquidity needs.

     At June 30, 2001, the Company had outstanding loan commitments of $2.4
million. The Company had no commitments to purchase securities and
mortgage-backed and related securities at June 30, 2001. The Company anticipates
it will have sufficient funds available to meet its current loan commitments,
including loan applications received and in process to the issuance of firm
commitments. Certificates of deposit scheduled to mature in one year or less at
June 30, 2001 totaled $163.1 million.

IMPACT OF INFLATION AND CHANGING PRICES

     The Company's Consolidated Financial Statements and Notes thereto have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of the
Company's operations. Unlike most industrial companies, nearly all of the assets
and liabilities of the Company are monetary in nature. As a result, interest
rates have a greater impact on the Company's performance.

                                        63
<PAGE>   66

ASSET/LIABILITY MANAGEMENT

     The Company's profitability, like that of most financial institutions,
depends to a large extent upon its net interest income, which is the difference
between interest earned on interest-earning assets, such as loans and
investments, and interest paid on interest-bearing liabilities, such as deposits
and borrowings. Net interest income is significantly affected by changes in
market interest rates. During periods of rising interest rates, the Company is
required to pay higher rates to attract deposits which can result in a decline
in net interest income if the Company is unable to increase the yield on its
interest-earning assets sufficiently to compensate for the increase in its cost
of funds.

     In an attempt to manage vulnerability to interest rate changes, management
closely monitors the Company's interest rate risk. The Company has established
its investment strategies through an Asset/Liability Committee. The Committee
consists of James Smessaert, President/CEO, Peter Gilbert, Executive Vice
President/COO, Arthur Thompson, Senior Vice President-Finance/CFO, and Elizabeth
Borst, Senior Vice President-Sales & Marketing. The Committee generally meets
weekly and reviews the Company's interest rate risk position, maturing
securities and borrowings, interest rates and programs for increasing retail and
brokered and non-brokered wholesale deposits and originating and purchasing
loans, and develops strategies regarding such issues. In addition, the Committee
closely monitors the Company's growth, profitability, liquidity and capital
adequacy ratios. Minutes of these meetings are prepared and given to the Board
of Directors for their review as well as formal quarterly asset/liability
management and investment strategy reports.

     The Company utilizes basic strategies in managing its assets and
liabilities by managing or maximizing the net interest income under various
interest rate scenarios. In addition to monitoring interest rate risk on a
weekly basis, the Company reviews loan and deposit rates weekly. The emphasis
has been on prudent pricing as opposed to increasing local retail market share,
and the Company has significantly supplemented and substituted retail deposits
using FHLB-Chicago advances and wholesale brokered and non-brokered deposits in
fiscal 1999 and 2000 as a result of favorable advance and wholesale rates in
relation to those obtainable on retail deposits Also, during fiscal 2000 hedging
techniques through the use of interest rate caps were utilized by management
with the approval of the Board of Directors to manage the interest rate risk on
the Company's short-term wholesale certificates of deposit.

     Generally, the Company utilizes the following strategies to manage its
interest rate risk: (i) the Company maintains a relatively high level of liquid
assets, such as investment securities and mortgage-backed and related securities
available-for-sale; (ii) the Company seeks to primarily originate and retain
mortgage loans and mortgage-backed and related securities with short-to
medium-term periods to re-pricing; (iii) the Company attempts to extend the
maturities of retail deposits when deemed cost effective through the pricing and
promotion of certificates of deposit with longer terms, and periodically
utilizes deposit marketing programs offering maturity and repricing terms
structured to complement the repricing and maturity characteristics of the
existing asset/liability mix; (iv) the Company also attempts to extend the
maturities of wholesale brokered deposits when deemed cost effective; (v) the
Bank utilizes longer-term borrowings from the FHLB-Chicago and reverse
repurchase agreements to manage its assets and liabilities and enhance earnings.
At June 30, 2001, 2000 and 1999, total borrowings (FHLB-Chicago advances,
borrowings under reverse repurchase agreements and the open line of credit with
Wells Fargo Bank) were $141.1 million or 27.8% of total assets, $132.0 million
or 25.4% of total assets, and $129.5 million or 27.6% of total assets,
respectively; and (vi) the Company also periodically reviews the pricing of
hedging strategies such as options and interest rate swaps as a way to manage
it's interest rate risk exposure.

     Prior to fiscal year 2001 the Company maintained a approximate maturity on
wholesale brokered and non-brokered certificates of deposits of 90 days. During
fiscal 2001 the maturities of wholesale certificates of deposit were extended so
that at June 30, 2001 the average maturity was fifteen months. During the fiscal
year ended June 30, 2001, management maintained the maturity level fixed-rate
term advances from the FHLB-Chicago to between one to five years. Liquidity is
another factor in asset/liability management. As of June 30, 2001, the Company
had $22.9 million in cash or demand deposits and $93.0 million in its
available-for-sale

                                        64
<PAGE>   67

portfolio, of which $14.8 million is due or will be repriced within one year.
The amount of the held-to-maturity portfolio as of June 30, 2001 was $11.1
million, all of which will be due or repriced after one year.

     During fiscal 2001, the Company decreased its interest rate risk by
extending the maturity of wholesale certificates of deposit and FHLB advances.
The decrease was due to the increase longer term liabilities combined with an
interest rate environment during fiscal 2001 that led to an increase in the
early repayment of fixed-rate and adjustable rate loans. The Company's ARM loans
and ARM mortgage-backed and related securities typically have annual and
lifetime interest rate caps which reduce their ability to protect the Company
against a prolonged and significant increase in interest rates. Mortgage-backed
and related securities are subject to reinvestment risk. For example, during
periods of falling interest rates, mortgage-backed and related securities are
more likely to prepay, and the Company may not be able to reinvest the proceeds
from prepayments in securities or other assets with yields similar to those of
the prepaying mortgage-backed and related securities.

     The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are rate sensitive and by monitoring
an institution's interest rate sensitivity. An asset or liability is said to be
interest rate sensitive within a specific time period if it matures or reprices
within that time period. The interest rate sensitivity gap is defined as the
difference between the amount of interest-earning assets anticipated, based upon
certain assumptions, to mature or reprice within a specific time period and the
amount of interest-bearing liabilities anticipated, based upon certain
assumptions, to mature or reprice within that same time period. An interest rate
sensitivity gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities that
mature or reprice within a specified time period. An interest rate sensitivity
gap is considered negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets that mature or
reprice within a specified time period.

     At June 30, 2001 and 2000, total interest-bearing liabilities repricing
within one year exceeded total interest-bearing assets repricing in the same
period by $79.7 million and $213.7 million, respectively, representing a
negative cumulative one-year interest rate sensitivity gap equal to 15.7% and
41.1%, respectively, of total assets. The decrease in the Company's negative
one-year gap reflects the increased use of longer-term maturity wholesale
deposits and borrowings to fund fixed rate mortgage loans. During periods of
rising interest rates, a positive interest rate sensitivity gap would tend to
positively affect net interest income while a negative interest rate sensitivity
gap would tend to adversely affect net interest income. In addition to the
potentially adverse effect on net interest income resulting from increasing
interest rates due to the Company's one-year gap position, the Company could
experience a substantial decrease in prepayments of its fixed-rate mortgage
loans with rising interest rates, which may result in a lower level of proceeds
available for reinvestment.

     In addition to measuring the interest rate risk as a static gap
measurement, the Company also measures the impact on interest income with an
instantaneous increase or decrease of interest rates of 100, 200, 300 and 400
basis points. This shock analysis is performed quarterly. A third measurement is
used whereby interest rates are ramped over a one-year time frame with increases
and decreases of 100, 200, 300 and 400 basis points. Management continues to
upgrade its modeling techniques related to asset/liability modeling. Results of
the gap, shock and ramped interest risk analysis are reviewed by the Board of
Directors.

     In fiscal 2002, the Company intends to continue the extension of its
fixed-rate liabilities, including FHLB borrowings and certificates of deposit,
to decrease its exposure to rising interest rates.* Management anticipates that
the effect of funding the origination and purchase of an increasing portfolio of
multi-family real estate, multi-family construction and
commercial/nonresidential loans with such liabilities will be to lessen the
Company's negative gap position.* Also, the origination and purchase of such
assets normally carry more desirable interest rate repricing features as
compared to the Company's experience with one-to-four family mortgage lending.

     Certain shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. The interest rates on certain types
of assets and
                                        65
<PAGE>   68

liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as ARM loans and mortgage-backed and related
securities, have features which restrict changes in interest rates on a
short-term basis and over the life of the asset. In addition, the proportion of
ARM loans and mortgage-backed and related securities in the Company's portfolios
could decrease in future periods if market interest rates remain at or decrease
below current levels due to refinance activity. Further, in the event of a
change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in the table. Finally, the ability of
many borrowers to service their adjustable-rate debt may decrease in the event
of an interest rate increase.

                                        66
<PAGE>   69

ASSET/LIABILITY MANAGEMENT SCHEDULE

     The following table sets forth at June 30, 2001 the amounts of
interest-earning assets and interest-bearing liabilities maturing or repricing
within the time periods indicated, based on the information and assumptions set
forth in the notes thereto.
<Table>
<Caption>
                                                             AMOUNT MATURING OR REPRICING
                                   ---------------------------------------------------------------------------------
                                                                                 MORE THAN            MORE THAN
                                         WITHIN              FOUR TO            ONE YEAR TO         THREE YEARS TO
                                      THREE MONTHS        TWELVE MONTHS         THREE YEARS           FIVE YEARS
                                   ------------------   ------------------   ------------------   ------------------
                                              AVERAGE              AVERAGE              AVERAGE              AVERAGE
                                    AMOUNT     RATE      AMOUNT     RATE      AMOUNT     RATE      AMOUNT     RATE
                                    ------    -------    ------    -------    ------    -------    ------    -------
                                                                (DOLLARS IN THOUSANDS)
<S>                                <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
INTEREST-EARNING ASSETS(1):
Mortgage loans(2):
 Fixed rate......................  $ 14,424     7.77%   $ 42,184     7.78%   $100,089     7.88%   $ 45,705    7.96%
 Adjustable rate.................    31,155     7.80      31,439     7.83      25,688     7.98       3,652    8.04
Consumer loans(2)................       145    10.55       2,181    13.63         300    10.86          --
Commercial loans(2)..............    10,542     8.41       7,966     9.83       4,859     9.36          --
Mortgage-backed and related
 securities:
 Fixed rate and securities
   available-for-sale............     4,798     6.60      11,742     6.60      18,293     6.59       8,322    6.58
 Adjustable rate.................     8,681     7.27       5,135     7.19          --                   --
Investment securities and
 securities available-for-sale...    28,121     4.76         717     6.00       4,983     4.75       6,674    5.80
                                   --------             --------             --------             --------
     Total interest-earning
       assets....................  $ 97,866     6.89    $101,364     7.90    $154,212     7.69    $ 64,353    7.56
                                   ========             ========             ========             ========
INTEREST-BEARING LIABILITIES:
Deposits(3):
 NOW accounts....................  $    290     0.89    $    871     0.89    $  1,382     0.89    $    677    0.89
 Money market deposit accounts...     6,168     3.71      18,505     3.71      13,817     3.71       2,211    3.71
 Passbook savings accounts.......     1,103     2.88       3,308     2.88       5,248     2.88       2,572    2.88
 Certificates of deposit.........    91,843     5.55      71,268     5.25      51,642     5.44      26,967    5.75
 Escrow deposits.................        --                3,938     2.50          --                   --
Borrowings(4)
 FHLB advances and other
   borrowings....................    71,590     6.01      10,000     5.39      13,018     5.83      40,000    6.40
                                   --------             --------             --------             --------
     Total interest-bearing
       liabilities...............  $170,994     5.62    $107,890     4.79    $ 85,107     4.99    $ 72,427    5.90
                                   ========             ========             ========             ========
Excess (deficiency) of
 interest-earning assets over
 interest-bearing liabilities....  $(73,128)            $ (6,526)            $ 69,105             $ (8,074)
                                   ========             ========             ========             ========
Cumulative excess (deficiency) of
 interest-earning assets over
 interest-bearing liabilities....  $(73,128)            $(79,654)            $(10,549)            $(18,623)
                                   ========             ========             ========             ========
Cumulative excess (deficiency) of
 interest-earning assets over
 interest-bearing liabilities as
 a percent of total assets.......     (14.4)%              (15.7)%               (2.1)%               (3.7)%
                                   ========             ========             ========             ========

<Caption>
                                        AMOUNT MATURING OR REPRICING
                                   --------------------------------------

                                    OVER FIVE YEARS          TOTAL
                                   -----------------   ------------------
                                             AVERAGE              AVERAGE
                                   AMOUNT     RATE      AMOUNT     RATE
                                   ------    -------    ------    -------
                                           (DOLLARS IN THOUSANDS)
<S>                                <C>       <C>       <C>        <C>
INTEREST-EARNING ASSETS(1):
Mortgage loans(2):
 Fixed rate......................  $29,462    7.75%    $231,864     7.85%
 Adjustable rate.................      953    7.69       92,887     7.87
Consumer loans(2)................       --                2,626    13.14
Commercial loans(2)..............       --               23,367     9.09
Mortgage-backed and related
 securities:
 Fixed rate and securities
   available-for-sale............    4,620    6.52       47,775     6.59
 Adjustable rate.................       --               13,816     7.24
Investment securities and
 securities available-for-sale...   29,837    7.34       70,332     5.97
                                   -------             --------
     Total interest-earning
       assets....................  $64,872    7.47     $482,667     7.53
                                   =======             ========
INTEREST-BEARING LIABILITIES:
Deposits(3):
 NOW accounts....................  $   652    0.89     $  3,872     0.89
 Money market deposit accounts...      421    3.71       41,122     3.71
 Passbook savings accounts.......    2,470    2.88       14,701     2.88
 Certificates of deposit.........       --              241,720     5.44
 Escrow deposits.................       --                3,938     2.50
Borrowings(4)
 FHLB advances and other
   borrowings....................    6,500    6.52      141,108     6.08
                                   -------             --------
     Total interest-bearing
       liabilities...............  $10,043    5.14     $446,461     5.33
                                   =======             ========
Excess (deficiency) of
 interest-earning assets over
 interest-bearing liabilities....  $54,829             $ 36,206
                                   =======             ========
Cumulative excess (deficiency) of
 interest-earning assets over
 interest-bearing liabilities....  $36,206             $ 36,206
                                   =======             ========
Cumulative excess (deficiency) of
 interest-earning assets over
 interest-bearing liabilities as
 a percent of total assets.......     7.1%                  7.1%
                                   =======             ========
</Table>

-------------------------
(1) Adjustable- and floating-rate assets are included in the period in which
    interest rates are next scheduled to adjust rather than in the period in
    which they are due, and fixed-rate assets are included in the periods in
    which they are scheduled to be repaid based on scheduled amortization, in
    each case adjusted to take into account estimated prepayments utilizing the
    Company's historical prepayment statistics modified for forecasted
    statistics using annual prepayment rates ranging from 8% to 20%, based on
    the loan type.

(2) Balances have been reduced for undisbursed loan proceeds, unearned credit
    insurance premiums, deferred loan fees, purchased loan discounts and the
    allowance for loan losses, which aggregated $11.9 million at June 30, 2001.

(3) Although the Company's negotiable order of withdrawal ("NOW") accounts,
    passbook savings accounts and money market deposit accounts generally are
    subject to immediate withdrawal, management considers a certain historical
    amount of such accounts to be core deposits having significantly longer

                                        67
<PAGE>   70

effective maturities and times to repricing based on the Company's historical
retention of such deposits in changing interest rate environments. NOW accounts,
passbook savings accounts and money market deposit accounts are assumed to be
     withdrawn at annual rates of 30%, 30% and 60%, respectively, of the
     declining balance of such accounts during the period shown. The withdrawal
     rates used are higher than the Company's historical rates but are
     considered by management to be more indicative of expected withdrawal rates
     currently. If all of the Company's NOW accounts, passbook savings accounts
     and money market deposit accounts had been assumed to be subject to
     repricing within one year, the one-year cumulative deficiency of
     interest-earning assets over interest-bearing liabilities would have been
     $109.1 million or 21.5% of total assets.

(4) Adjustable- and floating-rate borrowings are included in the period in which
    their interest rates are next scheduled to adjust rather than in the period
    in which they are due.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     A derivative financial instrument includes futures, forwards, interest rate
swaps, option contracts and other financial instruments with similar
characteristics. The Company generally has not entered into futures, forwards,
swaps or options but has decided to purchase interest rate caps to manage the
interest rate risk on the Company's short-term wholesale certificates of
deposit. 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 consist primarily of commitments to
extend credit. These instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the consolidated
balance sheets. 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. Commitments generally have fixed expiration dates and may require
collateral from the borrower if deemed necessary by the Company.

     Additional information required herein pursuant to Item 305 of Regulation
S-K is incorporated by reference in sections entitled "Liquidity and Capital
Resources" from pages 61 to 63 and "Asset/Liability Management" from pages 64 to
66 hereof.

                                        68
<PAGE>   71

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Ledger Capital Corp.:

     We have audited the accompanying consolidated statements of financial
condition of Ledger Capital Corp. and subsidiary (the "Company") as of June 30,
2001 and 2000, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the years in the three-year period ended June
30, 2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 Ledger
Capital Corp. and subsidiary as of June 30, 2001 and 2000 and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 2001, in conformity with accounting principles generally
accepted in the United States of America.

                                          KPMG LLP

Milwaukee, Wisconsin
August 3, 2001

                                        69
<PAGE>   72

                      LEDGER CAPITAL CORP. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                     (IN THOUSANDS, EXCEPT FOR SHARE DATA)

<Table>
<Caption>
                                                                    AT JUNE 30,
                                                                --------------------
                                                                  2001        2000
                                                                  ----        ----
<S>                                                             <C>         <C>
ASSETS
Cash and non-interest bearing deposits......................    $  3,411    $  2,782
Interest-bearing deposits...................................      19,515      13,777
                                                                --------    --------
Cash and cash equivalents...................................      22,926      16,559
Securities available-for-sale (at fair value):
  Investment securities.....................................      42,007      38,315
  Mortgage-backed and related securities....................      50,972      35,944
Securities held-to-maturity:
  Investment securities (fair value -- $455 at June 30,
     2001)..................................................         455          --
  Mortgage-backed and related securities (fair
     value -- $10,708 at June 30, 2001; $14,685 at June 30,
     2000)..................................................      10,619      15,017
Loans held for sale, at lower of cost or market.............       4,357       1,122
Loans receivable, net.......................................     352,672     392,306
Federal Home Loan Bank stock, at cost.......................       8,355       7,760
Foreclosed properties, net..................................       1,619       1,114
Office properties and equipment, net........................       5,920       5,461
Prepaid expenses and other assets...........................       7,018       6,373
                                                                --------    --------
       Total assets.........................................    $506,920    $519,971
                                                                ========    ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Deposits..................................................    $319,812    $345,318
  Federal Home Loan Bank and other borrowings...............     141,108     132,040
  Advance payments by borrowers for taxes and insurance.....       3,938       3,724
  Accrued interest on deposit accounts and borrowings.......       3,382       3,421
  Accrued expenses and other liabilities....................       2,472       1,872
                                                                --------    --------
       Total liabilities....................................    $470,712    $486,375
Shareholders' Equity:
  Preferred stock, $1.00 par value; 2,000,000 shares
     authorized; none outstanding...........................          --          --
  Common stock, $1.00 par value; 6,000,000 shares
     authorized; 3,162,500 shares issued; 2,437,141 and
     2,563,241 shares outstanding at June 30, 2001 and 2000,
     respectively...........................................       3,162       3,162
  Additional paid-in capital................................      10,227      10,075
  Unearned ESOP compensation................................        (217)       (311)
  Unearned restricted stock award...........................         (74)        (74)
  Retained earnings, substantially restricted...............      30,410      28,627
  Accumulated other comprehensive loss, net of tax..........         (75)     (2,059)
  Treasury stock, at cost: 725,359 shares at June 30, 2001
     and 599,259 shares at June 30, 2000....................      (7,225)     (5,824)
                                                                --------    --------
       Total shareholders' equity...........................    $ 36,208    $ 33,596
                                                                --------    --------
       Total liabilities and shareholders' equity...........    $506,920    $519,971
                                                                ========    ========
</Table>

          See accompanying Notes to Consolidated Financial Statements

                                        70
<PAGE>   73

                      LEDGER CAPITAL CORP. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME
                   (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<Table>
<Caption>
                                                                     FOR THE YEARS ENDED
                                                                          JUNE 30,
                                                                -----------------------------
                                                                 2001       2000       1999
                                                                 ----       ----       ----
<S>                                                             <C>        <C>        <C>
INTEREST INCOME:
  Loans receivable..........................................    $31,603    $29,356    $23,547
  Securities................................................      3,520      3,766      2,095
  Mortgage-backed and related securities....................      3,446      5,416      7,813
  Interest-bearing deposits.................................        691        444        843
                                                                -------    -------    -------
       Total interest income................................     39,260     38,982     34,298
INTEREST EXPENSE:
  Deposits..................................................     18,969     16,984     15,163
  Federal Home Loan Bank and other borrowings...............      8,626      8,968      7,576
  Advance payments by borrowers for taxes and insurance.....         79         71         75
                                                                -------    -------    -------
       Total interest expense...............................     27,674     26,023     22,814
                                                                -------    -------    -------
Net interest income.........................................     11,586     12,959     11,484
Provision for losses on loans...............................        430        871        480
                                                                -------    -------    -------
Net interest income after provision for losses on loans.....     11,156     12,088     11,004
NON-INTEREST INCOME:
  Service charges on loans..................................        306        300        334
  Service charges on deposit accounts.......................        423        457        451
  Insurance commissions.....................................         95        125         90
  Loan servicing fees, net..................................         76         50         21
  Gain on sale of loans.....................................        988          9        892
  Gain on sale of securities and mortgage-backed and related
     securities, net........................................         49         48         68
  Other income..............................................        173        242        226
                                                                -------    -------    -------
       Total non-interest income............................      2,110      1,231      2,082
NON-INTEREST EXPENSE:
  Compensation and benefits.................................      5,971      5,007      5,021
  Occupancy and equipment...................................      1,311      1,096      1,174
  Data Processing...........................................        349        377        431
  Marketing.................................................        479        366        352
  Deposit insurance premiums................................         67        122        173
  Other non-interest expense................................      1,606      1,569      1,300
                                                                -------    -------    -------
       Total non-interest expense...........................      9,783      8,537      8,451
                                                                -------    -------    -------
Income before income taxes..................................      3,483      4,782      4,635
Income taxes................................................      1,209      1,537      1,505
                                                                -------    -------    -------
  Net income................................................    $ 2,274    $ 3,245    $ 3,130
                                                                =======    =======    =======
Earnings per share:
  Basic.....................................................    $  0.95    $  1.27    $  1.13
                                                                =======    =======    =======
  Diluted...................................................    $  0.92    $  1.23    $  1.10
                                                                =======    =======    =======
Dividends per share.........................................    $  0.20    $  0.15    $  0.00
                                                                =======    =======    =======
</Table>

           See accompanying Notes to Consolidated Financial Statement

                                        71
<PAGE>   74

                      LEDGER CAPITAL CORP. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    (IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<Table>
<Caption>
                                                                                                                    ACCUMULATED
                                                   ADDITIONAL     UNEARNED      UNEARNED                               OTHER
                                          COMMON    PAID-IN         ESOP       RESTRICTED   RETAINED   TREASURY    COMPREHENSIVE
                                          STOCK     CAPITAL     COMPENSATION     STOCK      EARNINGS    STOCK     LOSS, NET OF TAX
                                          ------   ----------   ------------   ----------   --------   --------   ----------------
<S>                                       <C>      <C>          <C>            <C>          <C>        <C>        <C>
Balance at June 30, 1998................  $3,162    $ 9,512         $(532)        $(124)    $22,847    $(1,386)       $   (27)

Net income..............................     --          --            --            --       3,130         --             --
Other comprehensive income
  Unrealized holding loss arising during
    period..............................     --          --            --            --          --         --         (1,720)
  Re-classification adjustment for gains
    realized in income..................     --          --            --            --          --         --            (68)
  Income tax effect.....................     --          --            --            --          --         --            726
Comprehensive Income....................     --          --            --            --          --         --             --
Amortization of unearned ESOP and
  restricted stock award compensation...     --         248           127            46          --         --             --
Purchase of 146,900 shares for treasury
  stock.................................     --          --            --            --          --     (1,784)            --
Exercise of stock options (53,233 shares
  issued in connection with 61,294
  options exercised)....................     --         177            --            --        (212)       373             --
                                          ------    -------         -----         -----     -------    -------        -------
Balance at June 30, 1999................  $3,162    $ 9,937         $(405)        $ (78)    $25,765    $(2,796)       $(1,089)

Net income..............................     --          --            --            --       3,245         --             --
Other comprehensive income
  Unrealized holding loss arising during
    period..............................     --          --            --            --          --         --         (1,534)
  Re-classification adjustment for gains
    realized in income..................     --          --            --            --          --         --            (48)
  Income tax effect.....................     --          --            --            --          --         --            612
Comprehensive Income....................     --          --            --            --          --         --             --
Cash dividends paid $(.15 per share)....     --          --            --            --        (383)        --             --
Amortization of unearned ESOP and
  restricted stock award compensation...     --         138            94             4          --         --             --
Purchase of 276,700 shares of treasury
  stock.................................     --          --            --            --          --     (3,028)            --
                                          ------    -------         -----         -----     -------    -------        -------
Balance at June 30, 2000................  $3,162    $10,075         $(311)        $ (74)    $28,627    $(5,824)       $(2,059)

Net income..............................     --          --            --            --       2,274         --             --
Other comprehensive income
  Unrealized holding gain arising during
    period..............................     --          --            --            --          --         --          3,333
  Reclassification adjustment for gains
    realized in income..................     --          --            --            --          --         --            (49)
  Income tax effect.....................     --          --            --            --          --         --         (1,300)
Comprehensive Income....................     --          --            --            --          --         --             --
Cash dividends paid $(.20 per share)....     --          --            --            --        (479)        --             --
Amortization of unearned ESOP
  compensation..........................     --         147            94            --          --         --             --
Purchase of 128,100 shares for treasury
  stock.................................     --          --            --            --          --     (1,421)            --
Exercise of stock options (2,000
  shares)...............................     --           5            --            --         (12)        20             --
                                          ------    -------         -----         -----     -------    -------        -------
Balance at June 30, 2001................  $3,162    $10,227         $(217)        $ (74)    $30,410    $(7,225)       $   (75)
                                          ======    =======         =====         =====     =======    =======        =======

<Caption>

                                              TOTAL
                                          SHAREHOLDERS'
                                             EQUITY
                                          -------------
<S>                                       <C>
Balance at June 30, 1998................     $33,453
Net income..............................       3,130
Other comprehensive income
  Unrealized holding loss arising during
    period..............................      (1,720)
  Re-classification adjustment for gains
    realized in income..................         (68)
  Income tax effect.....................         726
                                             -------
Comprehensive Income....................       2,068
Amortization of unearned ESOP and
  restricted stock award compensation...         421
Purchase of 146,900 shares for treasury
  stock.................................      (1,784)
Exercise of stock options (53,233 shares
  issued in connection with 61,294
  options exercised)....................         338
                                             -------
Balance at June 30, 1999................     $34,496
Net income..............................       3,245
Other comprehensive income
  Unrealized holding loss arising during
    period..............................      (1,534)
  Re-classification adjustment for gains
    realized in income..................         (48)
  Income tax effect.....................         612
                                             -------
Comprehensive Income....................       2,275
Cash dividends paid $(.15 per share)....        (383)
Amortization of unearned ESOP and
  restricted stock award compensation...         236
Purchase of 276,700 shares of treasury
  stock.................................      (3,028)
                                             -------
Balance at June 30, 2000................     $33,596
Net income..............................       2,274
Other comprehensive income
  Unrealized holding gain arising during
    period..............................       3,333
  Reclassification adjustment for gains
    realized in income..................         (49)
  Income tax effect.....................      (1,300)
                                             -------
Comprehensive Income....................       1,984
Cash dividends paid $(.20 per share)....        (479)
Amortization of unearned ESOP
  compensation..........................         241
Purchase of 128,100 shares for treasury
  stock.................................      (1,421)
Exercise of stock options (2,000
  shares)...............................          13
                                             -------
Balance at June 30, 2001................     $36,208
                                             =======
</Table>

          See accompanying Notes to Consolidated Financial Statements

                                        72
<PAGE>   75

                      LEDGER CAPITAL CORP. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                FOR THE YEARS ENDED JUNE 30,
                                                              --------------------------------
                                                                2001       2000        1999
                                                                ----       ----        ----
<S>                                                           <C>        <C>         <C>
OPERATING ACTIVITIES
Net income..................................................  $  2,274   $   3,245   $   3,130
Adjustments to reconcile net income to cash provided by
  (used in) operating activities:
  Provision for losses on loans.............................       430         871         480
  Provision for depreciation and amortization...............       445         618         394
  Amortization of unearned ESOP and restricted stock
     awards.................................................       241         236         421
  Deferred income taxes.....................................      (142)       (399)       (246)
  Net gain on sales of investments and mortgage-backed and
     related securities.....................................       (49)        (48)        (68)
  Proceeds from sale of trading securities..................        --      25,499          --
  Net gain on sale of loans.................................      (988)         (9)       (892)
  Loans originated for sale.................................   (75,861)    (34,008)    (54,499)
  Sales of loans originated for sale........................    73,614      33,112      50,118
  (Increase) decrease in prepaid expenses and other
     assets.................................................    (1,804)        136      (1,964)
  Increase (decrease) in other liabilities..................       561      (8,412)         74
  Other adjustments.........................................        64          --       1,637
                                                              --------   ---------   ---------
Net cash provided by (used in) operating activities.........    (1,215)     20,841      (1,415)
                                                              --------   ---------   ---------
INVESTING ACTIVITIES
Proceeds from the sale of securities available-for-sale.....     3,503      45,209      10,641
Proceeds from the maturities of securities
  available-for-sale........................................    14,970       4,160       8,365
Purchases of securities available-for-sale..................   (46,369)    (34,737)   (125,264)
Purchases of securities held-to-maturity....................    (2,104)         --        (184)
Proceeds from maturities of securities held-to-maturity.....     1,649          --         572
Purchases of mortgage-backed and related securities.........        --      (8,096)    (12,314)
Principal collected on mortgage-backed and related
  securities................................................    16,870      32,031      93,379
Net change in loans receivable..............................    38,571    (107,310)       (440)
Proceeds from sales of foreclosed properties................        71         980          11
Purchase of Federal Home Loan Bank stock....................      (595)     (1,233)       (595)
Purchases of office properties and equipment, net...........      (873)        (98)       (512)
                                                              --------   ---------   ---------
Net cash provided by (used in) investing activities.........    25,693     (69,094)    (26,341)
                                                              --------   ---------   ---------
FINANCING ACTIVITIES
Net increase (decrease) in deposits.........................   (25,506)     56,604      17,095
Proceeds from long-term notes payable to Federal Home Loan
  Bank......................................................    55,000      95,000      25,000
Net increase (decrease) in short-term notes payable and
  other borrowings..........................................    (7,920)      9,035      10,475
Repayment of long-term notes payable to Federal Home Loan
  Bank......................................................   (38,012)   (101,514)    (23,015)
Net increase in advance payments by borrowers for taxes and
  insurance.................................................       214         499          62
Purchase of treasury stock..................................    (1,421)     (3,028)     (1,784)
Cash dividends..............................................      (479)       (383)         --
Stock option transactions...................................        13          --         338
                                                              --------   ---------   ---------
Net cash provided by (used in) financing activities.........   (18,111)     56,213      28,171
                                                              --------   ---------   ---------
  Net increase in cash and cash equivalents.................     6,367       7,960         415
  Cash and cash equivalents at beginning of year............    16,559       8,599       8,184
                                                              --------   ---------   ---------
  Cash and cash equivalents at end of year..................  $ 22,926   $  16,559   $   8,599
                                                              ========   =========   =========
</Table>

          See accompanying Notes to Consolidated Financial Statements

                                        73
<PAGE>   76

                      LEDGER CAPITAL CORP. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                     FOR THE YEARS ENDED
                                                                          JUNE 30,
                                                                -----------------------------
                                                                 2001       2000       1999
                                                                 ----       ----       ----
<S>                                                             <C>        <C>        <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid (including amounts credited to deposit
  accounts).................................................    $27,634    $24,629    $22,265
Income taxes paid...........................................    $ 1,421    $ 1,505    $ 1,724
Non-cash transactions:
  Loans transferred to foreclosed properties................    $   628    $ 1,473    $   682
  Loans-held-for-sale transferred to loan portfolio.........    $    --    $12,355    $    --
  Securities and mortgage-backed securities reclassified to
     trading and securities available-for-sale..............    $    --    $37,879    $    --
</Table>

          See accompanying Notes to Consolidated Financial Statements

                                        74
<PAGE>   77

                      LEDGER CAPITAL CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

     Ledger Capital Corp. (the "Company"), a Wisconsin corporation, is the
holding company for Ledger Bank, SSB (the "Bank"), a Wisconsin state-chartered
savings bank. The Company provides a wide range of financial services including
real-estate mortgage, commercial and consumer loans and transaction and time
deposit accounts and the sale of certain non-deposit financial products to
individual and corporate customers through the Bank with four locations in the
counties of Milwaukee and Waukesha, Wisconsin. The Bank is subject to
competition from other financial institutions and other financial service
providers. The Bank is subject to the regulations of certain federal and state
agencies and undergoes periodic examinations by those regulatory authorities.

BASIS OF FINANCIAL STATEMENT PRESENTATION

     The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
("GAAP") and include the accounts of the Company and its wholly owned
subsidiary, Ledger Bank, and its subsidiaries, for the periods presented.
Significant intercompany accounts and transactions have been eliminated. In
preparing 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 balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates. Material estimates that
are particularly susceptible to significant change in the near term relate to
the determination of the allowance for losses on loans and the valuation of real
estate acquired in connection with foreclosure or in satisfaction of loans. In
connection with the determination of the allowance for loan losses and
foreclosed assets, management obtains independent appraisals for significant
properties.

STATEMENTS OF CASH FLOWS

     For the purposes of the consolidated statements of cash flows, cash and
cash equivalents include cash on hand and interest-bearing deposits with the
FHLB and other financial institutions. The Company considers interest-bearing
deposits having a maturity of three months or less when purchased to be cash
equivalents.

SECURITIES

     Management determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designation as of each
financial statement reporting date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost. Trading account securities are carried at fair value. Gains and losses on
sales and changes in market value are included in non-interest income. Debt
securities not classified as trading or held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
unrealized gains and losses, net of tax, reported as a separate component of
shareholders' equity for the periods presented. The amortized cost of debt
securities classified as held-to-maturity or available-for-sale is adjusted for
the amortization of premiums and accretion of discounts to maturity, or in the
case of mortgage-backed and related securities, over the estimated life of the
security. Such amortization or accretion is included in interest income from the
related security. Interest and dividends are included in interest income from
the related securities. Realized gains and losses and declines in value judged
to be other-than-temporary are included in gain (loss) on sale of securities and
mortgage-backed and related securities, net. The cost of securities sold is
based on the specific identification method.

LOANS HELD FOR SALE

     Loans held for sale are recorded at the lower of aggregate cost or market
value and generally consist of certain fixed-rate first mortgage loans which are
expected to be sold in the foreseeable future. Fees received
                                        75
<PAGE>   78
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

LOANS HELD FOR SALE -- (CONTINUED)

from the borrower and direct costs to originate the loans are deferred and
recorded as an adjustment of the sales price. Loans transferred from the
held-for-sale category to the loan portfolio are valued at the lower of cost or
market value at the time of transfer. Any unrealized loss at the time of
transfer is accounted for as a discount and is amortized to interest income
using a yield method.

LOANS RECEIVABLE AND INTEREST ON LOANS AND LOAN FEES

     Loans receivable which are originated or purchased with the intent and
ability to hold to maturity or for the foreseeable future are carried at their
unpaid principal balances. Interest on loans is recorded as income in the
periods earned. An allowance for interest is established for uncollected
interest on loans when in the judgement of management it is not likely such
interest will be collected, generally when any payments are 91 days or more past
due and on loans which are impaired. Impaired loans are defined as all
non-accrual loans except for one-to-four family residential real estate loans
and consumer loans. Loan origination and commitment fees and certain direct loan
origination costs are deferred and the net amounts are amortized as an
adjustment to the related loan's yield. The Bank is amortizing these amounts
using a level-yield method over the contractual life of the related loans.

     Impaired loans are measured at 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. Interest income is not
recognized on these loans until the principal balance has been reduced
sufficiently to ensure future collections and then generally on a cash basis
only.

     Mortgage servicing rights associated with loans originated and sold, where
servicing is retained, are capitalized and included in other assets in the
balance sheet. The value of these capitalized servicing rights is amortized in
relation to the servicing revenue expected to be earned. Impairment of mortgage
servicing rights is assessed based on the fair value of those rights. The
Company periodically evaluates the carrying value and remaining amortization
periods for impairment. For purposes of measuring impairment, the rights are
stratified into certain risk characteristics of the underlying loans. The
amortization of servicing rights is netted against loan servicing fees.

ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses is established through a provision charged to
expense and is maintained at a level believed adequate by management to absorb
probable losses in the loan portfolio. Management's determination of the
adequacy of the allowance is based on an evaluation of the portfolio and, among
other things, general economic conditions, the borrowers' ability to repay,
estimated collateral values, prior loss experience, and growth and composition
of the portfolio; however, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies periodically review the allowance for loan losses. These agencies may
require the Bank to make additions to the allowance for loan losses based on
information available to them at the time of their examination.

FEDERAL HOME LOAN BANK STOCK

     Federal Home Loan Bank stock is held as required by current regulation and
is carried at cost which is the amount at which it can be redeemed and which
approximates fair value since the market for this stock is limited. Dividends
are received from the Federal Home Loan Bank stock and are included in interest
income on securities.

                                        76
<PAGE>   79
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

FORECLOSED PROPERTIES

     Foreclosed properties (which were acquired by foreclosure or by deed in
lieu of foreclosure) are initially recorded at the lower of cost or fair value
minus estimated costs to sell at the date of foreclosure and any loss at that
time is charged to the allowance for loan losses. Costs related to the
development and improvement of property are capitalized, whereas costs related
to holding the property are expensed. Valuations are periodically performed by
management and independent third parties, any future adjustments to the value of
the foreclosed property are recorded through the income statement. An allowance
for losses is established by a charge to expense if the carrying value of a
property exceeds its fair value minus estimated costs to sell.

OFFICE PROPERTIES AND EQUIPMENT

     Premises and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation and amortization expense are provided on a
straight-line basis over the estimated useful lives of the assets. The cost of
leasehold improvements is amortized on the straight-line basis over the lesser
of the term of the respective lease or the estimated economic life of the
improvements. Expenditures for normal repairs and maintenance are charged to
expense as incurred. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the respective
accounts and the resulting gain or loss is recorded in income.

MARKETING COSTS

     Marketing costs are expensed in the period in which they are incurred.

INCOME TAXES

     The Company accounts for income taxes using the liability method. Under
this method, deferred tax assets and liabilities are determined based on the
temporary difference between financial reporting and the tax basis of assets and
liabilities and are measured using the enacted tax rates and laws in effect.
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.

EARNINGS PER SHARE

     Basic earnings per share is derived by dividing net income available to
common stockholders by the weighted-average number of common shares outstanding
and does not include the impact of any potentially dilutive common stock
equivalents. The diluted earnings per share calculation is derived by dividing
net income by the weighted-average number of shares outstanding, adjusted for
the dilutive effect of stock options.

REPORTING COMPREHENSIVE INCOME

     All items that are required to be recognized under accounting standards as
components of comprehensive income are to be reported in a financial statement
that is displayed with the same prominence as other financial statements. Items
of other comprehensive income are classified by their nature in a financial
statement and are displayed in the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in-capital in the
equity section of the balance sheet. The Company's other comprehensive income
comprises unrealized gains and losses on available for sale securities and the
related deferred tax impact.

                                        77
<PAGE>   80
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

SEGMENTS AND RELATED INFORMATION

     The Company through the branch network of its subsidiaries provides a broad
range of financial services to individuals and companies in southeastern
Wisconsin. These services include demand, time and savings deposits; the sale of
certain non-deposit financial products; and commercial and retail lending. While
the Company's chief decision-maker monitors the revenue streams of the various
products and services, operations are managed and financial performance is
evaluated on a corporate-wide basis. Accordingly, all of the Company's
operations are considered by management to be aggregated in one reportable
operating segment.

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     On January 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities("Statement 133"). Statement 133 standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts. Under the standard, entities are required to carry all
derivative instruments in the statement of financial position at fair value. The
accounting for changes in the fair value (i.e. gains or losses) of a derivative
instrument depends on whether it has been designed and qualifies as part of a
hedging relationship and, if so, on the reason for holding it. If certain
conditions are met, entities may elect to designate a derivative instrument as a
hedge of exposures to changes in fair values, cash flows, or foreign currencies.
If the hedged exposure is a fair value exposure, the gain or loss on the
derivative instrument is recognized in earnings in the period of change together
with the offsetting loss or gain on the hedged item attributable to the risk
being hedged.

     If the hedged exposure is a cash flow exposure, the effective portion of
the gain or loss on the derivative instrument is reported initially as a
component of other comprehensive income (outside earnings) and subsequently
reclassified into earnings when the forecasted transaction affects earnings. Any
amounts excluded from the assessment of hedge effectiveness as well as the
ineffective portion of the gain or loss is reported in earnings immediately.
Accounting for foreign currency hedges is similar to the accounting for fair
value and cash flow hedges. If the derivative instrument is not designed as a
hedge, the gain or loss is recognized in earnings in the period of change.

     The Company formally documents all relationships between hedging
instruments and hedged items as well as its risk-management objective and
strategy for undertaking the hedge transaction. This process includes linking
derivatives that are designated as fair value or cash flow hedges to specific
recorded assets or liabilities or to firm commitments on forecasted
transactions.

     The Company formally assesses at inception and on an ongoing basis, whether
derivatives that are used in hedging transactions have been highly effective in
offsetting fair values or cash flows of hedged items and whether they are
expected to continue to be highly effective in the future.

     If at any time the Company determined that the hedge was no longer
effective, or if the hedged forecasted transactions were not executed, hedge
accounting would be discontinued and the derivative instrument would continue to
be marked to its fair value with gains or losses recognized in non-interest
income. The change in fair value of derivative instruments designated as cash
flow hedges will be recognized in other comprehensive income in future periods
and the changes in the fair value of derivative instruments designated as fair
value hedges will be recognized in non-interest income or expense.

     At June 30, 2001, the interest rate caps are the only derivative
instruments used by the Company to manage interest rate risk. The Company's
derivative activities are monitored by its Asset Liability Committee as part of
that Committee's oversight of risk management and asset/liability functions.

                                        78
<PAGE>   81
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- (CONTINUED)

     Certain commitments to originate mortgage loans and forward commitments to
sell originated loans are also considered derivatives.

     On July 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 138, Accounting for Certain Derivative Instruments and Hedging
Activities. This Statement modifies certain provisions of Statement 133.
Adoption had no effect on the Company's Statement of Financial Condition or its
results of operations.

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES

     In September 2000, the Financial Standards Accounting Board issued
Statement No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities ("Statement 140"). Statement 140 replaces, in
its entirety, FASB 125. Statement 140 has changed many of the rules regarding
securitizations, however it continues to require an entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred
and to derecognize financial assets when control has been surrendered in
accordance with the criteria provided in the Statement. As required the Company
will apply the new rules prospectively to certain transactions occurring after
March 31, 2001 and to transfers of financial assets subject to possible
receivership under the FDIC occurring after December 31, 2001. Adoption of
Statement 140 did not have a material effect on the Company's results of
operations or financial position.

PENDING ACCOUNTING CHANGES

     On July 20, 2001, the Financial Accounting Standards Board issued
Statements No. 141 Business Combinations ("Statement 141") and No. 142, Goodwill
and Other Intangible Assets ("Statement 142"). Statement 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Poolings initiated prior June 30, 2001 are grandfathered.
Statement 142 replaces the requirements to amortize intangible assets with
indefinite lives and goodwill with a requirement for an impairment test.
Statement 142 also requires an evaluation of intangible assets and their useful
lives and a transitional impairment test for goodwill and certain intangible
assets. After transition, the impairment tests are to be performed annually. A
company must adopt Statement 142 at the beginning of the fiscal year. Adoption
of Statements 141 and 142 is not expected to have an effect on the results of
operations or financial position of the Company.

                                        79
<PAGE>   82
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

EARNINGS PER SHARE

     Basic earnings per share is calculated by dividing net income for the years
ended June 30, 2001, 2000 and 1999 by the weighted average number of shares of
common stock reduced by ungranted restricted stock and uncommitted ESOP shares.
Diluted earnings per share is calculated by dividing net income by the sum of
the weighted average shares used in the basic earnings per share calculation
plus the effect of dilutive stock options. The effect of dilutive stock options
is calculated using the treasury stock method.

     The computation of net income per common share is as follows:

<Table>
<Caption>
              FOR THE YEAR ENDED JUNE 30, 2001                    BASIC        DILUTED
              --------------------------------                    -----        -------
<S>                                                             <C>           <C>
Weighted average common shares outstanding..................     2,477,535     2,477,535
Ungranted restricted stock..................................       (18,462)      (18,462)
Uncommitted ESOP shares.....................................       (63,250)      (63,250)
Common stock equivalents due to dilutive effect of stock
  options...................................................            --        75,482
                                                                ----------    ----------
     Total weighted average common shares and equivalents
      outstanding...........................................     2,395,823     2,471,305
                                                                ==========    ==========
Net income for period.......................................    $2,274,000    $2,274,000
Earnings per share..........................................    $     0.95    $     0.92
                                                                ==========    ==========
</Table>

<Table>
<Caption>
              FOR THE YEAR ENDED JUNE 30, 2000                    BASIC        DILUTED
              --------------------------------                    -----        -------
<S>                                                             <C>           <C>
Weighted average common shares outstanding..................     2,670,519     2,670,519
Ungranted restricted stock..................................       (18,462)      (18,462)
Uncommitted ESOP shares.....................................       (90,658)      (90,658)
Common stock equivalents due to dilutive effect of stock
  options...................................................            --        73,872
                                                                ----------    ----------
     Total weighted average common shares and equivalents
      outstanding...........................................     2,561,399     2,635,271
                                                                ==========    ==========
Net income for period.......................................    $3,245,000    $3,245,000
Earnings per share..........................................    $     1.27    $     1.23
                                                                ==========    ==========
</Table>

<Table>
<Caption>
              FOR THE YEAR ENDED JUNE 30, 1999                    BASIC        DILUTED
              --------------------------------                    -----        -------
<S>                                                             <C>           <C>
Weighted average common shares outstanding..................     2,898,004     2,898,004
Ungranted restricted stock..................................       (18,462)      (18,462)
Uncommitted ESOP shares.....................................      (113,850)     (113,850)
Common stock equivalents due to dilutive effect of stock
  options...................................................            --        85,942
                                                                ----------    ----------
     Total weighted average common shares and equivalents
      outstanding...........................................     2,765,692     2,851,634
                                                                ==========    ==========
Net income for period.......................................    $3,130,000    $3,130,000
Earnings per share..........................................    $     1.13    $     1.10
                                                                ==========    ==========
</Table>

RECLASSIFICATIONS

     Certain amounts in the 2000 and 1999 financial statements have been
reclassified to conform with the 2001 presentation.

                                        80
<PAGE>   83
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SECURITIES

     The following is a summary of available-for-sale securities and
held-to-maturity securities.

<Table>
<Caption>
                                                                        GROSS         GROSS       ESTIMATED
                                                         AMORTIZED    UNREALIZED    UNREALIZED      FAIR
                                                           COST         GAINS         LOSSES        VALUE
                                                         ---------    ----------    ----------    ---------
                                                                           (IN THOUSANDS)
<S>                                                      <C>          <C>           <C>           <C>
At June 30, 2001:
  Available-For-Sale:
     U.S. Government and federal agency
       obligations...................................     $35,634        $ --         $  315       $35,319
     Adjustable-rate mortgage mutual funds...........       1,000          --             32           968
     Corporate trust preferred stock.................       5,460         137            177         5,420
     Municipal Bonds/other...........................         300          --             --           300
                                                          -------        ----         ------       -------
                                                          $42,394        $ --         $  387       $42,007
                                                          =======        ====         ======       =======
  Held-To-Maturity:
     Certificates of deposit.........................     $   455        $ --         $   --       $   455
                                                          -------        ----         ------       -------
                                                          $   455        $ --         $            $   455
                                                          =======        ====         ======       =======
At June 30, 2000:
  Available-For-Sale:
     U.S. Government and federal agency
       obligations...................................     $34,905        $ --         $2,147       $32,758
     Adjustable-rate mortgage mutual funds...........       1,000          --             42           958
     Corporate trust preferred stock.................       4,975          --            650         4,325
     Municipal Bonds.................................         275          --              1           274
                                                          -------        ----         ------       -------
                                                          $41,155        $ --         $2,840       $38,315
                                                          =======        ====         ======       =======
</Table>

     The amortized cost and estimated fair value of securities at June 30, 2001
by contractual maturity, are shown below.

<Table>
<Caption>
                                                         AVAILABLE-    AVAILABLE-    HELD-TO-      HELD-TO-
                                                          FOR-SALE      FOR-SALE     MATURITY      MATURITY
                                                         AMORTIZED     ESTIMATED     AMORTIZED    ESTIMATED
                                                            COST       FAIR VALUE      COST       FAIR VALUE
                                                         ----------    ----------    ---------    ----------
                                                                           (IN THOUSANDS)
<S>                                                      <C>           <C>           <C>          <C>
Due in one year or less..............................     $    --       $    --        $200          $200
Due after one year through five years................      11,229        11,202          --            --
Due after five years through ten years...............       4,405         4,393         160           160
Due after ten years..................................      26,760        26,412          95            95
                                                          -------       -------        ----          ----
                                                          $42,394       $42,007        $455          $455
                                                          =======       =======        ====          ====
</Table>

     Proceeds from the sale of securities available-for-sale were $3,503,000,
$45,209,000 and $10,641,000 during the years ended June 30, 2001, 2000 and 1999,
respectively. The gross realized losses on such sales totaled $0 in 2001,
$51,000 in 2000, and $2,000 in 1999. The gross realized gains on such sales
totaled $49,000 in 2001, $115,000 in 2000, and $70,000 in 1999. There were no
sales of held-to-maturity securities during 2001, 2000 and 1999. Proceeds from
the sale of trading securities were $25,499,000 during the year ended June 30,
2000. The gross realized losses on such sales totaled $297,000 in 2000. The
gross realized gains on such sales totaled $281,000 in 2000. There were no sales
of trading securities during 2001 and 1999. Securities pledged to secure FHLB
borrowings and for other legal and contractual reasons totaled $19,635,000 at
June 30, 2001.

                                        81
<PAGE>   84
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. MORTGAGE-BACKED AND RELATED SECURITIES

     The following is a summary of available-for-sale and held-to-maturity
mortgage-backed and related securities.

<Table>
<Caption>
                                                                        GROSS         GROSS       ESTIMATED
                                                         AMORTIZED    UNREALIZED    UNREALIZED      FAIR
                                                           COST         GAINS         LOSSES        VALUE
                                                         ---------    ----------    ----------    ---------
                                                                           (IN THOUSANDS)
<S>                                                      <C>          <C>           <C>           <C>
At June 30, 2001:
  Available-For-Sale:
     Mortgage-backed securities
       Adjustable-rate...............................     $ 3,951        $ 85          $  1        $ 4,035
       Fixed-rate....................................       4,009           4            29          3,984
     Collateralized mortgage obligations
       Adjustable-rate...............................       9,722          62             4          9,780
       Fixed-rate....................................      33,032         203            62         33,173
                                                          -------        ----          ----        -------
                                                          $50,714        $354          $ 96        $50,972
                                                          =======        ====          ====        =======
  Held-To-Maturity:
     Mortgage-backed securities
       Fixed-rate....................................     $   526        $  5          $ --        $   531
     Collateralized mortgage obligations:
       Fixed-rate....................................      10,093          87             3         10,177
                                                          -------        ----          ----        -------
                                                          $10,619        $ 92          $  3        $10,708
                                                          =======        ====          ====        =======
At June 30, 2000:
  Available-For-Sale:
     Mortgage-backed securities
       Adjustable-rate...............................     $ 4,655        $ 40          $ 31        $ 4,664
       Fixed-rate....................................       8,328           1           287          8,042
     Collateralized mortgage obligations
       Adjustable-rate...............................      16,675          13           188         16,500
       Fixed-rate....................................       6,860           8           130          6,738
                                                          -------        ----          ----        -------
                                                          $ 6,518        $ 62          $636        $35,944
                                                          =======        ====          ====        =======
  Held-To-Maturity:
     Mortgage-backed securities
       Fixed-rate....................................     $ 1,390        $  1          $ 28        $ 1,363
     Collateralized mortgage obligations
       Fixed-rate....................................      13,627          --           305         13,322
                                                          -------        ----          ----        -------
                                                          $15,017        $  1          $333        $14,685
                                                          =======        ====          ====        =======
</Table>

                                        82
<PAGE>   85
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. MORTGAGE-BACKED AND RELATED SECURITIES -- (CONTINUED)

     The following table is a summary of aggregate mortgage-backed and related
securities by issuer.

<Table>
<Caption>
                                                                        GROSS         GROSS       ESTIMATED
                                                         AMORTIZED    UNREALIZED    UNREALIZED      FAIR
                                                           COST         GAINS         LOSSES        VALUE
                                                         ---------    ----------    ----------    ---------
                                                                           (IN THOUSANDS)
<S>                                                      <C>          <C>           <C>           <C>
At June 30, 2001:
  Federal Home Loan Mortgage Corporation (FHLMC).....     $ 7,218        $ 32          $ 32        $ 7,218
  Federal National Mortgage Association (FNMA).......       3,156          65            --          3,221
  Government National Mortgage Association (GNMA)....       7,771         114            19          7,866
  Private issuers....................................      43,188         235            48         43,375
                                                          -------        ----          ----        -------
                                                          $61,333        $446          $ 99        $61,680
                                                          =======        ====          ====        =======
At June 30, 2000:
  FHLMC..............................................     $ 8,976        $  5          $322        $ 8,659
  FNMA...............................................       6,770          31           104          6,697
  GNMA...............................................          78           2            --             80
  Private issuers....................................      35,711          25           543         35,193
                                                          -------        ----          ----        -------
                                                          $51,535        $ 63          $969        $50,629
                                                          =======        ====          ====        =======
</Table>

     There were no sales of mortgage-backed and related securities
held-to-maturity for the years ended June 30, 2001, 2000 and 1999.

     During fiscal 2000, as permitted by the adoption of Financial Accounting
Standards Board Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, the Company transferred held-to-maturity mortgage-backed and
related securities with a carrying value of $37,803,000 to trading securities
($24,320,000) and to securities available-for-sale ($13,483,000). At the time of
transfer there was an unrealized gain on the trading securities of $16,000 and
an unrealized gain on the securities available-for-sale of $60,000. The
unrealized gains are included in the gain on sale of securities and
mortgage-backed and related securities in the Consolidated Statements of Income
for the trading securities and in Other Comprehensive Income-Unrealized Holding
Loss for the year ended June 30, 2000 and are not presented as a cumulative
effect of an accounting change due to their immateriality to net income and
comprehensive income for the period.

     Mortgage-backed and related securities pledged to secure FHLB borrowings
were approximately $26.1 million at June 30, 2001.

                                        83
<PAGE>   86
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LOANS RECEIVABLE

     Loans receivable are summarized as follows:

<Table>
<Caption>
                                                                    AT JUNE 30,
                                                                --------------------
                                                                  2001        2000
                                                                  ----        ----
                                                                   (IN THOUSANDS)
<S>                                                             <C>         <C>
Real estate mortgage loans:
  Residential one-to-four family............................    $153,599    $186,276
  Residential multi-family..................................      47,190      41,751
  Commercial real estate....................................      82,290      86,521
  Home equity...............................................      21,469      21,758
  Residential construction..................................       6,550      21,284
  Other construction and land...............................      24,832      27,179
                                                                --------    --------
     Total real estate mortgage loans.......................     335,930     384,769
Consumer and other loans:
  Automobile................................................         184         262
  Credit card...............................................       1,909       2,112
  Other.....................................................         658         853
                                                                --------    --------
     Total consumer and other loans.........................       2,751       3,227
Commercial loans............................................      23,982      24,589
                                                                --------    --------
     Gross loans............................................     362,663     412,585
Accrued interest receivable.................................       2,415       2,573
Less:
  Undisbursed portion of loan proceeds......................      (8,084)    (18,589)
  Deferred loan fees........................................        (484)       (630)
  Deferred interest on sale of REO..........................         (55)        (61)
  Deferred gain on sale of REO..............................         (58)        (58)
  Unearned interest.........................................        (374)       (313)
  Allowance for loan losses.................................      (3,351)     (3,201)
                                                                --------    --------
                                                                $352,672    $392,306
                                                                ========    ========
</Table>

     Activity in the allowance for loan losses is summarized as follows:

<Table>
<Caption>
                                                                   FOR THE YEARS ENDED
                                                                         JUNE 30,
                                                                --------------------------
                                                                 2001      2000      1999
                                                                 ----      ----      ----
                                                                      (IN THOUSANDS)
<S>                                                             <C>       <C>       <C>
Balance at beginning of year................................    $3,201    $2,648    $2,329
Provisions charged to expense...............................       430       871       480
Charge-offs.................................................      (356)     (340)     (176)
Recoveries..................................................        76        22        15
                                                                ------    ------    ------
Balance at end of year......................................    $3,351    $3,201    $2,648
                                                                ======    ======    ======
</Table>

     Non-accrual loans for which interest is recognized only when received,
totaled approximately $4,314,000 and $1,852,000 at June 30, 2001 and 2000,
respectively.

     Non-performing loans include troubled debt restructuring and loans on which
accrual of interest, amortization of deferred net fees or costs and accretion of
discount has ceased. Non-performing loans totaled

                                        84
<PAGE>   87
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LOANS RECEIVABLE -- (CONTINUED)

$4,369,000, $1,870,000 and $2,425,000 at June 30, 2001, 2000 and 1999,
respectively. The effect of non-performing loans on interest income is as
follows:

<Table>
<Caption>
                                                              FOR THE YEARS ENDED
                                                                    JUNE 30,
                                                              --------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
                                                                 (IN THOUSANDS)
<S>                                                           <C>     <C>     <C>
Interest at original contract rate........................    $670    $351    $368
Interest collected........................................     399     124     108
                                                              ----    ----    ----
Net reduction of interest income..........................    $271    $227    $260
                                                              ====    ====    ====
</Table>

     The Company has identified three loans with an aggregate balance of
$1,833,000 as being impaired at June 30, 2001. These loans have $65,000 in
allocated loan loss reserves. During the fiscal years ended June 30, 2001, 2000
and 1999 the average balance of impaired loans was $2,230,000, $384,000 and
$1,113,000, respectively. Interest income of $329,000, $51,000 and $8,000 was
recorded on such loans in the fiscal years ended June 30, 2001, 2000 and 1999,
respectively.

     Loans serviced for investors were $23,735,000 and $23,929,000 at June 30,
2001 and 2000, respectively. Custodial escrow balances maintained in connection
with the foregoing serviced loans and included in liabilities were $608,000 and
$603,000 at June 30, 2001 and 2000, respectively. Serviced loans are not
reflected in the accompanying consolidated statements of financial condition.

     The fair value of capitalized mortgage servicing rights exceeded the
carrying value at June 30, 2001 and 2000. Changes in capitalized mortgage
servicing rights is summarized as follows:

<Table>
<Caption>
                                                                 AT JUNE 30,
                                                                --------------
                                                                2001      2000
                                                                ----      ----
                                                                (IN THOUSANDS)
<S>                                                             <C>       <C>
Balance beginning of year...................................    $ 85      $106
Originated servicing rights capitalized.....................      --         1
Amortization of servicing rights............................     (11)      (22)
                                                                ----      ----
Balance end of year.........................................    $ 74      $ 85
                                                                ====      ====
</Table>

     The Bank originates mortgage loans, which, depending upon whether the loans
meet the Bank's investment objectives, may be sold in the secondary market or to
other private investors. All loans are sold on a nonrecourse basis and the
servicing of these loans may or may not be retained by the Bank. Direct
origination and servicing costs for mortgage banking activities cannot be
presented as these operations are integrated with and not separable from the
origination and servicing of portfolio loans, and, as a result, cannot be
accurately estimated.

                                        85
<PAGE>   88
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable on securities and interest bearing deposits is
summarized as follows:

<Table>
<Caption>
                                                                 AT JUNE 30,
                                                                 -----------
                                                                2001     2000
                                                                ----     ----
                                                                (IN THOUSANDS)
<S>                                                             <C>     <C>
Interest-bearing deposits...................................    $  4    $    4
Investment securities.......................................     605       684
Mortgage-backed and related securities......................     360       322
                                                                ----    ------
                                                                $969    $1,010
                                                                ====    ======
</Table>

6. OFFICE PROPERTIES AND EQUIPMENT

     Office properties and equipment are summarized as follows:

<Table>
<Caption>
                                                                  AT JUNE 30,
                                                                ----------------
                                                                 2001      2000
                                                                 ----      ----
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Land........................................................    $1,572    $1,572
Office buildings and improvements...........................     4,896     4,463
Furniture and equipment.....................................     2,848     2,408
                                                                ------    ------
                                                                 9,316     8,443
Less:
  Accumulated depreciation..................................     3,396     2,982
                                                                ------    ------
                                                                $5,920    $5,461
                                                                ======    ======
</Table>

                                        86
<PAGE>   89
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. DEPOSITS

     Deposits are summarized as follows:

<Table>
<Caption>
                                                                      AT JUNE 30,
                                          --------------------------------------------------------------------
                                                        2001                                2000
                                          --------------------------------    --------------------------------
                                                                  WEIGHTED                            WEIGHTED
                                                      PERCENT     AVERAGE                 PERCENT     AVERAGE
                                                      OF TOTAL    NOMINAL                 OF TOTAL    NOMINAL
                                           AMOUNT     DEPOSITS      RATE       AMOUNT     DEPOSITS      RATE
                                           ------     --------    --------     ------     --------    --------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                       <C>         <C>         <C>         <C>         <C>         <C>
DEMAND DEPOSITS:
  Non-interest bearing................    $ 18,397       5.75%        --%     $  8,400       2.43%        --%
  NOW.................................       3,872       1.21       0.89         3,147       0.91       0.76
  Money market........................      41,122      12.86       3.71        27,398       7.94       4.95
  Passbook............................      14,701       4.60       2.89        18,373       5.32       2.92
                                          --------     ------                 --------     ------
       Total..........................      78,092      24.42       2.54        57,318      16.60       3.34
CERTIFICATES OF DEPOSIT:
  One to 12 months....................    $ 54,381      17.00       5.47      $ 42,420      12.28       5.53
  12 to 24 months.....................      10,851       3.39       5.26        10,159       2.94       5.88
  24 to 36 months.....................       1,426       0.45       5.18         2,999       0.87       5.93
  36 to 60 months.....................       2,215       0.69       5.92         1,935       0.56       5.38
  Wholesale...........................     172,847      54.05       5.20       230,487      66.75       6.46
                                          --------     ------                 --------     ------
       Total..........................     241,720      75.58       5.27       288,000      83.40       6.29
                                          --------     ------                 --------     ------
       Total deposits.................    $319,812     100.00%      4.60%     $345,318     100.00%      5.80%
                                          ========     ======                 ========     ======
</Table>

     The aggregate amount of certificates of deposit with a minimum denomination
of $100,000 was approximately $173,816,000 and $212,453,000 at June 30, 2001 and
2000, respectively, which also includes brokered deposit accounts. The average
maturity of wholesale certificates of deposit was fifteen months and four months
at June 30, 2001 and 2000, respectively.

     Aggregate annual maturities of certificate accounts at June 30, 2001 are as
follows:

<Table>
<Caption>
                       MATURES DURING
                         YEAR ENDED
                          JUNE 30,                                  AMOUNT
                       --------------                               ------
                                                                (IN THOUSANDS)
<S>                                                             <C>
2002........................................................       $163,111
2003........................................................         30,221
2004........................................................         21,421
2005........................................................         18,475
Thereafter..................................................          8,492
                                                                   --------
                                                                   $241,720
                                                                   ========
</Table>

                                        87
<PAGE>   90
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. DEPOSITS -- (CONTINUED)

     Accrued interest payable on deposits was approximately $2,574,000 and
$2,666,000 at June 30, 2001 and 2000, respectively. Interest expense on deposits
consists of the following:

<Table>
<Caption>
                                                       FOR THE YEARS ENDED JUNE 30,
                                                       -----------------------------
                                                        2001       2000       1999
                                                        ----       ----       ----
                                                              (IN THOUSANDS)
<S>                                                    <C>        <C>        <C>
NOW accounts.......................................    $    30    $    48    $    48
Money market accounts..............................      1,712      1,409      1,736
Passbook accounts..................................        457        580        613
Certificate accounts...............................     16,770     14,947     12,766
                                                       -------    -------    -------
                                                       $18,969    $16,984    $15,163
                                                       =======    =======    =======
</Table>

8. FEDERAL HOME LOAN BANK AND OTHER BORROWINGS

     Federal Home Loan Bank and other borrowings are summarized as follows:

<Table>
<Caption>
                                                                AT JUNE 30, 2001        AT JUNE 30, 2000
                                                              --------------------    --------------------
                                                                          WEIGHTED                WEIGHTED
                                                                          AVERAGE                 AVERAGE
                                                  MATURITY     AMOUNT       RATE       AMOUNT       RATE
                                                  --------     ------     --------     ------     --------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                               <C>         <C>         <C>         <C>         <C>
Advances from
  Federal Home Loan Bank......................      2000      $     --        --      $  5,000      6.60%
                                                    2001            --        --         3,000      5.91
                                                    2002         5,000      6.43         5,000      6.43
                                                    2003        13,018      6.12         3,030      5.59
                                                    2004        30,000      6.14        50,000      5.63
                                                    2005        60,000      6.18        35,000      6.03
                                                    2007         6,500      6.52         6,500      6.52
                                                    2008         5,000      4.35         5,000      4.35
                                                    2010        10,000      5.90            --
                                                              --------                --------
                                                              $129,518      6.10%     $112,530      5.84%
                                                                            ====                    ====
Open line of credit
  With Wells Fargo Bank.......................      2001      $  2,350      5.69%     $  1,000      9.00%
                                                                            ====                    ====
Securities sold under
  Agreements to repurchase....................      2010      $  9,240      5.87%     $ 18,510      6.24%
                                                              --------      ====      --------      ====
                                                              $141,108                $132,040
                                                              ========                ========
</Table>

     The Company is required to maintain as collateral unencumbered one-to-four
family mortgage loans such that the outstanding balance of FHLB advances does
not exceed 60% of the book value of this collateral. Certain advances are
callable by the FHLB, advances callable within one year amount to $65 million
and $70 million at June 30, 2001 and 2000, respectively. At June 30, 2001, the
Bank had delivered mortgage-backed securities with a carrying value of $35.7
million to the FHLB as additional collateral for the advances. In addition,
advances are collateralized by all FHLB stock. FHLB advances are subject to a
prepayment penalty if they are repaid prior to maturity.

     The Company enters into sales of mortgage-backed securities with agreements
to repurchase identical securities (reverse repurchase agreements) and
substantially identical securities (dollar reverse repurchase

                                        88
<PAGE>   91
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. FEDERAL HOME LOAN BANK AND OTHER BORROWINGS -- (CONTINUED)

agreements). These transactions are treated as financings with the obligations
to repurchase securities reflected as a liability. The dollar amount of
securities underlying the agreements remains in the asset accounts. The
securities underlying the agreements are delivered to the counterparty's
account. Securities sold under agreements to repurchase were $9,240,000 and
$18,510,000 at June 30, 2001 and 2000, respectively.

     Securities sold under agreements to repurchase averaged $9,887,000 and
$22,462,000 for the year ended June 30, 2001 and 2000, respectively. The average
is computed using daily balances for the respective fiscal year. The maximum
outstanding at any month-end during the year ended June 30, 2001 and 2000 was
$9,240,000 and $28,350,000, respectively. The Company retains the securities
sold under its control.

     The Company has a $12.0 secured revolving line of credit facility with
Wells Fargo Bank. The line of credit is secured by the Company's investment in
the Bank and real estate. The line of credit matures August 31, 2001.
Outstanding balances bear interest at 1.75% plus the Federal Funds rate.

9. SHAREHOLDERS' EQUITY

     The Bank is 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 Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt and corrective action, the
Bank must meet specific capital guidelines that involve quantitative measures of
the Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's 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 Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined in the regulations), and of Tier I capital (as
defined in the regulations) to average assets (as defined in the regulations).
Management believes, as of June 30, 2001, that the Bank meets all capital
adequacy requirements to which it is subject.

     As of June 30, 2001, the most recent notification from the Bank's
regulators categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I
leverage ratios as set forth in the table below. There are no conditions or
events since that notification that management believes have changed the Bank's
category.

                                        89
<PAGE>   92
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SHAREHOLDERS' EQUITY -- (CONTINUED)

     The Bank's actual capital amounts and ratios are presented in the tables
below.

<Table>
<Caption>
                                                                                             TO BE WELL
                                                                                            CAPITALIZED
                                                                       FOR CAPITAL          UNDER PROMPT
                                                                         ADEQUACY        CORRECTIVE ACTION
                                                      ACTUAL             PURPOSES            PROVISIONS
                                                 ----------------    ----------------    ------------------
                                                 AMOUNT     RATIO    AMOUNT     RATIO     AMOUNT     RATIO
                                                 ------     -----    ------     -----     ------     -----
                                                                   (DOLLARS IN THOUSANDS)
<S>                                              <C>        <C>      <C>        <C>      <C>         <C>
As of June 30, 2001:
  Tier I Capital Leverage (to Average
     Assets):
     Consolidated............................    $36,233     7.21%   $15,066    3.00%        N/A       N/A
     Ledger Bank, SSB........................     36,968     7.39     15,009    3.00     $25,014      5.00%
  Tier I Capital (to Risk-Weighted Assets):
     Consolidated............................     36,233    10.39     13,954    4.00         N/A       N/A
     Ledger Bank, SSB........................     36,968    10.62     13,923    4.00      20,885      6.00
  Total Capital (to Risk-Weighted Assets):
     Consolidated............................     39,584    11.35     27,907    8.00         N/A       N/A
     Ledger Bank, SSB........................     40,319    11.58     27,847    8.00      34,809     10.00
</Table>

<Table>
<Caption>
                                                                                             TO BE WELL
                                                                                            CAPITALIZED
                                                                       FOR CAPITAL          UNDER PROMPT
                                                                         ADEQUACY        CORRECTIVE ACTION
                                                      ACTUAL             PURPOSES            PROVISIONS
                                                 ----------------    ----------------    ------------------
                                                 AMOUNT     RATIO    AMOUNT     RATIO     AMOUNT     RATIO
                                                 ------     -----    ------     -----     ------     -----
                                                                   (DOLLARS IN THOUSANDS)
<S>                                              <C>        <C>      <C>        <C>      <C>         <C>
As of June 30, 2000:
  Tier I Capital Leverage (to Average
     Assets):
     Consolidated............................    $34,954     6.73%   $15,583    3.00%        N/A       N/A
     Ledger Bank, SSB........................     34,689     6.69     15,561    3.00     $25,935      5.00%
  Tier I Capital (to Risk-Weighted Assets):
     Consolidated............................     34,954     9.62     14,530    4.00         N/A       N/A
     Ledger Bank, SSB........................     34,689     9.51     14,586    4.00      21,878      6.00
  Total Capital (to Risk-Weighted Assets):
     Consolidated............................     38,155    10.50     29,059    8.00         N/A       N/A
     Ledger Bank, SSB........................     37,890    10.39     29,171    8.00      36,464     10.00
</Table>

     As a state-charted savings bank, the Bank is also subject to a minimum
regulatory capital requirement of the State of Wisconsin. At June 30, 2001, on a
fully-phased-in basis of 6.0%, the Bank had actual capital of $40,321,000 with a
required amount of $30,647,000, for excess capital of $9,674,000.

     At the time of conversion, the Bank established a liquidation account in
the amount of $14.9 million that was equal to its retained earnings as of the
latest practicable date prior to the conversion. The liquidation account is
established to provide a limited priority claim to the assets of the Bank to
qualified depositors (Eligible Account Holders) at December 30, 1993 who
continue to maintain those deposits at the Bank after conversion. As the
deposits are withdrawn, the liquidation account decreases. In the unlikely event
of a complete liquidation of the Bank, and only in such event, each Eligible
Account Holder would receive from the liquidation account a liquidation
distribution based on his or her proportionate share of the then remaining
qualifying deposits.

                                        90
<PAGE>   93
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SHAREHOLDERS' EQUITY -- (CONTINUED)

     The Company has a shareholders' rights plan (the "Rights Plan"). Under the
terms of the Rights Plan, shareholders hold one preferred share purchase right
on each outstanding share of common stock of the Company. Upon becoming
exercisable, each right entitles shareholders to buy one one-hundredth of a
share of the Company's preferred stock at a price of $100.00, subject to
adjustment as provided in the Rights Plan (the "Exercise Price"). Rights do not
become exercisable until eleven business days after any person or group has
acquired, commenced or announced its intention to commence a tender or exchange
offer to acquire 20% or more of the Company's common stock, or in the event a
person or group owning 15% or more of the Company's common stock is deemed to be
"adverse" to the Company. If the rights become exercisable, holders of each
right other than the acquirer, upon payment of the Exercise Price, will have the
right to purchase the Company's common stock (in lieu of preferred stock) having
a value equal to two times the Exercise Price. If the Company is acquired in a
merger, share exchange or other business combination or 50% or more of its
consolidated assets or earning power are sold, rights holders, other than the
acquiring or adverse person or group, will be entitled to purchase the
acquirer's shares at a similar discount. If the rights become exercisable, the
Company may also exchange rights, other than those held by the acquiring or
adverse person or group, in whole or in part, at an exchange rate of one share
of the Company's common stock per right held. Rights are redeemable by the
Company at any time until they are exercisable at the exchange rate of $.01 per
right. The rights have no immediate dilutive effect currently, and therefore do
not effect reported earnings per share, are not taxable to the Company or its
shareholders, and have no effect on the way in which the Company's shares are
traded. The rights expire ten years from the Rights Plan's adoption.

10. EMPLOYEE BENEFIT PLANS

     The Bank has a qualified defined-contribution plan covering substantially
all full-time employees who have completed one year of service and are at least
21 years old. Participating employees may contribute up to 15% of their
compensation to the Plan, and such contributions up to 4% are matched 25% by the
Bank. In addition, the Bank may make a profit-sharing contribution to the Plan
at its discretion. Retirement plan expense recorded in connection with the Plan
was $22,000, $20,000 and $19,000 during fiscal 2001, 2000 and 1999,
respectively.

     The Company has an Employee Stock Ownership Plan ("ESOP") for substantially
all of its full-time employees. The cost of unearned ESOP shares is shown as a
reduction of shareholders' equity. ESOP expense for the years ended June 30,
2001, 2000 and 1999 totaled $255,000, $248,000 and $375,000, respectively. The
expense was determined using the fair value of shares committed to be released
during the year. As shares are committed, the reduction in shareholders' equity
decreases by the cost of those shares. The difference between the cost and fair
value of the shares committed is a charge or credit to additional
paid-in-capital. The fair value of the uncommitted ESOP shares totaled $877,000
at June 30, 2001.

     The Company has agreements with two executive officers of the Company to
provide certain deferred payments upon retirement and certain payments to their
beneficiaries in the event of their deaths. The expense related to these
agreements was $376,000 in 2001, $219,000 in fiscal 2000 and $214,000 in fiscal
1999.

     The Bank has Management Recognition and Retention Plans ("MRPs") for
officers and directors. As of June 30, 2001 and 2000, 18,462 shares remain
reserved for future grants. All shares previously awarded to officers and
directors are vested at June 30, 2001 and 2000. The aggregate cost of these
shares was amortized to compensation expense as the participants became vested.
The unamortized cost is reflected as a reduction of shareholders' equity as
unearned restricted stock. Compensation expense of $0, $4,000 and $46,000 was
recognized for the years ended June 30, 2001, 2000 and 1999.

     For the purposes of providing the pro-forma disclosures required under SFAS
No. 123 "Accounting for Stock Based Compensation," the fair value of stock
options granted was estimated using a binomial pricing

                                        91
<PAGE>   94
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

model for stock options granted in fiscal year 2001 and 1999 and the
Black-Scholes option pricing model for stock options granted prior to 1999. The
per share weighted-average fair value of stock options granted during fiscal
2001 and 1999 was $2.76 and $3.06, respectively, on the date of grant with the
following variable assumptions -- 2001 -- The Company's dividend yield was
2.00%, an expected life of ten years and expected volatility of 12.0%;
1999 -- The Company did not pay a dividend, return on equity of 8.79%, an
expected life of ten years and expected volatility of 32.4%. The per share
weighted-average fair value of stock options was not calculated for fiscal 2000
since there were no options granted during the period.

     The Company applies APB Opinion No. 25 in accounting for stock options and,
accordingly, compensation cost based on the fair value at grant date has not
been recognized for stock option grants in the consolidated financial statements
for the fiscal years ended June 30, 2001, 2000 and 1999. Had compensation cost
of the Company's stock-based plans been determined in accordance with Statement
No. 123, net income would have been reduced to proforma amounts as follows;
$2,231,000, $3,226,000 and $3,118,000 for fiscal 2001, 2000 and 1999,
respectively. Diluted earnings per share would have been reduced to proforma
amounts as follows; $0.90, $1.22 and $1.09, respectively for fiscal 2001, 2000
and 1999.

     The Company has reserved 373,642 shares of common stock for its
non-qualified stock option plan for employees and directors. With respect to
options which have not been granted, the option exercise price cannot be less
than the fair market value of the underlying common stock as of the date of
option grant, and the maximum term cannot exceed ten years. During fiscal 2001
there were 15,500 options granted under fixed option plans and 30,300 options
granted under performance based plans.

     The following is a summary of stock option activity:

<Table>
<Caption>
                                                         SHARES         OPTION
                                                          UNDER        PRICE PER
                                                         OPTION          SHARE
                                                         ------        ---------
<S>                                                      <C>        <C>
Outstanding at June 30, 1996.........................    330,614    $ 4.00 - $ 7.63
  Granted............................................     16,000             $ 7.38
                                                         -------    ---------------
Outstanding at June 30, 1997.........................    346,614    $ 4.00 - $ 7.63
  Granted............................................     30,000             $14.63
  Exercised..........................................    (55,340)            $ 4.00
                                                         -------    ---------------
Outstanding at June 30, 1998.........................    321,274    $ 4.00 - $14.63
  Granted............................................     21,500    $10.00 - $11.38
  Exercised..........................................    (61,294)   $ 4.00 - $ 7.38
  Forfeited..........................................     (4,000)   $ 4.00 - $ 7.38
                                                         -------    ---------------
Outstanding at June 30, 1999.........................    277,480    $ 4.00 - $14.63
                                                         -------    ---------------
Outstanding at June 30, 2000.........................    277,480    $ 4.00 - $14.63
  Granted............................................     45,800    $ 9.75 - $10.69
  Exercised..........................................     (2,000)            $ 4.00
                                                         -------    ---------------
Outstanding at June 30, 2001.........................    321,280    $ 4.00 - $14.63
</Table>

                                        92
<PAGE>   95
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

     The range of options outstanding at June 30, 2001 were:

<Table>
<Caption>
                                                                                                       WEIGHTED-
                                                                           WEIGHTED-AVERAGE             AVERAGE
                                             NUMBER OF SHARES               EXERCISE PRICE             REMAINING
                                        --------------------------    --------------------------    CONTRACTUAL LIFE
            PRICE RANGE                 OUTSTANDING    EXERCISABLE    OUTSTANDING    EXERCISABLE       (IN YEARS)
            -----------                 -----------    -----------    -----------    -----------    ----------------
<S>                                     <C>            <C>            <C>            <C>            <C>
$4.00 - 7.63........................      225,980        223,180        $ 4.61         $ 4.58             2.9
$9.75 - 11.38.......................       67,300          8,600         10.61          11.12             8.7
$14.63..............................       28,000         16,800         14.63          14.63             7.0
                                          -------        -------        ------         ------             ---
                                          321,280        248,580        $ 6.74         $ 5.48             4.5
                                          =======        =======        ======         ======             ===
</Table>

11. FINANCIAL INSTRUMENTS

     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 consist of commitments to extend credit. Commitments
to extend credit involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement of financial
condition. The contract amount reflects the extent of involvement the Company
has in this particular class of financial instrument.

     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.
Commitments generally have fixed expiration dates or other termination clauses
and generally require payment of a fee.

     As some commitments expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Company
evaluates the creditworthiness of each customer on a case-by-case basis. The
Company generally extends credit on a secured basis. Collateral obtained varies,
but consists primarily of one-to four-family residences located in the counties
of Milwaukee and Waukesha, Wisconsin.

     Commitments to sell mortgage loans represent commitments to sell mortgage
loans to other entities at a future date and at a specified price. Commitments
to sell mortgage loans and commitments to extend credit are generally exercised
and fulfilled within ninety days. The fair value of mortgage loans held for sale
plus the commitments to extend credit generally offset the commitments to sell
mortgage loans. Both the commitments to extend credit and the commitments to
sell mortgage loans are at current market interest rates.

     Off-balance sheet financial instruments whose contract amounts represent a
potential credit risk are as follows:

<Table>
<Caption>
                                                               FOR THE YEARS ENDED
                                                                     JUNE 30,
                                                               --------------------
                                                                 2001        2000
                                                                 ----        ----
                                                                  (IN THOUSANDS)
<S>                                                            <C>         <C>
Commitments to extend credit:
  Fixed-rate mortgage loans (6.5% - 7.625% at June 30,
     2001).................................................    $ 2,048     $   381
  Adjustable rate mortgage loans...........................        305         623
Unused lines of credit:
  Credit cards.............................................      6,567       6,179
  Home equity..............................................     13,684      12,782
  Commercial...............................................      5,351       8,985
  Stand-by letters of credit...............................      3,183       3,239
</Table>

                                        93
<PAGE>   96
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. FINANCIAL INSTRUMENTS -- (CONTINUED)

     During the year ended June 30, 2000, the Company entered into interest rate
caps with a notional amount of $75 million with maturity dates ranging from July
14, 2001 to January 3, 2002. The interest rate caps are carried at fair market
value of $0 and $166,000 in the Consolidated Statement of Financial Condition at
June 30, 2001 and 2000, respectively. The difference between the cost of the
caps of $340,000 and the fair market value is included in expense. At March 31,
2000, the Company designated these caps as a cash flow hedge of the interest
rate risk on short-term wholesale certificates of deposit which renew every 90
days and are indexed to the 3-month LIBOR. The caps are tied to the 3-month
LIBOR interest rate with a 7% strike rate. Cash payments will be received by the
Company if the 3-month LIBOR exceeds 7%.

12. LITIGATION

     The Company and its subsidiary are involved in certain lawsuits in the
course of its general lending business and other operations. The Company
believes that there are sound defenses against the claims asserted therein and
is vigorously defending these actions. Management, after review with its legal
counsel, is of the opinion that the ultimate disposition of its litigation will
not have a material effect on the Company's financial condition.

13. PARENT COMPANY ONLY FINANCIAL INFORMATION

<Table>
<Caption>
                                                                   AT JUNE 30,
                                                                ------------------
                                                                 2001       2000
                                                                 ----       ----
                                                                  (IN THOUSANDS)
<S>                                                             <C>        <C>
STATEMENT OF CONDITION
Assets:
  Cash and cash equivalents.................................    $   403    $   283
  Securities available-for-sale.............................        635        649
  Investment in bank subsidiary.............................     37,635     33,770
  Other assets..............................................         88         50
                                                                -------    -------
                                                                $38,761    $34,752
                                                                =======    =======
Liabilities and Shareholders' Equity:
  Borrowings................................................    $ 2,350    $ 1,000
  Other liabilities.........................................        203        156
  Total shareholders' equity................................     36,208     33,596
                                                                -------    -------
                                                                $38,761    $34,752
                                                                =======    =======
</Table>

                                        94
<PAGE>   97
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. PARENT COMPANY ONLY FINANCIAL INFORMATION -- (CONTINUED)


<Table>
<Caption>
                                                                FOR THE YEARS ENDED JUNE 30,
                                                                -----------------------------
                                                                 2001       2000       1999
                                                                 ----       ----       ----
                                                                       (IN THOUSANDS)
<S>                                                             <C>        <C>        <C>
STATEMENT OF INCOME
Interest and dividend income................................    $   253    $   147    $   243
Dividend income from subsidiary.............................        500      1,500      1,300
Gain (loss) on sale of investment securities................         --         (3)        28
Equity in undistributed net income of subsidiaries..........      1,891      1,775      1,740
                                                                -------    -------    -------
          Total income......................................      2,644      3,419      3,311
Other expense...............................................        454        189        136
                                                                -------    -------    -------
Income before provision for income taxes....................      2,190      3,230      3,175
Provision for income taxes (benefits).......................        (84)       (15)        45
                                                                -------    -------    -------
          Net income........................................    $ 2,274    $ 3,245    $ 3,130
                                                                =======    =======    =======
STATEMENT OF CASH FLOWS
Operating activities:
  Net income................................................    $ 2,274    $ 3,245    $ 3,130
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Equity in undistributed net income of subsidiaries.....     (1,891)    (1,775)    (1,740)
     Loss (gain) on sale of securities......................         --          3        (28)
     Decrease (increase) in other assets....................        (38)       195       (185)
     Increase (decrease) in other liabilities...............         47         96         (2)
     Other..................................................        265         18        215
                                                                -------    -------    -------
  Net Cash Provided By Operating Activities.................        657      1,782      1,390
Investment activities:
  Sales and maturities of securities........................         --        657        528
  Investment in Bank subsidiary.............................         --     (1,000)        --
                                                                -------    -------    -------
  Net Cash Provided By (Used In) Investing Activities.......         --       (343)       528
Financing activities:
  Increase in borrowings....................................      1,350      1,000         --
  Purchase of common stock of subsidiary....................     (1,421)    (3,029)    (1,785)
  Dividends paid............................................       (479)      (383)        --
  Proceeds from exercise of stock options...................         13         --        273
                                                                -------    -------    -------
  Net Cash Used In Financing Activities.....................       (537)    (2,412)    (1,512)
                                                                -------    -------    -------
Net increase (decrease) in cash.............................        120       (973)       406
Cash and cash equivalents at beginning of year..............        283      1,256        850
                                                                -------    -------    -------
Cash and cash equivalents at end of year....................    $   403    $   283    $ 1,256
                                                                =======    =======    =======
</Table>

14. FAIR VALUES OF FINANCIAL INSTRUMENTS

     Statement 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the

                                        95
<PAGE>   98
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. FAIR VALUES OF FINANCIAL INSTRUMENTS -- (CONTINUED)

derived fair market value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Statement 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not necessarily
represent the underlying value of the Company. The Company does not routinely
measure the market value of financial instruments because such measurements
represent point-in-time estimates of value. It is generally not the intent of
the Company to liquidate and therefore realize the difference between market
value and carrying value and even if it were, there is no assurance that the
estimated market values could be realized. Thus, the information presented is
not particularly relevant to predicting the Company's future earnings or cash
flows.

     The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS

     The carrying amount reported in the statement of financial condition for
cash and cash equivalents approximates those assets' fair values.

INVESTMENT AND MORTGAGE-BACKED AND RELATED SECURITIES

     Fair values for investment and mortgage-backed and related securities are
based on quoted market prices.

DERIVATIVE INSTRUMENTS

     Fair values for derivative instruments are based on quoted market prices.

FHLB STOCK

     FHLB stock is carried at cost, which is its redeemable value, since the
market for this stock is limited.

LOANS RECEIVABLE

     The fair value of one-to-four family fixed-rate mortgage loans is
determined based on the current market price for securities collateralized by
similar loans. For variable rate one-to-four family mortgage, consumer and other
loans that reprice frequently and with no significant change in credit risk,
carrying values approximate fair values. The fair value for fixed-rate consumer
and other loans is estimated by discounting cash flows at market interest rates.
The fair value of commercial loans was calculated by discounting cash flows
using an estimated rate that reflects the type of loan and the credit risk
inherent in the loan category. The carrying value of accrued interest receivable
approximates fair value.

DEPOSITS

     The fair values disclosed for demand deposits are equal to the amounts
payable on demand at the reporting date. Fair values for fixed-rate certificates
of deposit are estimated using a discounted cash flow calculation that applies
interest rates currently offered on certificates to a schedule of aggregated
expected monthly maturities on such deposits. The carrying value of accrued
interest payable approximates fair value.

NOTES PAYABLE TO THE FHLB

     The fair values of long-term notes payable to the FHLB are estimated using
discounted cash flow analysis, based on current borrowing rates for similar
types of borrowing arrangements. The carrying value for variable rate notes
payable to the FHLB approximates fair value.
                                        96
<PAGE>   99
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. FAIR VALUES OF FINANCIAL INSTRUMENTS -- (CONTINUED)

ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST PAYABLE

     The carrying amounts reported in the statement of financial condition for
accrued interest receivable and accrued interest payable approximate fair value.

OFF-BALANCE SHEET ITEMS

     The fair value of commitments to extend credit and forward commitments to
sell originated loans is not material and is therefore not presented.

     The carrying amounts and fair values of the Company's financial instruments
consisted of the following:

<Table>
<Caption>
                                                                         AT JUNE 30,
                                                        ----------------------------------------------
                                                                2001                     2000
                                                        ---------------------    ---------------------
                                                                    ESTIMATED                ESTIMATED
                                                        CARRYING      FAIR       CARRYING      FAIR
                                                         AMOUNT       VALUE       AMOUNT       VALUE
                                                        --------    ---------    --------    ---------
                                                                        (IN THOUSANDS)
<S>                                                     <C>         <C>          <C>         <C>
Cash and cash equivalents...........................    $ 22,926    $ 22,926     $ 16,559    $ 16,559
Investment securities available-for-sale............      42,007      42,007       38,315      38,315
Investment securities held-to-maturity..............         455         455           --          --
Mortgage-backed and related securities
  available-for-sale................................      50,972      50,972       35,944      35,944
Mortgage-backed and related securities
  held-to-maturity..................................      10,619      10,708       15,017      14,685
Derivative investment securities....................          --          --          166         166
Federal Home Loan Bank stock........................       8,355       8,355        7,760       7,760
Loans receivable:
  Real estate (including home equity)...............     324,495     324,843      362,848     360,192
  Credit card and other consumer....................       2,628       2,628        3,079       3,079
  Commercial........................................      23,621      23,621       24,238      24,238
                                                        --------    --------     --------    --------
                                                        $350,744    $351,092     $390,165    $387,509
                                                        --------    --------     --------    --------
Accrued interest receivable.........................    $  3,384    $  3,384     $  3,583    $  3,583
Deposits:
  NOW and non-interest bearing......................      22,269      22,269       11,547      11,547
  Money market......................................      41,122      41,122       27,398      27,398
  Passbooks.........................................      14,701      14,701       18,373      18,373
  Certificates......................................     241,720     244,097      288,000     288,115
                                                        --------    --------     --------    --------
                                                        $319,812    $322,189     $345,318    $345,433
                                                        --------    --------     --------    --------
Borrowings:
  Notes payable and other borrowings................    $141,108    $145,243     $132,040    $130,629
Accrued interest payable............................    $  3,382    $  3,382     $  3,421    $  3,421
</Table>

                                        97
<PAGE>   100
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. INCOME TAXES

     Income tax expense (benefit) in the consolidated statements of income
consists of the following:

<Table>
<Caption>
                                                                CURRENT    DEFERRED    TOTAL
                                                                -------    --------    -----
                                                                       (IN THOUSANDS)
<S>                                                             <C>        <C>         <C>
Year ended June 30, 2001:
  Federal...................................................    $1,351      $(129)     $1,222
  State.....................................................         0        (13)        (13)
                                                                ------      -----      ------
                                                                $1,351      $(142)     $1,209
                                                                ======      =====      ======
Year ended June 30, 2000:
  Federal...................................................    $1,867      $(304)     $1,563
  State.....................................................        69        (95)        (26)
                                                                ------      -----      ------
                                                                $1,936      $(399)     $1,537
                                                                ======      =====      ======
Year ended June 30, 1999:
  Federal...................................................    $1,705      $(213)     $1,492
  State.....................................................        46        (33)         13
                                                                ------      -----      ------
                                                                $1,751      $(246)     $1,505
                                                                ======      =====      ======
</Table>

     Income tax expense attributable to income from operations was $1,209,000,
$1,537,000 and $1,505,000 for fiscal 2001, 2000 and 1999, respectively, and
differed from the amounts computed by applying the federal income tax rate of 34
percent to pre-tax income from continuing operations as a result of the
following:

<Table>
<Caption>
                                                                   YEARS ENDED JUNE 30,
                                                                --------------------------
                                                                 2001      2000      1999
                                                                 ----      ----      ----
                                                                      (IN THOUSANDS)
<S>                                                             <C>       <C>       <C>
Computed "expected" tax expense.............................    $1,184    $1,626    $1,576
  State income tax (benefits), net of federal income tax
     effect.................................................      (115)      (17)        9
  Recapture (utilization) of Low Income Housing credits.....        10       (34)      (20)
     Net (increase)/decrease in the cash surrender value of
      life insurance net of premiums paid...................       (13)      (14)       15
  Other.....................................................       143       (24)      (75)
                                                                ------    ------    ------
                                                                $1,209    $1,537    $1,505
                                                                ======    ======    ======
</Table>

                                        98
<PAGE>   101
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. INCOME TAXES -- (CONTINUED)

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:

<Table>
<Caption>
                                                                  AT JUNE 30,
                                                                ----------------
                                                                 2001      2000
                                                                 ----      ----
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Deferred Tax Assets:
  Deferred compensation.....................................    $  553    $  370
  Allowances for loan losses................................     1,301     1,274
  Deferred loan fees........................................       185        --
  Unrealized depreciation on securities available for
     sale...................................................        54     1,354
  Other, net................................................       382       294
                                                                ------    ------
  Gross deferred tax assets.................................     2,475     3,292
Deferred Tax Liabilities:
  Depreciation..............................................       141       163
  Unearned Loan Fees........................................       204        --
  FHLB stock................................................       405       174
  Other.....................................................        43       116
                                                                ------    ------
  Gross deferred tax liabilities............................       793       453
                                                                ------    ------
  Net deferred tax assets...................................    $1,682    $2,839
                                                                ======    ======
</Table>

     The net deferred tax asset decreased by $1,157,000 in fiscal 2001 and
increased $1,014,000 in fiscal 2000. The difference between the increase and the
deferred portion of tax expense is primarily attributable to the tax effect on
the unrealized depreciation on securities available-for-sale which does not have
an income statement impact in 2001 and 2000.

                                        99
<PAGE>   102
                      LEDGER CAPITAL CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<Table>
<Caption>
                                                                 FOR THE THREE MONTHS ENDED,
                                   ---------------------------------------------------------------------------------------
                                   JUNE 30,   MAR. 31,   DEC. 31,   SEPT. 30,   JUNE 30,   MAR. 31,   DEC. 31,   SEPT. 30,
                                     2001       2001       2000       2000        2000       2000       1999       1999
                                   --------   --------   --------   ---------   --------   --------   --------   ---------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                <C>        <C>        <C>        <C>         <C>        <C>        <C>        <C>
Interest and dividend income.....   $9,409     $9,755     $9,993     $10,103    $10,180    $10,173     $9,755     $8,874
Interest expense.................    6,386      6,863      7,176       7,249      6,955      6,889      6,417      5,762
                                    ------     ------     ------     -------    -------    -------     ------     ------
Net interest income..............    3,023      2,892      2,817       2,854      3,225      3,284      3,338      3,112
Provision for loan losses........      100        150        100          80        244        337        170        120
                                    ------     ------     ------     -------    -------    -------     ------     ------
Net interest income after
  provision for loan losses......    2,923      2,742      2,717       2,774      2,981      2,947      3,168      2,992
Gain (loss) on sales of
  investments and mortgage-backed
  and related securities.........       49         --         --          --         --        (14)         8         54
Gain (loss) on sale of loans,
  net............................      398        312        166         112         45       (188)        57         96
Other non-interest income........      279        262        257         275        303        291        322        257
                                    ------     ------     ------     -------    -------    -------     ------     ------
Total non-interest income........      726        574        423         387        348         89        387        407
Total non-interest expense.......    2,850      2,537      2,239       2,157      2,059      2,082      2,200      2,196
                                    ------     ------     ------     -------    -------    -------     ------     ------
Income before income taxes.......      799        779        901       1,004      1,270        954      1,355      1,203
Income tax expense...............      294        266        300         349        435        276        431        395
                                    ------     ------     ------     -------    -------    -------     ------     ------
Net income.......................   $  505     $  513     $  601     $   655    $   835    $   678     $  924     $  808
                                    ======     ======     ======     =======    =======    =======     ======     ======
Earnings per share (basic).......   $ 0.21     $ 0.22     $ 0.25     $  0.27    $  0.34    $  0.27     $ 0.36     $ 0.30
Earnings per share (diluted).....   $ 0.20     $ 0.21     $ 0.25     $  0.26    $  0.33    $  0.26     $ 0.35     $ 0.29
Cash dividends per share.........   $ 0.05     $ 0.05     $ 0.05     $  0.05    $  0.05    $  0.05     $ 0.05         --
Market Information
  Trading range -- high..........   $16.15      11.25      11.06       10.75      11.25      10.50      11.25      12.31
                   low...........   $10.00       9.63       9.75        8.31       8.13       8.50       8.94      10.00
                   close.........   $16.13      11.00       9.75       10.69       9.13       9.38       9.00      10.97
</Table>

                                       100
<PAGE>   103

                                    PART II

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

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information required by this item with respect to directors is included
under the heading "Election of Directors" in the Company's definitive Proxy
Statement/Prospectus dated September 21, 2001, relating to the 2001 Annual
Meeting of Shareholders currently scheduled for October 24, 2001, which section
is hereby incorporated herein by reference. Information concerning executive
officers who are not directors, with the exception of Messrs. James D. Smessaert
and Peter A. Gilbert, is contained in Part I of this Form 10-K pursuant to
paragraph (b) of Item 401 of Regulation S-K in reliance on Instruction G(3).

ITEM 11. EXECUTIVE COMPENSATION

     Information required by this item is included under the heading
"Compensation of Executive Officers and Directors" in the Company's definitive
Proxy Statement/Prospectus dated September 21, 2001, relating to the 2001 Annual
Meeting of Shareholders currently scheduled for October 24, 2001, which section
is hereby incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information required by this item is included under the heading "Stock
Ownership of Certain Beneficial Owners" in the Company's definitive Proxy
Statement/Prospectus dated September 21, 2001, relating to the 2001 Annual
Meeting of Shareholders currently scheduled for October 24, 2001, which section
is hereby incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information required by this item is included under the heading
"Indebtedness of Management and Certain Transactions" in the Company's
definitive Proxy Statement/Prospectus dated September 21, 2001, relating to the
2001 Annual Meeting of Shareholders currently scheduled for October 24, 2001,
which section is hereby incorporated herein by reference.

                                       101
<PAGE>   104

                                    PART IV

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

(A)(1) FINANCIAL STATEMENTS

     The following financial statements and financial statement schedules are
included under a separate caption "Financial Statements and Supplementary Data"
in Part II, Item 8 hereof and are incorporated herein by reference.

     Independent Auditor's Report

     Consolidated Statements of Financial Condition at June 30, 2001 and 2000

     Consolidated Statements of Income for Years Ended June 30, 2001, 2000 and
1999

     Consolidated Statements of Shareholders' Equity for Years Ended June 30,
2001, 2000 and 1999

     Consolidated Statements of Cash Flows for Years Ended June 30, 2001, 2000
and 1999

     Notes to Consolidated Financial Statements

(A)(2) FINANCIAL STATEMENT SCHEDULES

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

                                       102
<PAGE>   105
     (A)(2)  FINANCIAL STATEMENT SCHEDULES

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

<TABLE>
<CAPTION>

                                                                                                        SEQUENTIAL
     (A)(3)  EXHIBITS                                                                                   PAGE NUMBER
             --------                                                                                   -----------
<S>     <C>                                                                                          <C>
   2.1   Agreement and Plan of Merger (1)
   2.2   Stock Option Agreement (1)
   3.1   Amended Articles of Incorporation of Registrant (2)
   3.2   Amended By-laws of Registrant (3)
   3.3   Stock Charter of Ledger Bank (2)
   3.4   By-laws of Ledger Bank (2)
  10.1   Ledger Bank 401(k) Savings Plan (2)
  10.2   Ledger Bank Employee Stock Ownership Plan (2)
  10.3   Credit Agreement by and between Ledger Bank,
           Employee Stock Ownership Trust and Company (2)
  10.4   Ledger Bank Management Recognition and Retention Plan (2)
  10.5   Ledger Capital Corp. 1993 Incentive Stock Option Plan, as amended (4)
  10.6   Ledger Capital Corp. 1993 Stock Option Plan for Outside Directors, as amended (4)
  10.7   Executive Employee Supplemental Compensation Agreement - James D. Smessaert (5)
  10.8   Executive Employee Supplemental Compensation Agreement - Peter A. Gilbert (5)
  10.9   Ledger Bank Employment Agreement - James D. Smessaert (6)
  10.10  Ledger Bank Employment Agreement - Peter A. Gilbert (6)
  10.11  Ledger Bank Employment Agreement - Arthur E. Thompson (2)
  10.12  Ledger Bank Employment Agreement - Elizabeth S. Borst (8)
  10.13  Ledger Capital Corp. Employment Agreement - James D. Smessaert (6)
  10.14  Ledger Capital Corp. Employment Agreement - Peter A. Gilbert (6)
  12.1   Statement regarding computation of per share earnings - See Footnote
         (1) in Part II, Item 8
  13.1   President's Letter to Shareholders (7)
  21.1   Subsidiaries of the Registrant - See "Subsidiary Activities" in Part I, Item 1
  23.1   Consent of KPMG LLP (8)
  24.1   Powers of Attorney for certain officers and directors (2)

</TABLE>

------------
(1)  Incorporated by reference to exhibits filed with the Company's Current
     Report on Form 8-K filed with the SEC on June 18, 2001.
(2)  Incorporated by reference to exhibits filed with the Company's Form S-1
     Registration Statement declared effective on November 4, 1993 (Registration
     Number 33-67184).
(3)  Incorporated by reference to exhibits filed with the Company's Annual
     Report on Form 10-K for the fiscal year ended June 30, 1995.
(4)  Incorporated by reference to exhibits filed with the Company's Annual
     Report on Form 10-K for the fiscal year ended June 30, 1997.
(5)  Incorporated by reference to exhibits filed with the Company's Quarterly
     Report on Form 10-Q for the quarter Ended December 31, 1998.
(6)  Incorporated by reference to exhibits filed with the Company's Quarterly
     Report on Form 10-Q for the quarter Ended March 31, 2000.
(7)  Filed in paper format with the SEC pursuant to Rule 101 of Regulation S-T.
(8)  Filed herein.

     (b)  Reports on Form 8-K
          The following reports on Form 8-K were filed with the SEC by the
          Company during the fourth quarter of fiscal 2001:


                                     -103-
<PAGE>   106

         1)       Current Report on Form 8-K filed on May 1, 2001, reporting the
                  Company's intent to restate its previously reported results of
                  operations for the fiscal year ended June 30, 2000 and the
                  first two quarters of fiscal 2001, September 30, 2000 and
                  December 31, 2000. The press release dated April 30, 2001 and
                  attached as Exhibit 99 to the Form 8-K contained restated
                  financial statements for the fiscal year ended June 30, 2000
                  and the six months ended December 31, 2000.

         2)       Current Report on Form 8-K filed on June 18, 2001, reporting
                  the execution by the Company of the Agreement and Plan of
                  Merger and Stock Option Agreement referred to in Exhibits 2.1
                  and 2.2 to this Form 10-K.

    (c)  Exhibits
         Reference is made to the exhibit index set forth above at (a)(3).

    (d)  Financial Statement Schedules
         Reference is made to the disclosure set forth above at (a)(1 and 2).




                                     -104-
<PAGE>   107

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
                                          LEDGER CAPITAL CORP.
                                          /s/ JAMES D. SMESSAERT
                                          --------------------------------------
                                          James D. Smessaert, Chairman,
                                          President and Chief Executive Officer
                                          Date: September 13, 2001

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

<Table>
<S>                                              <C>
/s/ MARTIN HEDRICH, JR.                          /s/ REGINALD M. HISLOP, III
---------------------------------------------    ---------------------------------------------
Martin Hedrich Jr., Director                     Reginald M. Hislop, III, Director

Date: September 13, 2001                         Date: September 13, 2001

/s/ PETER A. GILBERT                             /s/ CHARLES E. RICKHEIM
---------------------------------------------    ---------------------------------------------
Peter A. Gilbert, Executive Vice President,      Charles E. Rickheim, Director
Corporate Secretary and Director

Date: September 13, 2001                         Date: September 13, 2001

/s/ JAMES D. SMESSAERT                           /s/ ARTHUR E. THOMPSON
---------------------------------------------    ---------------------------------------------
James D. Smessaert, Chairman,                    Arthur E. Thompson
President and Chief Executive Officer            Chief Financial Officer and Corporate
(Principal Executive Officer)                    Treasurer
                                                 (Principal Financial and Accounting Officer)

Date: September 13, 2001                         Date: September 13, 2001

/s/ DONALD A. ZELLMER
---------------------------------------------
Donald A. Zellmer, Director

Date: September 13, 2001
</Table>

                                       105