<PAGE>   1

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

[ X ]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

                   For The Fiscal Year Ended December 31, 1999
                                       OR

[   ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

                         Commission file number 0-19391

                              NAB ASSET CORPORATION
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                        <C>
                 Texas                            76-0332056
     (State or other jurisdiction of           (I.R.S. Employer
     incorporation or organization)           Identification No.)

         23361 Madero, Suite 200                   92679
            Mission Viejo, CA                   (Zip Code)
         (Address of principal
           executive offices)
</TABLE>

       Registrant's telephone number, including area code: (949) 465-0244

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

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

                          Common Stock, $.10 Par Value
                                (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 filing
requirements for the past 90 days. Yes X  No __.

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 2000 was $1,114,000 based upon the closing price as
of such date.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:

<TABLE>
<S>                                              <C>
Title of Class                                   Outstanding at March 15, 2000
Common Stock                                                5,091,300
</TABLE>

DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III, Items 10, 11, 12 and 13, will be
included in a definitive proxy statement to be filed on or before April 30, 2000
pursuant to Regulation 14A and is incorporated herein by reference.
<PAGE>   2
                                     PART 1


ITEM 1. BUSINESS

THE COMPANY

         NAB Asset Corporation, (the "Company" or "NAB") is a financial services
company engaged in the residential lending business. The Company commenced
operations in July 1991 following its acquisition and assumption of
substantially all the assets and liabilities of National Asset Bank (a bank in
liquidation) (the "Bank"). The Bank was formed in 1988 in connection with the
merger of Allied Bancshares, Inc. ("Allied") with a subsidiary of First
Interstate Bancorp ("First Interstate") for the purpose of liquidating various
non-performing loan and real estate assets held by Allied and its subsidiaries
for the benefit of the prior Allied stockholders. Until June 5, 1996, the
Company's business consisted of the acquisition, ownership, management and
disposition of loans and real estate for its own account and the accounts of
others. The Company's business activities were limited to the ownership,
collection and sale of the assets acquired by the Company from the Bank, the
investment in and management of four privately held limited partnerships formed
for the purpose of acquiring non-performing and other troubled loans.

         On June 5, 1996, pursuant to a Plan and Agreement of Merger, CPS
Investing Corp. ("CPS Sub"), a wholly owned subsidiary of Consumer Portfolio
Services, Inc. ("CPS"), was merged with and into NAB (the "Merger"). Under the
terms of the Plan and Agreement of Merger and in exchange for all of the
outstanding shares of NAB $.01 par value common stock, the shareholders of NAB
received on a pro rata basis (i) an aggregate cash distribution of $15.3 million
($3.64 per share), (ii) an undivided interest in a liquidating trust
("Liquidating Trust"), and (iii) 62% of the outstanding shares of common stock,
$.10 par value (the "New Common Stock") of the new combined company which had a
net asset value of $7.5 million as of the merger date. The Liquidating Trust was
established for the benefit of converting the trust assets to cash for the NAB
shareholders. On June 5, 1996 in connection with the Merger, NAB contributed
approximately $3.0 million in cash and all of the remaining non-cash assets of
NAB with a net book value of $3.7 million to the Liquidating Trust. No gain or
loss was recognized by NAB in connection with the merger. In exchange for a $4
million contribution to NAB, CPS received 38% or 1,934,706 shares of the New
Common Stock of NAB.

         Simultaneously with the merger, the Company amended its Articles of
Incorporation and By-laws to remove the previous operating restrictions on NAB
and, in order to preserve the Company's large net operating loss ("NOL") for tax
purposes, to restrict the acquisition of 5% or more of the outstanding shares of
New Common Stock of the Company so as to prevent the occurrence of an ownership
change under Section 382 of the Internal Revenue Code of 1986 (Section 382), as
amended. Section 382 provides in general that if a corporation undergoes an
ownership change, the amount of taxable income that the corporation may offset
after the date of such ownership change with NOLs and certain built-in losses
existing at the date of such ownership change will be subject to an annual
limitation. The Company's NOL's could become subject to certain limitations on
utilization in the event the Company undergoes an ownership change within the
meaning of Section 382.

         On July 10, 1996 the Company acquired from CPS 84% of the outstanding
common stock of Mortgage Portfolio Services, Inc. ("MPS") for a purchase price
of $300,000. The Company also acquired all of the outstanding shares of MPS
preferred stock for $2.25 million, through conversion of debt to equity, and
contributed $249,000 to the additional paid-in capital of MPS.

         MPS, which was organized in October 1995 and began business operations
in April 1996, is a Dallas, Texas based mortgage lender whose customers are
typically home purchasers and owners who cannot access traditional lending
institutions for financing because of job stability, credit problems or type of
property (sub-prime).

                                       1
<PAGE>   3
         On August 31, 1997, MPS acquired the fixed assets and employed the
personnel of the single-family mortgage lending division of Pacific Southwest
Bank ("PSB"), a Dallas based savings and loan. A premium of $200,000 was paid
for the operation. In 1999 and 1998, the Company incurred additional purchase
premiums of $18,000 and $195,000 respectively based on 1999 and 1998 production
levels. The division, Pacific American Mortgage Company ("PAMCO") is primarily
engaged in mortgage lending through eleven retail branches in seven states.
Substantially all PAMCO mortgage loan originations are conventional conforming,
non-conforming and government insured mortgages (prime).

THE BUSINESS

         Through MPS, the Company originates, acquires, warehouses and sells
residential mortgage loans. MPS originates both conventional and government
insured mortgages (prime originations) and originates non-conforming residential
mortgage loans that are not salable to the government-sponsored entities or the
government agencies. These loans are commonly referred to as sub-prime loans.

         MPS also has a division that services construction loans that are made
to consumers. These loans are originated through the PAMCO retail branches. The
construction loans are originated in conjunction with the customer's permanent
mortgage (one-time closings). Originations of these loans in 1999 and 1998
totaled $22 and $24 million, respectively. This amount represents the total
commitment of funds not necessarily the ultimate amount disbursed. Amounts
outstanding at December 31, 1999 and 1998 totaled $3,330,000 and $9,465,000,
respectively. Originations of this product has declined over the past two years
as financial institutions in the areas where PAMCO originates these loans,
principally northern California, have begun to offer the product at more
competitive rates.

Origination Strategies

         Retail Originations

         PAMCO originates loans through thirteen branches in six states using
account executives that solicit loans through real estate agents, homebuilders
and referrals from previous customers. PAMCO has 28 account executives
soliciting loans in this manner. PAMCO retail originations totaled $444 million
in 1999 and $549 million in 1998. Retail prime originations totaled $433 million
in 1999 and $534 million in 1998. Retail sub-prime originations totaled $11
million in 1999 and $15 million in 1998.

         In late 1998, MPS began a direct to consumer solicitation program
through the internet. Preliminary applications are completed on-line by
prospective customers. The applications are then processed underwritten and
closed by MPS personnel. In 1999 MPS discontinued this origination strategy. MPS
is currently developing a business to business internet site that will assist
its wholesale customers in the loan origination process. The internet site will
contain pricing and product information and allow the customer to track the
status of loans in the process of underwriting and closing.

         In 1999 MPS began to enter into the retail sub-prime origination
market. At December 31, 1999 MPS had one branch in Virginia. This branch
originates both prime and sub-prime mortgage loans through direct contact with
the consumer. Since December 31, 1999 MPS has hired a senior level executive to
seek out additional branches. These branches are operated as "net branches". A
net branch manager or owner receives a portion of the profit of a branch. These
profits are calculated under various formulas, but generally are the revenues
relating to the loans produced by the branch less direct expenses and an charge
from MPS for providing support services. Retail originations in 1999 amounted to
less than $1 million.

         Wholesale Originations

         In 1999 MPS originated approximately 72% of its sub-prime mortgage
loans using a network of approved independent mortgage brokers. PAMCO also
originated approximately 11% of its mortgages in the same manner through a
branch in northern California. All loans are underwritten and closed centrally.
A fee is normally paid to the mortgage broker of up to 2% of the loan amount for
sub-prime loans and 3% of the loan amount for prime loans. Wholesale sub-prime
originations totaled $203 million in 1999 and $234 million in 1998. Wholesale
prime originations totaled $55 million in 1999 and $63 million in 1998.

                                       2
<PAGE>   4
         Correspondent Originations

         In 1999 MPS originated approximately 20% of its sub-prime loans by
purchasing closed loans from other mortgage bankers. These loans are
underwritten by MPS prior to purchase. Correspondent sub-prime production was
$41 million in 1999 and $83 million in 1998.

Underwriting

         Underwriting guidelines with respect to prime mortgage loans are based
upon the guidelines set forth by the Federal National Mortgage Association
("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC") for conventional
loans. The guidelines of the Federal Housing Administration ("FHA") and Veterans
Administration ("VA") are utilized for government insured or guaranteed
mortgages. Prime mortgage loans that would be conforming if not for the size of
the loan are underwritten to specific mortgage investor guidelines and are
generally consistent with FNMA or FHLMC guidelines. In most cases PAMCO has been
approved to underwrite the mortgage loan on behalf of the investor. MPS is also
an approved FHLMC seller/servicer.

         Underwriting guidelines for sub-prime mortgages are developed to
generally conform to the guidelines as set forth by mortgage loan investors that
have approved MPS as a seller of mortgage loans. MPS utilizes a grid that, based
upon a borrower's credit history and current financial situation (including debt
to income ratios, employment and cash on hand), assigns a grade, A through D, to
that borrower. The grading of the loan determines the rate charged to the
borrower and the maximum loan based on the appraised value of the collateral.

Loan Sales

         Best Efforts Sales

         The Company's originations of conventional and government insured or
guaranteed loans are sold to investors on a loan by loan basis. When the
customer wishes to lock in an interest rate, PAMCO will grant the rate to the
borrower and in turn lock in a price on or about the same date with an investor.
PAMCO represents to the investor that if the loan is closed within the time
allotted by the investor PAMCO will deliver that loan to that investor. If the
loan does not close within the allotted time period PAMCO is under no further
obligation to the investor. If the loan closes and upon receipt of the
appropriate executed legal documentation PAMCO will deliver the legal documents
and credit file to the investor. Upon satisfactory completion of the investor's
review of the documents the investor purchases the loan at the agreed upon
price. All of PAMCO's loans are sold on a servicing released basis, meaning a
portion of the price paid to PAMCO represents the value of the servicing rights
that PAMCO has released to the investor.

         Bulk Sales

         MPS has historically sold its sub-prime mortgage production on a
servicing released basis to investors in pools based on a bidding process.
Monthly, loans would be aggregated and summarized information regarding the
loans would be distributed to potential bidders. A winning bidder would be
selected who would then review the files and purchase the acceptable loans. In
late 1998, a severe liquidity strain in the sub-prime mortgage industry caused
many investors to exit the market for sub-prime mortgage pools. As a result MPS
is not currently selling a significant amount of loans on a bid basis.

         Forward Commitments

         MPS enters into commitments with investors to sell sub-prime mortgage
loans at an agreed to price assuming certain criteria are met. The commitments
also contain formulas that would allow the investor to pay less than the maximum
price if those criteria were not met. These commitments generally provide for
maximum delivery amounts and specific time periods for delivery ranging from
three to six months

                                       3
<PAGE>   5
         Securitization

         In June 1998 MPS completed its first securitization of approximately
$51,000,000 of sub-prime loans. In a securitization, the owner of loans sells
loans to a trust which in turn issues mortgage loan asset backed securities to
investors. The cash received is then distributed to the owner. The owner also
receives an interest in the excess cash flow generated from the sold loans which
is called a residual interest. The holder of the security then receives the
stated interest on the security and the principal repayments on the underlying
loans. The security that MPS issued was insured by a monoline insurance company
and the underlying mortgages were insured, as to credit losses, up to 5% of the
original principal balance of the loans sold to the trust under a pool policy
issued by a mortgage insurance company. Additionally a portion of the excess
cash flows accruing to MPS monthly are held in trust until certain minimum
levels of cash reserves are achieved.

         MPS recorded a gain on sale of loans equal to the present value of the
cash flows to be received over the life of the securities. This gain was
calculated using prepayment and loss assumptions that affect the future cash
flows to be received. MPS is also the servicer of the loans and as a result
receives a portion of the monthly interest paid by the borrowers as a fee.

         Hedging Activities

         All of the Company's prime mortgage production is sold on a best
efforts basis as described above. The Company incurs no interest rate risk in
its sales strategy and therefore has no hedging activities. MPS's sub-prime
mortgage loans are generally sold within thirty days of origination and based
upon its history, short term fluctuations in interest rates have had little
impact on the prices that have been received for its mortgage loan production.
Additionally, the Company has determined that the cost of hedging its sub-prime
production outweighs any benefit that would be derived as a result.

Competition and Other Risks

         MPS faces competition from numerous other mortgage bankers, banks,
savings and loans and finance companies. Many of these competitors are larger
and have greater access to capital and other financial resources than MPS.

         In connection with financing MPS's mortgage loans receivable, most
financial institutions will not finance 100% of the loan amount. MPS will
generally be required to contribute, in addition to the normal costs of
operating the origination function, two percent of the principal amount of the
loan. MPS must generate sufficient cash flow from sales of mortgage loans to
fund the negative cash flow associated with the origination of its loans.
Additionally, the term of MPS's financing agreements is generally one year and
there can be no assurance that the financing can be renewed or replaced or if
renewed or replaced at the same or more favorable terms.

         The contractual arrangements associated with the sale of sub-prime
loans require, for a specified period of time, generally one to two years,
indemnification for loans that prepay or default. Additionally MPS represents
and warrants to the investor that at the date of sale no material changes in the
borrowers condition since the origination date has occurred. A significant
increase in prepayments or defaults related to the loans sold would have a
significant negative impact on the liquidity and financial condition of MPS.

         The business of MPS could be negatively affected if there is a downturn
in the economy in the geographic areas served by MPS, which results in a decline
for consumer credit or in real estate values. If originations decline, sales of
mortgage loans, the main source of MPS's revenue will also decline. Declining
real estate values inhibit the borrower's ability to refinance and obtain cash
based on the value of the borrowers property.

         Fluctuations in interest rates may adversely affect MPS's loan
production. Substantial increases in long-term interest rates generally result
in a decline in mortgage originations. A large decline in interest rates may
result in unusually large prepayments which, under the terms of the contracts
governing MPS's sales of mortgage loans, could require MPS to reimburse the
purchasers of such loans for a portion of the

                                       4
<PAGE>   6
servicing release premium paid by them for such loans. Approximately 66% of
MPS's loan production is at a fixed rate of interest. If short-term interest
rates rise, MPS's borrowing cost would increase, resulting in a decline in the
spread (the difference between interest received on loans and paid on
borrowings) MPS earns. Additionally, prices paid for the Company's loans may be
negatively impacted. An increase in short-term interest rates would also
negatively impact the value of MPS's residual interest in securitization as a
portion of the payments made to bondholders adjust based upon movements in the
LIBOR.

         The Company's sub-prime mortgage loan production in 1999 represented
34% of the Company's total loan production and revenues through the sale of its
sub-prime loans totaled $7,405,000 or 27% of the Company's consolidated revenue.
The Company is highly dependent upon bulk sale and forward commitment deliveries
for its sub-prime revenue. The number of financial institutions purchasing
sub-prime mortgages has declined over the past two years. Competitors that have
greater capital and financial resources than the Company have access to the
financial markets to securitize their sub-prime production. If investors of the
Company's sub-prime mortgage loans continue to exit the market it would have a
material adverse effect on the Company. In 1999 two customers accounted for
$5,791,000 or 74% of the Company's gains on sales of sub-prime mortgage loans.

         During 1999, approximately $9,469,000 or 71% of the Company's gain on
sale of loans were as a result of loan sales to three customers.

         MPS's business is subject to extensive regulation, supervision and
licensing by federal, state and local government authorities and is subject to
various laws and judicial and administrative decisions imposing requirements and
restrictions on a substantial portion of its operations. The Company's consumer
lending activities are subject to the Federal Truth-in-Lending Act and
Regulation Z (including the Home Ownership and Equity Protection Act of 1994),
the Federal Equal Credit Opportunity Act and Regulation B, as amended ("ECOA"),
the Fair Credit Reporting Act of 1970, as amended, the Federal Real Estate
Settlement Procedures Act ("RESPA") and Regulation X, the Fair Housing Act, the
Home Mortgage Disclosure Act and the Federal Debt Collection Practices Act, as
well as other federal and state statutes and regulations affecting the Company's
activities. The Company is also subject to the rules and regulations of and
examinations by the Department of Housing and Urban Development ("HUD") and
state regulatory authorities with respect to originating, processing,
underwriting and selling loans. These rules and regulations, among other things,
impose licensing obligations on the Company, establish eligibility criteria for
mortgage loans, prohibit discrimination, provide for inspections and appraisals
of properties, require credit reports on loan applicants, mandate certain
disclosures and notices to borrowers and, in some cases, fix maximum interest
rates, fees and mortgage loan amounts. Failure to comply with these requirements
can lead to loss of approved status, demands for indemnification or mortgage
loan repurchases, certain rights of rescission for mortgage loans, claims by
mortgage borrowers and administrative enforcement actions.

DISCONTINUED OPERATIONS

         In the third quarter of 1999 the Company elected to dispose of two of
its operating segments, Construction Portfolio Funding, Inc. ("CPFI") and NAFCO,
Inc. ("NAFCO").

         CPFI began operations in December 1997 and was engaged in the business
of providing financing and servicing to residential homebuilders for the
construction of single family residences and, to a lesser extent, acquisition
and development loans, lot loans and model home loans to those homebuilders.

         NAFCO began operations in January 1997 and was a lender to companies in
the rent-to-own and rental purchase business.

EMPLOYEES

         At December 31, 1999 the Company and its subsidiaries employed 237
persons. Of that total MPS employed 119 persons, PAMCO employed 113 persons and
NAB employed 3 persons at the corporate level. Two persons were employed by the
discontinued operations.

                                       5
<PAGE>   7
ITEM 2. PROPERTIES

         The Company's executive offices, totaling 888 square feet and located
in Mission Viejo, California, are leased at an annual base rent of $17,000. The
lease expires in April of 2001.

         The Company through its subsidiaries also leases 55,000 square feet and
occupies 38,000 square feet in Dallas for administrative and sales functions
relating to its mortgage banking operations. One lease representing 14,000
square feet expires in August 2000 and will not be renewed. MPS leases office
space for its branches in Arizona, California, Colorado, Florida, Nevada,
Tennessee and Texas. The offices vary in size depending on the origination
volume in each location.

         The Company believes that its facilities are adequate for its immediate
needs and that additional space is available at a comparable cost if needed.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is subject to lawsuits which arise in the ordinary course
of its business. Management is of the opinion, based in part upon consultation
with its counsel, that the liability of the Company, if any, arising from
existing and threatened lawsuits would not have a material adverse effect on the
Company's consolidated financial position and results of operations.

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

         No matters were submitted to a vote of the Company's stockholders
during the fiscal quarter ended December 31, 1999.

                                     PART II

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

         The Company's common stock trades on The OTC Bulletin Board under the
symbol "NABC.OB". The following table sets forth the quarterly high and low sale
prices for the common stock.

<TABLE>
<CAPTION>
                                                                PRICE
                                                      -------------------------
                                                      HIGH           LOW
                                                      ----------     ----------
     Year ended December 31, 1998
<S>                                                   <C>            <C>
          First Quarter                               3-1/4           2-1/8
          Second Quarter                              4               2-3/8
          Third Quarter                               2-7/8           1-3/8
          Fourth Quarter                              2-1/4           1-1/4

     Year ended December 31, 1999
          First Quarter                               1-5/8           1-1/32
          Second Quarter                              1-1/4            13/16
          Third Quarter                               1                 5/16
          Fourth Quarter                                5/8             3/16
</TABLE>

         As of February 29, 2000, there were approximately 7,200 shareholders of
record.

                                       6
<PAGE>   8
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

                    As of and for the year ended December 31,
                  (all amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                      1999            1998            1997           1996             1995(1)
                                                      ----            ----            ----           ----             -------
STATEMENT OF OPERATIONS:
<S>                                                <C>             <C>             <C>            <C>                    <C>
  Revenues from continuing operations .......      $  27,210       $  35,676       $  16,213      $   1,414              $-
  Earnings (loss) from continuing operations          (5,000)           (634)          1,053           (796)             --
  Earnings (loss) from discontinued
   operations, net of income taxes ..........         (1,553)            796           1,181          2,344            (456)
  Net earnings (loss) .......................         (6,553)            162           2,234          1,548            (456)
 Basic and diluted earnings (loss) per share
     from continuing operations before
     cumulative change in accounting
     principle ..............................          (0.95)          (0.13)           0.21          (0.16)             --
  Basic and diluted earnings (loss) per share          (1.29)           0.03            0.44           0.30           (0.11)
  Weighted average number common shares
   outstanding ..............................          5,091           5,091           5,091          5,091           4,209
 BALANCE SHEET:
  Residential mortgage loans ................         46,029          78,911          45,472         12,648              --
  Construction loans ........................          3,330           9,465          13,091             --              --
  Total assets ..............................         64,406         113,317          83,235         17,904          22,720
  Total debt ................................         49,495          86,994          66,302         11,819              --
  Total liabilities .........................         62,313         104,203          75,080         12,298             744
  Shareholders' equity (net assets) .........          2,046           8,599           7,839          5,605          21,976
  Distributions .............................             --              --              --         21,883              --
  Book value per share ......................           0.40            1.69            1.54           1.10              --
  Cash distributions per share (2) ..........             --              --              --           3.64              --
  Transfer to liquidating trust per share (2)             --              --              --           1.56              --
</TABLE>

(1)      All amounts relate to discontinued operations.

(2)      Paid on 4,208,835 shares of common stock

      Reference is made to Item 1. Business, for discussion of the merger
between the Company and CPS Sub and the resulting distribution of cash and other
assets to the shareholders.

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

         The following should be read in conjunction with the Consolidated
Financial Statements of the Company for the three years ended December 31, 1999.

GENERAL

         NAB is a financial services company engaged in two reportable segments,
sub-prime and prime residential mortgage banking. The sub-prime residential
mortgage banking segment (MPS) was acquired in July 1996 and the prime
residential mortgage banking segment (PAMCO) was acquired in August of 1997.
PAMCO is a division of MPS. In the third quarter of 1999, the Company began
disposition efforts related to two other segments, residential construction
lending (CPFI) and commercial lending (NAFCO). The residential construction
lending business, begun in December, 1997, originated and held for investment
single family residential construction loans to homebuilders and to a lesser
extent lots, model homes and acquisition and development projects for those
homebuilders. The commercial finance operations, begun in January, 1997,
provided financing to operators of rent-to-own or rental purchase retailers. In
1997 the Company sold its interest in its retail automobile sales business.
Prior to the Merger on June 5, 1996, the Company's primary operations consisted
of the acquisition, ownership, management and disposition of loans and real
estate for its own account and the account of others.

                                       7
<PAGE>   9
FINANCIAL CONDITION

         Beginning in September 1998, as a result of a number of factors, cash
prices in the sub-prime mortgage market significantly deteriorated. Prices paid
for the Company's sub-prime production declined in excess of 200 basis points.
The Company, in response, entered into forward commitments to protect itself
from any continued deterioration in sales prices, lowered the prices it paid for
its wholesale and correspondent production and reduced its workforce in certain
areas. As a result of lowering its prices, the Company's sub-prime loan
production has declined. The decline in sales prices and the reduced levels of
originations of sub-prime mortgages has resulted in losses in the sub prime
segment.

         Increases in long term interest rates over the past twelve months have
severely reduced the mortgage banking industry's level of prime originations,
particularly the refinancing of borrower existing indebtedness to a lower rate.
Although historically PAMCO has not relied on the refinance business, the
Company's origination of prime mortgages has declined. On a reportable segment
basis, the prime origination segment of the Company was profitable but at levels
below 1998.

         In order to maintain its net operating loss carryforwards the Company
is limited under Section 382 of the Internal Revenue Code of 1986 as to issuance
of new common shares in order to raise additional capital. The Company has
relied on borrowings to grow its operations. Historically the Company has relied
on Stanwich Financial Services Corp. ("SFSC") and CPS to provide funds to
support the additional growth of the Company. Charles E. Bradley, Sr., who is an
officer and director of NAB, and Charles E. Bradley, Jr., who is a director of
NAB, together own a majority interest in SFSC.

         Operating income from the two reportable segments has been insufficient
to cover the corporate expenses and interest to date. The Company continues to
minimize, to the extent possible, expenses for the ongoing operation and to
expand its origination network without requiring any capital.

         In order to reduce the debt to SFSC and CPS, the Company elected to
dispose of its investment in CPFI and NAFCO. Proceeds from the disposal have
been and will continue to be used, as funds become available, to reduce the
outstanding indebtedness to SFSC. The notes payable to CPS were paid in full
during 1999.

         Loans Held For Sale

         The Company's mortgage loan production and its originations of
construction loans to individuals (one-time closings) are financed under a
$80,000,000 line of credit with a federal savings bank of which $40,218,000 was
outstanding at December 31, 1999. The interest rates charged on the line of
credit vary based on the type of loan, such as prime, sub-prime and
construction. Generally the Company must fund 2% of the mortgage loan amount and
10% of the outstanding balance of the construction loan. The interest rate
charged the Company is based upon a spread over the one month London Inter Bank
Offering Rate ("LIBOR") ranging from 1.25% to 2.50%.

         At December 31, 1999 residential mortgage loans held for sale totaled
$46,029,000. Of this amount $25,525,000 was conventional and government insured
or guaranteed loans (prime) and $20,504,000 was sub-prime loans.

         The prime loans are sold individually to large mortgage bankers or
financial institutions. The Company represents and warrants to the investor that
the loans were underwritten to the appropriate guidelines. The sub-prime loans
held for sale at December 31,1999 are generally being sold through forward
commitments. The Company generally represents and warrants to the investor that
each sub-prime loan was underwritten to the Company's guidelines and that the
borrowers financial position is the same at the date of delivery to the investor
as the origination date. The Company also agrees to reimburse the investor a
portion of the purchase premium if the loan pays in full over a period of up to
one year. The Company defers a portion of the purchase premium, which reduces
the gain recorded on each loan sale, to cover the potential liability resulting
from the warranties given to the investor.

                                       8
<PAGE>   10
         At December 31, 1999 the liability as a result of the warranties given
to the purchasers of the Company's loans totaled $956,000. Additions to the
liability totaled $1,141,000 in 1999, $1,555,000 in 1998 and $617,000 in 1997.
Such additions are charged to gains on sales of loans.

         Securitization

          In June 1998 the Company, through MPS, securitized approximately
$51,000,000 of sub-prime mortgage loans. MPS retained the servicing
responsibilities for the loans. MPS recorded a net gain of $1,908,000 or 3.74%
of the principal balance of the loans sold, which is the excess of the cash
received and fair value of the assets retained by the Company over the relative
fair value of the loans sold, less transaction costs.

         The performance of the loans underlying the security through December
31, 1999 is as follows:

<TABLE>
<CAPTION>
                                                             Fixed Rate            Adjustable Rate
<S>                                                          <C>                   <C>
Remaining Principal                                          $21,925,000               $15,479,000
Annualized prepayment rates                                        12.2%                     20.9%
Cumulative losses                                                $28,000                         -
Delinquency percentages
  30-59 days                                                        .43%                     2.46%
  60-89 days                                                        .54%                     2.17%
  Over 90 days                                                      .81%                     1.25%
  Delinquent bankruptcies                                          1.79%                      .98%
  Loans in foreclosure                                             3.53%                     4.25%
  Foreclosed loans                                                  .86%                     4.43%
  Total delinquencies                                              7.96%                    15.54%
</TABLE>

         The Company purchased a mortgage pool insurance policy that covers all
losses up to 5% of the initial pool balances. Total loss coverage under the pool
insurance policy is $2,569,000. The fee is .52% annually of the unpaid principal
of the loans. The pool insurance policy stipulates that the loans covered must
be current at the date of the policy. Three loans were delinquent at that date
and subsequently were foreclosed upon and sold. Two loans were repurchased by
the Company and the remaining loan incurred a loss of approximately $28,000.

         In addition, to facilitate the sale, the Company provided a credit
enhancement for the benefit of the investors in the form of additional
collateral held by the trust. The over-collateralization account is required by
the servicing agreement to be maintained at 2.75% of the fixed rate balance and
4% of the adjustable rate balance of the securities. The Company has met the
original minimum over-collateralization requirement as set forth by the bond
insurer. One of the requirements set forth by the bond insurer is that the
interest rate spread between the adjustable rate loans and the underlying bonds,
after expenses must be 2.5%. At December 31, 1999 this requirement was not met.
A formula is used to calculate the new required over-collateralization based
upon the extent of the spread deficiency. Based on the formula, assuming the
deposits to the over-collateralization account continue at present levels and
there is not a significant increase in the underlying bond rates, the Company
expects to begin receiving cash flow from the security in the second quarter of
2000.

         The residual interests in the securitization of loans represents the
sum of 1) the net interest receivable (NIR) which is the present value of the
difference between the contractual interest rates on the loans and the rate paid
to the buyer or bondholder using various prepayment, discount rate and loss
assumptions and 2) the over-collateralization account which is the excess
monthly cash flows, other than servicing revenues, that are required to be
maintained with the trustee until certain over-collateralization levels are met.
The residual interest is accounted for as a trading security and as such is
recorded at its estimated fair value. The Company is not aware of an active
market for the purchase or sale of the residual interests. Accordingly, the
Company determines the estimated fair value of the residual interests by
discounting the expected cash flows released from the trust (the cash out
method) using a discount rate which the Company believes is commensurate with
the risks involved.

                                       9
<PAGE>   11
         At December 31, 1999 and 1998 the residual interests in the
securitization consisted of the following:

<TABLE>
<CAPTION>
                                         1999             1998
                                         ----             ----
<S>                                   <C>              <C>
NIR                                   $1,978,000       $2,900,000
Over-collateralization account         1,700,000          634,000
                                       ---------          -------
                                      $3,678,000       $3,534,000
                                      ==========       ==========
</TABLE>

         At December 31, 1999 the assumptions used in the valuation of the
residual interests were as follows:

         The assumptions used in the valuation of the residual interests were as
follows:

<TABLE>
<CAPTION>
                                             December 31, 1999             Original Assumptions
                                        ----------------------------    ---------------------------
                                           Fixed       Adjustable          Fixed       Adjustable
                                        ------------- --------------    ------------- -------------
<S>                                     <C>           <C>               <C>           <C>
Discount rate                               12%            12%              12%           12%
Weighted average life                    4.58 years    2.77 years       3.94 years     3.16 years
Prepayment speeds-ramp up to               17%CPR        35%CPR            24%CPR        25%CPR
Cumulative defaults                        15.50%        18.00%            8.00%         10.00%
Cumulative losses, net of losses
  covered by pool insurance                 .62%          .71%              .40%          .50%
Delinquencies (over 30 days)               13.00%        13.00%            8.00%         8.00%
</TABLE>

Upon reaching the required over-collateralization levels, the Company is
entitled to receive the cash flows that represent collections on the mortgage
loans in excess of the amounts required to be paid to the bondholders. If the
actual performance of the mortgage loans differs significantly from the original
assumed performance, the cash the Company is entitled to receive will vary from
the NIR calculated using the assumptions above.

         Escrow balances on securitized loans serviced by the Company are not
included in the accompanying consolidated balance sheets and totaled $27,000 and
$109,000 at December 31, 1999 and 1998, respectively.

         Discontinued Operations

         In the third quarter of 1999 the Company elected to dispose of two of
its operating segments, CPFI and NAFCO.

         At December 31, 1999 CPFI had $5,409,000 in remaining assets of which
$5,122,000 were loans receivable. The allowance for losses totaled $164,000 at
that date. The remaining loans receivable which represent loans to six customers
are expected to be paid either through maturity or sale of the collateral by the
end of the second quarter of 2000. At December 31, 1999, CPFI had outstanding
bank borrowings of $2,914,000 secured by loans receivable. The borrowings were
repaid in the first quarter of 2000.

         At December 31, 1999 NAFCO had two loans remaining totaling $974,000,
net of allowance for losses. These two loans were disposed of in January 2000.

         RESULTS OF OPERATIONS

         YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31,
1998

         For the year ended December 31, 1999 the Company reported a loss from
continuing operations, before cumulative change in accounting principle of
$(4,845,000), compared to a loss from continuing operations of $(634,000) for
the year ended December 31, 1998. In 1999 the Company disposed of its
construction and commercial lending operations. Including discontinued
operations the Company reported a net loss of $(6,553,000) in 1999 as compared
to net earnings of $162,000 in 1998.

                                       10
<PAGE>   12
         The 1999 loss was principally due to three factors: the continued
losses associated with the Company's sub prime mortgage lending operation, MPS;
a decline in PAMCO's originations resulting from an increase in long-term
interest rates; and the losses associated with disposal of the Company's
commercial lending operation, NAFCO.

         PAMCO's mortgage production declined approximately 18% over 1998.
Rising long-term interest rates have reduced originations in general in the
prime mortgage banking industry as a whole. Although still profitable, the PAMCO
segment contributed less earnings than in prior periods.

         The Company recorded $1,962,000 in losses in 1999 for the discontinued
operations of NAFCO, which was primarily a result of the disposal of the
commercial loan portfolio.

         The following discussion and analysis presents the significant changes
in financial condition and results of continuing operations of the Company's
operating segments for the years ended December 31, 1999, 1998 and 1997. The
results of operations include acquired operations and businesses since the
acquisition date. A summary of the operating profits and losses by the Company's
operating segments is as follows:

<TABLE>
<CAPTION>
                                                     1999          1998           1997
                                                     ----          ----           ----
<S>                                               <C>            <C>            <C>
Revenues:
     Residential mortgage banking-sub-prime...    $ 10,663       $ 15,427       $ 10,856
     Residential mortgage banking-prime ......      16,329         19,634          5,245
     Corporate and intercompany eliminations..         218            615            112
                                                  --------       --------       --------
          Total revenues: ....................      27,210         35,676         16,213

Costs and expenses:
     Residential mortgage banking-sub-prime...      14,842         15,308          8,475
     Residential mortgage banking-prime ......      15,026         16,997          4,690
     Corporate and intercompany eliminations..       2,187          4,005          1,995
                                                  --------       --------       --------
          Total costs and expenses ...........      32,055         36,310         15,160
                                                  --------       --------       --------
Operating profit (loss):
     Residential mortgage banking-sub-prime...      (4,179)           119          2,381
     Residential mortgage banking-prime ......       1,303          2,637            555
     Corporate and intercompany eliminations..      (1,969)        (3,390)        (1,883)
                                                  --------       --------       --------
Earnings (loss) from continuing operations...
 before cumulative effect of change
 in accounting principle ....................     $ (4,845)      $   (634)      $  1,053
                                                  ========       ========       ========
</TABLE>

         The Company operates its mortgage banking activities through its 81%
owned subsidiary MPS. The mortgage banking operations has two primary divisions,
sub-prime and prime. The prime origination function operates as Pacific American
Mortgage Company or PAMCO, which was acquired in August of 1997. MPS and PAMCO
originate loans in 42 states.

         Residential mortgage loan production for 1999, 1998 and 1997 is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                     Prime (1)                                      Sub-prime
                          1999          1998          1997           1999         1998          1997
                          ----          ----          ----           ----         ----          ----
<S>                     <C>           <C>           <C>           <C>           <C>           <C>
Retail:
Originations
obtained from the
consumer                $433,156      $534,497      $150,621      $ 11,497      $ 14,785      $  6,362
</TABLE>

                                       11
<PAGE>   13
<TABLE>
<CAPTION>
                                     Prime (1)                                      Sub-prime
                          1999          1998          1997           1999         1998          1997
                          ----          ----          ----           ----         ----          ----
<S>                     <C>           <C>           <C>           <C>           <C>           <C>
Wholesale:
Loans received
from mortgage
brokers and closed
in MPS's name             55,086        63,181        11,096       202,714       234,999       145,305

Correspondent:
Closed loans
purchased from
other mortgage
originators                   --            --            --        41,472        83,144        59,567
                        --------      --------      --------      --------      --------      --------
                        $488,242      $597,678      $161,717      $255,683      $332,928      $211,234
                        ========      ========      ========      ========      ========      ========
</TABLE>

         Total combined 1999, 1998 and 1997 originations by state are as follows
(in thousands):

<TABLE>
<CAPTION>
                               1999                          1998                           1997
                    --------------------------    --------------------------     --------------------------
                        Originations    Percent      Originations    Percent        Originations    Percent
<S>                    <C>             <C>          <C>              <C>           <C>              <C>
Texas                     $323,600        43%          $365,667         39%           $136,222         37%
California                 160,876         22           154,631          16             36,326          10
Tennessee                   65,947          9            98,772          11             36,953          10
Colorado                    43,624          6            71,072           8             24,056           6
All others (38)            149,878         20           240,464          26            139,394          37
                           -------         --           -------          --            -------          --
                          $743,925       100%          $930,606        100%           $372,951        100%
                          ========       ====          ========        ====           ========        ====
</TABLE>

         Mortgage banking revenues consist of primarily gains from the sales of
loans, fees collected from the borrower or mortgage broker/banker and interest
earned on mortgage loans held for sale. Expenses consist primarily of
compensation and benefits and interest expense.

         A summary of the major revenue and expense components of the mortgage
banking operation is as follows (in thousands):

<TABLE>
<CAPTION>
                                                1999                  1998                  1997
                                                ----                  ----                  ----
<S>                                           <C>                  <C>                    <C>
MPS (principally sub-prime)

Gains on sales of loans
  and other fee income                          $8,062               $11,630                $8,847
Interest income                                  2,601                 3,797                 2,009
Compensation and benefits                        9,475                 8,609                 4,717
Interest expense                                 1,657                 2,769                 1,531
Other expenses                                   3,710                 3,930                 2,227

Loans originated                              $244,197              $318,240              $204,872
Loans sold                                    $250,489              $305,652              $197,855
Gains on sales of loans and
  other fee income as a percent
  of loan sales                                  3.22%                 3.80%                 4.47%
Compensation and benefits
  as a percent of originations                   3.88%                 2.71%                 2.30%
Other expenses as a percent
  of originations                                1.52%                 1.23%                 1.09%
Net interest income as a
  percent of originations                         .39%                  .32%                  .23%
</TABLE>

                                       12
<PAGE>   14
<TABLE>
<S>                                           <C>                  <C>                    <C>
PAMCO (principally prime) (1)

Gains on sales of loans
  and other fee income                         $13,773               $16,459                $4,516
Interest income                                  2,556                 3,175                   729
Compensation and benefits                        9,189                10,520                 2,971
Interest expense                                 2,522                 3,383                   863
Other expenses                                   3,315                 3,094                   856

Loans originated                              $499,728              $612,366              $168,079
Loans sold   (2)                              $524,071              $595,209              $140,733
Gains on sales of loans and
other fee income as a percent
  of loan sales                                  2.63%                 2.77%                 3.21%
Compensation and benefits
  as a percent of originations                   1.84%                 1.72%                 1.77%
Other expenses as a percent
  of originations                                 .66%                  .51%                  .51%
Net interest income (expense)
  as a percent of originations                    .01%                (.03%)                (.08%)
</TABLE>

(1) PAMCO operations are shown from date of acquisition, August 31,1997.

(2) Includes loans totaling $39,123,000 in 1999, $53,911,000 in 1998 and
    $18,167,000 in 1997 that were closed in the name of a third party
    (brokered-out).

MPS operations

         For the year ended December 31, 1999 the MPS mortgage operation
incurred losses totaling $(4,179,000) as compared to earnings of $119,000 in
1998. Revenues decreased $4,764,000 or 31% over 1998 and expenses decreased
$466,000 or 3% over 1998.

         In late 1998 severe turmoil in the credit markets resulted in a credit
crunch for the larger sub-prime lenders. Many of the larger lenders cut back
production or eliminated entirely their loan production facilities.
Additionally, spreads on sub-prime backed securities widened considerably,
reducing the profitability of MPS's larger competitors and many of the firms
that MPS sold loans to. In reaction to the turmoil the investors that continued
to purchase loans reduced the price paid for such loans which negatively
impacted MPS's spreads between the prices received upon the sale of the loans
and the price or brokerage premiums paid to acquire the loans. As a result the
net gain on loan sales declined from 3.80% as a percent of loans sold to 3.22%.
MPS also tightened its underwriting standards which had a negative impact on
origination volumes.

         Compensation expenses as a percent of production increased to 3.88% in
1999 from 2.71% in 1998. The increase is partially attributable to deferred
compensation expense of $1,278,000 or .52% of production as compared to $778,000
or .24% of production in 1998. Additionally, processing and underwriting costs
at MPS have remained higher as a percentage of loan production as the Company
has increased its underwriting procedures and cost savings from staffing
reductions have not completely offset the lower production levels.

         Other expenses increased in 1999 to 1.52% from 1.23% of production in
1998. The increase was attributable to the increased processing and underwriting
costs discussed above.

         Net interest spread as a percentage of production increased from .32%
in 1998 to .39% in 1999 as a result of higher rates charged borrowers.

                                       13
<PAGE>   15
PAMCO operations

         For the year ended December 31, 1999, MPS's principally prime
production operation, PAMCO, earned $1,303,000. For the year ended December 31,
1998 PAMCO earned $2,637,000. Operating revenues totaled $16,329,000 as compared
to $19,634,000 for 1998 and expenses totaled $15,026,000 as compared to
$16,997,000 for 1998.

         Gains on sales of loans and other loan fees as a percent of loans sold
was 2.63% in 1999 as compared to 2.77% in 1998. In periods of increasing
interest rates the Company's competitors generally reduce rates relative to the
sales prices that can be received. In order to maintain production levels, PAMCO
will reduce prices or fees charged to borrowers. Compensation expenses as a
percent of production increased to 1.84% from 1.72% in 1998 as PAMCO's average
monthly mortgage production declined over 1998. Other expenses as a percent of
originations increased to .66% in 1999 as compared to .51% in 1998 as a result
of rising fixed costs, as a percentage of originations, such as rent and
depreciation expense.

         Net interest income was .01% in 1999 as a percent of production as
compared to net interest expense of .03% in 1998. Higher rates charged to
borrowers were offset mostly by higher borrowing costs.

Corporate and Intercompany Eliminations

         Corporate revenues and expenses represent interest income and
unallocated compensation, interest expense, minority interest and other general
and administrative expenses.

         Compensation expense totaled $592,000 in 1999 as compared to $1,316,000
in 1998. The decrease was attributable to a reduction in personnel costs of
$184,000 in 1999 and a reduction in option termination related charges of
$108,000 in 1999 from $636,000 in 1998. Interest expense totaled $1,776,000 in
1999, a decrease of $657,000 over 1998. The decrease was due to a total
reduction in debt payable to CPS and SFSC of $3,600,000 from the end of 1998 to
the end of 1999.

Discontinued Operations

         The discontinued operations, consisting of commercial and construction
lending recorded losses in 1999 of $1,553,000 as compared to earnings of
$796,000 in 1998. The 1999 loss included charges totaling $2,061,000 related to
the disposition of loans and severance and disposal charges totaling $346,000.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

         For the year ended December 31, 1998 the Company reported a loss from
continuing operations, before cumulative change in accounting principle of
$(634,000) as compared to earnings from continuing operations of $1,053,000 for
the year ended December 31, 1997. In 1997 the Company disposed of its retail
automotive sales segment resulting in a gain of $1,384,000. Prior to the sale
the discontinued operation incurred a loss of $271,000 for the period from
January 1 to June 27, 1997 (the sale date).

         Earnings in 1998 were negatively impacted by principally three factors:

         1) Beginning in September 1998, as a result of a number of factors,
cash prices in the sub-prime mortgage market significantly deteriorated. Prices
received by the Company's for its sub-prime production declined in excess of 200
basis points. The Company, in response, entered into forward commitments,
lowered the prices it paid for its wholesale and correspondent production and
reduced operating expenses in the sub-prime operation. As a result of lowering
its prices, the Company's loan production declined. The decline in sales prices
and the reduced levels of originations of sub-prime mortgages resulted in a loss
in the fourth quarter.

         2) In 1997, the Company entered into agreements with the executives of
MPS that granted options to the executives, exercisable only if certain
conditions are satisfied, to acquire up to 20% of the authorized

                                       14
<PAGE>   16
common shares of MPS. The number of shares to be issued pursuant to the
agreements was dependent upon several factors, including the future earnings and
value of MPS.

         On June 26, 1998 the Company, MPS and the executives entered into a
Restructure Agreement, which terminated the options. In exchange for the
termination of the options the Company entered into a deferred compensation
arrangement with the executives that requires the Company to pay annual
installments of approximately $1,100,000 to the executives over the three year
period beginning June 26, 1999, as long as the executive continues employment
with the Company. If the executive is terminated without cause all remaining
amounts due under the deferred compensation arrangement become immediately due
to the Company.

         The Company also granted loans totaling $3,040,000 to the executives
repayable in three equal annual installments, plus interest at 5.7% per annum,
beginning June 30, 1999. The loans are secured by the stock that each executive
owns, which aggregates approximately 19% of the outstanding shares of MPS. If
the executive terminates for any reason prior to the end of the three-year
period, all remaining amounts under the note become immediately payable.

         Included in the Restructure Agreement is an additional provision that
requires the Company to pay to one of the executives $93,334 every six months,
beginning June 30, 1998, over the next three years, contingent upon continued
employment.

         Compensation expense totaling $778,000 was recorded in the 1998
financial statements as a result of these agreements.

         3) In April 1998, the board of directors authorized the Company to make
payments to officers and directors in lieu of stock options that were originally
granted under stock option plans that were never presented to shareholders for
approval. The Company recorded a charge to earnings of $636,000 in 1998 as a
result.

MPS operations

         For the year ended December 31, 1998 the MPS mortgage operation earned
$119,000 as compared to $2,381,000 in 1997. Revenues increased $4,571,000 or 42%
over 1997 and expenses increased $6,833,000 or 81% over 1997.

         The decline in earnings resulted from the decline in sales prices in
the fourth quarter of 1998. In that quarter severe turmoil in the credit markets
resulted in a credit crunch for the larger sub-prime lenders. Many of the larger
lenders cut back production or eliminated entirely their loan production
facilities. Additionally, spreads on sub-prime backed securities widened
considerably, reducing the profitability of MPS's larger competitors and many of
the firms that MPS sold loans to. In reaction to the turmoil the firms that
continued to purchase loans reduced the price paid for such loans. The effect of
the price declines negatively impacted MPS's spreads between the prices received
upon the sale of the loans and the price or brokerage premiums paid to acquire
the loans. As a result the net gain on loan sales decline from 4.47% as a
percent of loans sold to 3.80%.

         Compensation expenses as a percent of production increased to 2.71% in
1998 from 2.30% in 1997. The increase is mainly attributable to deferred
compensation expense of $778,000 or .24% of production and increased processing
and underwriting costs as the Company continued to emphasize customer service.
The sub-prime operation was also negatively impacted by a decline in its
production in the fourth quarter.

         Other expenses increased in 1998 to 1.23% from 1.09% of production in
1997. The increase was attributable to an increase in losses on foreclosures
from $12,000 in 1997 to $230,000 in 1998 and the increased processing and
underwriting costs discussed above.

         Net interest spread as a percentage of production increased from .23%
in 1997 to .32% in 1998 as a result of lowered borrowing costs.

                                       15
<PAGE>   17
PAMCO operations

         For the year ended December 31, 1998, MPS's principally prime
production operation, PAMCO, earned $2,637,000. For the four months ended
December 31, 1997 PAMCO earned $555,000. Operating revenues totaled $19,634,000
as compared to $5,245,000 for 1997 and expenses totaled $16,997,000 as compared
to $4,690,000 for 1997.

         Gains on sales of loans and other loan fees as a percent of loans sold
was 2.77% in 1998 as compared to 3.21% in 1997. In 1997, as part of the
acquisition of PAMCO, the Company received $350,000 to dispose of the existing
loan inventory of the seller, Pacific Southwest Bank. The amount is included in
other fees. Additional retail production and sales that had higher margins were
a greater percentage of the Company's production in 1997. Compensation expenses
as a percent of production declined to 1.72% from 1.77% in 1997 as the PAMCO
gained efficiencies from higher average monthly mortgage production. Other
expenses as a percent of originations remained at .51%.

         Net interest expense as a percent of production was .03% in 1998 as
compared to .08% in 1997. The deficit narrowed due to reduced borrowing costs
which was offset somewhat by lower interest rates on the products PAMCO
originates.

         Corporate and Intercompany Eliminations

         Corporate revenues and expenses represent interest income and
unallocated compensation, interest expense, minority interest and other general
and administrative expenses.

         Compensation expense totaled $1,316,000 in 1998 as compared to $787,000
in 1997. The increase was attributable to option termination related charges
totaling $636,000. Interest expense totaled $2,433,000 in 1998, an increase of
$2,045,000 over 1997. The increase in interest expense was due to borrowings
attributable to financing CPFI's acquisition of construction loans in December
of 1997 and borrowings to finance other corporate transactions. The borrowings
were obtained from CPS and SFSC.

Discontinued Operations

         Earnings for the discontinued operations totaled $796,000 in 1998 as
compared to $1,181,000 in 1997. In June 1997, the Company disposed of its retail
automotive sales segment and recorded a gain of $1,384,000 as a result of the
sale of the segment. In 1998 the increased earnings were the result of a full
year of operations of CPFI which commenced operations in December of 1997.

         LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 1999, the Company had approximately $2,854,000 in
cash as compared to $4,898,000 at December 31, 1998. Of those amounts $1,457,000
and $3,952,000 as of December 31, 1999 and 1998, respectively, was restricted to
usage for mortgage loan fundings and repayments under the Company's residential
warehouse line of credit.

         Total assets have decreased to $64,406,000 at December 31, 1999 from
$113,317,000 at December 31, 1998. The decrease is attributable to the decline
in the mortgage loan production, reduced levels of construction loans and
investment in the discontinued operations as the Company has disposed of a
significant amount of its investment in the operations at NAFCO and CPFI.

         MPS's line of credit with Bank United totals $80,000,000. Outstanding
borrowings bear interest at various spreads (ranging from 1.25% to 2.50%) over
the LIBOR rate. The line of credit matures June 15, 2000. The mortgage loans
receivable of MPS are pledged as collateral for the line of credit. At December
31, 1999, $40,218,000 was borrowed under the line.

         The MPS line of credit requires NAB to have a minimum net worth of
$5,000,000. At December 31, 1999 NAB did not meet the guarantors net worth
requirement under the line of credit. Effective March

                                       16
<PAGE>   18
7, 2000 the line of credit was amended to allow subordinated debt totaling
$4,000,000 from SFSC to be included in the net worth of NAB under the credit
agreement.

         Management considers its relationships with its lenders to be good and
is currently in compliance with all of the covenants contained in its various
debt agreements as amended. Additionally management believes that the debt
agreements will be renewed in the ordinary course of business on substantially
the same terms and conditions or alternative credit facilities are available on
acceptable terms.

         At December 31, 1999, the Company had borrowed under notes and a line
of credit from SFSC a total of $9,277,000 summarized as follows:

<TABLE>
<CAPTION>
Payee        Type             Original Date          Maturity                 Balance         Rate
<S>          <C>              <C>                    <C>                      <C>             <C>
SFSC         Line of Credit   August 28, 1997        September 30, 2000       3,500,000        16%
SFSC         Note             December 30, 1997      January 3, 2000          4,000,000        13%
SFSC         Note             September 30, 1997     September 30, 2000         900,000        14%
SFSC         Note             March 13, 1998         January 3, 2000            877,000        13%
</TABLE>

         During 1999, cash flow from operations was negative and as a result was
insufficient to cover the operating expenses of NAB. In the third quarter of
1999 NAB elected to dispose of its investments in CPFI and NAFCO in order to
reduce its debt to SFSC and provide operating funds to NAB. As of December 31,
1999 NAB had remaining indebtedness to SFSC totaling $9,277,000. Since December
31, 1999 NAB has repaid $1,724,000 and has $7,553,000 remaining. Additionally
NAB is current with respect to all interest due under the notes.

         On March 15, 2000 NAB entered into a Second Debt Restructure Agreement,
effective March 7, 2000, with SFSC in which SFSC agreed to extend the maturity
dates on the indebtedness to December 31, 2002. Additionally, SFSC agreed to
defer monthly interest payments, at NAB's option, on the notes to March 31,
2001; provided that any deferred interest payment will bear interest at 14% per
annum until paid. Beginning in March 2001, monthly principal payments of
$100,000 are required in addition to monthly interest (and any deferred
interest). In order to pay the remaining indebtedness NAB must obtain cash from
operations (which consists primarily of tax sharing payments from MPS),
financing from third parties, sell existing assets, obtain more favorable terms
under its various debt agreements or achieve a combination of the above. The
Company is currently pursuing all of these alternatives and believes that the
remaining amounts due will be paid on a timely basis. In connection with the
Second Debt Restructure Agreement, SFSC agreed to subordinate $4,000,000 of NAB
indebtedness to the MPS lenders under the MPS line of credit.

         On March 7, 2000, CPFI borrowed $500,000 from two officers of the
Company. The notes bear interest at 14% per annum and are due April 30, 2000.
Proceeds from the disposition of the remaining CPFI loans will be used to repay
this indebtedness. The proceeds from the borrowings were used to repay principal
and interest due SFSC and are included in the repayments discussed above.

         On August 13, 1998, the Company entered into a Debt Restructure
Agreement with SFSC, in which, among other things a note due from the sale of
CARS was exchanged for a corresponding reduction in the Company's indebtedness
to SFSC.

         In order to maintain its net operating loss carryforwards the Company
is limited under Section 382 of the Internal Revenue Code of 1986 as to issuance
of new common shares in order to raise additional capital. The Company must rely
on additional borrowings to grow its operations. In 1998, NAB relied on SFSC and
CPS to provide funds to support the additional growth of the Company. During
1999 the Company required no additional funding.

         In the next twelve months the Company intends to expand the current
operations of MPS and PAMCO and acquire additional operations complimentary to
its core business lines. The Company anticipates no additional funding from SFSC
or CPS, therefore it must rely on internally generated funds or additional
borrowings from third parties. The ability of the Company to acquire additional
compatible

                                       17
<PAGE>   19
operations is dependent upon the availability of financing. Current
credit agreements in place are sufficient to provide the Company funds to
operate its business lines as currently structured. There can be no assurance
that internally generated funds will be sufficient or financing will be
available.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk is the risk of loss from adverse changes in market prices
and interest rates. The Company's operations are materially impacted by net
gains on sales of mortgage loans and net interest margins. The level of gains
from loan sales the Company achieves is dependent on demand for the products
originated. Net interest margins are dependent upon the ability of the Company
to maintain the spread or interest differential between the interest it charges
the customer for loans and the interest the Company is charged for the financing
of those loans.

Loans held for sale and securitization related assets

         The sub-prime loans the Company sells generally are included in asset
backed securities the investor or purchaser issues. These securities are priced
at spreads over the LIBOR or an equivalent term treasury security. These spreads
are determined by demand for the security. Demand is affected by the perception
of credit quality and prepayment risk associated with the loans the Company
originates and sells. Interest rates offered to customers also affect prices
paid for loans. These rates are determined by review of competitors rate
offerings to the public and current prices being paid to the Company for its
products. The Company does not hedge these price risks.

         Prices paid for prime loans are impacted by movements in long-term
interest rates. The Company mitigates this risk by locking in prices with its
investors as the customer locks in the price with the Company, thus allowing the
Company to maintain its margins. Generally, if interest rates rise
significantly, home sales will decline adversely affecting the Company's prime
mortgage loan production.

         The Company's residual interest in securitization represents the
present value of the excess cash flows the Company expects to receive over the
life of the underlying sub-prime mortgage loans. The value is adversely affected
by prepayments, losses and delinquencies. The value would also be negatively
impacted by an increase in short-term interest rates, as a portion of the cash
flows fluctuate monthly based upon the one-month LIBOR.

         In summary, the Company would be negatively impacted by rising interest
rates and declining prices for its sub-prime loans. Rising interest rates would
negatively impact prime mortgage production and the value of the residual
interest in the securitization and declining prices for the Company's sub-prime
loans would adversely effect the levels of gains achieved upon the sale of those
loans. The estimated negative effect on the statement of operations for fiscal
year 2000 of a 1% rise in interest rates and a 1% decline in prices received for
its sub-prime loans would be as follows:

Sub prime operations - $3,486,000
Prime operations - $1,139,000
Residual interest in securitization - $220,000

         Certain shortcomings are inherent in the methodology used in the above
market risk measurement. Modeling changes requires the making of certain
assumptions that may tend to oversimplify the manner in which actual yield and
costs respond to changes in market interest rate. Assumptions are the underlying
factors that drive the interest rate and market risk measurement system which
include asset and liability compositions, changes in pricing of loans, cost
structures and prepayment assumptions. The model also assumes that a particular
change in interest rates is reflected uniformly across the yield curve.
Accordingly the model is intended to provide an indication of the Company's
market risk at a particular point in time and is not a forecast of the effect of
changes in market conditions on the results of operations of the Company and
will differ from actual results.

                                       18
<PAGE>   20
         The maturities of the Company's construction loan portfolio are
generally short term and a substantial portion of the portfolio is adjustable
rate mortgage loans where the rate fluctuates with the prime rate. The Company
has determined that the market risk associated with this portfolio is not
material to the financial condition of the Company.

OTHER MATTERS

YEAR 2000

         The Company did not experience any disruptions in its operations during
the transition into the Year 2000. In the third quarter of 1999, the Company
announced that it had completed necessary assessments, modifications or
replacement and testing of systems critical for to the Company's operations and
that it believed it had met its Year 2000 readiness objectives. The amounts
incurred and expensed for developing and carrying out the overall Year 2000 plan
totaled less than $15,000. While the Company did not experience any Year 2000
disruptions during the transition into the Year 2000, it will continue to
monitor its operations and systems and address any date-related problems that
may arise as the year progresses.

RECENT ACCOUNTING PRONOUNCEMENTS

         Statement of Financial Accounting Standards No. 133 ("SFAS No. 133)
"Accounting for Derivative Instruments and for Hedging Activities," requires
companies to recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. SFAS No. 133 requires
that changes in fair value of a derivative be recognized currently in earnings
unless specific hedge accounting criteria are met. Upon implementation of SFAS
No. 133, hedging relationships may be redesignated and securities held to
maturity may be transferred to held for sale or trading. SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities- Deferral of the
Effective Date of FASB Statement No. 133", deferred the effective date of SFAS
No. 133 to fiscal years beginning after June 15, 2000. The Company will adopt
SFAS No. 133 on January 1, 2001 and is evaluating the impact, if any, this
statement may have on the future consolidated financial statements.

PRIVATE LITIGATION SECURITIES REFORM ACT OF 1995

         This report contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The
forward-looking statements are made pursuant to safe harbor provisions of the
Private Litigation Securities Reform Act of 1995. The factors that could cause
actual results to differ materiality include competition, interest rates,
availability of additional or alternative financing and other risks described
elsewhere in the Company's filings with the Securities and Exchange Commission.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                       19
<PAGE>   21
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders
NAB Asset Corporation:


We have audited the accompanying consolidated balance sheets of NAB Asset
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NAB Asset
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for organizational costs in accordance with the
American Institute of Certified Public Accountants Statement of Position 98-5
"Reporting on the Costs of Start-Up Activities".


                                         KPMG LLP

Dallas, Texas
March 22, 2000

                                       20
<PAGE>   22
                              NAB ASSET CORPORATION
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                                ------------
           Assets                                                           1999            1998
           ------                                                         --------       ---------
<S>                                                                       <C>            <C>
Cash and cash equivalents                                                   $1,397            $946
Restricted cash                                                              1,457           3,952
Receivables:
     Construction loans, net                                                 3,330           9,465
     Residential mortgage loans held for sale                               46,029          78,911
     Loans to officers                                                       2,213           3,040
     Other receivables                                                         995           1,085
Residual interest in securitization of mortgage loans                        3,678           3,534
Real estate owned, net                                                         728             579
Property and equipment, net                                                    612           1,038
Costs in excess of net assets acquired, net                                    442             630
Net assets of discontinued operations                                        2,855           9,536
Other assets, net                                                              670             601
                                                                           -------        --------
          Total assets                                                     $64,406        $113,317
                                                                           =======        ========

          Liabilities and Shareholders' Equity

Liabilities:
Warehouse line of credit                                                   $40,218         $74,117
Notes payable to affiliates                                                  9,277          12,877
Drafts payable                                                               8,279          11,681
Accounts payable and accrued expenses                                        4,539           5,528
                                                                             -----           -----
          Total liabilities                                                 62,313         104,203


Minority interest                                                               47             515

Commitments and contingencies (notes 12 and 16) Shareholders' equity :
     Common stock:  $.10 par value,  30,000,000
       authorized shares; 5,091,300 issued and outstanding at
       December 31, 1999 and 1998                                              509             509
     Additional paid-in capital                                              7,815           7,815
     Retained earnings (deficit)                                           (6,278)             275
                                                                           -------             ---
          Total shareholders' equity                                         2,046           8,599
                                                                             -----           -----
          Total liabilities and shareholders' equity                       $64,406        $113,317
                                                                           =======        ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       21
<PAGE>   23
                              NAB ASSET CORPORATION
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                    For the years ended December 31,
                                                                     1999             1998            1997
<S>                                                                <C>               <C>             <C>
Revenues:
  Gains on sales of loans                                          $13,295           $18,530         $10,153
  Interest income                                                    5,375             7,587           2,851
  Origination and other fee income                                   8,540             9,559           3,209
                                                                     -----             -----           -----
       Total revenues                                               27,210            35,676          16,213
                                                                    ------            ------          ------

Costs and expenses:
  Compensation and benefits                                         19,248            20,445           8,475
  Interest expense                                                   3,799             5,591           2,234
  Interest expense-affiliates                                        1,776             2,432             337
  Bad debt expense                                                     487               296               -
  General and administrative                                         6,898             7,156           3,740
  Minority interest                                                  (468)               224             263
                                                                     -----               ---             ---
       Total costs and expenses                                     31,740            36,144          15,049
                                                                    ------            ------          ------

Earnings (loss) from continuing operations before
   income taxes and cumulative effect of change in
    accounting principle                                           (4,530)             (468)           1,164

Income tax expense                                                     315               166             111
                                                                       ---               ---             ---

Earnings (loss) from continuing operations before
  cumulative effect of change in accounting principle              (4,845)             (634)           1,053

Cumulative effect of change in accounting principle,
 write off of organizational costs                                   (155)                 -               -

Earnings (loss) from discontinued operations, net
 of income taxes of $75, $18 and $6                                (1,553)               796           1,181
                                                                   -------               ---           -----

Net earnings (loss)                                               $(6,553)              $162          $2,234
                                                                  ========              ====          ======

Basic and diluted earnings (loss) per share:

Continuing operations before cumulative effect of
 change in accounting principle                                    $(0.95)           $(0.13)           $0.21

Cumulative effect of change in accounting principle                 (0.03)                 -               -

Earnings (loss) per share from discontinued operations              (0.31)              0.16            0.23
                                                                   ------              -----            ----

Earnings (loss) per share                                          $(1.29)             $0.03           $0.44
                                                                   =======             =====           =====

Weighted average number of common shares outstanding             5,091,300         5,091,300       5,091,300
                                                                 =========         =========       =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       22
<PAGE>   24
                              NAB ASSET CORPORATION
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 ( IN THOUSANDS)
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                ADDITIONAL              RETAINED
                                          COMMON                 PAID-IN                EARNINGS
                                          STOCK                  CAPITAL                (DEFICIT)                TOTAL
                                      -------------          ---------------         --------------         --------------

<S>                                   <C>                    <C>                     <C>                    <C>
Balance, December 31, 1996                    $509                   $7,217               $(2,121)                 $5,605

Net earnings                                     -                        -                  2,234                  2,234
                                      -------------          ---------------         --------------         --------------

Balance, December 31, 1997                     509                    7,217                    113                  7,839
Issuance of stock of subsidiaries                -                      598                      -                    598
Net earnings                                     -                        -                    162                    162
                                      -------------          ---------------         --------------         --------------

Balance, December 31, 1998                     509                    7,815                    275                  8,599
Net (loss)                                       -                        -                (6,553)                (6,553)
                                      -------------          ---------------         --------------         --------------

Balance, December 31,  1999                   $509                   $7,815               $(6,278)                 $2,046
                                      ============           ==============          =============          =============
</TABLE>

           See accompanying notes to consolidated financial statements

                                       23
<PAGE>   25
                              NAB ASSET CORPORATION
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        1999          1998          1997
                                                                        ----          ----          ----
<S>                                                                  <C>            <C>            <C>
Cash flows from operating activities:
        Net earnings (loss) ...................................      $ (6,553)      $    162       $  2,234
        Discontinued operations ...............................         1,553           (796)        (1,181)
        Adjustments to reconcile net earnings (loss) to
          net cash provided by (used in) operating activities:
        Proceeds from sale of CARS USA ........................            --             --            200
        Non-cash gain on securitization of mortgage loans .....            --         (3,248)            --
        Amortization of net interest receivable account .......           922            348             --
        Deposits to over-collateralization account ............        (1,066)          (634)            --
        Depreciation and amortization .........................           784            779            421
        Change in accounting principle ........................           155             --             --
        Reduction in note receivable from affiliate in exchange
          for payment of interest .............................           644             --             --
        Minority interest .....................................          (468)           224            263
        Net changes in:
          Residential mortgage loans originated, purchased
            and sold, net .....................................        32,882        (33,439)       (32,824)
          Restricted cash .....................................         2,495           (297)        (3,655)
          Loans to officers ...................................           827         (3,040)            --
          Real estate owned ...................................          (149)          (566)           (13)
          Other receivables ...................................           367           (395)          (504)
          Other assets ........................................          (281)           139           (351)
          Drafts payable ......................................        (3,402)         6,256          5,425
          Accounts payable and accrued expenses ...............          (989)         2,068          2,873
                                                                     --------       --------       --------
            Net cash provided by (used in) operating activities        27,721        (32,439)       (27,112)
                                                                     --------       --------       --------
Cash flows from investing activities:
     Construction loan repayments, net ........................         6,135          3,626        (13,091)
     Note receivable from affiliate ...........................          (921)            --             --
     Acquisition of businesses, net of cash acquired ..........           (18)          (195)          (725)
     Purchases of  property and equipment .....................           (95)          (437)          (439)
                                                                     --------       --------       --------
            Net cash provided by (used in) investing activities         5,101          2,994        (14,255)
                                                                     --------       --------       --------
Cash flows from financing activities:
     Net borrowings under (repayments of) warehouse lines
       of credit ..............................................       (33,899)        24,115         38,184
     Borrowings on notes payable to affiliates ................            --          1,300         16,300
     Principal payments on notes payable to affiliates ........        (3,600)        (4,723)            --
     Notes receivable from affiliates .........................            --             --         (1,300)
     Payments received on notes receivable from affiliates ....            --          1,300             --
     Issuance of stock of subsidiaries ........................            --            598             --
                                                                     --------       --------       --------
           Net cash provided by (used in) financing activities        (37,499)        22,590         53,184
Cash provided by (used in) discontinued operations ............         5,128          5,843        (12,998)
                                                                     --------       --------       --------
Net increase (decrease) in cash and cash equivalents ..........           451         (1,012)        (1,181)
Cash and cash equivalents at beginning of year ................           946          1,958          3,139
                                                                     --------       --------       --------
Cash and cash equivalents at end of year ......................      $  1,397       $    946       $  1,958
                                                                     ========       ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       24
<PAGE>   26
                     NAB ASSET CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS AND DISCONTINUED OPERATIONS

Description of Business

         NAB Asset Corporation, a Texas Corporation ("NAB") and subsidiaries
(together with NAB, the "Company") is primarily engaged in the residential
lending business. As discussed below NAB disposed of its retail automotive sales
business in June, 1997. Prior to June 5, 1996 NAB's business consisted of the
acquisition, ownership, management and disposition of loans and real estate for
its own account and the account of others.

         NAB was organized on March 31, 1991, by National Asset Bank (a bank in
liquidation) (the "Bank") as a wholly-owned subsidiary of the Bank for the
purpose of acquiring substantially all of the assets of the Bank through a
series of transactions and agreements intended to effect the final liquidation
of the Bank. NAB acquired substantially all of the assets of the Bank in
consideration of the issuance by the NAB of shares of its common stock, $.01 par
value (the "Common Stock"), and the assumption of all the Bank's liabilities.
Immediately following such acquisition, the Bank distributed the shares of
Common Stock received to the holders of the Bank's common stock, (the "Bank
Common Stock"), on the basis of one share of Common Stock for each ten shares of
the Bank Common Stock held of record as of the close of business on July 17,
1991. Because NAB was formed for the purpose of effecting the acquisition of
substantially all of the Bank's assets, NAB had only limited operating
activities prior to such acquisition.

         On June 5, 1996, pursuant to the Plan and Agreement of Merger, CPS
Investing Corp. ("CPS Sub"), a wholly owned subsidiary of Consumer Portfolio
Services, Inc. ("CPS"), was merged with and into NAB (the "Merger"). Under the
terms of the Plan and Agreement of Merger and in exchange for all of the
outstanding shares of NAB $.01 par value common stock, the shareholders of NAB
received on a pro rata basis (i) an aggregate cash distribution of $15.3 million
($3.64 per share), (ii) an undivided interest in a liquidating trust
("Liquidating Trust"), and (iii) 62% of the outstanding shares of common stock,
$.10 par value (the "New Common Stock") of the new combined company which had a
net asset value of $7.5 million as of the merger date. The Liquidating Trust was
established for the benefit of converting the trust assets to cash for the NAB
shareholders. On June 5, 1996 in connection with the Merger, NAB contributed
approximately $3.0 million in cash and all of the remaining non-cash assets of
NAB with a net book value of $3.7 million to the Liquidating Trust. No gain or
loss was recognized by NAB in connection with the merger. In exchange for a $4
million contribution to NAB, CPS received 38% or 1,934,706 shares of the New
Common Stock of NAB.

Acquisitions

         On July 10, 1996 NAB acquired from CPS 84% percent of the outstanding
voting common stock of Mortgage Portfolio Services, Inc. ("MPS") for a purchase
price of $300,000. NAB also acquired $2.25 million of MPS preferred stock
through conversion of debt to equity and contributed approximately $249,000 to
the additional paid-in capital of MPS. The MPS preferred stock acquired by NAB
provides cumulative dividends at a rate of 10% per annum and has liquidation
preference over the MPS common stock equal to the purchase price of the MPS
preferred stock plus any accrued and unpaid dividends.

         MPS is a mortgage banking company that specializes in the purchase,
origination, sale and servicing of residential mortgage loans that do not meet
traditional secondary market guidelines due to credit or employment history of
the borrower, debt-to-income ratios, or the nature of the collateral.

                                       25
<PAGE>   27
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         On August 31, 1997, MPS acquired the fixed assets and employed the
personnel of the single-family mortgage lending division of Pacific Southwest
Bank ("PSB"), a Dallas based savings and loan. A premium of $200,000 was paid
for the operation. In 1999 and 1998 the Company incurred additional purchase
premiums of $18,000 and $195,000, respectively, based on 1999 and 1998
production levels. The additional purchase premium increased the cost in excess
of net assets acquired. The division, Pacific American Mortgage Company
("PAMCO") is primarily engaged in mortgage lending through eleven retail
branches in seven states. Substantially all PAMCO mortgage loan originations are
conventional conforming, non-conforming and government insured mortgages.

         A summary of the PAMCO assets and liabilities acquired by MPS at fair
value are as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                 <C>
         Property and equipment                     $  560
         Other assets                                  125
         Accounts payable and accrued
         expenses                                     (160)
                                                     -----
              Net assets acquired                      525
         Purchase price paid                          (725)
                                                     -----
         Cost in excess of net assets
         acquired                                    $(200)
                                                     =====
</TABLE>

         Total accumulated amortization of the costs in excess of net assets
acquired related to MPS and PAMCO totaled $542,000 and $336,000 at December 31,
1999 and 1998, respectively.

Discontinued Construction Lending Operations

         In the third quarter of 1999 the Company elected to dispose of
Construction Portfolio Funding, Inc. ("CPFI"). CPFI began operations in December
1997 and was engaged in the business of providing financing and servicing to
residential homebuilders.

         Summarized assets and liabilities for the discontinued construction
lending operation are as follows (in thousands):

<TABLE>
<CAPTION>
                                                     December 31,
                                             -----------------------------
                                              1999                  1998
                                             -------              --------
<S>                                          <C>                  <C>
Loans receivable, net                        $ 5,122              $ 29,186
Other assets                                      49                 1,322
Line of credit                                (2,914)              (23,534)
Other liabilities                               (222)                 (786)
                                             -------              --------
Net assets of discontinued operation         $ 2,035              $  6,188
                                             ======               ========
</TABLE>

                                       26
<PAGE>   28


                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

           Operating results of the discontinued construction lending operation
is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                 Period from January 1,
                      Period from July 1,           1999 to June 30,          Period from January 1,      Period from January 1,
                      1999 to December 31,          1999 (measurement          1998 to December 31,        1997 to December 31,
                              1999                        date)                        1998                        1997
                     -----------------------     ------------------------     ------------------------    ------------------------
<S>                  <C>                         <C>                          <C>                         <C>
Revenues                      $1,229                     $1,691                        $6,093                        $28
Expenses                       1,137                      1,374                         5,544                         24
                              ------                     ------                        ------                        ---
Net income                    $   92                     $  317                        $  549                        $ 4
                              ======                     ======                        ======                        ===
</TABLE>


Revenues and expenses for the discontinued construction lending operation
consisted primarily of interest income, interest expense and general and
administrative expenses. Expenses in 1999 include $159,000 relating to the
disposition of loans and severance costs and $173,000 of loan losses.

Discontinued Commercial Lending Operations

           In the third quarter of 1999 the Company elected to dispose of its
interest in NAFCO, Inc. (NAFCO). NAFCO began operations in 1997 and was a lender
to companies in the rent-to-own and rental purchase business.

           Summarized assets and liabilities for the discontinued commercial
lending operation are as follows (in thousands):

<TABLE>
<CAPTION>
                                                             December 31,
                                                        ---------------------
                                                         1999          1998
                                                        ------        -------
<S>                                                     <C>             <C>
Loans receivable, net                                   $  974        $ 6,099
Other assets                                                38            307
Line of credit                                              --         (3,000)
Other liabilities                                         (192)           (58)
                                                        ------        -------
Net assets of discontinued operation                    $  820        $ 3,348
                                                        ======        =======
</TABLE>

           Operating results of the discontinued commercial lending operation is
summarized as follows (in thousands):


<TABLE>
<CAPTION>
                                                 Period from January 1,
                      Period from July 1,           1999 to June 30,          Period from January 1,      Period from January 1,
                      1999 to December 31,          1999 (measurement          1998 to December 31,        1997 to December 31,
                              1999                        date)                        1998                        1997
                     -----------------------     ------------------------     ------------------------    ------------------------
<S>                  <C>                         <C>                          <C>                         <C>
Revenues                     $  325                       $  433                        $ 954                       $644
Expenses                      1,293                        1,427                          707                        581
                             ------                        -----                        -----                       ----
Net income (loss)            $ (968)                       $(994)                       $ 247                       $ 63
                             ======                        =====                        =====                       ====
</TABLE>


                                       27
<PAGE>   29
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         Revenue and expenses for the discontinued commercial lending operation
consisted primarily of interest income, interest expense, loan loss provisions,
which includes losses on sales of loans of $1,888,000 and general and
administrative expenses. Expenses include $187,000 in 1999 for disposal costs.

Discontinued Retail Automotive Sales Operations

         On July 8, 1996, NAB acquired 80% of CARS USA, Inc. ("CARS") for a
purchase price of $100,000. Additionally, NAB invested $400,000 in preferred
stock of CARS and made a $1,000,000 subordinated loan to CARS. At the time of
acquisition, Charles E. Bradley, Jr., a director of the Company, owned 50% of
the outstanding shares of CARS.

         In March 1997, NAB entered into a definitive agreement to sell its
interest in CARS and on June 27, 1997 completed the transaction. The acquirer
was a newly formed company owned by Charles E. Bradley, Sr., the chief executive
officer and chairman of the board of NAB, and Charles E. Bradley, Jr., a
director of NAB. The purchase price consisted of a $200,000 cash payment and a
note for $1,300,000. The note was paid in 1998. NAB recorded a $1,384,000 gain
as a result of the sale.

         Operating results of the discontinued retail automotive sales operation
is summarized as follows (in thousands):


<TABLE>
<CAPTION>
                                                           Period from January 1,
                        Period from April 1, 1997          1997 to March 31, 1997
                             to June 27, 1997                (measurement date)
                        -------------------------          ----------------------
<S>                     <C>                                <C>
Revenues                          $4,570 (1)                      $2,199
Expenses                           3,249                           2,406
                                  ------                          ------
Net loss                          $1,321                          $ (207)
                                  ======                          ======
</TABLE>


(1) Includes gain on sale of $1,384,000.

         Revenue and expenses for the discontinued automotive sales operation
consisted primarily of sales and cost of sales, respectively.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The Company has two reportable segments, sub-prime and prime mortgage
banking. The sub prime mortgage banking segment originates residential mortgage
loans to borrowers who are unable to obtain financing from conventional mortgage
sources due to credit problems or income qualification issues. The prime
mortgage banking segment originates conventional and government guaranteed or
insured mortgage loans.

         The following is a description of significant accounting and financial
reporting policies:

Basis of Presentation

         The consolidated financial statements include the accounts of NAB and
its majority-owned subsidiaries, with all significant inter-company transactions
being eliminated in consolidation.

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





                                       28
<PAGE>   30
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Residential Mortgage Loans Held for Sale

         Residential mortgage loans are stated at the lower of cost or market in
the aggregate as determined by outstanding commitments from investors or current
investor yield requirements.

Construction Loans Receivable

         Construction loans are carried at the outstanding principal balance net
of unamortized purchase discount and net of allowances for loan losses of $0 at
December 31, 1999 and 1998. The outstanding principal balance of construction
loans is represented by the loan commitment amount net of the balance of
construction loan advances unsettled. At the end of the interim construction
phase, loans are modified, transferred to mortgage loans held for sale and
subsequently sold to outside investors.

Residual Interest in Securitization of Mortgage Loans

         Net gains on securitization of loans represent the excess of the
estimated cash to be received and assets retained by the Company over the
relative fair value of the loans sold, less transaction costs. Various
assumptions are used in the calculation of the gain on the sale of the loans and
the valuation of the residual interest in the securitization of mortgage loans.

         The residual interests in the securitization of loans represent the sum
of (1) the net interest receivable (NIR) which is the present value of the
difference between the contractual interest rates on the loans and the rate paid
to the buyer or bondholder using various assumptions and (2) the
over-collateralization account which is the excess monthly cash flows, other
than servicing revenues, that are required to be maintained with the trustee
until certain over-collateralization levels are met. The residual interest is
accounted for as a trading security and as such is recorded at its estimated
fair value. The Company is not aware of an active market for the purchase or
sale of the residual interests. Accordingly, the Company determines the
estimated fair value of the residual interests by discounting the expected cash
flows released from the trust (the cash out method) using a discount rate which
the Company believes is commensurate with the risks involved.

Property and Equipment, Net

         Property and Equipment are stated at cost, net of accumulated
depreciation. Major renewals and improvements are capitalized and depreciated.
Repairs and maintenance are expensed as incurred.

         Depreciation is provided on a straight-line basis over the estimated
useful lives of depreciable assets. Cost and accumulated depreciation applicable
to assets retired or sold are eliminated from the accounts and any resulting
gains or losses are recognized at such time.

Real Estate Owned

         Real estate owned is transferred from the loan portfolio at fair market
value less estimated selling costs. The excess carrying value, if any, of the
loan over the estimated fair value less selling costs is charged to the accrual
for indemnifications. Any subsequent impairments in value are recognized through
a valuation allowance.


                                       29
<PAGE>   31
                     NAB ASSET CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


Costs in Excess of Net Assets Acquired

         Costs in net excess of net assets acquired, which represents the excess
of purchase price over fair value of net assets acquired, are amortized on a
straight-line basis over five years. The Company assesses the recoverability of
this intangible asset by determining whether the amortization of the costs in
excess of net assets acquired balance over its remaining life can be recovered
through undiscounted future operating cash flows. The assessment of the
recoverability of costs in excess of assets acquired will be impacted if
estimated future operating cash flows are not achieved

Organizational Costs

         On January 1, 1999 the Company adopted the American Institute of
Certified Public Accountants Statement of Position 98-5, "Reporting on the Costs
of Start-Up Activities" (SOP 98-5). SOP 98-5 provides guidance on the financial
reporting of start-up costs and organizational costs. It requires costs of
start-up activities and organizational costs to be expensed as incurred and
currently expense net amounts previously capitalized. The Company charged-off
$155,000 in organizational costs as of January 1, 1999. The amount is reported
as a cumulative effect of a change in accounting principle as described in
Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes".

Drafts Payable

         The Company issues checks or initiates wire transfers in connection
with the origination of its residential mortgage loans. Drafts payable represent
checks or wire transfers on originated loans which have not been presented for
payment to the bank. Upon presentment, the Company either funds the loans with
operating cash or borrowings under its warehouse line of credit.

Accrual for Indemnifications

         The Company sells substantially all of its originated and purchased
residential mortgage loans to third party investors for cash. The prime loans
are sold individually to large mortgage bankers or financial institutions. The
Company represents and warrants to the investor that the loans were underwritten
to the appropriate guidelines. The sub-prime loans held for sale are being sold
through forward commitments. The Company generally represents and warrants to
the investor that each sub-prime loan was underwritten to the Company's
guidelines and that the borrowers financial position is the same at the date of
delivery to the investor as the origination date. The Company also agrees to
reimburse the investor a portion of the purchase premium paid if the loan pays
in full over a period of up to one year. The Company defers a portion of the
purchase premium, which reduces the gain recorded on each loan sale, to cover
potential liability resulting from the warranties given to the investor. The
accrual for indemnifications is included in accounts payable and accrued
expenses in the consolidated balance sheets.

Revenue Recognition

         Gains on sales of loans are recognized to the extent the selling price
exceeds the carrying value of the loans sold based on the estimated relative
fair values of the assets transferred, assets obtained and liabilities incurred.
A portion of the sales price on loans sold servicing released is recorded as an
accrual for indemnifications.

         Non-refundable fees and direct costs associated with the origination of
loans are deferred and included in the carrying value until the related loan is
sold. Interest is recognized as revenue when earned according to the terms of
the security instruments and when, in the opinion of management, it is
collectable.





                                       30
<PAGE>   32
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         The Company's gain on sale of loans conforms to the Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
No. 125 (SFAS 125), "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities." Under SFAS 125, a transfer of financial
assets in which control is surrendered is accounted for as a sale to the extent
that consideration other than beneficial interests in the transferred assets is
received in the exchange. Liabilities and derivatives incurred or obtained by
the transfer of financial assets are required to be measured at fair value, if
practical. Also, servicing assets and other retained interests in the
transferred assets must be measured by allocating the previous carrying value
between the asset sold and the interest retained, if any, based on their
relative fair values at the date of transfer.

         SFAS 125 also requires an assessment of interest-only strips, loans,
other receivables and retained interests in securitization (residuals). If these
assets can be contractually prepaid or otherwise settled such that the holder
would not recover substantially all of its recorded investment, the asset will
be measured like debt securities classified as available for sale or trading
securities.

         Construction related lending revenues consist primarily of interest
income on loans and loan commitment fees. Interest is recognized as revenue when
earned according to the terms of the loan and when, in the opinion of
management, it is collectable. Non-refundable fees and direct costs are deferred
and income is recognized over the life of the loan commitment using the interest
method.

Income Taxes

         Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
base. To the extent that current available evidence about the future raises
doubt about the realization of a deferred tax asset, a valuation allowance is
established. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in earnings in the
period that includes the enactment date.

Earnings (Loss) Per Share

         Basic earnings (loss) per share is computed based on the weighted
average number of common shares outstanding during the period. Diluted earnings
(loss) per share is computed based on the weighted average number of common
shares and dilutive common share equivalents outstanding during the period. For
the years ended December 31, 1999, 1998 and 1997 there were no dilutive common
share equivalents.

Restricted Cash

         Restricted cash primarily represents amounts required to be used to
fund loans and repay amounts outstanding under the residential mortgage
warehouse line of credit.

Consolidated Statements of Cash Flows

         For purposes of reporting cash flows, cash and cash equivalents include
cash in banks and interest bearing demand deposits.




                                       31
<PAGE>   33
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Consolidated Statements of Cash Flows-Supplemental Disclosure (in thousands):

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                           ------------------------------
                                                                            1999         1998       1997
                                                                           ------       ------     ------
<S>                                                                        <C>           <C>       <C>
            Interest paid - continuing operations                          $5,613       $7,721     $1,930
                                                                           ======       ======     ======
            Taxes paid                                                     $  354       $  163     $  116
                                                                           ======       ======     ======
            Non-cash activities:
            Loans held for sale transferred to real estate owned           $  898       $  566     $   14
                                                                           ======       ======     ======
            Note receivable from affiliate in exchange for payment of
            interest                                                       $  644       $   --     $   --
                                                                           ======       ======     ======
            Notes receivable exchanged for reduction in payable to
            affiliates                                                     $   --       $1,600     $   --
                                                                           ======       ======     ======
</TABLE>

Recent Accounting Pronouncements

         Statement of Financial Accounting Standards No. 133 ("SFAS No. 133")
"Accounting for Derivative Instruments and for Hedging Activities," requires
companies to recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. SFAS No. 133 requires
that changes in fair value of a derivative be recognized currently in earnings
unless specific hedge accounting criteria are met. Upon implementation of SFAS
No. 133, hedging relationships may be redesignated and securities held to
maturity may be transferred to held for sale or trading. SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities- Deferral of the
Effective Date of FASB Statement No. 133", deferred the effective date of SFAS
No. 133 to fiscal years beginning after June 15, 2000. The Company will adopt
SFAS No. 133 on January 1, 2001 and is evaluating the impact, if any, this
statement may have on the future consolidated financial statements.

Reclassifications

         Certain amounts for the prior periods have been reclassified to conform
to the current presentation.

 (3) RESIDENTIAL MORTGAGE LOANS HELD FOR SALE

         Residential mortgage loans originated by the Company are fixed-rate or
adjustable-rate, 15 to 30-year fully amortizing loans, secured by first and
second liens on single-family residential properties. Loans held for sale were
comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                    December 31, 1999                    December 31, 1998
                                --------------------------        -------------------------------
                                                Weighted                               Weighted
                                Amount        Average Rate         Amount            Average Rate
                                -------       ------------         -------           ------------
<S>                             <C>           <C>                  <C>                <C>
    Adjustable-rate             $13,124           9.52%            $17,178               9.77%
    Fixed-rate                   32,551           8.96%             60,906               7.78%
                                -------                            -------
                                 45,675                             78,084
    Deferred loan fees
    (net)                           354                                827
                                -------                            -------
                                $46,029                            $78,911
                                =======                            =======
</TABLE>




                                       32
<PAGE>   34
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(4) RESIDUAL INTEREST IN SECURITIZATION OF MORTGAGE LOANS

           Securitization

            In June 1998 the Company, through MPS, securitized approximately
$51,000,000 of sub-prime mortgage loans. MPS retained the servicing
responsibilities for the loans. MPS recorded a net gain of $1,908,000 or 3.74%
of the principal balance of the loans sold, which is the excess of the cash
received and fair value of the assets retained by the Company over the relative
fair value of the loans sold, less transaction costs.

           The performance of the loans underlying the security through December
31, 1999 is as follows:

                                          Fixed Rate         Adjustable Rate
                                          ----------         ---------------
Remaining Principal                      $21,925,000            $15,479,000
Annualized prepayment rates                    12.2%                  20.9%
Cumulative losses                            $28,000                     --

Delinquency percentages
  30-59 days                                    .43%                  2.46%
  60-89 days                                    .54%                  2.17%
  Over 90 days                                  .81%                  1.25%
  Delinquent bankruptcies                      1.79%                   .98%
  Loans in foreclosure                         3.53%                  4.25%
  Foreclosed loans                              .86%                  4.43%
  Total delinquencies                          7.96%                 15.54%

         The Company purchased a mortgage pool insurance policy that covers all
losses up to 5% of the initial pool balances. Total loss coverage under the pool
insurance policy is $2,569,000. The fee is .52% annually of the unpaid principal
of the loans. The pool insurance policy stipulates that the loans covered must
be current at the date of the policy. Three loans were delinquent at that date
and subsequently were foreclosed upon and sold. Of the three loans two were
repurchased by the Company prior to foreclosure and the remaining loan incurred
a loss of approximately $28,000.

         In addition, to facilitate the sale, the Company provided a credit
enhancement for the benefit of the investors in the form of additional
collateral held by the trust. The over-collateralization account is required by
the servicing agreement to be maintained at 2.75% of the fixed rate balance and
4% of the adjustable rate balance of the securities. The Company has met the
original minimum over-collateralization requirement as set forth by the bond
insurer. One of the requirements set forth by the bond insurer is that the
interest rate spread between the adjustable rate loans and the underlying bonds,
after expenses must be 2.5%. At December 31, 1999 this requirement was not met.
A formula is used to calculate the new required over-collateralization based
upon the extent of the spread deficiency. Based on the formula, assuming the
deposits to the over-collateralization account continue at present levels and
there is not a significant increase in the underlying bond rates, the Company
expects to begin receiving cash flow from the security in the second quarter of
2000.

         Upon reaching the required over-collateralization levels, the Company
is entitled to receive the cash flows that represent collections on the mortgage
loans in excess of the amounts required to be paid to the bondholders. If the
actual performance of the mortgage loans differs significantly from the original
assumed performance, the cash the Company is entitled to receive will vary from
the NIR calculated using the assumptions above.

         Escrow balances on securitized loans serviced by the Company are not
included in the accompanying consolidated balance sheets and totaled $27,000 and
$109,000 at December 31, 1999 and 1998, respectively.



                                       33
<PAGE>   35
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


           At December 31, 1999 and 1998 the residual interests in the
securitization consisted of the following:

                                                   1999                1998
                                                 ----------          ----------
NIR                                              $1,978,000          $2,900,000
Over-collateralization account                    1,700,000             634,000
                                                 ----------          ----------
                                                 $3,678,000          $3,534,000
                                                 ==========          ==========

           The assumptions used in the valuation of the residual interests were
as follows:

<TABLE>
<CAPTION>
                                                     December 31, 1999                   Original Assumptions
                                              ---------------------------------     --------------------------------
                                                   Fixed         Adjustable             Fixed         Adjustable
                                              ---------------  ----------------     --------------  ----------------
<S>                                           <C>              <C>                  <C>             <C>
Discount rate                                        12%              12%                 12%              12%
Weighted average life                           4.58 years       2.77 years           3.94 years      3.16 years
Prepayment speeds-ramp up to                      17% CPR          35% CPR             24% CPR          25% CPR
Cumulative defaults                               15.50%           18.00%               8.00%           10.00%
Cumulative losses, net of losses
  Covered by pool insurance                         .62%             .71%                .40%             .50%
Delinquencies (over 30 days)                      13.00%           13.00%               8.00%            8.00%
</TABLE>


(5) PROPERTY AND EQUIPMENT, NET

           Property and equipment, stated at cost, consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                            December 31,
                                                     --------------------------
                                                      1999               1998
                                                     -------            -------
<S>                                                  <C>                <C>
Furniture and Equipment                              $   905             $  882

Computer Equipment and Software                          973                901
Accumulated Depreciation                              (1,266)              (745)
                                                     -------             ------
                                                     $   612             $1,038
                                                     =======             ======
</TABLE>


(6) REAL ESTATE OWNED

         Activity in the allowance for real estate losses consists of the
following (in thousands):

<TABLE>
<CAPTION>
                                                          December 31,
                                                 -------------------------------
                                                  1999         1998         1997
                                                 -----        -----        -----
<S>                                              <C>          <C>          <C>
Balance, beginning of year                       $ 147        $  14        $  --
Increase in allowance for foreclosures             748          230           14
Charge-offs, net                                  (455)         (97)          --
                                                 =====        =====        =====
Balance, end of year                             $ 440        $ 147        $  14
                                                 =====        =====        =====
</TABLE>


(7) WAREHOUSE LINE OF CREDIT

         MPS has an $80,000,000 line of credit agreement with a bank, of which
$40,218,000 was outstanding at December 31, 1999. The credit agreement matures
June 15, 2000 and requires monthly payments of principal and interest. Interest
is at an adjusted LIBOR rate plus 1.25% to 2.50%, as defined in the credit
agreement. At December 31, 1998, MPS had a $120,000,000 line of credit agreement
with a bank of which $74,117,000 was outstanding. The terms were consistent with
those in the current line-of-credit agreement. Outstanding amounts are
collateralized by mortgage loans held for sale and construction loans. Fees paid
in association with the line of credit are capitalized and amortized over the
life of the warehouse line of credit. The line of credit is guaranteed by NAB.




                                       34
<PAGE>   36
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         The MPS line of credit provide for various financial covenants
including limitations on indebtedness, investments, transactions with
affiliates, minimum levels of net worth and restricts the payment of dividends
and material changes in ownership.

         The MPS line of credit requires NAB to have a minimum net worth of
$5,000,000 and MPS to have a minimum tangible net worth, as defined in the
warehouse line of credit, of $7,000,000. At December 31, 1999, MPS had tangible
net worth of $7,844,000. At December 31, 1999 NAB did not meet the net worth
requirement under the line of credit. Effective March 7, 2000 the line of credit
was amended to allow subordinated debt totaling $4,000,000 to Stanwich Financial
Services Corp. ("SFSC") (Note 8) to be included in the net worth of NAB under
the credit agreement. As a result of this amendment, the net worth requirement
has been satisfied.

         The Company is in compliance with all covenants in the warehouse line
of credit agreement as amended. Management believes its warehouse line of credit
will be renewed in the normal course of business.

 (8) NOTES PAYABLE TO AFFILIATES

         Notes payable to affiliates were comprised of the following (in
thousands) (see note 16):

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                       ---------------------
                                                                                        1999          1998
                                                                                       -------       -------
<S>                                                                                    <C>           <C>
Note payable to Stanwich Financial Services, Corp., unsecured, interest at 13%
payable quarterly, principal due December 31, 2002                                     $ 4,000       $ 4,000

Line of credit payable to Stanwich Financial Services Corp., unsecured, interest
at 16% payable quarterly, payable in full on December 31, 2002                           3,500         3,500

Note payable to Stanwich Financial Services Corp., unsecured, interest at 14%
payable quarterly, paid in 1999                                                             --           900

Note payable to Stanwich Financial Services Corp., unsecured, interest at 13%
payable quarterly, paid in 1999                                                             --           377

Note payable to Stanwich Financial Services Corp., unsecured, interest at 14%
payable quarterly, due December 31, 2002                                                   900           900

Note payable to Stanwich Financial Services Corp., unsecured, interest at 13%
payable quarterly, due December 31, 2002                                                   877         1,100

Note payable to Consumer Portfolio Services, Inc., unsecured, interest at 13%
payable quarterly, paid in 1999                                                             --         2,100
                                                                                       -------       -------
                                                                                       $ 9,277       $12,877
                                                                                       =======       =======
</TABLE>


           Charles E. Bradley Sr., NAB's Chairman of the Board, and Charles E.
Bradley Jr., a NAB director, collectively own 92.5% of Stanwich Financial
Services Corp. ("SFSC").




                                       35
<PAGE>   37
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(9) ACCRUAL FOR INDEMNIFICATIONS

         The accrual for indemnifications are included in accounts payable and
accrued expenses in the consolidated balance sheets. Activity in the accrual for
indemnifications consisted of the following:

<TABLE>
<CAPTION>
                                                      December 31,
                                          -------------------------------------
                                            1999           1998           1997
                                          -------        -------        -------
<S>                                       <C>            <C>            <C>
Balance, beginning of year                $   830        $   500        $   163
Increase in accrual for loans sold          1,141          1,555            617
Charge-offs, net                           (1,015)        (1,225)          (280)
                                          -------        -------        -------
Balance, end of year                      $   956        $   830        $   500
                                          =======        =======        =======
</TABLE>


(10) SHAREHOLDER AND OPTION AGREEMENTS

         In June 1996 the Board of Directors adopted, subject to shareholder
approval, the 1996 Incentive Stock Option Plan (the "Incentive Plan") and the
1996 Non-Employee Director Stock Option Plan (the "Director Plan" and, together
with the Incentive Plan, the Option Plans). The Incentive Plan provided for,
among other things, the grant to key employees of the Company options to
purchase shares of NAB Common Stock. The Director Plan provided for, among other
things, the grant of options to purchase shares of NAB Common Stock to directors
of the Company who were not also employees of the Company.

         The Option Plans were not presented to the shareholders for approval.
The Company currently has no employee or director stock option plans, and there
are no currently outstanding stock options held by any employee or director.

         In April 1998, the board of directors authorized the Company to make
payments to officers and directors in lieu of stock options that had been
conditionally granted to them under the Option Plans. As a result, the Company
recorded a charge of $85,000 in 1999 and $636,000 in 1998.

         In 1997, the Company entered into agreements with the executives of MPS
that granted options to the executives, exercisable only if certain conditions
are satisfied, to acquire up to 20% of the authorized common shares of MPS. The
number of shares to be issued pursuant to the agreements was dependent upon
several factors, including the future earnings and value of MPS.

         On June 26, 1998 the Company, MPS and the executives entered into a
Restructure Agreement which terminated the options. In exchange for the
termination of the options, the Company entered into a deferred compensation
arrangement with the executives that requires the Company to pay annual
installments of $1,121,000, $1,101,000 and $1,101,000 in the years 1999, 2000
and 2001, respectively, to the executives, as long as the executives continue
employment with the Company. If an executive is terminated without cause all
remaining amounts due under the deferred compensation arrangement become
immediately payable.

         The Company also granted loans totaling $3,040,000 to the executives
repayable in three equal annual installments, plus interest at 5.7% per annum,
beginning June 30, 1999. The loans are secured by the stock that each executive
owns, which aggregates approximately 19% of the outstanding shares of MPS. If
the executive terminates for any reason prior to the end of the three-year
period, all remaining amounts under the note become immediately payable.

         Included in the Restructure Agreement is an additional provision that
requires the Company to pay to one of the executives $93,334 every six months,
beginning June 30, 1998, over the next three years, contingent upon continued
employment. In exchange, the executive agreed to purchase stock in MPS of
$560,000.




                                       36
<PAGE>   38
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         Compensation expense totaling $1,278,000 and $778,000 was recorded in
the 1999 and 1998 financial statements, respectively as a result of these
agreements.

(11) INCOME TAXES

         Total income taxes for the three years ended December 31, 1999 were
allocated as follows (in thousands):

<TABLE>
<CAPTION>
                                                    Year ending December 31,
                                                --------------------------------
                                                1999          1998          1997
                                                ----          ----          ----
<S>                                            <C>           <C>           <C>
From continuing operations                      $315          $166          $111
From discontinued operations                      75            18             6
                                                ----          ----          ----
                                                $390          $184          $117
                                                ====          ====          ====
</TABLE>


         Income taxes from continuing operations are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
                                                   Year ended December 31,
                                              ---------------------------------
                                               1999          1998          1997
                                              -----         -----         -----
<S>                                           <C>           <C>           <C>
Current
  Federal                                     $ 190         $  17         $ 299
  State                                         313           232            55
                                              -----         -----         -----
Deferred
  Federal                                        --          (143)          132
  State                                        (188)          (27)           24
                                              -----         -----         -----
                                                315            79           510
Increase (reduction) in valuation
allowance                                        --            87          (399)
                                              -----         -----         -----
                                              $ 315         $ 166         $ 111
                                              =====         =====         =====
</TABLE>


         The Company's tax expense (benefit) before cumulative change in
accounting principle differs from the amount determined by applying the
statutory federal rate of 35% to earnings (loss) from continuing operations
before income taxes and cumulative effect of change in accounting principle as
follows (in thousands):

<TABLE>
<CAPTION>
                                                Year ended December 31,
                                          -------------------------------------
                                            1999           1998           1997
                                          -------        -------        -------
<S>                                       <C>            <C>            <C>
Expense (benefit) at Federal rate         $(1,586)       $  (164)       $   407
Excess inclusion interest                     190             --             --
State taxes                                   (81)           205             79
Other                                         (37)            38             24
Increase (decrease) in valuation
  allowance                                 1,829             87           (399)
                                          -------        -------        -------
Expense per accompanying
 statements of operations                 $   315        $   166        $   111
                                          =======        =======        =======
</TABLE>


                                       37
<PAGE>   39
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


           The components of the deferred taxes assets and liabilities are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                   December 31,
                                                             ------------------------
                                                               1999            1998
                                                             --------        --------
<S>                                                          <C>             <C>
Deferred tax assets:
Accrual for indemnifications                                 $    351        $    290
Excess inclusion income                                           338             224
Foreclosure allowance                                             212              --
Deferred compensation                                             138              49
Other                                                             185             114
Tax net operating loss carryforwards                           65,855          64,405
                                                             --------        --------
  Deferred tax assets                                          67,079          65,082
Valuation allowance                                           (66,795)        (64,966)
                                                             --------        --------
  Deferred tax assets                                             284             116

Deferred tax liabilities:
Deferred loan costs                                               (64)           (116)
Other                                                             (32)             --
                                                             --------        --------
  Deferred tax liabilities                                        (96)           (116)
                                                             --------        --------

Net deferred tax asset (included in other receivables)       $    188        $     --
                                                             ========        ========
</TABLE>


           Net Federal deferred tax assets on a consolidated basis totaled $67.0
million and $65.0 million at December 31, 1999 and 1998, respectively with
corresponding valuation allowances of $66.8 million and $65.0 million,
respectively. No Federal deferred tax assets have been recognized in the 1999 or
1998 consolidated financial statements due to the fact that, based on the weight
of available evidence, it is more likely than not that the deferred tax assets
will not be realized. A state tax benefit of $188,000 was recognized in 1999
through a reduction of the state valuation allowance.

           At December 31, 1999, for federal income tax purposes, the Company
had regular tax and alternative minimum tax net operating loss carryforwards of
approximately $188 million expiring as follows (in thousands):

<TABLE>
<CAPTION>
            Year                                   Amount
            ----                                   ------
<S>                                             <C>
            2003                                 $   51,214

            2004                                     42,120

            2005                                     28,004

            2006                                     11,091

            Thereafter                               55,129
                                                 ----------
                                                 $  187,558
                                                 ==========
</TABLE>


           On June 5, 1996 the Company amended its Articles of Incorporation and
By-laws to restrict the acquisition of 5% or more of the outstanding shares of
New Common Stock of the Company so as to prevent the occurrence of an ownership
change under Section 382 of the federal income tax laws. Section 382 of the
Internal Revenue Code of 1986 (Section 382), as amended, provides in general
that if a corporation undergoes an ownership change, the amount of taxable
income that the corporation may offset after the date of such ownership change
will be subject to an annual limitation. The Company's NOL's could become
subject to certain limitations on utilization in the event the Company undergoes
an ownership change within the meaning of Section 382.




                                       38
<PAGE>   40
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


(12) COMMITMENTS AND CONTINGENCIES

         MPS is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to originate and sell loans and involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated financial statements.

         Commitments to originate mortgage loans are agreements to provide
financing at a fixed or variable interest rate subject to specific terms and a
customer's creditworthiness on a case-by-case basis. These commitments have
fixed expiration dates and other termination clauses and may require payment of
a fee. At December 31, 1999 and 1998 MPS had commitments to originate mortgage
loans of approximately $14,793,000 and $29,400,000, respectively. These
commitments do not necessarily represent future cash requirements, as some
portion of the commitments will expire without being drawn upon or will be
declined for credit or other reasons. At December 31, 1999 and 1998, MPS had no
outstanding firm commitments to purchase loans. At January 1, 2000 MPS had a
$40,000,000 commitment with a remaining balance of $20,000,000 to sell sub-prime
loans to an institutional investor. On January 31, 2000 the commitment was
renewed for $30,000,000. The new commitment expires April 30, 2000.

         MPS has entered into loan sale agreements with investors in the normal
course of business which includes standard representations and warranties
customary to the mortgage banking industry. Violations of these representations
and warranties may require MPS to repurchase loans previously sold. As of
December 31, 1999 and 1998, MPS had repurchase requests outstanding of
$1,248,000 and $0, respectively. MPS may in certain circumstances choose to
indemnify the investor rather than repurchase the loan. In the opinion of
management, the potential exposure related to loan sale agreements of MPS will
not have a material adverse effect on the consolidated financial position and
results of operations of the Company.

         The Company's originations of conventional and government insured or
guaranteed loans are sold to investors on a loan by loan basis. If the loan does
not close within the allotted time period, the Company is under no further
obligation to the investor.

         The Company is subject to lawsuits that arise in the ordinary course of
its business. Management is of the opinion, based in part upon consultation with
its counsel, that the liability of the Company, if any, arising from existing
and threatened lawsuits would not have a material adverse effect on the
Company's consolidated financial position and results of operations.

         The Company conducts its business from leased facilities. Rent expense
for continuing operations of approximately $1,260,000, $1,082,000 and $451,000
have been recorded for the years ended December 31, 1999, 1998 and 1997,
respectively.

         At December 31, 1999, minimum rental commitments under all
noncancelable leases with terms exceeding one year were as follows (in
thousands):

<TABLE>
<CAPTION>
           Year ending
           December 31,
           ------------
<S>                                           <C>
           2000                                $ 1,243
           2001                                    826
           2002                                    622
           2003                                     48
                                               -------
                                               $ 2,739
                                               =======
</TABLE>





                                       39
<PAGE>   41
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(13) RELATED PARTY TRANSACTIONS

         In May 1999, the Company advanced SFSC $921,000 pursuant to a
promissory note. The note bears interest at 16%, payable quarterly. The
principal is due and payable on September 30, 2000. As of December 31, 1999 the
note had a balance of $277,000. This note was fully paid by SFSC in March 2000.

         In October 1998, the Company borrowed $800,000 from SFSC pursuant to an
unsecured promissory note. The loan was paid off in 1998.

         In September 1998, the Company borrowed $500,000 from SFSC pursuant to
an unsecured promissory note. The loan was paid off in 1998.

         In December 1997, the Company borrowed $5,500,000 from CPS pursuant to
an unsecured promissory note. The loan was paid off in 1999. Messrs. Bradley,
Sr. and Bradley, Jr. are officers and directors of CPS.

         As discussed in Note (1), the Company sold its Retail Automotive Sales
Segment in June, 1997 to a company controlled by Charles E. Bradley, Sr., the
Chief Executive Officer and Chairman of NAB and Charles E. Bradley, Jr., a
director of NAB, for $1,500,000. The purchase price consisted of a $200,000 cash
payment and a note for $1,300,000. The note was satisfied in 1998.

         Also see Notes 7 and 16 for additional related party transactions.

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following disclosure of the estimated fair value of financial
instruments is made using estimated fair value amounts that have been determined
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required to interpret market data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that could be realized in a
current market exchange. The use of different market assumptions or estimation
methodologies may have a material impact on the estimated fair value amounts.

         The carrying values of cash and cash equivalents, restricted cash,
loans to officers and drafts payable are a reasonable estimate of their fair
value due to the short-term nature of these instruments.

         The estimated fair value of the Company's financial instruments are as
follows:

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                  ------------------------------------------------------
                                                             1999                        1998
                                                  --------------------------  --------------------------
                                                  CARRYING VALUE  FAIR VALUE  CARRYING VALUE  FAIR VALUE
                                                  --------------  ----------  --------------  ----------
<S>                                               <C>             <C>         <C>             <C>
Financial assets:
   Construction loans                                $ 3,330       $ 3,330       $ 9,465       $ 9,465
   Residential mortgage loans held for sale           46,029        46,888        78,911        79,903
    Residual interest in the securitization of
    mortgage loans                                     3,678         3,678         3,534         3,534
    Loans to officers                                  2,213         2,213         3,040         3,040
Financial liabilities:
   Warehouse line of credit                           40,218        40,218        74,117        74,117
   Notes payable to affiliates                         9,277         9,277        12,877        12,877
</TABLE>


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





                                       40
<PAGE>   42
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


           Construction loans: The carrying value reported in the consolidated
balance sheets approximates fair value as the construction loans are short term
and bear interest at a rate that approximates current market interest rates for
similar types of credit.

           Residential mortgage loans held for sale: The fair value of loans
receivable held for sale is determined in the aggregate based on current
investor yield requirements.

           Warehouse line of credit: The fair value of the variable rate line of
credit is equal to its carrying value as the variable rates are considered to be
the market rates.

           Notes payable to affiliates and loans to officers: The carrying value
reported in the consolidated balance sheets approximates fair value based upon
current investor yield requirements for similar instruments.

           Commitments to originate loans: The fair value is based on fees paid
by the borrowers to obtain the loan and is not considered material.

(15) SEGMENT REPORTING

           The Company has two reportable segments, sub-prime and prime mortgage
lending. The sub prime mortgage banking segment originates residential mortgage
loans to borrowers who are unable to obtain financing from conventional mortgage
sources due to credit problems or income qualification issues. The prime
mortgage banking segment originates conventional and government guaranteed or
insured mortgage loans. Both of the business segments operate within the U.S.

           The accounting policies of the segments are the same as those
described in the Summary of Significant Accounting Policies. The segment data
includes charges for interest and taxes from the parent, NAB Asset Corporation.
Allocation between segments represents charges from the sub prime mortgage
banking operation to the prime mortgage operation for administrative services.
The charges are based upon an estimate of actual expenses incurred.

           The sub prime segment was acquired July 10, 1996. The prime mortgage
lending segment was acquired August 31, 1997.

           Information concerning the operations of the segments is as follows
(in thousands):

<TABLE>
<CAPTION>
                                       Sub Prime        Prime
                                        Mortgage       Mortgage
                                        Lending         Lending          Total
                                        --------        --------       --------
<S>                                     <C>            <C>             <C>
Year ended December 31, 1999
Revenues, other than interest           $  8,062        $ 13,773       $ 21,835
Interest income                            2,601           2,556          5,157
Interest expense                           1,657           2,522          4,179
Depreciation and amortization                588             246            834
Segment profit (loss)                     (4,179)          1,303         (2,876)
Segment assets (1)                            --              --         59,969
Expenditures for fixed assets (1)             --              --             95
</TABLE>




                                       41
<PAGE>   43
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<CAPTION>
                                          Sub Prime       Prime
                                           Mortgage      Mortgage
                                           Lending       Lending         Total
                                           -------       -------         -----
<S>                                       <C>            <C>            <C>
Year ended December 31, 1998
Revenues, other than interest             $ 11,630       $ 16,459       $ 28,089
Interest income                              3,797          3,175          6,972
Interest expense                             2,769          3,383          6,152
Depreciation and amortization                  403            264            667
Segment profit                                 119          2,637          2,756
Other non-cash items:
  Securitization of mortgage loans           3,248             --          3,248
Segment assets (1)                              --             --        100,680
Expenditures for fixed assets (1)               --             --            437
</TABLE>



<TABLE>
<CAPTION>
                                             Sub Prime     Prime
                                             Mortgage      Mortgage
                                             Lending       Lending        Total
                                             -------       -------        -----
<S>                                          <C>           <C>           <C>
Year ended December 31, 1997
Revenues, other than interest                $ 8,847       $ 4,516       $13,363
Interest income                                2,009           729         2,738
Interest expense                               1,531           863         2,394
Depreciation and amortization                    332            76           408
Segment profit  (loss)                         2,381           555         2,936
Other non-cash items:
  Premium amortization                            --           383           383
Segment assets (1)                                --            --        66,342
Expenditures for fixed assets (1)                 --            --           439
</TABLE>


(1) The Company has not disclosed separate asset information for the sub prime
and prime mortgage segments because that information is not produced internally.



                                       42
<PAGE>   44
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


           The reconciliation of the segment information above to that as
reported in the Company's Statement of Financial Condition and Statement of
Operations is as follows (in thousands):

<TABLE>
<CAPTION>
                                                             1999             1998             1997
                                                          ---------        ---------        ---------
Revenues
<S>                                                       <C>              <C>              <C>
Total revenues for reportable segments                    $  26,992        $  35,061        $  16,101
Other revenues                                                  218              615              112
                                                          ---------        ---------        ---------
    Total consolidated revenues                           $  27,210        $  35,676        $  16,213
                                                          =========        =========        =========

                                                             1999             1998             1997
                                                          ---------        ---------        ---------
Interest Income
Total interest income for reportable segments             $   5,157        $   6,972        $   2,738
Unallocated interest income                                     598            1,177              324
Net interest paid to corporate from segments                   (380)            (562)            (211)
                                                          ---------        ---------        ---------
Total consolidated interest income                        $   5,375        $   7,587        $   2,851
                                                          =========        =========        =========

                                                             1999             1998             1997
                                                          ---------        ---------        ---------
Interest Expense
Total interest expense for reportable
  segments                                                $   4,179        $   6,152        $   2,394
Unallocated interest expense                                  1,776            2,433              388
Net interest paid to corporate from segments                   (380)            (562)            (211)
                                                          ---------        ---------        ---------
Total consolidated interest expense                       $   5,575        $   8,023        $   2,571
                                                          =========        =========        =========

                                                             1999             1998             1997
                                                          ---------        ---------        ---------
Earnings (loss)
Total segment profit (loss)                               $  (2,876)       $   2,756        $   2,936
Unallocated amounts:
  Interest expense                                           (1,776)          (2,433)            (388)
  Corporate income                                              218              615              112
  Corporate expenses                                         (1,259)          (1,910)          (1,555)
  Minority interest                                             468             (224)            (263)
  Net interest paid to corporate from segments                  380              562              211
                                                          ---------        ---------        ---------
Earnings (loss) from continuing operations, before
cumulative effect of change in accounting principle       $  (4,845)       $    (634)       $   1,053
                                                          =========        =========        =========

                                                             1999             1998             1997
                                                          ---------        ---------        ---------
Assets
Total assets for reportable segments                      $  59,969        $ 100,680        $  66,342
Elimination of corporate payables / receivables              (1,187)            (464)              --
Net assets of discontinued operation                          2,855            9,536           14,608
Other assets                                                  2,769            3,565            2,285
                                                          ---------        ---------        ---------
    Total consolidated assets                             $  64,406        $ 113,317        $  83,235
                                                          =========        =========        =========
</TABLE>


           During 1999, approximately $9,469,000 or 35% of the Company's
revenues were as a result of loan sales to three customers. During 1998
approximately $5,619,000 or 16% of the Company's revenues were the result of
sub-prime loan sales to one customer. During 1997 approximately $6,236,000 or
38% of the Company's revenues were the result of sub-prime loan sales to two
customers.


                                       43
<PAGE>   45
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


(16) SUBSEQUENT EVENTS AND LIQUIDITY

           During 1999, cash flow from operations was negative and as result
insufficient to cover the operating expenses of NAB. In the third quarter of
1999 NAB elected to dispose of its investments in CPFI and NAFCO in order to
reduce its debt to SFSC and provide operating funds to NAB. As of December 31,
1999 NAB had remaining indebtedness to SFSC totaling $9,277,000. Since December
31, 1999 NAB has repaid $1,724,000 of this indebtedness, leaving a principal
balance of $7,553,000. Additionally, NAB is current in the payment of interest
due on this indebtedness.

           On March 15, 2000 NAB entered into a Second Debt Restructure
Agreement, effective March 7, 2000, with SFSC in which SFSC agreed to extend the
maturity dates on the indebtedness to December 31, 2002. Additionally, SFSC
agreed to defer monthly interest payments, at NAB's option, on the notes to
March 31, 2001; provided that any deferred interest payment will bear interest
at 14% per annum until paid. Beginning in March 2001, monthly principal payments
of $100,000 are required in addition to monthly interest (and any deferred
interest). In order to pay the remaining indebtedness NAB must obtain cash from
operations (which consists primarily of tax sharing payments from MPS),
financing from third parties, sell existing assets, obtain more favorable terms
under its various debt agreements or achieve a combination of the above. The
Company is currently pursuing all of these alternatives and believes that the
remaining amounts due will be paid on a timely basis.

           Principal repayments related to the notes payable to affiliates are
as follows (in thousands):

              Year ended December 31,
                      2001                                $  900
                      2002                                 6,653
                                                          ------
                                                          $7,553
                                                          ======

           On March 7, 2000, CPFI borrowed $500,000 from two officers of the
Company. The notes bear interest at 14% per annum and are due April 30, 2000.
Proceeds from the disposition of the remaining CPFI loans will be used to repay
this indebtedness. The proceeds from the borrowings were used to repay principal
and interest due SFSC and are included in the repayments discussed above.

           In the next twelve months the Company intends to expand the current
operations of MPS and PAMCO and acquire additional operations complimentary to
its core business lines. The Company anticipates no additional funding from SFSC
or CPS, and therefore must rely on internally generated funds or additional
borrowings from third parties. The ability of the Company to acquire additional
compatible operations is dependent upon the availability of financing. Current
credit agreements in place are sufficient to provide the Company funds to
operate its business lines as currently structured. There can be no assurance
that internally generated funds will be sufficient or financing will be
available.




                                       44
<PAGE>   46
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


(17) PARENT COMPANY FINANCIAL STATEMENTS

                          BALANCE SHEETS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           ---------------------
                                                                December 31,
                                                           ---------------------
Assets                                                      1999          1998
------                                                     -------       -------
<S>                                                        <C>           <C>
Cash and cash equivalents                                  $    71       $   145
Loans to MPS officers                                        2,213         3,040
Note receivable from MPS                                     1,800         3,500
Note receivable from affiliate                                 277            --
Investment in discontinued operations                        2,855         9,536
Investment in MPS                                            6,637         6,327
Other assets                                                   251           381
                                                           -------       -------
       Total assets                                        $14,104       $22,929
                                                           =======       =======

Liabilities and Shareholders' Equity

Liabilities:
Notes payable to affiliates                                $ 9,277       $12,877
Payable to MPS                                               1,201           317
Payable to MPS officers                                        860           683
Other accounts payable and accrued expenses                    720           453
                                                           -------       -------
       Total liabilities                                    12,058        14,330
Shareholders' equity                                         2,046         8,599
                                                           -------       -------
          Total liabilities and shareholders' equity       $14,104       $22,929
                                                           =======       =======
</TABLE>



                     STATEMENTS OF OPERATIONS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     ------------------------------------
                                                        For the years ended December 31,
                                                     ------------------------------------
                                                      1999           1998          1997
                                                     -------        -------       -------
<S>                                                  <C>            <C>            <C>
Revenues:
  Interest income                                    $   597        $ 1,177       $   323
  Earnings (loss) from MPS                            (2,530)         2,532         2,673
  Earnings (loss) from discontinued operations        (1,553)           796         1,181
                                                     -------        -------       -------
       Total revenues (losses)                        (3,486)         4,505         4,177
                                                     -------        -------       -------
Costs and expenses:
  Compensation and benefits                              585          1,316           787
  Interest expense-affiliates                          1,776          2,433           388
 General and administrative expenses                     486            576           657
  Income taxes                                           220             18           111
                                                     -------        -------       -------
       Total costs and expenses                        3,067          4,343         1,943
                                                     -------        -------       -------
Net earnings (loss)                                  $(6,553)       $   162       $ 2,234
                                                     =======        =======       =======
</TABLE>





                                       45
<PAGE>   47
                     NAB ASSET CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


                     STATEMENTS OF CASH FLOWS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           For the years ended December 31,
                                                                      ----------------------------------------
                                                                        1999            1998            1997
                                                                      --------        --------        --------
<S>                                                                   <C>             <C>             <C>
Cash flows from operating activities:
        Net earnings (loss)                                           $ (6,553)       $    162        $  2,234
        Discontinued operations                                          1,553            (796)         (1,181)
        Adjustments to reconcile net earnings (loss) to
          Net cash used in operating activities:
        Undistributed earnings (loss) from MPS                           2,530          (2,532)         (2,673)
        MPS intercompany tax (benefit) expense                            (562)          1,237             911
        Depreciation                                                       106             119              24
        Reduction in note receivable from affiliate in exchange
          for payment of interest                                          644              --              --
        Net changes in:
          Other assets                                                      24             134            (360)
          Payable to MPS                                                   884             559            (242)
          Payable to MPS officers                                          177             683              --
          Accounts payable and accrued expenses                            267            (138)            405
                                                                      --------        --------        --------
            Net cash used in operating activities                         (930)           (572)           (882)
                                                                      --------        --------        --------
Cash flows from investing activities:
     Repayments from (loans to) MPS                                      1,700              --          (3,500)
     Preferred stock dividend from MPS                                      --             463              --
     Note receivable from affiliate                                       (921)             --              --
     Pushdown of deferred compensation liability                        (1,278)           (778)             --
     Acquisition of MPS preferred stock                                 (1,000)             --              --
     Repayments from (loans to) MPS officers                               827          (3,040)             --
                                                                      --------        --------        --------
            Net cash used in investing activities                         (672)         (3,355)         (3,500)
                                                                      --------        --------        --------
Cash flows from financing activities:
     Borrowings on notes payable to affiliates                              --           1,300          16,300
     Principal payments on notes payable to affiliates                  (3,600)         (4,723)             --
     Notes receivable from affiliates                                       --              --          (1,300)
     Payments received on notes receivable from affiliates                  --           1,300              --
                                                                      --------        --------        --------
           Net cash provided by (used in) financing activities          (3,600)         (2,123)         15,000
     Cash provided by discontinued operations                            5,128           5,843         (12,998)
                                                                      --------        --------        --------
Net decrease in cash and cash equivalents                                  (74)           (207)         (2,380)
Cash and cash equivalents at beginning of year                             145             352           2,732
                                                                      --------        --------        --------
Cash and cash equivalents at end of year                              $     71        $    145        $    352
                                                                      ========        ========        ========
</TABLE>





                                       46
<PAGE>   48
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

           Pursuant to General Instruction G(3) to Form 10-K, information on
executive compensation is incorporated by reference from the Registrant's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated by
the Securities and Exchange Commission.

ITEM 11.  EXECUTIVE COMPENSATION

           Pursuant to General Instruction G(3) to Form 10-K, information on
executive compensation is incorporated by reference from the Registrant's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated by
the Securities and Exchange Commission.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

           Pursuant to General Instruction G(3) to Form 10-K, information on
security ownership of certain beneficial owners and management is incorporated
by reference from the Registrant's definitive Proxy Statement to be filed
pursuant to Regulation 14A promulgated by the Securities and Exchange
Commission.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           Pursuant to General Instruction G(3) to Form 10-K, information on
certain relationships and related transactions is incorporated be reference from
the Registrant's definitive Proxy Statement to filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission.

PART IV

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

<TABLE>
<CAPTION>
(a) 1. INDEX TO FINANCIAL STATEMENTS                                                             PAGE
<S>                                                                                             <C>
       Independent Auditors' Report                                                                20
       Consolidated Balance Sheets as of December 31, 1999 and 1998                                21
       Consolidated Statements of Operations for the years ended
                 December 31, 1999, 1998 and 1997                                                  22
       Consolidated Statements of Shareholders' Equity for the years ended
                 December 31, 1999, 1998 and 1997                                                  23
       Consolidated Statements of Cash Flows for the years ended
                 December 31, 1999, 1998 and 1997                                                  24
       Notes to Consolidated Financial Statements                                                  25

       FINANCIAL STATEMENT SCHEDULES

       None
</TABLE>




                                       47
<PAGE>   49
<TABLE>
<S>        <C>
3.         EXHIBITS

2.1        Plan and Agreement of Merger dated February 7, 1996, by and among
           Consumer Portfolio Services, Inc., CPS Investing Corp., and
           Registrant (Incorporated by reference to Exhibit 2.1 to Form 8-K
           dated February 28, 1996).

3.1        Restated Articles of Incorporation (Incorporated by reference to
           Exhibit A to Appendix A to the Registrant's Proxy Statement dated
           April 23, 1996).

3.2        Restated By-laws (Incorporated by reference to Exhibit B to Appendix
           A to the Registrant's Proxy Statement dated April 23, 1996).

10.1       Employment Agreement dated December 1, 1996 between James E. Hinton
           and Mortgage Portfolio Services, Inc. (Incorporated by reference to
           Exhibit 10.9 to Form 10K dated December 31, 1996).

10.2       Amendment No.1 to Employment Agreement dated December 1, 1996 between
           James E. Hinton and Mortgage Portfolio Services, Inc. (Filed
           herewith).

10.3       $3,000,000 Promissory Note dated June 25,1998 issued by Registrant to
           CPS. Paid in full. (Incorporated by reference to Exhibit 10.26 to
           Form 10Q dated September 30, 1998)

10.4       Third Restated Credit Agreement between Mortgage Portfolio Services,
           Inc. and Guaranty Federal Bank, F.S.B. dated June 30, 1998
           (Incorporated by reference to Exhibit 10.23 to Form 10Q dated June
           30, 1998)

10.5       Debt Restructure Agreement dated as of August 13, 1998 between the
           Registrant and SFSC (Incorporated by reference to Exhibit 10.13 to
           Form 10K dated December 31, 1998)

10.6       $500,000 Promissory Note dated September 25,1998 issued by Registrant
           to SFSC. (Incorporated by reference to Exhibit 10.27 to Form 10Q
           dated September 30, 1998) Paid in full

10.7       $800,000 Promissory Note dated October 23,1998 issued by Registrant
           to SFSC. (Incorporated by reference to Exhibit 10.15 to Form 10K
           dated December 31, 1998) Paid in full

10.8       Credit agreement between Mortgage Portfolio Services, Inc., and Bank
           United dated June 15, 1999 (Incorporated by reference to Exhibit
           10.18 to Form 10Q dated June 30, 1999)

10.11      Third Amendment to Warehousing Credit and Security Agreement dated as
           of December 15, 1998 between Construction Portfolio Funding, Inc. and
           Bank United (Incorporated by reference To Exhibit 10.13 to Form 10K
           dated December 31, 1998)

10.12      Payment Deferral Agreement dated March 26, 1999 between Registrant
           and SFSC (Incorporated by reference to Exhibit 10.17 to Form 10K
           dated December 31, 1998)

10.13      Separation Agreement dated as of June 4, 1999 between Registrant and
           Michael W. Caton effective as of July 15, 1999 (Incorporated by
           reference to Exhibit 10.19 to Form 10Q dated June 30, 1999)

10.14      Consulting and Finder's Agreement dated as of June 4, 1999 between
           Registrant and Caton Financial Services, Inc. effective as of July
           15, 1999 (Incorporated by reference to Exhibit 10.20 to Form 10Q
           dated June 30, 1999)

10.15      $921,345 Promissory Note dated May 12, 1999 issued by SFSC to
           Registrant (Incorporated by reference to Exhibit 10.21 to Form 10Q
           dated June 30, 1999) Paid in full

10.16      Credit Agreement between Mortgage Portfolio Services, Inc. and Bank
           United dated June 15, 1999 (incorporated by reference to Exhibit
           10.19 to Form 10Q dated June 30, 1999)

10.17      First Amendment to Credit Agreement between Mortgage Portfolio
           Services, Inc., and Bank United dated June 15, 1999 (Incorporated by
           reference to Exhibit 10.22 to Form 10Q dated September 30, 1999)

10.18      Eighth Amendment to Warehousing Credit and Security Agreement and
           Amendment of Promissory Note dated February 1, 2000 between
           Construction Portfolio Funding, Inc. and Bank United (Filed herewith)

10.19      $300,000 Promissory Note from Construction Portfolio Funding, Inc. to
           James E. Hinton dated March 7, 2000 (Filed herewith)

10.20      Pledge Agreement dated as of March 7, 2000 made by Construction
           Portfolio Funding, Inc. in favor of James E. Hinton (Filed herewith)

10.21      $200,000 Promissory Note from Construction Portfolio Funding, Inc. to
           Alan Ferree dated March 7, 2000 (filed herewith)

10.22      Pledge Agreement dated as of March 7, 2000 made by Construction
           Portfolio Funding, Inc. in favor of Alan Ferree (filed herewith)

10.23      Second Debt Restructure Agreement dated March 15, 2000 (effective
           March 7, 2000) between
</TABLE>



                                       48
<PAGE>   50
<TABLE>
<S>        <C>
           SFSC and the Registrant (filed herewith)

10.24      $4,000,000 Promissory Note issued March 15, 2000 (effective March 7,
           2000) between SFSC and the Registrant (filed herewith)

10.25      $3,553,169.20 Promissory Note issued March 15, 2000 (effective March
           7, 2000) between SFSC and the Registrant (filed herewith)

10.26      Subordination Agreement dated as of March 15, 2000 between SFSC the
           Registrant and Bank United (filed herewith)

10.27      Second Amendment to Credit Agreement dated January 31, 2000 by and
           among MPS, the Registrant and Bank United (filed herewith)

21.1       Subsidiaries of the registrant.

27         Financial Data Schedule.
</TABLE>



(b).       REPORTS ON FORM 8-K

           None






                                       49
<PAGE>   51
                                   SIGNATURES


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

                        NAB ASSET CORPORATION


                        By:       /s/  Charles E. Bradley, Sr.
                                  ----------------------------
                                  Charles E. Bradley, Sr.
                                  Chairman of the Board/Chief Executive Officer
                                  (Principal Executive Officer)


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 in
the capacities and on the dates indicated.


<TABLE>
<CAPTION>
                 Signature                                   Title                                     Date
                 ---------                                   -----                                     ----
<S>                                               <C>                                            <C>
                                                  Chairman of the Board                           March 29, 2000
   /s/  Charles E. Bradley, Sr.                   Chief Executive Officer
   ------------------------------------------
        Charles E. Bradley, Sr.                   (Principal Executive Officer)


                                                  Senior Vice President                           March 29, 2000
   /s/  Alan Ferree                               Chief Financial Officer
   ------------------------------------------
         Alan Ferree                              (Principal Financial Officer)


   /s/  Timothy G. Hanson                         Controller                                      March 29, 2000
   ------------------------------------------
         Timothy G. Hanson                        (Principal Accounting Officer)


   /s/  Charles E. Bradley, Jr.                   Director                                        March 29, 2000
   ------------------------------------------
         Charles E. Bradley, Jr.


   /s/  James B. Gardner                          Director                                        March 29, 2000
   ------------------------------------------
         James B. Gardner


   /s/  Jeffrey W. Kramer                         Director                                        March 29, 2000
   ------------------------------------------
         Jeffrey W. Kramer


   /s/  James Hinton                              Director and President of                       March 29, 2000
   ------------------------------------------
         James Hinton                             Mortgage Portfolio Services, Inc.
</TABLE>




                                       50
<PAGE>   52
<TABLE>
<S>        <C>
3.         EXHIBITS

2.1        Plan and Agreement of Merger dated February 7, 1996, by and among
           Consumer Portfolio Services, Inc., CPS Investing Corp., and
           Registrant (Incorporated by reference to Exhibit 2.1 to Form 8-K
           dated February 28, 1996).

3.1        Restated Articles of Incorporation (Incorporated by reference to
           Exhibit A to Appendix A to the Registrant's Proxy Statement dated
           April 23, 1996).

3.2        Restated By-laws (Incorporated by reference to Exhibit B to Appendix
           A to the Registrant's Proxy Statement dated April 23, 1996).

10.1       Employment Agreement dated December 1, 1996 between James E. Hinton
           and Mortgage Portfolio Services, Inc. (Incorporated by reference to
           Exhibit 10.9 to Form 10K dated December 31, 1996).

10.2       Amendment No.1 to Employment Agreement dated December 1, 1996 between
           James E. Hinton and Mortgage Portfolio Services, Inc. (Filed
           herewith).

10.3       $3,000,000 Promissory Note dated June 25,1998 issued by Registrant to
           CPS. Paid in full. (Incorporated by reference to Exhibit 10.26 to
           Form 10Q dated September 30, 1998)

10.4       Third Restated Credit Agreement between Mortgage Portfolio Services,
           Inc. and Guaranty Federal Bank, F.S.B. dated June 30, 1998
           (Incorporated by reference to Exhibit 10.23 to Form 10Q dated June
           30, 1998)

10.5       Debt Restructure Agreement dated as of August 13, 1998 between the
           Registrant and SFSC (Incorporated by reference to Exhibit 10.13 to
           Form 10K dated December 31, 1998)

10.6       $500,000 Promissory Note dated September 25,1998 issued by Registrant
           to SFSC. (Incorporated by reference to Exhibit 10.27 to Form 10Q
           dated September 30, 1998) Paid in full

10.7       $800,000 Promissory Note dated October 23,1998 issued by Registrant
           to SFSC. (Incorporated by reference to Exhibit 10.15 to Form 10K
           dated December 31, 1998) Paid in full

10.8       Credit agreement between Mortgage Portfolio Services, Inc., and Bank
           United dated June 15, 1999 (Incorporated by reference to Exhibit
           10.18 to Form 10Q dated June 30, 1999)

10.11      Third Amendment to Warehousing Credit and Security Agreement dated as
           of December 15, 1998 between Construction Portfolio Funding, Inc. and
           Bank United (Incorporated by reference To Exhibit 10.13 to Form 10K
           dated December 31, 1998)

10.12      Payment Deferral Agreement dated March 26, 1999 between Registrant
           and SFSC (Incorporated by reference to Exhibit 10.17 to Form 10K
           dated December 31, 1998)

10.13      Separation Agreement dated as of June 4, 1999 between Registrant and
           Michael W. Caton effective as of July 15, 1999 (Incorporated by
           reference to Exhibit 10.19 to Form 10Q dated June 30, 1999)

10.14      Consulting and Finder's Agreement dated as of June 4, 1999 between
           Registrant and Caton Financial Services, Inc. effective as of July
           15, 1999 (Incorporated by reference to Exhibit 10.20 to Form 10Q
           dated June 30, 1999)

10.15      $921,345 Promissory Note dated May 12, 1999 issued by SFSC to
           Registrant (Incorporated by reference to Exhibit 10.21 to Form 10Q
           dated June 30, 1999) Paid in full

10.16      Credit Agreement between Mortgage Portfolio Services, Inc. and Bank
           United dated June 15, 1999 (incorporated by reference to Exhibit
           10.19 to Form 10Q dated June 30, 1999)

10.17      First Amendment to Credit Agreement between Mortgage Portfolio
           Services, Inc., and Bank United dated June 15, 1999 (Incorporated by
           reference to Exhibit 10.22 to Form 10Q dated September 30, 1999)

10.18      Eighth Amendment to Warehousing Credit and Security Agreement and
           Amendment of Promissory Note dated February 1, 2000 between
           Construction Portfolio Funding, Inc. and Bank United (Filed herewith)

10.19      $300,000 Promissory Note from Construction Portfolio Funding, Inc. to
           James E. Hinton dated March 7, 2000 (Filed herewith)

10.20      Pledge Agreement dated as of March 7, 2000 made by Construction
           Portfolio Funding, Inc. in favor of James E. Hinton (Filed herewith)

10.21      $200,000 Promissory Note from Construction Portfolio Funding, Inc. to
           Alan Ferree dated March 7, 2000 (filed herewith)

10.22      Pledge Agreement dated as of March 7, 2000 made by Construction
           Portfolio Funding, Inc. in favor of Alan Ferree (filed herewith)

10.23      Second Debt Restructure Agreement dated March 15, 2000 (effective
           March 7, 2000) between
</TABLE>



                                       48
<PAGE>   53
<TABLE>
<S>        <C>
           SFSC and the Registrant (filed herewith)

10.24      $4,000,000 Promissory Note issued March 15, 2000 (effective March 7,
           2000) between SFSC and the Registrant (filed herewith)

10.25      $3,553,169.20 Promissory Note issued March 15, 2000 (effective March
           7, 2000) between SFSC and the Registrant (filed herewith)

10.26      Subordination Agreement dated as of March 15, 2000 between SFSC the
           Registrant and Bank United (filed herewith)

10.27      Second Amendment to Credit Agreement dated January 31, 2000 by and
           among MPS, the Registrant and Bank United (filed herewith)

21.1       Subsidiaries of the registrant.

27         Financial Data Schedule.
</TABLE>



(b).       REPORTS ON FORM 8-K

           None






                                       49