<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, 2000
                                       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)

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

      4144 N. Central Expy.,Suite 800                    75204
                Dallas, TX                             (Zip Code)
          (Address of principal
            executive offices)

       Registrant's telephone number, including area code: (888) 451-7830

        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 31, 2001 was $239,000 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>
            Title of Class                        Outstanding at March 31, 2001
            --------------                        -----------------------------
            <S>                                   <C>
            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, 2001
pursuant to Regulation 14A and is incorporated herein by reference.



<PAGE>   2

                                     PART I

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).


        On August 31, 1997, MPS acquired the fixed assets and employed the
personnel of a single-family mortgage lending division of a Dallas based savings
and loan. A premium totaling $413,000 was paid for the operation. The division,
Pacific American Mortgage Company ("PAMCO") is engaged in mortgage lending,
primarily conventional conforming, non-conforming and government insured
mortgages (prime).



                                       1
<PAGE>   3

PROPOSED TRANSACTION WITH CENTEX FINANCIAL SERVICES, INC.

        On March 16, 2001, the Company entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") with Centex Financial Services, Inc. ("CFS")
and Stanwich Financial Services Corp. ("SFSC"). Pursuant to the Stock Purchase
Agreement, the Company agreed to issue to CFS a number of shares of common stock
of the Company equal to 49.9% of the issued and outstanding post-redemption (as
described below) common stock of the Company. These shares will be in addition
to the 117,500 shares of common stock (2.31% of outstanding) of the Company
currently owned by CFS. Under the Stock Purchase Agreement, at closing CFS will
(i) pay to a disbursing agent an amount (the "Closing Payment") equal to $0.125
(subject to certain negative adjustments not to exceed $50,000 in the aggregate)
multiplied by the number of shares of common stock held by the Non-Principal
Holders (the "Closing Payment"), and (ii) pay to the Company approximately
$930,000 plus the amount of outstanding trade payables in order to fully satisfy
other outstanding debts and claims of the Company. The Non-Principal Holders
include all common shareholders of the Company other than CFS, Consumer
Portfolio Services, Inc. ("CPS") and Greenhaven Associates, Inc. ("Greenhaven"
and, together with CPS and CFS, the "Principal Holders").

        As part of the Stock Purchase Agreement, the Company has agreed to
solicit acceptances of a prepackaged plan of reorganization (the "Plan of
Reorganization") under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") from the Company's shareholders that encompasses the
transactions described above. The Company has agreed to commence solicitation of
these acceptances as soon as practicable following receipt of required
Securities and Exchange Commission approvals. Once the Company has received the
requisite consents necessary to satisfy applicable Bankruptcy Code requirements,
the Company has agreed to file a voluntary petition for relief under Chapter 11
of the United States Bankruptcy Code with the bankruptcy court. Consummation of
transactions contemplated by the Stock Purchase Agreement is contingent upon a
number of conditions precedent, including, without limitation, approval of the
Plan of Reorganization by the bankruptcy court.

        Upon approval of the Plan of Reorganization, the Company will, through a
disbursing agent, redeem the shares held by the Non-Principal Holders by
distributing a pro-rata portion of the Closing Payment to each of the
Non-Principal Holders. Following the closing, the Principal Holders will retain
the number of shares of common stock they currently hold. As a result of the
transactions contemplated by the Stock Purchase Agreement, CFS will own a
majority of the issued and outstanding common stock of the Company following the
closing. Additionally the Company will become privately held and the stock will
no longer be traded on any exchange.

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. This division is currently winding down its operation and no longer
originates construction loans to individuals.

Origination Strategies

        Retail Originations

        PAMCO originates loans through nine branches in four states using
account executives that solicit loans through real estate agents, homebuilders
and referrals from previous customers. PAMCO retail originations totaled $318
million in 2000 and $444 million in 1999. PAMCO retail prime originations
totaled $308 million in 2000 and $433 million in 1999. Retail sub-prime
originations totaled $10 million in 2000 and $11 million in 1999.

        In late 1999, MPS began to enter into the retail sub-prime origination
market. At December 31, 2000, MPS had 19 branches in 13 states. These branches
originate both prime and sub-prime mortgage loans through direct contact with
the consumer. Retail originations of this type totaled $77 million ($65 million
in sub-prime and $12 million in prime) in 2000. In 1999 originations of this
type amounted to less than $1 million.



                                       2
<PAGE>   4

        Wholesale Originations

        In 2000, MPS originated approximately 62% of its sub-prime mortgage
loans using a network of approved independent mortgage brokers. PAMCO also
originated approximately 16% 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 $141 million in 2000 and $203 million in 1999. Wholesale
prime originations totaled $53 million in 2000 and $55 million in 1999.

        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. The correspondent division was eliminated
in the second quarter of 2000. Correspondent sub-prime production was $11
million in 2000 and $41 million in 1999.

Underwriting

        Underwriting guidelines with respect to prime mortgage loans are based
upon the guidelines set forth by the Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") or MPS's mortgage
loan investors 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 has approximately eight
active investors for its loans. As applications are received and underwritten
the loans are slotted to the investor program fitting the borrowers profile.

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 and Flow Sales

        MPS sells a majority of its sub-prime mortgage production on a servicing
released basis to investors in pools of loans that meet its investors guidelines
(bulk sales). These pools are sold as often as weekly depending on loan
production volumes. MPS sells a small portion of its production on a loan by
loan basis, servicing released (flow sales).

        Forward Commitments

        In late 1998 and continuing through 2000, MPS entered into commitments
with investors to sell sub-prime mortgage loans at an agreed to price assuming
certain criteria are met. The commitments also contained formulas that would
allow the investor to pay less than the maximum price if those criteria were not
met. These commitments generally provided for maximum delivery amounts and
specific time periods



                                       3
<PAGE>   5

for delivery ranging from three to six months. MPS discontinued this practice in
late 2000 and does anticipate entering into such arrangements in the future.

        Securitization

        In June 1998, MPS completed a securitization of approximately
$51,000,000 of sub-prime loans. In a securitization, the owner of loans sells
loans to a trust that 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 that
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 MPS issued is 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 is 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 the
Company's 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 servicing release premium paid by
them for such loans. Approximately 72% of MPS's loan production is



                                       4
<PAGE>   6

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 the securitization as a portion of the payments made
to bondholders adjusts based upon fluctuations in the LIBOR.

        The Company's sub-prime mortgage loan production in 2000 represented 37%
of the Company's total loan production. The Company is highly dependent upon
bulk sale and flow 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 exit the
market it would have a material adverse effect on the Company.

        During 2000, approximately $6,717,000 or 32% of the Company's revenues
were as a result of loan sales to four 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.

Seasonality


        The mortgage banking industry is generally subject to seasonal trends.
These trends reflect the general national pattern of sales and resales of homes,
although refinancings tend to be less seasonal and more closely related to
changes in interest rates. Sales and resales of homes typically peak during the
spring and summer seasons and decline to lower levels from mid-November through
February.


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, 2000, the Company and its subsidiaries employed 266
persons.



                                       5
<PAGE>   7

ITEM 2. PROPERTIES

        The Company through its subsidiaries occupies 42,000 square feet in
Dallas for administrative and sales functions. MPS leases office space for its
branches in Arizona, California, Colorado, Florida, Georgia, Massachusetts,
Michigan, Missouri, Nevada, North Carolina, Ohio, Oklahoma, Tennessee, Texas and
Virginia. 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 has been named as a defendant in the following related
lawsuits, all filed in or after December, 2000 in the Superior Court for Los
Angeles County, California: Robert Schultz et al. vs. Stanwich Financial
Services Corp., et al.; Jerry Walls, et al. vs. Stanwich Financial Services
Corp., et al.; Martha Torbitt vs. Merrill Lynch Settlement Services, Inc. et
al.; Robert A. Havlik, et al. vs. Morgan Stanley Dean Witter & Co., et al.; and
Lawrence M. Gomes, et al. vs. Merrill Lynch Pierce Fenner & Smith Incorporated,
et al. The plaintiffs in each of these suits, except the Schultz suit, are
structured settlement payees to whom Stanwich Financial Services Corp. ("SFSC")
is indebted. In addition to the Company, there are numerous defendants in these
suits, including SFSC, Charles E. Bradley, Sr., Charles E. Bradley, Jr., several
major financial institutions and certain others. All of these suits arise out of
SFSC's default on certain payments to the payees. Although the claims made and
the relief sought vary somewhat from suit to suit, in general (1) the suits
allege breach of contract, breach of fiduciary duty, negligence, conversion,
fraudulent conveyance, fraud and violations of certain statutes and (2) the
relief sought includes compensatory and punitive damages, statutory penalties
and attorneys' fees and costs. The plaintiffs in the Schultz suit, who are
former owners of a predecessor of the SFSC business and current operators of a
structured settlement business, also claim that their business and reputation
has been damaged by SFSC's default in payments to the payees and seek damages
for unfair competition. The Walls and Torbitt suits claim class action status,
and the plaintiffs in the Schultz suit purport to sue on behalf of the payees.
The plaintiffs' theory of liability against the Company in these suits is based
on the allegations that the Company is the alter ego of SFSC and Mr. Bradley,
Sr., who is the sole shareholder and director of SFSC and the Chairman of the
Board of the Company, and that the Company participated in the actions and
omissions alleged. The Company denies these allegations and intends to
vigorously defend against these lawsuits.

        The Company is also 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.

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

        No matters were submitted to a vote of the Company's shareholders during
the fiscal quarter ended December 31, 2000.



                                       6
<PAGE>   8

                                     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
                                             --------    --------
    <S>                                      <C>         <C>
    Year ended December 31, 1999
         First Quarter                        $1.625      $1.031
         Second Quarter                        1.250        .813
         Third Quarter                         1.000        .313
         Fourth Quarter                         .625        .188
</TABLE>

<TABLE>
    <S>                                         <C>         <C>
    Year ended December 31, 2000
         First Quarter                          .500        .188
         Second Quarter                         .250        .125
         Third Quarter                          .125        .094
         Fourth Quarter                         .094        .016
</TABLE>

        As of February 28, 2001, there were approximately 7,200 shareholders of
record.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                      As of and for the year ended December 31,
                                                                  (all amounts in thousands, except per share data)
                                                       ------------------------------------------------------------------------
                                                         2000            1999            1998            1997           1996
                                                       ---------       ---------       ---------       ---------      ---------
<S>                                                    <C>             <C>             <C>             <C>            <C>
STATEMENT OF OPERATIONS:
  Revenues from continuing operations                  $  20,947       $  27,210       $  35,676       $  16,213      $   1,414
  Earnings (loss) from continuing operations              (4,888)         (5,000)           (634)          1,053           (796)
  Earnings (loss) from discontinued
   operations, net of income taxes                            24          (1,553)            796           1,181          2,344
  Net earnings (loss)                                     (4,864)         (6,553)            162           2,234          1,548
 Basic and diluted earnings (loss) per share from
     continuing operations before cumulative
     change in accounting principle                        (0.96)          (0.95)          (0.13)           0.21          (0.16)
  Basic and diluted earnings (loss) per share              (0.96)          (1.29)           0.03            0.44           0.30
  Weighted average number common shares
     outstanding                                           5,091           5,091           5,091           5,091          5,091
 BALANCE SHEET:
  Residential mortgage loans                              51,828          46,029          78,911          45,472         12,648
  Construction loans                                       2,808           3,330           9,465          13,091             --
  Total assets                                            64,624          64,406         113,317          83,235         17,904
  Total debt                                              55,736          49,495          86,994          66,302         11,819
  Total liabilities                                       67,442          62,313         104,203          75,080         12,298
  Shareholders' equity (deficit)                          (2,818)          2,046           8,599           7,839          5,605
  Distributions                                               --              --              --              --         21,883
  Book value (deficit) per share                            (.55)           0.40            1.69            1.54           1.10
  Cash distributions per share (1)                            --              --              --              --           3.64
  Transfer to liquidating trust per share (1)                 --              --              --              --           1.56
</TABLE>


(1)     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.



                                       7
<PAGE>   9

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, 2000.

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 lending 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.

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 sub-prime mortgage market has yet to recover and prices received for
sub-prime loans may never return to the levels seen in the period prior to the
third quarter of 1998. The Company's sub prime production has declined
significantly and the segment has incurred significant losses. In the second
quarter of 2000, MPS sold its California sub-prime wholesale operation and
closed its correspondent division. The Company continues to originate sub-prime
loans on a wholesale basis using its Dallas facility and originate sub-prime
loans through retail branches.

        Long-term interest rates rose steadily in 1999 and 2000, until the third
quarter, severely reducing the mortgage banking industry's level of prime
originations, particularly the refinancing of existing borrower indebtedness to
a lower rate. Although historically PAMCO has not relied on the refinance
business, the Company's origination of prime mortgages has declined. Recently
rates have declined and the level of loan applications has increased
substantially, although originations at the end of 2000 and early 2001 have not
increased from prior periods.

        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, in the third quarter of
1999, the Company elected to dispose of its investment in CPFI and NAFCO. The
disposition is substantially complete. Proceeds from the disposal were used
primarily 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 are financed under a $55,000,000
line of credit with a federal savings bank of which $48,634,000 was outstanding
at December 31, 2000. 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 1.75% to 2.75%. At December 31, 2000 the LIBOR was 6.68%.

        At December 31, 2000, residential mortgage loans held for sale totaled
$51,828,000. Of this amount $32,836,000 was conventional and government insured
or guaranteed loans (prime) and $18,992,000 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, 2000 are being sold on a bulk and flow basis. The
Company generally represents and warrants to the investor that each sub-prime
loan was underwritten to the Company's guidelines and that the borrower's
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, 2000 the liability as a result of the warranties given
to the purchasers of the Company's loans totaled $342,000. Additions to the
liability totaled $663,000 in 2000, $1,141,000 in 1999 and $1,555,000 in 1998.
Such additions are charged to gains on sales of loans. Additions to the
liability have declined as repurchase activity has subsided.

        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, 2000 is as follows:

<TABLE>
<CAPTION>
                                               Fixed Rate         Adjustable Rate
                                               -----------        ---------------
<S>                                            <C>                <C>
Remaining Principal                            $17,131,000          $6,794,000
Annualized prepayment rates                          13.86%              27.09%
Cumulative losses                              $     1,000                  --
Delinquency percentages
  30-59 days                                          1.48%               3.70%
  60-89 days                                           .20%                 --
  Over 90 days                                          --                  --
  Delinquent bankruptcies                             4.71%               5.71%
  Loans in foreclosure                                2.47%              12.89%
  Foreclosed loans                                    1.85%               4.31%
  Total delinquencies                                10.71%              26.61%
</TABLE>

                The Company purchased a mortgage pool insurance policy that
covers all losses up to 5% of the initial pool balances. Claims for losses total
$989,000 that has been paid to date by the insurer. Total remaining loss
coverage under the pool insurance policy is $1,580,000. The fee for the
insurance coverage is .52% annually of the unpaid principal of the loans.

        In addition, to facilitate the sale, the Company provided a credit
enhancement for the benefit of the investors in the form of an
over-collateralization account 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,
subject to certain minimum performance requirements relating to the loans in the
security. One of these requirements is a delinquency (60 days or more) ratio
that must be less than 10.50% on a six month rolling average basis. In December
of 2000, the actual delinquency ratio exceeded 10.50%. As a result, the required
levels of over-collateralization were increased to an amount equal to the
principal balance of the loans that are 60 days or more delinquent. At December
31, 2000, that amount was $2,862,000. No cash will be released to the Company
until the delinquency ratio declines to below 10.50% or the
over-collateralization account exceeds the new required levels of
over-collateralization. Based upon the projected decline in delinquencies the
Company expects to resume receiving distributions in the third or fourth quarter
of 2001. Cash released to the Company from the over-collateralization account in
2000 totaled $752,000. No cash had been released prior to 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, 2000 and 1999 the residual interests in the
securitization consisted of the following:

<TABLE>
<CAPTION>
                                            2000            1999
                                         ----------      ----------
<S>                                      <C>             <C>
NIR                                      $1,164,000      $1,978,000
Over-collateralization account            1,742,000       1,700,000
                                         ----------      ----------
                                         $2,906,000      $3,678,000
                                         ==========      ==========
</TABLE>

        Escrow balances on securitized loans serviced by the Company are not
included in the accompanying consolidated balance sheets and totaled $21,000 and
$27,000 at December 31, 2000 and 1999, respectively.

        The assumptions used in the valuation of the residual interests at
December 31, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                         December 31, 2000           December 31, 1999
                                     -------------------------   -------------------------
                                       Fixed       Adjustable      Fixed      Adjustable
                                     -----------   -----------   -----------  ------------
<S>                                  <C>           <C>           <C>          <C>
Discount rate                           12%           12%           12%           12%
Weighted average life                4.95 years    2.02 years    4.58 years   2.77 years
Prepayment speeds-ramp up to          20% CPR       70% CPR       17% CPR       35% CPR
Cumulative defaults                    12.50%        12.50%        15.50%       18.00%
Cumulative losses, net of losses
   covered by pool insurance            .25%          .25%          .62%         .71%
</TABLE>

        At December 31, 2000, the sensitivity of the fair value of the residual
interest to two adverse changes in each of the key assumptions were as follows
(in thousands):

<TABLE>
<S>                                                <C>
Carrying value of residual interest                $ 2,906
                                                   =======
Discount rate:
Up 10% to 13.2%                                    $  (102)
                                                   =======
Up 20% to 14.4%                                    $  (198)
                                                   =======
Prepayment speeds:
Up 10% to ramp up to 22% CPR for fixed
and 77% CPR for adjustable                         $  (117)
                                                   =======
Up 20% to ramp up to 24% CPR for fixed
and 84% CPR for adjustable                         $  (225)
                                                   =======
Cumulative losses:
Up 10% to .275%                                    $  (127)
                                                   =======
Up 20% to .3%                                      $  (255)
                                                   =======
</TABLE>

        Discontinued Operations

        In the third quarter of 1999, the Company elected to dispose of two of
its operating segments, CPFI and NAFCO. The disposition has been substantially
completed.

        At December 31, 2000 the discontinued segments had $220,000 in remaining
assets of which $213,000 was a foreclosed property. At December 31, 1999, CPFI
had an outstanding borrowing to an officer totaling $185,000 secured by the
foreclosed property.



                                       10
<PAGE>   12

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

        For the year ended December 31, 2000, the Company reported a loss from
continuing operations, of $(4,888,000), compared to a loss from continuing
operations, before change in accounting principle of $(4,845,000) for the year
ended December 31, 1999. In 1999, the Company disposed of its construction and
commercial lending operations. Including discontinued operations the Company
reported a net loss of $(4,864,000) in 2000 as compared to a net loss of
$(6,553,000) in 1999.

        The 2000 loss was principally due to three factors: the continued losses
associated with the Company's sub prime mortgage lending operation, MPS and a
decline in PAMCO's originations resulting from an increase in long-term interest
rates.

        PAMCO's mortgage production declined approximately 24% over 1999. Rising
long-term interest rates have reduced originations in general in the prime
mortgage banking industry as a whole.

        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, 2000, 1999 and 1998. A
summary of the operating profits and losses by the Company's operating segments
is as follows:

<TABLE>
<CAPTION>
                                                    2000           1999           1998
                                                  --------       --------       --------
<S>                                               <C>            <C>            <C>
Revenues:
     Residential mortgage banking-sub-prime       $  9,704       $ 10,663       $ 15,427
     Residential mortgage banking-prime             11,158         16,329         19,634
     Corporate and intercompany eliminations            85            218            615
                                                  --------       --------       --------
          Total revenues:                           20,947         27,210         35,676

Costs and expenses:
     Residential mortgage banking-sub-prime         13,105         14,842         15,308
     Residential mortgage banking-prime             11,214         15,026         16,997
     Corporate and intercompany eliminations         1,516          2,187          4,005
                                                  --------       --------       --------
          Total costs and expenses                  25,835         32,055         36,310

Operating profit (loss):
     Residential mortgage banking-sub-prime         (3,401)        (4,179)           119
     Residential mortgage banking-prime                (56)         1,303          2,637
     Corporate and intercompany eliminations        (1,431)        (1,969)        (3,390)
                                                  --------       --------       --------

Loss from continuing operations
 before cumulative effect of change in
 accounting principle                             $ (4,888)      $ (4,845)      $   (634)
                                                  ========       ========       ========
</TABLE>

        The Company operates its mortgage banking activities through its 84%
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. The two divisions originate loans in 41 states.



                                       11
<PAGE>   13

        Residential mortgage loan production for 2000, 1999 and 1998 is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                    Prime                                   Sub-prime
                     --------      --------      --------      --------     ---------      --------
                       2000          1999          1998          2000          1999          1998
                     --------      --------      --------      --------      --------      --------
<S>                  <C>           <C>           <C>           <C>          <C>            <C>
Retail:
Originations
obtained from
the consumer         $319,743      $433,156      $534,497      $ 75,198      $ 11,497      $ 14,785

Wholesale:
Loans received
from mortgage
brokers and
closed in MPS's
name                   52,773        55,086        63,181       141,450       202,714       234,999

Correspondent:
Closed loans
purchased from
other mortgage
originators                --            --            --        10,576        41,472        83,144
                     --------      --------      --------      --------      --------      --------
                     $372,516      $488,242      $597,678      $227,224      $255,683      $332,928
                     ========      ========      ========      ========      ========      ========
</TABLE>

        Total combined 2000, 1999 and 1998 originations by state are as follows
(in thousands):

<TABLE>
<CAPTION>
                                 2000                           1999                         1998
                      ---------------------------   ---------------------------   ---------------------------
                      Originations        Percent   Originations        Percent   Originations        Percent
                      ------------        -------   ------------        -------   ------------        -------
<S>                   <C>                 <C>       <C>                 <C>       <C>                 <C>
Texas                     $328,357             55%      $323,600             43%      $365,667             39%
California                  87,617             15        160,876             22        154,631             16
Tennessee                   15,962              3         65,947              9         98,772             11
Colorado                    29,289              5         43,624              6         71,072              8
All others                 138,515             22        149,878             20        240,464             26
                           -------            ---        -------            ---        -------            ---
                          $599,740            100%      $743,925            100%      $930,606            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>
                                         2000             1999             1998
                                       ---------        ---------        ---------
<S>                                    <C>              <C>              <C>
MPS (principally sub-prime)

Gains on sales of loans
  and other fee income                 $   7,610        $   8,062        $  11,630
Interest income                            1,983            2,601            3,797
Other income                                 111               --               --
Compensation and benefits                 (7,939)          (9,475)          (8,609)
Interest expense                          (1,546)          (1,657)          (2,769)
Other expenses                            (3,620)          (3,710)          (3,930)
                                       ---------        ---------        ---------
  Earnings (loss) from operations      $  (3,401)       $  (4,179)       $     119

Loans originated                       $ 221,375        $ 244,197        $ 318,240
Loans sold                             $ 221,913        $ 250,489        $ 305,652


Gains on sales of loans and
  other fee income as a percent
  of loan sales                             3.43%            3.22%            3.80%
Compensation and benefits
  as a percent of originations              3.59%            3.88%            2.71%
Other expenses as a percent
  of originations                           1.64%            1.52%            1.23%
Net interest income as a
  percent of originations                    .20%             .39%             .32%


PAMCO (principally prime)

Gains on sales of loans
  and other fee income                 $   9,104        $  13,773        $  16,459
Interest income                            2,054            2,556            3,175
Compensation and benefits                 (6,435)          (9,189)         (10,520)
Interest expense                          (2,144)          (2,522)          (3,383)
Other expenses                            (2,635)          (3,315)          (3,094)
                                       ---------        ---------        ---------
  Earnings (loss) from operations      $     (56)       $   1,303        $   2,637

Loans originated                       $ 378,365        $ 499,728        $ 612,366
Loans sold                             $ 370,400        $ 524,071        $ 595,209
Gains on sales of loans and
other fee income as a percent
  of loan sales                             2.46%            2.63%            2.77%
Compensation and benefits
  as a percent of originations              1.70%            1.84%            1.72%
Other expenses as a percent
  of originations                            .70%             .66%             .51%
Net interest income (expense)
  as a percent of originations              (.02%)            .01%            (.03%)
</TABLE>



                                       12
<PAGE>   14

MPS operations

        For the year ended December 31, 2000 the MPS mortgage operations
incurred losses totaling $(3,401,000) as compared to losses of $(4,179,000) in
1999. Revenues decreased $959,000 or 9% over 1999 and expenses decreased
$1,737,000 or 12% over 1999.

        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 has declined significantly from 1998. The Company in
response to the price declines reduced staff and tightened underwriting
standards to reduce repurchase risk. In 2000, the Company sold its California
wholesale sub-prime operation and eliminated its correspondent division.

        The Company opened a significant number of retail branches in 2000. The
branches originate primarily sub-prime loans. Gains have decreased as a percent
of sales but have been offset by higher fees earned by the retail branches.

        Compensation expenses as a percent of production decreased to 3.59% in
2000 from 3.88% in 1999. The decrease is attributable to cost savings from
staffing reductions and elimination of the business operations discussed above.

        Other expenses increased in 2000 to 1.64% from 1.52% of production in
1999 as a result of rising fixed costs, as a percentage of originations, such as
rent and depreciation expense.

        Net interest spread as a percentage of production decreased to .20% in
2000 from .39% in 1999 as a result of higher short term rates that negatively
impact the interest rate charged the Company on its line of credit.
Additionally, the spread on the line of credit was increased at the time the
line was renewed.

PAMCO operations

        For the year ended December 31, 2000, MPS's principally prime production
operation, PAMCO, incurred losses of $(56,000). For the year ended December 31,
1999 PAMCO earned $1,303,000. Operating revenues for 2000 totaled $11,158,000 as
compared to $16,329,000 for 1999 and expenses totaled $11,214,000 as compared to
$15,026,000 for 1999.

        Gains on sales of loans and other loan fees as a percent of loans sold
was 2.46% in 2000 as compared to 2.63% in 1999. 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,



                                       13
<PAGE>   15

PAMCO will also reduce prices or fees charged to borrowers. In late 2000,
long-term interest rates began declining significantly and borrower applications
have increased as a result, although the Company had no appreciable increase in
mortgage loan production or related revenues in late 2000. Compensation expenses
as a percent of production declined to 1.70% from 1.84% in 1999. Commission
levels have declined as a result of lower revenues. Other expenses as a percent
of originations increased to .70% in 2000 as compared to .66% in 1999 as a
result of rising fixed costs, as a percentage of originations, such as rent and
depreciation expense.

        Net interest expense was .02% in 2000 as a percent of production as
compared to net interest income of .01% in 1999. Higher short-term rates in 2000
negatively impacted the interest rate charged the Company on its line of credit.
Additionally, the spread on the line of credit was increased at the time the
line was renewed.


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 $260,000 in 2000 as compared to $592,000
1999. The decrease was related to a reduction in incentive compensation expense
from $108,000 in 1999 to $0 in 2000 and a reduction in personnel in mid 1999 and
2000.

        Interest expense to affiliates was $1,080,000 for the year ended
December 31, 2000 as compared to $1,776,000 for 1999. The decrease is
attributable to the Company's partial repayment of debt to SFSC and the full
repayment of debt to Consumer Portfolio Services, Inc. ("CPS").

        Other expenses totaled $517,000 for the year ended December 31, 2000 as
compared to $485,000 for the same period in 1999. Reductions in minority
interest due to losses at MPS totaled $550,000 in 1999 as compared to $47,000
this year. Minority interest was reduced to zero in the first quarter of 2000.
Additionally income tax expense has declined from 1999. The tax expense arises
from the 1998 securitization of loans and represents the tax effect of excess
inclusion interest income that cannot be offset by the net operating loss
carryforwards of the Company. Included in other expenses are credits for
interest earned by NAB from MPS. Interest earned from MPS totaled $289,000 for
the year ended December 31, 2000 as compared to $381,000 for the year ended
December 31, 1999.

Discontinued Operations

        The discontinued operations, consisting of commercial and construction
lending, recorded earnings in 2000 of $24,000 as compared to losses of
$1,553,000 in 1999. The 1999 loss included charges totaling $2,061,000 related
to the disposition of loans and, severance costs and disposal charges totaling
$346,000.

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.

        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.



                                       14
<PAGE>   16

        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.

MPS operations

        For the year ended December 31, 1999 the MPS mortgage operation incurred
a loss 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 that 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 having 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.

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 for 1999 as compared
to $19,634,000 for 1998 and expenses totaled $15,026,000 for 1999 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 also 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 primarily 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



                                       15
<PAGE>   17

$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.

        LIQUIDITY AND CAPITAL RESOURCES

        As of December 31, 2000, the Company had $198,000 in unrestricted cash
as compared to $1,397,000 at December 31, 1999. The decrease in unrestricted
cash is attributable to the losses of the Company and the repurchase of
foreclosed and defaulted loans from an investor in the first quarter of 2000.

        Total assets have increased to $65,624,000 at December 31, 2000 from
$64,406,000 at December 31, 1999. The Company has reduced its levels of
construction loans along with disposing a significant amount of its investment
in the operations at NAFCO and CPFI. These reductions have been offset by the
increase in the mortgage loan inventory.

        MPS's line of credit with Bank United totals $55,000,000. Outstanding
borrowings bear interest at various spreads (ranging from 1.75% to 2.75%) over
the LIBOR rate. The line of credit matures April 30, 2001. The mortgage loans
receivable of MPS are pledged as collateral for the line of credit. At December
31, 2000, $48,634,000 was borrowed under the line.

        On March 22, 2001, MPS entered in a Master Mortgage Loan Purchase
Agreement with Centex Credit Corporation ("CCC"). The Agreement allows MPS to
sell certain mortgage loans, based on product type, to CCC. The Company will
assign the collateral, loan file and take out commitment from the investor to
CCC and CCC will fund a portion of the purchase price to MPS. Upon final payment
from the investor, CCC will remit the remaining funds to MPS. In addition to the
purchase price, the Company will receive interest at the rate stated in the
mortgage loan less the Federal Funds rate plus 1.5%. The Agreement may be
terminated upon 30 days notice.

        At December 31, 2000, the Company had borrowed under two notes from SFSC
a total of $7,102,000. The notes bear interest at 14% and are due December 31,
2002. Interest on the notes is due monthly. In 2000, the Company elected to
defer interest payments on the notes. The unpaid interest also accrues interest
at 14%. The notes require interest to be paid monthly beginning in March 2001,
along with mandatory monthly principal repayments of $100,000. NAB currently
does not have the cash resources to make principal or interest payments under
the notes.

        On March 7, 2000, CPFI borrowed $500,000 from two officers of the
Company. The notes were paid in July 2000. A renewal note was entered into in
July 2000 for $185,000 with one of the officers. The note bears interest at 14%
and is due April 30, 2001. The note is secured by real estate owned by CPFI with
a net book value of $213,000.

        During 1999 and 2000, NAB's cash flows from operations 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 to provide operating funds for NAB. The dispositions have been
substantially completed.

        NAB's sole source of internally generated cash is from interest and tax
sharing payments from MPS. No tax sharing payments are expected until MPS
generates sufficient taxable income to offset its accumulated tax losses.
Interest payments currently approximate $72,000 each quarter, less than the cash
required by NAB to fund its operating expenses as currently exist.

        As discussed in Item 1. Business, the Company has entered into a Stock
Purchase Agreement with Centex Financial Services, Inc. The Company will as part
of the Stock Purchase Agreement solicit acceptances of a prepackaged plan of
reorganization (the "Plan of Reorganization") under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") from the Company's shareholders.
The



                                       16
<PAGE>   18

Company has agreed to commence solicitation of these acceptances as soon as
practicable following receipt of required Securities and Exchange Commission
approvals. Once the Company has received the requisite consents necessary to
satisfy applicable Bankruptcy Code requirements, the Company has agreed to file
a voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code with the bankruptcy court. Consummation of transactions contemplated by the
Stock Purchase Agreement is contingent upon a number of conditions precedent,
including, without limitation, approval of the Plan of Reorganization by the
bankruptcy court. It is anticipated that upon completion of the transactions
contemplated, NAB will have sufficient funds to pay its creditors. Additionally
the Company will become privately held and the stock will no longer be traded on
any exchange.

        Management has had no indication that the CFS transactions will not be
completed as contemplated. If the CFS transactions do not occur the Company will
be required to sell assets, operations or its investment in MPS to settle its
obligations. Additionally, MPS's line of credit matures on April 30, 2001.
Management has requested that the line of credit be extended or renewed to a
date in 2001 that will allow the proposed transactions to be concluded. There
can be no assurance that the lenders will extend or renew MPS's credit facility.
As discussed above MPS has entered into a Master Mortgage Loan Purchase
Agreement with Centex Credit Corporation. The agreement may be terminated upon
30 days notice. If the CFS transactions are not completed, it is expected that
the CCC agreement would be terminated. If financing is unavailable the Company
will be required to sell assets, operations or its investment in MPS to settle
its obligations. These factors raise substantial doubt about the Company's
ability to continue as a going concern.

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 a 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 fluctuates 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 2001 of a 1% rise in interest rates and a 1% decline in prices received for
its sub-prime loans would be as follows:



                                       17
<PAGE>   19

Sub prime operations- $1,637,000
Prime operations- $1,093,000
Residual interest in securitization- $198,000

        As of December 31, 1999, 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

        The significant decline in the negative effect of changes in the
sub-operation is due to the sale of the California wholesale operation and the
elimination of the correspondent sub-prime division and an increased reliance on
retail originations that replaces the emphasis on loan sale premiums with fees
collected directly from the borrower.

    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 may also assume 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.

        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.

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. In June 2000, SFAS No.
138 was issued amending certain provisions of SFAS No. 133. The Company adopted
SFAS No. 133 and SFAS No. 138 on January 1, 2001. The adoption of these two
statements did not have a material impact on the financial statements of the
Company.

        In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement
of FASB Statement No. 125 (SFAS 140). This Statement revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS
125's provisions without reconsideration. SFAS 140 is effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after March 31, 2001. SFAS 140 is effective for recognition and reclassification
of collateral and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. See note 4 to the
consolidated financial statements for the required disclosures.

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



                                       18
<PAGE>   20

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, 2000 and 1999, and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NAB Asset
Corporation and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in notes 1 and
16 to the consolidated financial statements, the Company has suffered recurring
losses from operations, is in the process of filing for bankruptcy under Chapter
11 of the United States Bankruptcy Code and its line of credit is due April 30,
2001. These factors raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in notes 1 and 16. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

As discussed in Note 2 to the consolidated financial statements, in 1999, 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 16, 2001, except for note 16, which is as of March 22, 2001



                                       20
<PAGE>   22

                              NAB ASSET CORPORATION
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                    -----------------------
           Assets                                                     2000           1999
                                                                    --------       --------
<S>                                                                 <C>            <C>
Cash and cash equivalents                                           $    198       $  1,397
Restricted cash                                                        3,945          1,457
Receivables:
     Construction loans, net                                           2,808          3,330
     Residential mortgage loans held for sale                         51,828         46,029
     Loans to officers                                                   827          2,213
     Other receivables                                                   756            995
Residual interest in securitization of mortgage loans                  2,906          3,678
Real estate owned, net                                                   492            728
Property and equipment, net                                              298            612
Costs in excess of net assets acquired, net                              230            442
Net assets of discontinued operations                                     --          2,855
Other assets, net                                                        336            670
                                                                    --------       --------
          Total assets                                              $ 64,624       $ 64,406
                                                                    ========       ========

          Liabilities and Shareholders' Equity (Deficit)

Liabilities:
Warehouse line of credit                                            $ 48,634       $ 40,218
Notes payable to affiliates                                            7,102          9,277
Drafts payable                                                         7,673          8,279
Accounts payable and accrued expenses                                  3,993          4,539
Net liabilities of discontinued operations                                40             --
                                                                    --------       --------
          Total liabilities                                           67,442         62,313


Minority interest                                                         --             47

Commitments and contingencies (notes 1, 12 and 16)
Shareholders' equity (deficit):
     Common stock:  $.10 par value, 30,000,000
       authorized shares; 5,091,300 issued and outstanding at
       December 31, 2000 and 1999                                        509            509
     Additional paid-in capital                                        7,815          7,815
     Accumulated deficit                                             (11,142)        (6,278)
                                                                    --------       --------
          Total shareholders' equity (deficit)                        (2,818)         2,046
                                                                    --------       --------
          Total liabilities and shareholders' equity (deficit)      $ 64,624       $ 64,406
                                                                    ========       ========
</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,
                                                                        -----------------------------------------------
                                                                           2000              1999              1998
                                                                        -----------       -----------       -----------
<S>                                                                     <C>               <C>               <C>
Revenues:
  Gains on sales of loans                                               $     8,518       $    13,295       $    18,530
  Interest income                                                             4,122             5,375             7,587
  Origination and other fee income                                            8,307             8,540             9,559
                                                                        -----------       -----------       -----------
       Total revenues                                                        20,947            27,210            35,676
                                                                        -----------       -----------       -----------

Costs and expenses:
  Compensation and benefits                                                  14,634            19,248            20,445
  Interest expense                                                            3,401             3,799             5,591
  Interest expense-affiliates                                                 1,080             1,776             2,432
  General and administrative                                                  6,822             7,385             7,452
  Minority interest                                                             (47)             (468)              224
                                                                        -----------       -----------       -----------
       Total costs and expenses                                              25,890            31,740            36,144
                                                                        -----------       -----------       -----------

Loss from continuing operations before income taxes
   and cumulative effect of change in accounting principle                   (4,943)           (4,530)             (468)

Income tax expense (benefit)                                                    (55)              315               166
                                                                        -----------       -----------       -----------

Loss from continuing operations before cumulative
  effect of change in accounting principle                                   (4,888)           (4,845)             (634)

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

Loss from continuing operations                                              (4,888)           (5,000)             (634)

Earnings (loss) from discontinued operations, net
 of income taxes of $0, $75 and $18                                              24            (1,553)              796
                                                                        -----------       -----------       -----------

Net earnings (loss)                                                     $    (4,864)      $    (6,553)      $       162
                                                                        ===========       ===========       ===========

Basic and diluted earnings (loss) per share:

Continuing operations before cumulative effect of
 change in accounting principle                                         $     (0.96)      $     (0.95)      $     (0.13)

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

Earnings (loss) per share from discontinued
 operations, net of income taxes                                                 --             (0.31)             0.16
                                                                        -----------       -----------       -----------

Earnings (loss) per share                                               $     (0.96)      $     (1.29)      $      0.03
                                                                        ===========       ===========       ===========

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 (DEFICIT)
                                 ( IN THOUSANDS)
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                  RETAINED
                                                    ADDITIONAL    EARNINGS
                                       COMMON        PAID-IN     (ACCUMULATED
                                        STOCK        CAPITAL       DEFICIT)        TOTAL
                                       --------     ----------    -----------     --------
<S>                                    <C>          <C>           <C>             <C>
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
Net loss                                     --            --        (4,864)        (4,864)
                                       --------      --------      --------       --------

Balance, December 31, 2000             $    509      $  7,815      $(11,142)      $ (2,818)
                                       ========      ========      ========       ========
</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, 2000, 1999 AND 1998
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         2000           1999           1998
                                                                       --------       --------       --------
<S>                                                                    <C>            <C>            <C>
Cash flows from operating activities:
        Net earnings (loss)                                            $ (4,864)      $ (6,553)      $    162
        Discontinued operations                                             (24)         1,553           (796)
        Adjustments to reconcile net earnings (loss) to
          net cash provided by (used in) operating activities:
          Non-cash gain on securitization of mortgage loans                  --             --         (3,248)
          Amortization of net interest receivable account                   815            922            348
          Deposits to over-collateralization account                       (795)        (1,066)          (634)
          Cash released from over-collateralization account                 752             --             --
          Depreciation and amortization                                     634            784            779
          Deferred compensation charge                                      184             --             --
          Change in accounting principle                                     --            155             --
          Reduction in note receivable from affiliate in exchange
            for payment of interest                                         277            644             --
          Minority interest                                                 (47)          (468)           224
          Net changes in:
            Residential mortgage loans originated, purchased
              and sold, net and real estate owned                        (5,563)        32,733        (34,005)
            Restricted cash                                              (2,488)         2,495           (297)
            Loans to officers                                               826            827         (3,040)
            Other receivables                                               (86)           367           (395)
            Other assets                                                    303           (281)           139
            Drafts payable                                                 (606)        (3,402)         6,256
            Accounts payable and accrued expenses                          (122)          (989)         2,068
                                                                       --------       --------       --------
              Net cash provided by (used in) operating activities       (10,804)        27,721        (32,439)
                                                                       --------       --------       --------
Cash flows from investing activities:
     Construction loan repayments, net                                      522          6,135          3,626
     Note receivable from affiliate                                          --           (921)            --
     Acquisition of businesses, net of cash acquired                         --            (18)          (195)
     Sales of property and equipment                                         17             --             --
     Purchases of property and equipment                                    (94)           (95)          (437)
                                                                       --------       --------       --------
              Net cash provided by investing activities                     445          5,101          2,994
                                                                       --------       --------       --------
Cash flows from financing activities:
     Net borrowings under (repayments of) warehouse lines of
       credit                                                             8,416        (33,899)        24,115
     Borrowings on notes payable to affiliates                               --             --          1,300
     Principal payments on notes payable to affiliates                   (2,175)        (3,600)        (4,723)
     Payments received on notes receivable from affiliates                   --             --          1,300
     Issuance of stock of subsidiaries                                       --             --            598
                                                                       --------       --------       --------
             Net cash provided by (used in) financing activities          6,241        (37,499)        22,590
Cash provided by discontinued operations                                  2,919          5,128          5,843
                                                                       --------       --------       --------
Net increase (decrease) in cash and cash equivalents                     (1,199)           451         (1,012)
Cash and cash equivalents at beginning of year                            1,397            946          1,958
                                                                       --------       --------       --------
Cash and cash equivalents at end of year                               $    198       $  1,397       $    946
                                                                       ========       ========       ========
</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, BANKRUPTCY PROCEEDINGS 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. 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.

        In July 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.

        In August 1997, MPS acquired the fixed assets and employed the personnel
of a single-family mortgage lending division of a Dallas based savings and loan.
A premium totaling $413,000 was paid for the operation. The division, Pacific
American Mortgage Company ("PAMCO") is engaged in mortgage lending, primarily
conventional conforming, non-conforming and government insured mortgages
(prime).

        Total accumulated amortization of the costs in excess of net assets
acquired related to MPS and PAMCO totaled $754,000 and $542,000 at December 31,
2000 and 1999, respectively.



                                       25
<PAGE>   27

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

Proposed Transaction with Centex Financial Services, Inc.

        On March 16, 2001, the Company entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") with CFS Financial Services, Inc. ("CFS") and
Stanwich Financial Services Corp. ("SFSC"). Pursuant to the Stock Purchase
Agreement, the Company agreed to issue to CFS a number of shares of common stock
of the Company equal to 49.9% of the issued and outstanding post-redemption (as
described below) common stock of the Company. These shares will be in addition
to the 117,500 shares of common stock (2.31% of outstanding) of the Company
currently owned by CFS. Under the Stock Purchase Agreement, at closing CFS will
(i) pay to a disbursing agent an amount (the "Closing Payment") equal to $0.125
(subject to certain negative adjustments not to exceed $50,000 in the aggregate)
multiplied by the number of shares of common stock held by the Non-Principal
Holders (the "Closing Payment"), and (ii) pay to the Company approximately
$930,000 plus the amount of outstanding trade payables in order to fully satisfy
other outstanding debts and claims of the Company. The Non-Principal Holders
include all common shareholders of the Company other than CFS, Consumer
Portfolio Services, Inc. ("CPS") and Greenhaven Associates, Inc. ("Greenhaven"
and, together with CPS and CFS, the "Principal Holders").

        As part of the Stock Purchase Agreement, the Company has agreed to
solicit acceptances of a prepackaged plan of reorganization (the "Plan of
Reorganization") under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") from the Company's shareholders that encompasses the
transactions described above. The Company has agreed to commence solicitation of
these acceptances as soon as practicable following receipt of required
Securities and Exchange Commission approvals. Once the Company has received the
requisite consents necessary to satisfy applicable Bankruptcy Code requirements,
the Company has agreed to file a voluntary petition for relief under Chapter 11
of the United States Bankruptcy Code with the bankruptcy court. Consummation of
transactions contemplated by the Stock Purchase Agreement is contingent upon a
number of conditions precedent, including, without limitation, approval of the
Plan of Reorganization by the bankruptcy court.

        Upon approval of the Plan of Reorganization, the Company will, through a
disbursing agent, redeem the shares held by the Non-Principal Holders by
distributing a pro-rata portion of the Closing Payment to each of the
Non-Principal Holders. Following the closing, the Principal Holders will retain
the number of shares of common stock they currently hold. As a result of the
transactions contemplated by the Stock Purchase Agreement, CFS will own a
majority of the issued and outstanding common stock of the Company following the
closing. See note 16.

Discontinued Operations

        In the third quarter of 1999 the Company elected to dispose of
Construction Portfolio Funding, Inc. ("CPFI") and NAFCO, Inc. CPFI began
operations in December 1997 and was engaged in the business of providing
financing and servicing to residential homebuilders. NAFCO began operations in
1997 and was a lender to companies in the rent-to-own and rental purchase
industries.

        Summarized assets and liabilities for the discontinued operations are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                              December 31,
                                                         ---------------------
                                                          2000          1999
                                                         -------       -------
<S>                                                      <C>           <C>
Loans receivable, net                                    $    --       $ 6,096
Other assets                                                 220            87
Line of credit                                                --        (2,914)
Other liabilities                                           (260)         (414)
                                                         -------       -------

Net assets (liabilities) of discontinued operations      $   (40)      $ 2,855
                                                         =======       =======
</TABLE>



                                       26
<PAGE>   28


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

        Operating results of the discontinued operations are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
                                                 Year ended December 31, 1999
                                                -------------------------------
                                                                   Period from
                                                                    January 1,
                                                  Period from      1999 to June
                                 Year ended     July 1, 1999 to      30, 1999          Year ended
                                 December 31,     December 31,     (measurement       December 31,
                                    2000             1999              date)              1998
                                 ------------   ---------------     ------------      ------------
<S>                              <C>            <C>                 <C>               <C>
Revenues                           $   127          $ 1,554           $ 2,124           $ 7,047
Expenses                               103            2,430             2,801             6,251
                                   -------          -------           -------           -------
Net
Earnings (loss)                    $    24          $  (876)          $  (677)          $   796
                                   =======          =======           =======           =======
</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 $346,000 in costs relating
to the disposition of loans and severance charges and $2,061,000 of loan losses.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        The Company has two reportable segments, sub-prime and prime residential
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 accounting
principles generally accepted in the United States of America 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.

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.

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.



                                       27
<PAGE>   29

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

Construction Loans Receivable

        Construction loans are carried at the outstanding principal balance net
of unamortized purchase discount. 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 residential 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.

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.

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.

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.



                                       28
<PAGE>   30

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

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 that 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.

        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. See "New Accounting
Pronouncements" below.



                                       29
<PAGE>   31

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

        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
bases and operating loss and tax credit carryforwards. 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, 2000, 1999 and 1998 there were no dilutive common
share equivalents.

Consolidated Statements of Cash Flows

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

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

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                       -------------------------------------
                                                        2000           1999           1998
                                                       -------        -------        -------
         <S>                                           <C>            <C>            <C>
         Interest paid                                 $ 3,890        $ 7,267        $11,235
                                                       =======        =======        =======
         Taxes paid (received)                         $  (217)       $   354        $   163
                                                       =======        =======        =======
         Non-cash activities:
         Residential mortgage loans held for
         sale transferred to real estate owned         $ 1,313        $   898        $   566
                                                       =======        =======        =======
         Retirement of fully depreciated assets        $   142        $    --        $    --
                                                       =======        =======        =======
         Notes receivable exchanged for
         reduction in payable to affiliates            $    --        $    --        $ 1,600
                                                       =======        =======        =======
</TABLE>



                                       30
<PAGE>   32

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

<TABLE>
         <S>                                            <C>           <C>        <C>
         Exchange of Loan to Officer for MPS
         common stock and termination of
         deferred compensation agreement
                  Loan to Officer                       $ 560         $--        $--
                  Interest receivable                      48          --         --
                  Accrued deferred compensation          (424)         --         --
                                                        -----         ---        ---
                  Charge to compensation expense        $ 184         $--        $--
                                                        =====         ===        ===
</TABLE>

New Accounting Pronouncements

        Statement of Financial Accounting Standards No. 133 and No. 138 (SFAS
133 and 138), "Accounting for Derivative Instruments and 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 133 and
138 require that changes in fair value of a derivative be recognized currently
in earnings unless specific hedge accounting criteria are met. The Company
adopted SFAS 133 and 138 on January 1, 2001, and there was no impact on the
consolidated financial statements.

        In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities - a
Replacement of FASB Statement No. 125" (SFAS 140). This Statement revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral and requires certain disclosures, but it carries over most
of SFAS 125's provisions without reconsideration. SFAS 140 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001. SFAS 140 is effective for recognition and
reclassification of collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000. See
note 4 for required disclosures.

(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, 2000              December 31, 1999
                       ------------------             -------------------
                                 Weighted                        Weighted
                                  Average                         Average
                       Amount      Rate               Amount       Rate
                       ------    --------             -------    --------
   <S>                <C>        <C>                  <C>        <C>
   Adjustable-rate    $ 9,663     10.27%              $13,124      9.52%
   Fixed-rate          42,067      9.15%               32,551      8.96%
                      -------                         -------
                       51,730                          45,675
   Deferred loan
   fees (net)              98                             354
                      -------                         -------
                      $51,828                         $46,029
                      =======                         =======
</TABLE>

        Escrow balances on mortgage loans held for sale are not included in the
accompanying consolidated balance sheets and totaled $139,000 and $193,000 at
December 31, 2000 and 1999, respectively.

(4) RESIDUAL INTEREST IN SECURITIZATION OF MORTGAGE LOANS

         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.



                                       31
<PAGE>   33

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

        The performance of the loans underlying the security through December
31, 2000 is as follows:

<TABLE>
<CAPTION>
                                     Fixed Rate           Adjustable Rate
                                   --------------         ---------------
<S>                                <C>                    <C>
Remaining Principal                $   17,131,000         $    6,794,000
Annualized prepayment rates                 13.86%                 27.09%
Cumulative losses                  $        1,000                     --
Delinquency percentages
  30-59 days                                 1.48%                  3.70%
  60-89 days                                  .20%                    --
  Over 90 days                                 --                     --
  Delinquent bankruptcies                    4.71%                  5.71%
  Loans in foreclosure                       2.47%                 12.89%
  Foreclosed loans                           1.85%                  4.31%
  Total delinquencies                       10.71%                 26.61%
</TABLE>

        The Company purchased a mortgage pool insurance policy that covers all
losses up to 5% of the initial pool balances. Claims for losses total $989,000
that has been paid to date by the insurer. Total remaining loss coverage under
the pool insurance policy is $1,580,000. The fee for the insurance coverage is
 .52% annually of the unpaid principal of the loans.

        In addition, to facilitate the sale, the Company provided a credit
enhancement for the benefit of the investors in the form of an
over-collateralization account 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,
subject to certain minimum performance requirements relating to the loans in the
security. One of these requirements is a delinquency (60 days or more) ratio
that must be less than 10.50% on a six month rolling average basis. In December
of 2000, the actual delinquency ratio exceeded 10.50%. As a result, the required
levels of over-collateralization were increased to an amount equal to the
principal balance of the loans that are 60 days or more delinquent. At December
31, 2000 that amount was $2,862,000. No cash will be released to the Company
until the delinquency ratio declines to below 10.50% or the
over-collateralization account exceeds the new required levels of
over-collateralization. Based upon the projected decline in delinquencies the
Company expects to resume receiving distributions in the third or fourth quarter
of 2001. Cash released to the Company from the over-collateralization account in
2000 totaled $752,000. No cash had been released prior to the second quarter of
2000.

        At December 31, 2000 and 1999 the residual interests in the
securitization consisted of the following:

<TABLE>
<CAPTION>
                                         2000              1999
                                      ----------        ----------
<S>                                   <C>               <C>
NIR                                   $1,164,000        $1,978,000
Over-collateralization account         1,742,000         1,700,000
                                      ----------        ----------
                                      $2,906,000        $3,678,000
                                      ==========        ==========
</TABLE>

        Escrow balances on securitized loans serviced by the Company are not
included in the accompanying consolidated balance sheets and totaled $21,000 and
$27,000 at December 31, 2000 and 1999, respectively.



                                       32
<PAGE>   34

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

        The assumptions used in the valuation of the residual interests at
December 31, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                       December 31, 2000          December 31, 1999
                                   ------------------------   -------------------------
                                     Fixed       Adjustable      Fixed      Adjustable
                                   ----------    ----------   -----------  ------------
<S>                                <C>           <C>          <C>          <C>
Discount rate                         12%           12%           12%           12%
Weighted average life              4.95 years    2.02 years    4.58 years   2.77 years
Prepayment speeds-ramp up to        20% CPR       70% CPR       17% CPR       35% CPR
Cumulative defaults                  12.50%        12.50%        15.50%       18.00%
Cumulative losses, net of losses
   covered by pool insurance          .25%          .25%          .62%         .71%
</TABLE>

        At December 31, 2000, the sensitivity of the fair value of the residual
interest to two adverse changes in each of the key assumptions was as follows
(in thousands):

<TABLE>
<S>                                              <C>
Carrying value of residual interest              $ 2,906
                                                 =======

Discount rate:
   Up 10% to 13.2%                               $  (102)
                                                 =======
   Up 20% to 14.4%                               $  (198)
                                                 =======

Prepayment speeds:
   Up 10% to ramp up to 22% CPR for fixed
     and 77% CPR for adjustable                  $  (117)
                                                 =======
   Up 20% to ramp up to 24% CPR for fixed
     and 84% CPR for adjustable                  $  (225)
                                                 =======

Cumulative losses:
   Up 10% to .275%                               $  (127)
                                                 =======
   Up 20% to .3%                                 $  (255)
                                                 =======
</TABLE>

(5) PROPERTY AND EQUIPMENT, NET

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

<TABLE>
<CAPTION>
                                            December 31,
                                       -----------------------
                                         2000            1999
                                       -------         -------
<S>                                    <C>             <C>
Furniture and Equipment                $ 1,007         $   905
Computer Equipment and Software            790             973
Accumulated Depreciation                (1,499)         (1,266)
                                       -------         -------
                                       $   298         $   612
                                       =======         =======
</TABLE>

(6) REAL ESTATE OWNED

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

<TABLE>
<CAPTION>
                                                   Year ended December 31,
                                              ---------------------------------
                                              2000          1999          1998
                                              -----         -----         -----
<S>                                           <C>           <C>           <C>
Balance, beginning of year                    $ 440         $ 147         $  14
Increase in allowance for foreclosures          487           748           230
Charge-offs, net                               (421)         (455)          (97)
                                              -----         -----         -----
Balance, end of year                          $ 506         $ 440         $ 147
                                              =====         =====         =====
</TABLE>



                                       33
<PAGE>   35

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

(7) WAREHOUSE LINE OF CREDIT

        MPS has a $55,000,000 line of credit agreement with a bank, of which
$48,634,000 was outstanding at December 31, 2000. The credit agreement matures
April 30, 2001 (see note 16) and requires monthly payments of principal and
interest. The interest rate charged the Company is based upon a spread over the
one month LIBOR rate plus 1.75% to 2.75%, as defined in the credit agreement. At
December 31, 2000 the LIBOR was 6.68%. Generally, the Company must fund 2% of
the mortgage loan amount and 10% of the outstanding balance of the construction
loan. At December 31, 1999, MPS had an $80,000,000 line of credit agreement with
a bank of which $40,218,000 was outstanding. The terms were similar to those in
the current line-of-credit agreement. Outstanding amounts are collateralized by
residential mortgage loans held for sale and construction loans. Fees paid in
association with the line of credit have been capitalized and amortized over the
life of the warehouse line of credit. The line of credit is guaranteed by NAB.

        As of December 31, 2000, MPS had not met its debt to tangible net worth
covenant as established by the terms of the line-of-credit agreement. A 10 to 1
debt to tangible net worth ratio must be maintained to be in compliance. At
December 31, 2000, MPS's debt to tangible net worth was 10.59 to 1. The covenant
violation was due mostly to delays in loan purchases from one investor, which
caused the warehouse liability account to be higher than expected. The credit
agreement allows the MPS to cure any covenant violation within 30 days. As of
January 31, 2001 the covenant violation was cured. In addition, the MPS obtained
a waiver from the collateral agent to satisfy the temporary out of compliance
condition.

(8) NOTES PAYABLE TO AFFILIATES

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

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                     --------------------
                                                                                      2000          1999
                                                                                     ------        ------
<S>                                                                                  <C>           <C>
Note payable to SFSC, unsecured, interest at 14% payable
monthly, due December 31, 2002                                                       $4,000        $   --

Note payable to SFSC, unsecured, interest at 14% payable
monthly, due December 31, 2002                                                        3,102            --

Note payable to SFSC, unsecured, interest at 13% payable
quarterly, principal due December 31, 2002, restructured March 2000                      --         4,000

Line of credit payable to SFSC, unsecured, interest at 16% payable quarterly,
payable in full on December 31, 2002, restructured March 2000                            --         3,500

Note payable to SFSC, unsecured, interest at 14% payable
quarterly, due December 31, 2002, restructured March 2000                                --           900

Note payable to SFSC, unsecured, interest at 13% payable
quarterly, due December 31, 2002, restructured March 2000                                --           877
                                                                                     ------        ------

                                                                                     $7,102        $9,277
                                                                                     ======        ======
</TABLE>



                                       34
<PAGE>   36

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

        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 existing indebtedness to December 31, 2002 and combine the amounts
outstanding that date into two notes. 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). At
December 31, 2000 total interest due including deferred interest was $437,000.
NAB has elected to defer interest since July 2000. Charles E. Bradley Sr., NAB's
Chairman of the Board owns SFSC. NAB currently does not have the cash resources
to make principal or interest payments under the notes.

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

<TABLE>
<CAPTION>

Year ended December 31,
<S>             <C>
    2001        $  449
    2002         6,653
                ------
                $7,102
                ======
</TABLE>

(9) ACCRUAL FOR INDEMNIFICATIONS

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

<TABLE>
<CAPTION>
                                                     Year ended December 31,
                                             ---------------------------------------
                                              2000            1999            1998
                                             -------         -------         -------
        <S>                                  <C>             <C>             <C>
        Balance, beginning of year           $   956         $   830         $   500
        Increase in accrual for loans sold
           and recoveries                        663           1,141           1,555
        Charge-offs, net                      (1,277)         (1,015)         (1,225)
                                             -------         -------         -------
        Balance, end of year                 $   342         $   956         $   830
                                             =======         =======         =======
</TABLE>

(10) SHAREHOLDER AND OPTION AGREEMENTS

        In June 1996 the Board of Directors adopted 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 $108,000 in 1999 and $636,000 in 1998. No such charges were
made in 2000.

        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.



                                       35
<PAGE>   37

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

        In June 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.

        In April 2000, the Company and one of the executives agreed to terminate
his deferred compensation agreement in exchange for full repayment of the note
receivable and return of the executive's stock in MPS. The Company recorded a
$184,000 charge to compensation expense as a result.

        Compensation expense totaling $1,197,000, $1,278,000 and $778,000 was
recorded in the 2000, 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, 2000 were
allocated as follows (in thousands):

<TABLE>
<CAPTION>
                                        Year ending December 31,
                                    --------------------------------
                                    2000          1999         1998
                                    -----         -----        -----
<S>                                 <C>           <C>          <C>
From continuing operations          $ (55)        $ 315        $ 166
From discontinued operations           --            75           18
                                    -----         -----        -----
                                    $ (55)        $ 390        $ 184
                                    =====         =====        =====
</TABLE>

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

<TABLE>
<CAPTION>
                                     Year ended December 31,
                             ---------------------------------------
                              2000            1999            1998
                             -------         -------         -------
<S>                          <C>             <C>             <C>
Current
  Federal                    $     2         $   190         $    17
  State                         (245)            313             232

Deferred
  Federal                     (1,579)         (1,829)           (143)
  State                           (7)           (188)            (27)
                             -------         -------         -------
                              (1,829)         (1,514)             79
Increase in valuation
 allowance                     1,774           1,829              87
                             -------         -------         -------
                             $   (55)        $   315         $   166
                             =======         =======         =======
</TABLE>



                                       36
<PAGE>   38

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

        The Company's tax expense (benefit) before cumulative effect of change
in accounting principle differs from the amount determined by applying the
statutory federal rate of 35% to 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,
                                        ---------------------------------------
                                         2000            1999            1998
                                        -------         -------         -------
<S>                                     <C>             <C>             <C>
Expense (benefit) at Federal            $(1,730)        $(1,586)        $  (164)
rate
Excess inclusion interest                     2             190              --
State taxes                                (164)            (81)            205
Other                                        63             (37)             38
Increase (decrease) in valuation
 allowance                                1,774           1,829              87
                                        -------         -------         -------

Expense (benefit) per accompanying
 statements of operations               $   (55)        $   315         $   166
                                        =======         =======         =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                       December 31,
                                                 -------------------------
                                                   2000             1999
                                                 --------         --------
<S>                                              <C>              <C>
Deferred tax assets:
Accrual for indemnifications                     $    130         $    351
Excess inclusion income                               248              338
Foreclosure allowance                                 336              212
Deferred compensation                                 120              138
Other                                                 123              185
Tax net operating loss carryforwards               67,649           65,855
                                                 --------         --------
  Deferred tax assets                              68,606           67,079
Valuation allowance                               (68,569)         (66,795)
                                                 --------         --------
  Deferred tax assets                                  37              284
Deferred tax liabilities:
Deferred loan costs                                   (37)             (64)
Other                                                  --              (32)
                                                 --------         --------
  Deferred tax liabilities                            (37)             (96)
                                                 --------         --------
Net deferred tax asset (included in
 other receivables)                              $     --         $    188
                                                 ========         ========

</TABLE>

        Net Federal deferred tax assets on a consolidated basis totaled $68.6
million and $67.0 million at December 31, 2000 and 1999, respectively, with
corresponding valuation allowances of $68.6 million and $66.8 million,
respectively. No Federal deferred tax assets have been recognized in the 2000 or
1999 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.



                                       37
<PAGE>   39

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

        At December 31, 2000, for federal income tax purposes, the Company had
regular tax and alternative minimum tax net operating loss carryforwards of
approximately $193 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    60,196
                       --------
                       $192,625
                       ========
</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.

(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, 2000 and 1999 MPS had commitments to originate mortgage
loans of approximately $11,733,000 and $14,793,000, 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, 2000 and 1999, MPS had no
outstanding firm commitments to purchase loans. At January 1, 2001 MPS had a
$50,000,000 commitment with a remaining balance of $4,084,000 to sell sub-prime
loans to an institutional investor. On December 21, 2000, the commitment was
extended to January 31, 2001 to allow for additional time to fill the remaining
commitment balance. The remaining commitment balance was not fulfilled in
January 2001; however, no fee was charged by the investor.

        MPS has entered into loan sale agreements with investors in the normal
course of business that 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, 2000 and 1999, MPS had repurchase requests outstanding of $177,000
and $1,248,000, 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.



                                       38
<PAGE>   40

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

        The Company has been named as a defendant in the following related
lawsuits, all filed in or after December, 2000 in the Superior Court for Los
Angeles County, California: Robert Schultz et al. vs. Stanwich Financial
Services Corp., et al.; Jerry Walls, et al. vs. Stanwich Financial Services
Corp., et al.; Martha Torbitt vs. Merrill Lynch Settlement Services, Inc. et
al.; Robert A. Havlik, et al. vs. Morgan Stanley Dean Witter & Co., et al.; and
Lawrence M. Gomes, et al. vs. Merrill Lynch Pierce Fenner & Smith Incorporated,
et al. The plaintiffs in each of these suits, except the Schultz suit, are
structured settlement payees to whom Stanwich Financial Services Corp. ("SFSC")
is indebted. In addition to the Company, there are numerous defendants in these
suits, including SFSC, Charles E. Bradley, Sr., Charles E. Bradley, Jr., several
major financial institutions and certain others. All of these suits arise out of
SFSC's default on certain payments to the payees. Although the claims made and
the relief sought vary somewhat from suit to suit, in general (1) the suits
allege breach of contract, breach of fiduciary duty, negligence, conversion,
fraudulent conveyance, fraud and violations of certain statutes and (2) the
relief sought includes compensatory and punitive damages, statutory penalties
and attorneys' fees and costs. The plaintiffs in the Schultz suit, who are
former owners of a predecessor of the SFSC business and current operators of a
structured settlement business, also claim that their business and reputation
has been damaged by SFSC's default in payments to the payees and seek damages
for unfair competition. The Walls and Torbitt suits claim class action status,
and the plaintiffs in the Schultz suit purport to sue on behalf of the payees.
The plaintiffs' theory of liability against the Company in these suits is based
on the allegations that the Company is the alter ego of SFSC and Mr. Bradley,
Sr., who is the sole shareholder and director of SFSC and the Chairman of the
Board of the Company, and that the Company participated in the actions and
omissions alleged. The Company denies these allegations and intends to
vigorously defend against these lawsuits.

        The Company is also 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 $1,360,000, $1,260,000 and $1,082,000
have been recorded for the years ended December 31, 2000, 1999 and 1998,
respectively.

        At December 31, 2000, 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>
        2001          $  998
        2002             815
        2003             171
        2004              34
                      ------
                      $2,018
                      ======
</TABLE>

(13) RELATED PARTY TRANSACTIONS

        On March 7, 2000, CPFI borrowed $500,000 from two officers of the
Company. The notes were paid in July 2000. A renewal note was entered into in
July 2000 for $185,000 with one of the officers and is included in net
liabilities of discontinued operations in the accompanying consolidated balance
sheet at December 31, 2000. The note bears interest at 14% and is due April 30,
2001. The note is secured by real estate owned by CPFI with a net book value of
$213,000.

        In May 1999, the Company advanced SFSC $921,000 pursuant to a promissory
note. As of December 31, 1999, the note had a balance of $277,000. This note was
fully paid by SFSC in March 2000.



                                       39
<PAGE>   41

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

        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.

        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 Note 8 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 values of the Company's financial instruments are as
follows:

<TABLE>
<CAPTION>
                                                             December 31,
                                         ------------------------------------------------------
                                                 2000                           1999
                                         ------------------------      ------------------------
                                         Carrying                      Carrying
                                          Value        Fair Value        Value       Fair Value
                                         --------      ----------      --------      ----------
<S>                                      <C>           <C>             <C>           <C>
Financial assets:
   Construction loans                     $ 2,808        $ 2,808        $ 3,330        $ 3,330
   Residential mortgage loans held
     for sale                              51,828         52,485         46,029         46,888
   Residual interest in the
     securitization of mortgage loans       2,906          2,906          3,678          3,678
Financial liabilities:
   Warehouse line of credit                48,634         48,634         40,218         40,218
   Notes payable to affiliates              7,102          7,102          9,277          9,277
</TABLE>

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

        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.



                                       40
<PAGE>   42

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

        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: The carrying value reported in the
consolidated balance sheets approximates fair value based upon current investor
yield requirements for similar instruments.

(15) SEGMENT REPORTING

        The Company has two reportable segments, sub-prime and prime residential
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. 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.

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

<TABLE>
<CAPTION>
                                        Sub Prime          Prime
                                         Mortgage         Mortgage
                                         Banking           Banking          Total
                                        ---------         --------         --------
<S>                                     <C>               <C>              <C>
Year ended December 31, 2000
Revenues, other than interest            $  7,721         $  9,104         $ 16,825
Interest income                             1,983            2,054            4,037
Interest expense                            1,546            2,144            3,690
Depreciation and amortization                 283              311              594

Segment loss                               (3,401)             (56)          (3,457)

Segment assets (1)                             --               --           65,658

Expenditures for fixed assets (1)              --               --               94
</TABLE>

<TABLE>
<CAPTION>
                                        Sub Prime          Prime
                                         Mortgage         Mortgage
                                         Banking           Banking          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                 488              346             834

Segment profit                             (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
                                          Banking          Banking          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>

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

        The reconciliation of the segment information above to that as reported
in the Consolidated Balance Sheets and Statements of Operations is as follows
(in thousands):

<TABLE>
<CAPTION>
                                                        2000             1999             1998
                                                      --------         --------         --------
<S>                                                   <C>              <C>              <C>
Revenues
Total revenues for reportable segments                $ 20,862         $ 26,992         $ 35,061
Other revenues                                              85              218              615
                                                      --------         --------         --------

    Total consolidated revenues                       $ 20,947         $ 27,210         $ 35,676
                                                      ========         ========         ========
</TABLE>

<TABLE>
<CAPTION>
                                                        2000             1999             1998
                                                      --------         --------         --------
<S>                                                   <C>              <C>              <C>
Interest Income
Total interest income for reportable segments         $  4,037         $  5,157         $  6,972
Unallocated interest income                                374              598            1,177
Net interest paid to corporate from segments              (289)            (380)            (562)
                                                      --------         --------         --------

Total consolidated interest income                    $  4,122         $  5,375         $  7,587
                                                      ========         ========         ========
</TABLE>

<TABLE>
<CAPTION>
                                                        2000             1999             1998
                                                      --------         --------         --------
<S>                                                   <C>              <C>              <C>
Interest Expense
Total interest expense for reportable
  segments                                            $  3,690         $  4,179         $  6,152
Unallocated interest expense                             1,080            1,776            2,433
Net interest paid to corporate from segments              (289)            (380)            (562)
                                                      --------         --------         --------

Total consolidated interest expense                   $  4,481         $  5,575         $  8,023
                                                      ========         ========         ========
</TABLE>

<TABLE>
<CAPTION>
                                                        2000             1999             1998
                                                      --------         --------         --------
<S>                                                   <C>              <C>              <C>
Earnings (loss)
Total segment profit (loss)                           $ (3,457)        $ (2,876)        $  2,756
Unallocated amounts:
  Interest expense                                      (1,080)          (1,776)          (2,433)
  Corporate income                                          85              218              615
  Corporate expenses                                      (772)          (1,259)          (1,910)
  Minority interest                                         47              468             (224)
  Net interest paid to corporate from segments             289              380              562
                                                      --------         --------         --------

Earnings (loss) from continuing
operations, before cumulative effect
of change in accounting principle                     $ (4,888)        $ (4,845)        $   (634)
                                                      ========         ========         ========
</TABLE>



                                       42
<PAGE>   44

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

<TABLE>
<CAPTION>
                                                              2000              1999              1998
                                                           ---------         ---------         ---------
<S>                                                        <C>               <C>               <C>
Assets
Total assets for reportable segments                       $  65,658         $  59,969         $ 100,680
Elimination of corporate payables / receivables               (2,014)           (1,187)             (464)
Net assets (liabilities) of discontinued operations              (40)            2,855             9,536
Other assets                                                     980             2,769             3,565
                                                           ---------         ---------         ---------
    Total consolidated assets                              $  64,584         $  64,406         $ 113,317
                                                           =========         =========         =========
</TABLE>

        During 2000, approximately $6,717,000 or 32% of the Company's revenues
were as a result of loan sales to four customers. 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.

        In the normal course of its business, the Company has concentrations of
credit risk in its mortgage origination activities for loans originated in
certain geographic areas. For the three years ended December 31, 2000 the
Company originated a majority of the mortgage loans in Texas and California.

(16) SUBSEQUENT EVENTS AND GOING CONCERN

        The Company has suffered recurring losses from operations. 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 to provide operating funds for NAB. The
dispositions have been substantially completed.

        NAB's sole source of internally generated cash is from interest and tax
sharing payments from MPS. No tax sharing payments are expected until MPS
generates sufficient taxable income to offset its accumulated tax losses.
Interest payments currently approximate $72,000 each quarter, less than the cash
required by NAB to fund operating expenses as they currently exist.

        As discussed in Note 1, the Company has entered into a Stock Purchase
Agreement with Centex Financial Services, Inc. The Company will as part of the
Stock Purchase Agreement solicit acceptances of a prepackaged plan of
reorganization (the "Plan of Reorganization") under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") from the Company's shareholders.
The Company has agreed to commence solicitation of these acceptances as soon as
practicable following receipt of required Securities and Exchange Commission
approvals. Once the Company has received the requisite consents necessary to
satisfy applicable Bankruptcy Code requirements, the Company has agreed to file
a voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code with the bankruptcy court. Consummation of transactions contemplated by the
Stock Purchase Agreement is contingent upon a number of conditions precedent,
including, without limitation, approval of the Plan of Reorganization by the
bankruptcy court. It is anticipated that upon completion of the transactions
contemplated, NAB will have sufficient funds to pay its creditors.

        Management has had no indication that the CFS transactions will not be
completed as contemplated. If the CFS transactions do not occur the Company will
be required to sell assets, operations or its investment in MPS to settle its
obligations. Additionally, MPS's line of credit matures on April 30, 2001.
Management has requested that the line of credit be extended or renewed to a
date in 2001 that will allow the proposed transactions to be concluded. There
can be no assurance that the lenders will extend or renew MPS's credit facility.
As discussed below MPS has entered into a Master Mortgage Loan Purchase
Agreement with Centex Credit Corporation. The agreement may be terminated upon
30 days notice. If the CFS transactions are not completed, it is expected that
the CCC agreement would be terminated. If financing is unavailable the Company
will be required to sell assets, operations or its investment in MPS to settle
its obligations.



                                       43
<PAGE>   45

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

        On March 22, 2001, MPS entered into a Master Mortgage Loan Purchase
Agreement with Centex Credit Corporation (CCC). The Agreement allows the Company
to sell certain mortgage loans, based on product type, to CCC. The Company will
assign the collateral, loan file and take out commitment from the investor to
CCC, and CCC will fund a portion of the purchase price to the Company. Upon
final payment from the investor, CCC will remit the remaining funds to the
Company. In addition to the purchase price, the Company will receive interest at
the rate stated in the mortgage loan less the Federal Funds rate plus 1.5%.

        The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The above factors
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

(17) PARENT COMPANY FINANCIAL STATEMENTS

                          BALANCE SHEETS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                      -------------------------
Assets                                                                  2000             1999
                                                                      --------         --------
<S>                                                                   <C>              <C>
Cash and cash equivalents                                             $     --         $     71
Loans to MPS officers                                                      827            2,213
Note receivable from MPS                                                 1,800            1,800
Note receivable from affiliate                                              --              277
Investment in discontinued operations                                       --            2,855
Investment in MPS                                                        5,179            6,637
Other assets                                                               168              251
                                                                      --------         --------
           Total assets                                               $  7,974         $ 14,104
                                                                      ========         ========

Liabilities and Shareholders' Equity (Deficit)

Liabilities:
Bank overdraft                                                        $     14         $     --
Notes payable to affiliates                                              7,102            9,277
Payable to MPS                                                           1,985            1,201
Payable to MPS officers                                                    441              860
Other accounts payable and accrued expenses                              1,210              720
Net liability of discontinued operations                                    40               --
                                                                      --------         --------
          Total liabilities                                             10,792           12,058
Shareholders' equity (deficit)                                          (2,818)           2,046
                                                                      --------         --------
          Total liabilities and shareholders' equity (deficit)        $  7,974         $ 14,104
                                                                      ========         ========
</TABLE>

                     STATEMENTS OF OPERATIONS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          For the years ended December 31,
                                                      ---------------------------------------
                                                       2000            1999            1998
                                                      -------         -------         -------
<S>                                                   <C>             <C>             <C>
Revenues:
  Interest income                                     $   374         $   597         $ 1,177
  Earnings (loss) from MPS                             (3,410)         (2,530)          2,532
  Earnings (loss) from discontinued operations             24          (1,553)            796
                                                      -------         -------         -------
       Total revenues (loss)                           (3,012)         (3,486)          4,505
                                                      -------         -------         -------
</TABLE>



                                       44
<PAGE>   46

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

<TABLE>
<S>                                         <C>             <C>             <C>
Costs and expenses:
  Compensation and benefits                     260             585           1,316
  Interest expense-affiliates                 1,080           1,776           2,433
 General and administrative expenses            517             486             576
  Income taxes                                   (5)            220              18
                                            -------         -------         -------
       Total costs and expenses               1,852           3,067           4,343
                                            -------         -------         -------

Net earnings (loss)                         $(4,864)        $(6,553)        $   162
                                            =======         =======         =======
</TABLE>

                     STATEMENTS OF CASH FLOWS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          For the years ended December 31,
                                                                        2000            1999            1998
                                                                       -------         -------         -------
<S>                                                                    <C>             <C>             <C>
Cash flows from operating activities:
        Net earnings (loss)                                            $(4,864)        $(6,553)        $   162
        Discontinued operations                                            (24)          1,553            (796)
        Adjustments to reconcile net earnings (loss) to
          net cash used in operating activities:
        Undistributed earnings (loss) from MPS                           3,410           2,530          (2,532)
        Deferred compensation charge                                       184              --              --
        MPS intercompany tax (benefit) expense                            (755)           (562)          1,237
        Depreciation                                                         9             106             119
        Reduction in note receivable from affiliate in exchange
          for payment of interest                                          277             644              --
        Net changes in:
          Bank overdraft                                                    14              --              --
          Other assets                                                       9              24             134
          Payable to MPS                                                   784             884             559
          Payable to MPS officers                                            5             177             683
          Accounts payable and accrued expenses                            490             267            (138)
                                                                       -------         -------         -------
            Net cash used in operating activities                         (461)           (930)           (572)
                                                                       -------         -------         -------
Cash flows from investing activities:
     Repayments from (loans to) MPS                                         --           1,700              --
     Preferred stock dividend from MPS                                      --              --             463
     Proceeds from sale of property and equipment                           17              --              --
     Note receivable from affiliate                                         --            (921)             --
     Pushdown of deferred compensation liability                        (1,197)         (1,278)           (778)
     Acquisition of MPS preferred stock                                     --          (1,000)             --
     Repayments from (loans to) MPS officers                               826             827          (3,040)
                                                                       -------         -------         -------
            Net cash provided by (used in) investing activities           (354)           (672)         (3,355)
                                                                       -------         -------         -------
Cash flows from financing activities:
     Borrowings on notes payable to affiliates                              --              --           1,300
     Principal payments on notes payable to affiliates                  (2,175)         (3,600)         (4,723)
     Payments received on notes receivable from affiliates                  --              --           1,300
                                                                       -------         -------         -------
           Net cash used in financing activities                        (2,175)         (3,600)         (2,123)
     Cash provided by discontinued operations                            2,919           5,128           5,843
                                                                       -------         -------         -------
Net decrease in cash and cash equivalents                                  (71)            (74)           (207)
Cash and cash equivalents at beginning of year                              71             145             352
                                                                       -------         -------         -------
Cash and cash equivalents at end of year                               $    --         $    71         $   145
                                                                       =======         =======         =======
</TABLE>


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

        None.



                                       45
<PAGE>   47

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.



                                       46
<PAGE>   48

PART IV

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

(a) 1. INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                         PAGE
        <S>                                                                              <C>
        Independent Auditors' Report                                                      21
        Consolidated Balance Sheets as of December 31, 2000 and 1999                      22
        Consolidated Statements of Operations for the years ended
               December 31, 2000, 1999 and 1998                                           23
        Consolidated Statements of Shareholders' Equity (Deficit) for the years ended
               December 31, 2000, 1999 and 1998                                           24
        Consolidated Statements of Cash Flows for the years ended
               December 31, 2000, 1999 and 1998                                           25
        Notes to Consolidated Financial Statements                                        26
</TABLE>

        FINANCIAL STATEMENT SCHEDULES

        None required as the information is either presented in the notes to the
        consolidated financial statements or is not applicable.

   3.  EXHIBITS

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. (Incorporated by
        reference to Exhibit 10.2 to Form 10K dated December 31, 1999)

10.3    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)

10.4    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)

10.5    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)



                                       47
<PAGE>   49

10.6    $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

10.7    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)

10.8    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)

10.9    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 (Incorporated by reference to
        Exhibit 10.18 to Form 10K dated December 31, 1999)

10.10   $300,000 Promissory Note from Construction Portfolio Funding, Inc. to
        James E. Hinton dated March 7, 2000 (Incorporated by reference to
        Exhibit 10.19 to Form 10K dated December 31, 1999)

10.11   Pledge Agreement dated as of March 7, 2000 made by Construction
        Portfolio Funding, Inc. in favor of James E. Hinton (Incorporated by
        reference to Exhibit 10.20 to Form 10K dated December 31, 1999)

10.12   $200,000 Promissory Note from Construction Portfolio Funding, Inc. to
        Alan Ferree dated March 7, 2000 (Incorporated by reference to Exhibit
        10.21 to Form 10K dated December 31, 1999)

10.13   Pledge Agreement dated as of March 7, 2000 made by Construction
        Portfolio Funding, Inc. in favor of Alan Ferree (Incorporated by
        reference to Exhibit 10.22 to Form 10K dated December 31, 1999)

10.14   Second Debt Restructure Agreement dated March 15, 2000 (effective March
        7, 2000) between SFSC and the Registrant (Incorporated by reference to
        Exhibit 10.23 to Form 10K dated December 31, 1999)

10.15   $4,000,000 Promissory Note issued March 15, 2000 (effective March 7,
        2000) between SFSC and the Registrant (Incorporated by reference to
        Exhibit 10.24 to Form 10K dated December 31, 1999)

10.16   $3,553,169.20 Promissory Note issued March 15, 2000 (effective March 7,
        2000) between SFSC and the Registrant (Incorporated by reference to
        Exhibit 10.25 to Form 10K dated December 31, 1999)

10.17   Subordination Agreement dated as of March 15, 2000 between SFSC the
        Registrant and Bank United (Incorporated by reference to Exhibit 10.26
        to Form 10K dated December 31, 1999)

10.18   Second Amendment to Credit Agreement dated January 31, 2000 by and among
        MPS, the Registrant and Bank United (Incorporated by reference to
        Exhibit 10.27 to Form 10K dated December 31, 1999)

10.19   Amended and Restated Warehousing Credit and Security Agreement dated
        August 28, 2000 by and among MPS, the Registrant and Bank United
        (Incorporated by reference to Exhibit 10.28 to Form 10Q dated September
        30, 2000)

10.20   First Amendment to the Amended and Restated Credit Agreement dated
        October 15, 2000 by and among MPS, the Registrant and Bank United
        (Incorporated by reference to Exhibit 10.29 to Form 10Q dated September
        30, 2000)

10.21   Second Amendment to the Amended and Restated Credit Agreement dated
        November 13, 2000 by and among MPS, the Registrant and Bank United
        (Incorporated by reference to Exhibit 10.30 to Form 10Q dated September
        30, 2000)

10.22   Stock Purchase Agreement between Registrant, Stanwich Financial Services
        Corp., and Centex Financial Services, Inc. dated March 16, 2001
        (Incorporated by reference to Exhibit 10.1 to Form 8-K dated March 16,
        2001)

21.1    Subsidiaries of the registrant.


(b).    REPORTS ON FORM 8-K

        None



                                       48
<PAGE>   50

                                   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            April 10, 2001
/s/  Charles E. Bradley, Sr.         Chief Executive Officer
------------------------------       (Principal Executive
     Charles E. Bradley, Sr.         Officer)

                                     Senior Vice President            April 10, 2001
/s/  Alan Ferree                     Chief Financial Officer
------------------------------       (Principal Financial
     Alan Ferree                     Officer)

/s/  Charles E. Bradley, Jr.         Director                         April 10, 2001
------------------------------
     Charles E. Bradley, Jr.

/s/  James B. Gardner                Director                         April 10, 2001
------------------------------
     James B. Gardner

/s/  Jeffrey W. Kramer               Director                         April 10, 2001
------------------------------
     Jeffrey W. Kramer

/s/  James Hinton                    Director and President of        April 10, 2001
------------------------------       Mortgage Portfolio
     James Hinton                    Services, Inc.
</TABLE>



                                       49
<PAGE>   51
                                 EXHIBIT INDEX

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. (Incorporated by
        reference to Exhibit 10.2 to Form 10K dated December 31, 1999)

10.3    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)

10.4    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)

10.5    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)

<PAGE>   52

10.6    $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

10.7    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)

10.8    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)

10.9    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 (Incorporated by reference to
        Exhibit 10.18 to Form 10K dated December 31, 1999)

10.10   $300,000 Promissory Note from Construction Portfolio Funding, Inc. to
        James E. Hinton dated March 7, 2000 (Incorporated by reference to
        Exhibit 10.19 to Form 10K dated December 31, 1999)

10.11   Pledge Agreement dated as of March 7, 2000 made by Construction
        Portfolio Funding, Inc. in favor of James E. Hinton (Incorporated by
        reference to Exhibit 10.20 to Form 10K dated December 31, 1999)

10.12   $200,000 Promissory Note from Construction Portfolio Funding, Inc. to
        Alan Ferree dated March 7, 2000 (Incorporated by reference to Exhibit
        10.21 to Form 10K dated December 31, 1999)

10.13   Pledge Agreement dated as of March 7, 2000 made by Construction
        Portfolio Funding, Inc. in favor of Alan Ferree (Incorporated by
        reference to Exhibit 10.22 to Form 10K dated December 31, 1999)

10.14   Second Debt Restructure Agreement dated March 15, 2000 (effective March
        7, 2000) between SFSC and the Registrant (Incorporated by reference to
        Exhibit 10.23 to Form 10K dated December 31, 1999)

10.15   $4,000,000 Promissory Note issued March 15, 2000 (effective March 7,
        2000) between SFSC and the Registrant (Incorporated by reference to
        Exhibit 10.24 to Form 10K dated December 31, 1999)

10.16   $3,553,169.20 Promissory Note issued March 15, 2000 (effective March 7,
        2000) between SFSC and the Registrant (Incorporated by reference to
        Exhibit 10.25 to Form 10K dated December 31, 1999)

10.17   Subordination Agreement dated as of March 15, 2000 between SFSC the
        Registrant and Bank United (Incorporated by reference to Exhibit 10.26
        to Form 10K dated December 31, 1999)

10.18   Second Amendment to Credit Agreement dated January 31, 2000 by and among
        MPS, the Registrant and Bank United (Incorporated by reference to
        Exhibit 10.27 to Form 10K dated December 31, 1999)

10.19   Amended and Restated Warehousing Credit and Security Agreement dated
        August 28, 2000 by and among MPS, the Registrant and Bank United
        (Incorporated by reference to Exhibit 10.28 to Form 10Q dated September
        30, 2000)

10.20   First Amendment to the Amended and Restated Credit Agreement dated
        October 15, 2000 by and among MPS, the Registrant and Bank United
        (Incorporated by reference to Exhibit 10.29 to Form 10Q dated September
        30, 2000)

10.21   Second Amendment to the Amended and Restated Credit Agreement dated
        November 13, 2000 by and among MPS, the Registrant and Bank United
        (Incorporated by reference to Exhibit 10.30 to Form 10Q dated September
        30, 2000)

10.22   Stock Purchase Agreement between Registrant, Stanwich Financial Services
        Corp., and Centex Financial Services, Inc. dated March 16, 2001
        (Incorporated by reference to Exhibit 10.1 to Form 8-K dated March 16,
        2001)

21.1    Subsidiaries of the registrant.