<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, DC  20549

                                  FORM 10 - Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1999
                               -------------


Commission file number            000-21553
                       ---------------------------------------------------------

                         METROPOLITAN FINANCIAL CORP.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

             Ohio                                              34-1109469
---------------------------------                      -------------------------
 (State or Other Jurisdiction of                            (I.R.S. Employer
  Incorporation or Organization)                           Identification No.)

             6001 Landerhaven Drive, Mayfield Heights, Ohio  44124
--------------------------------------------------------------------------------
     (Address of Principal Executive Offices)                  (Zip Code)

                               (440)  646-1111
--------------------------------------------------------------------------------
             (Registrant's Telephone Number, Including Area Code)


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
      -----        -----

As of August 12, 1999, there were 8,056,393 shares of the Registrant's Common
Stock issued and outstanding.

                                                                               1
<PAGE>

                         METROPOLITAN FINANCIAL CORP.

                                   Form 10-Q
                          Quarter ended June 30, 1999

                               TABLE OF CONTENTS

PART I.    FINANCIAL INFORMATION                                  PAGE

Item 1.  Financial Statements:

Consolidated Statements of Financial Condition (Unaudited)
as of June 30, 1999 and December 31, 1998                             3

Consolidated Statements of Operations (Unaudited ) for the
Three and six months ended June 30, 1999 and 1998                     4

Condensed Consolidated Statements of Cash Flows (Unaudited)
For the six months ended June 30, 1999 and 1998                       5

Consolidated Statement of Changes in Shareholders'
Equity (Unaudited)                                                    6

Notes to Consolidated Financial Statements (Unaudited)             7-17

Item 2.  Management's Discussion and Analysis of
Financial Condition and Results of Operations                     18-31

Item 3. Quantitative and Qualitative Disclosures About
Market Risk                                                          32

PART II.   OTHER INFORMATION                                         35

Item 4. Submission of Matters to a Vote of Security Holders          35

Item 6. Exhibits and Reports on Form 8-K                             36

SIGNATURES                                                           37

                                                                               2
<PAGE>

  Item 1. FINANCIAL STATEMENTS
                          METROPOLITAN FINANCIAL CORP.
           CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>

                                                  June 30, 1999      December 31, 1998
                                                  -------------      -----------------
Assets
<S>                                                 <C>                 <C>
Cash and cash equivalents                           $   21,048          $   29,086
Securities available for sale                           37,430              19,443
Securities held to maturity                             16,001              16,217
Mortgage-backed securities                             181,358             198,296
Loans held for sale                                      6,622              15,017
Loans receivable, net                                1,185,006           1,018,271
Federal Home Loan Bank stock, at cost                    8,469               6,054
Accrued interest receivable                             10,225               8,678
Premises and equipment, net                             24,006              19,114
Real estate owned, net                                   9,958               5,534
Intangible assets                                        2,593               2,724
Loan servicing rights                                   15,520              13,412
Prepaid expenses and other assets                       10,351              11,588
                                                    ----------          ----------
     Total assets                                   $1,528,587         $1,363,434
                                                    ==========          ==========

Liabilities
Noninterest-bearing deposits                        $   61,724          $   63,717
Interest-bearing deposits                            1,110,699             987,640
Borrowings                                             246,447             215,486
Accrued interest payable                                 3,635               5,511
Other liabilities                                       16,478              20,686
                                                    ----------          ----------
   Total liabilities                                 1,438,983           1,293,040
                                                    ----------          ----------

Guaranteed Preferred Beneficial Interests
  In the Corporation's Junior Subordinated
  Debentures                                            43,750              27,750

Shareholders' Equity
Preferred stock, 10,000,000 shares authorized              ---                 ---
Common stock, no par value, 20,000,000 shares
   authorized, 8,056,393 shares issued
   and outstanding                                         ---                 ---
Additional paid-in capital                              20,702              18,505
Retained earnings                                       26,602              23,660
Accumulated other comprehensive income                  (1,450)                479
                                                    ----------          ----------
   Total shareholders' equity                           45,854              42,644
                                                    ----------          ----------
     Total liabilities and shareholders' equity     $1,528,587          $1,363,434
                                                    ==========          ==========

</TABLE>
See notes to consolidated financial statements.

                                                                               3
<PAGE>

                         METROPOLITAN FINANCIAL CORP.
               CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                 (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                            Three Months Ended June 30,   Six Months Ended June 30,
                                                            ----------------------------  -------------------------
                                                                1999           1998           1999         1998
                                                            -------------  -------------  ------------  -----------
<S>                                                         <C>            <C>            <C>           <C>
Interest income
  Interest and fees on loans                                   $   23,175    $   17,298     $   44,862   $   33,497
  Interest on mortgage-backed securities                            3,157         2,242          6,449        4,733
  Interest and dividends on other investments                       1,042           761          1,957        1,284
                                                               ----------    ----------     ----------   ----------
    Total interest income                                          27,374        20,301         53,268       39,514
                                                               ----------    ----------     ----------   ----------
Interest expense
  Interest on deposits                                             13,958        10,159         27,132       19,770
  Interest on borrowings                                            2,955         2,099          6,091        4,145
  Interest on Junior Subordinated Debentures                          813           412          1,422          412
                                                               ----------    ----------     ----------   ----------
    Total interest expense                                         17,726        12,670         34,645       24,327
                                                               ----------    ----------     ----------   ----------
Net interest income                                                 9,648         7,631         18,623       15,187
Provision for loan losses                                           1,600           910          2,250        1,360
                                                               ----------    ----------     ----------   ----------
Net interest income after provision for loan losses                 8,048         6,721         16,373       13,827
                                                               ----------    ----------     ----------   ----------
Noninterest income
  Gain on sale of loans, net                                          774           767          1,174        1,525
  Loan servicing income, net                                          367           239            701          479
  Service charges on deposit accounts                                 316           220            588          430
  Loan option income                                                  168           257            168          277
  Gain (loss) on sale of securities, net                              ---          (29)           ---           38
  Other operating income                                              605           450          1,057          793
                                                               ----------    ----------     ----------   ----------
    Total noninterest income                                        2,230         1,904          3,688        3,542
                                                               ----------    ----------     ----------   ----------
Noninterest expense
  Salaries and related personnel costs                              4,123         3,128          8,185        6,118
  Occupancy and equipment expense                                   1,207           885          2,295        1,727
  Federal deposit insurance premiums                                  233           169            433          328
  Data processing expense                                             320           101            556          215
  Marketing expense                                                   156           253            358          418
  State franchise taxes                                               248           156            496          311
  Amortization of intangibles                                          66            66            131          131
  Other operating expenses                                          1,572         1,418          3,012        2,498
                                                               ----------    ----------     ----------   ----------
    Total noninterest expense                                       7,925         6,176         15,466       11,746
                                                               ----------    ----------     ----------   ----------
Income before income taxes and extraordinary item                   2,353         2,449          4,595        5,623
Provision for income taxes                                            849           898          1,653        2,085
                                                               ----------    ----------     ----------   ----------
Income before extraordinary item                                    1,504         1,551          2,942        3,538
Extraordinary item                                                    ---           245            ---          245
                                                               ----------    ----------     ----------   ----------
Net Income                                                     $    1,504    $    1,306     $    2,942   $    3,293
                                                               ==========    ==========     ==========   ==========

Basic and diluted earnings per share                                $0.19         $0.17          $0.37        $0.42
                                                               ==========    ==========     ==========   ==========

Weighted average shares outstanding for basic
  earnings per share                                            7,924,525     7,756,393      7,840,923    7,756,393
Effect of dilutive options                                            ---       107,702            ---      127,653
                                                               ----------    ----------     ----------   ----------
Weighted average shares outstanding for diluted
  Earnings per share                                            7,924,525     7,864,095      7,840,923    7,884,046
                                                               ==========    ==========     ==========   ==========
</TABLE>

See notes to consolidated financial statements.

                                                                               4
<PAGE>

                         METROPOLITAN FINANCIAL CORP.
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                (In thousands)
<TABLE>
<CAPTION>
                                                                                            Six Months Ended June 30,
                                                                                      --------------------------------------
                                                                                         1999                        1998
                                                                                       ---------                   ---------
<S>                                                                                    <C>                         <C>
Cash flows from operating activities                                                   $  (2,636)                  $  80,358

Cash flows from investing activities
  Disbursement of loan proceeds                                                         (240,021)                   (263,208)
  Purchases of:
    Loans                                                                               (127,152)                    (81,143)
    Mortgage-backed securities                                                           (10,222)                    (28,119)
    Securities available for sale                                                        (20,030)                    (20,442)
    Securities held to maturity                                                              ---                     (14,814)
    Mortgage loan servicing rights                                                        (2,155)                       (791)
    Premises and equipment                                                                (6,238)                     (4,578)
    FHLB stock                                                                            (2,171)                        (27)
  Proceeds from maturities and repayments of:
    Loans                                                                                152,480                     116,213
    Mortgage-backed securities                                                            25,021                      40,761
    Securities held to maturity                                                              220                       4,740
  Proceeds from sale of:
    Loans                                                                                 59,603                       5,897
    Mortgage-backed securities                                                               ---                      32,479
    Securities available for sale                                                            ---                       2,700
    Premises, equipment, and real estate owned                                               ---                       1,242
                                                                                       ---------                   ---------
      Net cash used for investing activities                                            (170,665)                   (209,090)

Cash flows from financing activities
  Net change in deposit accounts                                                         121,032                      70,922
  Proceeds from borrowings                                                                23,054                      71,250
  Repayment of borrowings                                                                (22,393)                    (73,370)
  Proceeds from issuance of common stock                                                   2,197                         ---
  Proceeds from issuance of Guaranteed Preferred Beneficial
    Interests in the Corporation's Junior Subordinated Debentures                         15,073                      26,436
  Net activity on line of credit                                                          26,300                      31,250
                                                                                       ---------                   ---------
    Net cash provided by financing activities                                            165,263                     126,488
                                                                                       ---------                   ---------

Net change in cash and cash equivalents                                                   (8,038)                     (2,244)
Cash and cash equivalents at beginning of period                                          29,086                      22,511
                                                                                       ---------                   ---------
Cash and cash equivalents at end of period                                             $  21,048                   $  20,267
                                                                                       =========                   =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
    Interest                                                                             $36,521                    $24,450
    Income taxes                                                                           1,112                      2,027
Transfer from loans receivable to real estate owned                                        4,458                        ---
</TABLE>

See notes to consolidated financial statements.

                                                                               5
<PAGE>

                          METROPOLITAN FINANCIAL CORP.
     CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                           Accumulated
                                               Additional                     Other         Total
                                      Common    Paid-in      Retained     Comprehensive  Shareholders'
                                       Stock    Capital      Earnings         Income        Equity
                                      -------  ----------  -------------  --------------  ------------
<S>                                   <C>      <C>         <C>            <C>             <C>

Balance December 31, 1998              $---      $18,505      $23,660         $   479        $42,644
Comprehensive income:
 Net income                             ---          ---        2,942             ---          2,942
 Change in unrealized gain on
  securities                            ---          ---          ---          (1,929)        (1,929)
                                                                                             -------
  Total comprehensive income                         ---          ---             ---          1,013
                                                                                             -------
 Issuance of 300,000 common shares      ---        2,197          ---             ---          2,197
                                       ----      -------      -------         -------        -------
Balance June 30, 1999                  $---      $20,702      $26,602         $(1,450)       $45,854
                                       ====      =======      =======         =======        =======

</TABLE>
See notes to consolidated financial statements.

                                                                               6
<PAGE>

                         METROPOLITAN FINANCIAL CORP.
            Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

Metropolitan Financial Corp. ("Metropolitan" or the "Corporation") is a savings
and loan holding company and an Ohio corporation. Metropolitan's primary
operating subsidiary is Metropolitan Bank & Trust Company (the "Bank").
Metropolitan is engaged in the business of originating multifamily and
commercial real estate loans primarily in Ohio, Pennsylvania, Michigan, and
Kentucky and purchases multifamily and commercial real estate loans throughout
the United States. Metropolitan offers full service banking services to
communities in Northeast Ohio where its additional lending activities include
originating one- to four-family residential real estate, construction, business
and consumer loans. The accounting policies of the Corporation conform to
generally accepted accounting principles and prevailing practices within the
financial services industry. All significant intercompany transactions have been
eliminated. In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting only of normal recurring
accruals, which the Corporation considers necessary for a fair presentation of
(a) the results of operations for the three and six month periods ended June 30,
1999 and 1998; (b) the financial condition at June 30, 1999 and December 31,
1998; (c) the statement of cash flows for the six month periods ended June 30,
1999 and 1998; and (d) the statement of changes in shareholders' equity for the
six month period ended June 30, 1999. The results of operations for the six
month period ended June 30, 1999 are not necessarily indicative of the results
that may be expected for any other period. The annual report for Metropolitan
for the year ended December 31, 1998, contains consolidated financial statements
and related notes which should be read in conjunction with the accompanying
consolidated financial statements.

2. Accounting Policies

Securities:   The Corporation classifies debt and mortgage-backed securities as
----------
held to maturity or available for sale. The Corporation classifies marketable
equity securities as available for sale.

Securities classified as held to maturity are those that management has the
positive intent and ability to hold to maturity.  Securities held to maturity
are stated at cost, adjusted for amortization of premiums and accretion of
discounts.

Securities classified as available for sale are those that management intends to
sell or that could be sold for liquidity, investment management, or similar
reasons, even if there is not a present intention for such sale. Securities
available for sale are carried at fair value with unrealized gains and losses
included as a separate component of shareholders' equity, net of tax. Gains or
losses on dispositions are based on net proceeds and the carrying amount of
securities sold adjusted for amortization of premium and accretion of discount,
using the specific identification method.

Loans:  All loans are held for investment unless specifically designated as held
-----
for sale. When the Bank originates or purchases loans, it makes a determination
whether or not to classify loans as held for sale. The Bank re-evaluates its
intention to hold or sell loans at each balance sheet date based on the current
environment and, if

                                                                               7
<PAGE>

appropriate, reclassifies loans as held for sale. Sales of loans are dependent
upon various factors including interest rate movements, deposit flows, the
availability and attractiveness of other sources of funds, loan demand by
borrowers, and liquidity and capital requirements.

Loans held for investment are stated at the principal amount outstanding
adjusted for amortization of premiums and deferred costs and accretion of
discounts and deferred fees using the interest method.  At June 30, 1999 and
December 31, 1998, management had the intent and the Bank had the ability to
hold all loans being held for investment purposes for the foreseeable future.

Loans held for sale are recorded at the lower of cost or market. When the Bank
purchases real estate loans and simultaneously writes an option giving the
holder the right to purchase those loans, those loans are designated as held for
sale. Gains and losses on the sale of loans are determined by the identified
loan method and are reflected in operations at the time of the settlement of the
sale.

Allowance for Losses on Loans:  The allowance for losses on loans is established
-----------------------------
by a provision for loan losses charged against income.  Increases to the
allowance are recorded by a provision for loan losses charged to expense.
Estimating the risk of loss and the amount of loss on any loan is necessarily
subjective. Accordingly, the allowance is maintained by management at a level
considered adequate to cover possible losses that are currently anticipated
based on past loss experience, general economic conditions, information about
specific borrower situations including their financial position and collateral
values, and other factors and estimates which are subject to change over time.
While management may periodically allocate portions of the allowance for
specific problem loans, the whole allowance is available for any loan charge-
offs that occur. A loan is charged off against the allowance by management as a
loss when deemed uncollectible, although collection efforts continue and future
recoveries may occur.

Loans considered to be impaired are reduced to the present value of expected
future cash flows or to the fair value of collateral, by allocating a portion of
the allowance for losses on loans to such loans. If these allocations require an
increase in the allowance for losses on loans, such increase is reported as a
provision for loan losses. Management excludes all consumer loans and
residential single family loans with balances less than $200,000 from its review
for impairment. However, these loans are considered in determining the
appropriate level of the allowance for loss on loans. All impaired loans are
placed on nonaccrual status.

Earnings Per Share: Basic and diluted earnings per share are computed based on
------------------
weighted average shares outstanding during the period. Basic earnings per share
has been computed by dividing net income by the weighted average shares
outstanding. Diluted earnings per share has been computed by dividing net income
by the diluted weighted average shares outstanding. Diluted weighted average
common shares were calculated assuming the exercise of stock options less
treasury shares assumed to be purchased from the proceeds using the average
market price of the Corporation's stock. All per share information has been
retroactively adjusted to reflect the effect of the stock dividends and stock
splits.

Capitalized Interest: Interest expenses incurred to finance construction of
--------------------
buildings which take more than six months to build are capitalized as they are
incurred. The amount of capitalized interest included as a portion of the
historical cost of acquiring assets will be depreciated over the useful life of
the asset.

                                                                               8
<PAGE>

New Accounting Pronouncements: In quarters beginning after June 30, 2000, a new
-----------------------------
accounting standard will require all derivatives to be recorded at fair value.
Unless designated as hedges, changes in these fair values will be recorded in
the income statement. Fair value changes involving hedges will generally be
recorded by offsetting gains and losses on the hedge and on the hedged item,
even if the fair value of the hedged item is not recorded. This is not expected
to have a material effect, but the effect will depend on derivative holdings
when this standard applies.

Mortgage loans originated in mortgage banking are converted into securities on
occasion. A new accounting standard for 1999 will allow classifying these
securities as available for sale, trading, or held to maturity, instead of the
current requirement to classify as trading. This is not expected to have a
material effect but the effect will vary depending on the level and designation
of securitizations as well as on market price movements.

3. Securities

The amortized cost, gross unrealized gains and losses and fair values of
investment securities at June 30, 1999 and December 31, 1998 are as follows (In
thousands):
<TABLE>
<CAPTION>
                                                                    June 30, 1999
                                    -------------------------------------------------------------------------------
                                      Amortized        Gross Unrealized        Gross Unrealized          Fair
                                         Cost                Gains                  Losses               Value
                                    --------------  -----------------------  ------------------   -----------------
<S>                                 <C>             <C>                      <C>              <C>
Available for Sale
Mutual funds                              $    814            ---                      ---             $    814
FreddieMac preferred stock                   7,500            ---                  $   (75)               7,425
FannieMae medium term notes                 19,935            ---                     (611)              19,324
FreddieMac note                             10,000            ---                     (133)               9,867
Mortgage-backed securities                 182,770           $637                   (2,049)             181,358
                                          --------           ----                  -------             --------
                                           221,019            637                   (2,868)             218,788
Held to Maturity
Tax-exempt municipal bond                   14,821            ---                     ---                14,821
Revenue bond                                 1,180            ---                     ---                 1,180
                                          --------                                                     --------
                                            16,001            ---                     ---                16,001
                                          --------           ----                 -------              --------
   Total                                  $237,020           $637                 $(2,868)             $234,789
                                          ========           ====                 =======              ========

<CAPTION>
                                                                  December 31, 1998
                                    -------------------------------------------------------------------------------
                                      Amortized        Gross Unrealized        Gross Unrealized          Fair
                                         Cost                Gains                  Losses               Value
                                    --------------  -----------------------  ------------------   -----------------
<S>                                 <C>             <C>                      <C>              <C>
Available for Sale
Mutual funds                              $  2,059            ---                     ---            $  2,059
FreddieMac preferred stock                   7,500            ---                     ---               7,500
FannieMae medium term note                   9,921            ---                   $ (37)              9,884
Mortgage-backed securities                 197,521           $954                    (179)            198,296
                                          --------           ----                   -----            --------
                                           217,001            954                    (216)            217,739
Held to Maturity
Tax-exempt municipal bond                   14,817            ---                     ---              14,817
Revenue bond                                 1,400            ---                     ---               1,400
                                          --------                                  -----            --------
                                            16,217            ---                     ---              16,217
                                          --------           ----                   -----            --------
   Total                                  $233,218           $954                   $(216)           $233,956
                                          ========           ====                   =====            ========
</TABLE>

                                                                               9
<PAGE>

4. Loans Receivable

The composition of the loan portfolio at June 30, 1999 and December 31, 1998 is
as follows (In thousands):

                                        June 30, 1999         December 31, 1998
                                        -------------         -----------------
Real estate loans
Construction loans:
      Residential single family          $  101,394              $   81,584
      Commercial                             11,169                  19,129
      Land                                   39,781                  34,990
      Loans in process                      (61,772)                (46,001)
                                         ----------              ----------
         Construction loans, net             90,572                  89,702
   Permanent loans
      Residential single family             223,004                 189,182
      Multifamily                           378,779                 337,412
      Commercial                            261,336                 228,824
      Other                                     862                   1,320
                                         ----------              ----------
         Total real estate loans            954,553                 846,440
Consumer loans                              135,855                  96,115
Business and other loans                    100,869                  82,318
                                         ----------              ----------
         Total loans                      1,191,277               1,024,873
Premium (discount) on loans, net              7,301                   5,320
Deferred loan fees, net                      (5,483)                 (5,013)
Allowance for losses on loans                (8,089)                 (6,909)
                                         ----------              ----------
                                         $1,185,006              $1,018,271
                                         ==========              ==========

Activity in the allowance for losses on loans for the periods ended June 30,
1999 and 1998 is as follows (In thousands):

                                                Six Months Ended June 30,
                                             1999                     1998
                                             ----                     ----
Balance at the beginning of the period      $ 6,909                  $5,622
Provision for loan losses                     2,250                   1,360
Net charge-offs                              (1,070)                   (466)
                                            -------                  ------
Balance at end of period                    $ 8,089                  $6,516
                                            =======                  ======

                                                                              10
<PAGE>

Management analyzes loans on an individual basis and considers a loan to be
impaired when it is probable that all principal and interest amounts will not be
collected according to the terms of the contract. Information regarding impaired
loans at June 30, 1999 and December 31, 1998 is as follows (In thousands):

                                                 June 30,           December 31,
                                                   1999                1998
                                                  ------              -------
Balance of impaired loans                         $4,066              $10,142
Less portion for which no allowance
  for losses on loans is allocated                 3,062                9,002
                                                  ------              -------
Portion of impaired loans for which
  an allowance for loan losses is allocated       $1,004              $ 1,140
                                                  ======              =======
Portion of allowance for losses on loans
  allocated to the impaired loan balance          $  957              $ 1,012
                                                  ======              =======


                                                 June 30,             June 30,
                                                   1999                1998
                                                  ------              -------
Average investment in impaired loans
  during the period                               $8,431               $9,459
                                                  ======               ======
Interest income recognized during
  Impairment                                      $  163               $   64
                                                  ======               ======
Interest income recognized on a
  Cash basis during the period                    $  163               $   64
                                                  ======               ======

5. Loan Servicing

Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances of
these loans at June 30, 1999 and December 31, 1998 are summarized as follows (In
thousands):

                                               June 30,            December 31,
                                                 1999                  1998
                                                ------              ----------
Mortgage loan portfolios serviced for:
  FreddieMac                                  $  785,655            $  794,286
  FannieMae                                      621,763               587,476
  Other                                          165,907               114,585
                                              ----------            ----------
    Total loans serviced for others           $1,573,325            $1,496,347
                                              ==========            ==========

Custodial balances maintained in noninterest-bearing checking accounts in
connection with the foregoing loan servicing were approximately $26,704,000 and
$28,066,000 at June 30, 1999 and December 31, 1998, respectively.

                                                                              11
<PAGE>

The following is an analysis of the changes in cost of loan servicing rights for
the six-month period ended June 30, 1999 and 1998 (In thousands):
<TABLE>
<CAPTION>
                                                                                Six Months Ended June 30,
                                                                              1999                     1998
                                                                          ------------              ------------
<S>                                                                        <C>                       <C>
Balance at the beginning of the period                                       $13,412                   $ 9,224
Acquired or originated                                                         3,532                     1,840
Amortization                                                                  (1,424)                   (1,253)
                                                                             -------                   -------
Balance at the end of the period                                             $15,520                   $ 9,811
                                                                             =======                   =======
</TABLE>


6. Deposits

Deposits consist of the following (In thousands):

<TABLE>
<CAPTION>
                                                                            June 30,                December 31,
                                                                              1999                      1998
                                                                          ------------           -----------------
<S>                                                                       <C>                      <C>
Noninterest-bearing checking accounts                                     $   61,724                $   63,717

Interest-bearing checking accounts                                            54,141                    54,159
Passbook savings and statement savings                                       233,229                   212,710
Certificates of deposit                                                      823,329                   720,771
                                                                          ----------                ----------
  Total interest-bearing deposits                                          1,110,699                   987,640
                                                                          ----------                ----------
                                                                          $1,172,423                $1,051,357
                                                                          ==========                ==========
</TABLE>

At June 30, 1999, scheduled maturities of certificates of deposit are as follows
(In thousands):

             Year                           Weighted Average
            Ended             Amount         Interest Rate
         -----------       ----------       ----------------
             1999           $359,481              5.31%
             2000            381,784              5.50
             2001             59,853              5.58
             2002              3,946              5.75
             2003              7,592              5.98
          Thereafter          10,673              5.54
                            --------
                            $823,329              5.43
                            ========

                                                                              12
<PAGE>

7. Borrowings

Borrowings consisted of the following at June 30, 1999 and December 31, 1998 (In
thousands):

<TABLE>
<CAPTION>
                                                                       June 30,                 December 31,
                                                                         1999                       1998
                                                                       --------                 ------------
<S>                                                                   <C>                       <C>
Federal Home Loan Bank Advances (5.5% and 5.4% at
  June 30, 1999 and December 31, 1998, respectively)                   $140,201                  $111,236

Reverse repurchase agreements (5.6% at both June 30,
  1999 and December 31, 1998)                                            80,246                    82,250

Commercial bank line of credit (7.4 % and 7.7% at
  June 30, 1999 and December 31, 1998, respectively)                     12,000                     8,000

Subordinated debt maturing January 1, 2005
  (9.625% fixed rate)                                                    14,000                    14,000
                                                                       --------                  --------
                                                                       $246,447                  $215,486
                                                                       ========                  ========
</TABLE>

At June 30, 1999, scheduled payments on borrowings are as follows (In
thousands):

             Year                           Weighted Average
            Ended             Amount         Interest Rate
         -----------       ----------       ----------------
            1999            $ 79,696              5.65%
            2000              23,000              5.33
            2001               3,000              6.15
            2002              62,250              5.81
            2003              50,000              5.42
         Thereafter           28,501              7.45
                            --------
           Total            $246,447              5.83
                            ========

Federal Home Loan Bank ("FHLB") advances are collateralized by FHLB stock,
residential first mortgage loans with an aggregate carrying value of
approximately $221,000,000 and $184,000,000 at June 30, 1999 and December 31,
1998, respectively and mortgage backed securities with a carrying value of $9.6
million at June 30, 1999.

The Corporation has a commercial line of credit agreement with a commercial
bank. The maximum borrowing under the line is $12,000,000, which is also the
balance at June 30, 1999. The line matures annually on May 30. During the second
quarter, by mutual agreement, the line was extended to May 31, 2000. All other
terms remain unchanged. As collateral for the loan, the Corporation's largest
shareholder, Robert Kaye, has agreed to pledge a portion of his common shares in
an amount at least equal to 200% of any outstanding balance.

                                                                              13
<PAGE>

Interest on borrowings capitalized as part of the cost associated with the
construction of the new corporate headquarters totalled $15,000 for the three
and six months ended June 30, 1999.

8. Financial Instruments With Off-Balance-Sheet Risk

The Bank can be a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet financing needs of its customers. These
financial commitments include commitments to make loans. The Bank's exposure to
credit loss in the event of nonperformance by the other party to the financial
instrument for commitments to make loans is represented by the contractual
amount of these instruments.  The Bank follows the same credit policy to make
such commitments as is followed for those loans recorded in the financial
statements.

As of June 30, 1999, the Bank had fixed and variable rate commitments to
originate and/or purchase loans (at market rates) of approximately $66,474,000
and $83,419,000, respectively. Metropolitan's commitments to originate and
purchase loans are for loans with rates ranging from 5.875% to 16% and
commitment periods up to one year.

At December 31, 1998, the Bank had outstanding options which gave the holder the
option to purchase certain loans at a specified price within a specified time
period. The Bank collected a non-refundable fee on each option which is
recognized as income at the time the transaction is complete. The options may be
exercised at the carrying value for an initial period. The option price
escalates after the initial period until the option expires. At June 30, 1999,
there were no loans held for sale in connection with outstanding purchase
options.

9. Securities Issued

On May 14, 1999, the Corporation issued 1,600,000 shares ($10 liquidation amount
per security), of 9.50% cumulative trust preferred securities (the "Trust
Preferred") through a newly formed, wholly-owned subsidiary, Metropolitan
Capital Trust II (the "Trust Issuer") and 300,000 shares of Metropolitan
Financial Corp. common stock. The Trust Issuer invested the total proceeds from
the sale of the Trust Preferred in the 9.50% Junior Subordinated Deferrable
Interest Debentures (the "Junior Subordinated Debentures") issued by the
Corporation which mature on June 30, 2029. The Corporation used the net proceeds
from the sale of the Junior Subordinated Debentures and the common stock to
repay the $12.0 million outstanding balance on the commercial bank line of
credit and for a $5 million capital contribution to the Bank to support growth.
The remainder is available for working capital at the Corporation. The Trust
Preferred securities are listed on the NASDAQ Stock Market's National Market
under the symbol "METFO."

The Corporation also issued trust preferred securities in 1998 through its
subsidiary, Metropolitan Capital Trust I. A description of the trust preferred
securities currently outstanding is presented below:

<TABLE>
<CAPTION>
          Issuing                  Date of       Shares    Interest     Maturity             Principal Amount
           Entity                  Issuance      Issued      Rate         Date       June 30, 1999  December 31, 1998
-----------------------------   --------------  ---------  ---------  -------------  -------------  -----------------
<S>                             <C>             <C>        <C>        <C>            <C>            <C>
Metropolitan Capital Trust I    April 27, 1998  2,775,000    8.60%    June 30, 2028    $27,750,000      $27,750,000
Metropolitan Capital Trust II   May 11, 1999    1,600,000    9.50%    June 30, 2029     16,000,000              ---
                                                                                       -----------      -----------
                                                                                       $43,750,000      $27,750,000
                                                                                       ===========      ===========
</TABLE>

                                                                              14
<PAGE>

10. Segment Reporting

Metropolitan's operations include two major operating segments. A description of
those segments follows:

Retail and Commercial Banking--Retail and commercial banking is the segment of
the business that brings in deposits and lends those funds out to businesses and
consumers. The local market for deposits is the consumers and businesses in the
neighborhoods surrounding our 18 retail sales offices in Northeastern Ohio. The
market for lending is Ohio and the surrounding states for originations and
throughout the United States for purchases. The majority of loans are secured by
multifamily and commercial real estate. Loans are also made to businesses
secured by business assets and consumers secured by real or personal property.
Business and consumer loans are concentrated in Northeastern Ohio.

Mortgage banking--Mortgage banking is the segment of our business that
originates, sells and services permanent or construction loans secured by one-
to four-family residential properties. These loans are primarily originated
through commissioned loan officers located in Northeastern Ohio and Southeastern
Michigan. In general, fixed rate loans are originated for sale and adjustable
rate loans are originated to be retained in the portfolio. Loans being serviced
include loans originated and still owned by Metropolitan, loans originated by
Metropolitan but sold to others with servicing rights retained by Metropolitan,
and servicing rights to loans originated by others but purchased by
Metropolitan. The servicing rights Metropolitan purchases may be located in a
variety of states and are typically being serviced for FannieMae or FreddieMac.

The category below labeled Parent and Other consists of the remaining segments
of Metropolitan's business. It includes corporate treasury, interest rate risk,
and financing operations which do not generate revenue from outside customers.

Operating results and other financial data for the current and preceding year
are as follows (in thousands):

As of or for the six months ended June 30, 1999
<TABLE>
<CAPTION>

                                                   Retail and
                                                   Commercial  Mortgage    Parent
                                                    Banking    Banking   and Other     Total
                                                   ----------  --------  ----------  ----------
<S>                                                <C>         <C>       <C>         <C>
Operating results:
Net interest income                                  $ 12,515  $  3,245    $ 2,863   $   18,623
Provision for losses on loans                           2,038       212                   2,250
                                                     --------  --------    -------   ----------
Net interest income after
  provision for loan losses                            10,477     3,033      2,863       16,373
Noninterest income                                      2,337     1,380        (29)       3,688
Direct noninterest expense                              7,533     2,869        341       10,743
Allocation of overhead                                  3,213     1,510                   4,723
                                                     --------  --------    -------   ----------
Net income before income taxes                       $  2,068  $     34    $ 2,493   $    4,595
                                                     ========  ========    =======   ==========
</TABLE>

                                                                              15
<PAGE>

<TABLE>
<CAPTION>
                                                   Retail and
                                                   Commercial  Mortgage   Parent
                                                    Banking    Banking   and Other     Total
                                                   ----------  --------  ---------   ----------
Financial data:
<S>                                                <C>         <C>       <C>         <C>
Segment assets                                     $1,085,725  $336,534   $106,328   $1,528,587
Depreciation and amortization                             852     1,342        202        2,396
Expenditures for additions
  to premises and equipment                             4,387     1,901                   6,288
</TABLE>
     As of or for the six months ended June 30, 1998

<TABLE>
<CAPTION>
                                                   Retail and
                                                   Commercial  Mortgage    Parent
                                                    Banking    Banking    and Other     Total
                                                   ----------  --------   ---------   ----------
Operating results:
<S>                                                <C>         <C>       <C>          <C>
Net interest income                                  $ 10,101  $  3,308    $  1,778   $   15,187
Provision for losses on loans                           1,284        76                    1,360
                                                     --------  --------    --------   ----------
Net interest income after
  provision for loan losses                             8,817     3,232       1,778       13,827
Noninterest income                                      1,705     1,784          53        3,542
Direct noninterest expense                              6,100     2,299         219        8,618
Allocation of overhead                                  2,110     1,018                    3,128
                                                     --------  --------    --------   ----------
Net income before income taxes
  and extraordinary item                             $  2,312  $  1,699    $  1,612   $    5,623
                                                     ========  ========    ========   ==========
Financial data:
Segment assets                                       $681,241  $276,181    $101,465   $1,058,887
Depreciation and amortization                             805     1,229         168        2,202
Expenditures for additions
  to premises and equipment                             4,196       382                    4,578
</TABLE>

The financial information provided for each major operating segment has been
derived from the internal profitability system used to monitor and manage
financial performance and allocate resources. The internal profitability system
has been in place for only the two latest years; prior to the adoption of the
internal profitability system, the Company operated as one segment.

The measurement of performance for the operating segments is based on the
organizational structure of Metropolitan and is not necessarily comparable with
similar information for any other financial institution. The information
presented is also not indicative of the segments' financial condition and
results of operations if they were independent entities.

Metropolitan evaluates segment performance based on contribution to income
before income taxes. Certain indirect expenses have been allocated based on
various criteria considered by management to best reflect benefits derived. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies.  Indirect expense allocations and
accounting policies have been consistently applied for the periods presented.
There are no differences between segment profits and assets and the consolidated
profits and

                                                                              16
<PAGE>

assets of Metropolitan. The net interest income that results from investing in
assets and liabilities with different terms to maturity or repricing has been
eliminated from the two major operating segments and is included in the
category labeled Parent and Other.

11. Extraordinary Item

In the second quarter, 1998, earnings were affected by an extraordinary
expense of ($245,000), net of tax, or ($0.03) per common share, pertaining to
the Corporation's early retirement of $4.9 million of 10% Subordinated Notes
which were scheduled to mature December 31, 2001. This amount represents the
write-off of the unamortized issuance costs and the prepayment premium resulting
from the early retirement. The retirement of the 10% Subordinated Notes
was funded during the quarter through the issuance of the 8.60% Guaranteed
Preferred Beneficial Interests in the Junior Subordinated Debentures.

                                                                             17
<PAGE>

Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                          Three months ended June 30,                Six months ended June 30,
                                                           1999                 1998                  1999               1998
                                                           ----                 ----                  ----               ----
<S>                                                       <C>                  <C>                   <C>               <C>
Income before extraordinary item (in thousands)            $1,504              $1,551                $2,942            $3,538
Net income (in thousands)                                  $1,504              $1,306                $2,942            $3,293
Basic earnings per share before
   extraordinary item (1)                                  $ 0.19              $ 0.20                $ 0.37            $ 0.46
Diluted earnings per share before
   extraordinary item (1)                                  $ 0.19              $ 0.20                $ 0.37            $ 0.45
Basic and diluted earnings per share (1)                   $ 0.19              $ 0.17                $ 0.37            $ 0.42
Return on average assets                                     0.41%               0.52%                 0.41%             0.68%
Return on average equity                                    13.51%              13.43%                13.46%            17.26%
Noninterest expense to average assets                        2.15%               2.47%                 2.16%             2.41%
Efficiency ratio                                            66.17%              63.89%                68.73%            62.14%
Net interest margin                                          2.76%               3.23%                 2.74%             3.31%
</TABLE>

(1)  Per share data has been restated for a 10% stock dividend completed in
     December, 1998 and the 1999 amounts include the effect of the issuance of
     300,000 additional shares on May 14, 1999.

<TABLE>
<CAPTION>
                                                         June 30,                   December 31,                   June 30,
                                                          1999                         1998                         1998
                                                          ----                         ----                         ----
<S>                                                     <C>                       <C>                           <C>
Total assets (in thousands)                             $1,528,587                 $1,363,434                  $1,058,887
Shareholders' equity (in thousands)                         45,854                     42,645                      39,543
Shareholders' equity to total assets                          3.00%                      3.13%                       3.73%
Shares outstanding                                       8,056,393                  7,756,393                   7,756,393
Book value per share                                        $ 5.69                    $  5.50                     $  5.10
Tangible book value per share                               $ 5.37                    $  5.14                     $  4.72
Market value of common stock                                $ 7.63                    $ 10.50                     $ 13.53
Nonperforming assets to total assets (2)                      1.31%                      1.34%                       1.45%
Allowance for losses on loans to total loans (2)              0.67%                      0.66%                       0.77%
Net charge-offs to average loans                              0.19%                      0.16%                       0.12%
</TABLE>

(2) Ratios are based on period end balances.
                                                                              18
<PAGE>

OVERVIEW

The reported results of Metropolitan primarily reflect the operations of the
Bank. Our results of operations are dependent on a variety of factors, including
the general interest rate environment, competitive conditions in the industry,
governmental policies and regulations and conditions in the markets for
financial assets. Like most financial institutions, the primary contributor to
our income is net interest income, the difference between the interest we earn
on interest-earning assets, such as loans and securities, and the interest we
pay on interest-bearing liabilities, such as deposits and borrowings. Our
operations are also affected by noninterest income, such as loan servicing fees,
servicing charges on deposit accounts, gains or losses on the sales of loans and
securities and loan option income. Our principal operating expenses, aside from
interest expense, consist of compensation and employee benefits, occupancy
costs, and general and administrative expenses.

Average Balances and Yields.  The following tables present the total dollar
amount of interest income from average interest-earning assets and the resulting
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin. Net interest
margin is influenced by the level and relative mix of interest-earning assets
and interest-bearing liabilities. All average balances are daily average
balances. Nonaccruing loans are considered in average loan balances. The average
balances of mortgage-backed securities and securities are presented at
historical cost.
                                                                              19
<PAGE>

<TABLE>
<CAPTION>
                                                     Three Months Ended June 30,
                                        ----------------------------------------------------------
                                                    1999                           1998
                                        ----------------------------  ----------------------------
                                                        (Dollars in thousands)
                                        Average                           Average
                                        Balance    Interest      Rate     Balance    Interest  Rate
                                        -------    --------      ----     -------    --------  ----
<S>                                   <C>          <C>           <C>    <C>          <C>       <C>
Interest-earning assets:
Loans receivable                      $1,142,360    $23,175      8.11% $  785,379     $17,298  8.81%
Mortgage-backed securities               184,395      3,157      6.85     113,029       2,242  7.93
Other                                     67,271      1,042      6.20      47,478         761  6.41
                                      ----------    -------             ----------    -------
Total interest-earning assets          1,394,026     27,374      7.85     945,886      20,301  8.58
                                                    -------                           -------
Nonearning assets                         78,322                           55,344
                                      ----------                       ----------
Total assets                          $1,472,348                       $1,001,230
                                      ==========                       ==========

Interest-bearing liabilities:
Deposits                              $1,100,052     13,958      5.09  $  749,246      10,159  5.44
Borrowings                               202,317      2,970      5.89     133,737       2,099  6.30
Junior Subordinated Debentures            36,180        813      8.99      18,808         412  8.76
                                      ----------    -------            ----------     -------
Total interest-bearing liabilities     1,338,549     17,741      5.32     901,791      12,670  5.63
                                                    -------      ----                 -------  ----
Noninterest-bearing liabilities           89,291                           60,539
Shareholders' equity                      44,508                           38,900
                                      ----------                       ----------
Total liabilities and
  shareholders' equity                $1,472,348                       $1,001,230
                                      ==========                       ==========
Net interest income before
  capitalized interest                                9,633                             7,631
                                                    -------                           -------
Interest rate spread                                             2.53%                         2.95%
                                                                 ====                          ====
Net interest margin                                              2.76%                         3.23%
Interest expense capitalized                             15                               ---
                                                    -------                           -------
Net interest income                                 $ 9,648                           $ 7,631
                                                    =======                           =======
Average interest-earning
  assets to average
  interest-bearing
  liabilities                             104.14%                          104.89%
</TABLE>

                                                                              20
<PAGE>

<TABLE>
<CAPTION>
                                                     Six Months Ended June 30,
                                        -----------------------------------------------------
                                                   1999                        1998
                                        -------------------------   -------------------------
                                                        (Dollars in thousands)
                                        Average                      Average
                                        Balance   Interest   Rate   Balance    Interest  Rate
                                        -------   --------   ----   -------    --------  ----
<S>                                   <C>         <C>        <C>    <C>        <C>       <C>
Interest-earning assets:
Loans receivable                      $1,105,853   $44,862   8.11%  $756,374    $33,497  8.86%
Mortgage-backed securities               187,104     6,449   6.89    123,138      4,733  7.69
Other                                     63,276     1,957   6.19     37,918      1,284  6.77
                                      ----------   -------          --------    -------
Total interest-earning assets          1,356,233    53,268   7.86    917,430     39,514  8.61
                                                   -------                      -------
Nonearning assets                         75,120                      57,527
                                      ----------                    --------
Total assets                          $1,431,353                    $974,957
                                      ==========                    ========

Interest-bearing liabilities:
Deposits                              $1,064,897    27,132  5.14    $734,404     19,770  5.43
Borrowings                               207,178     6,106  5.94     130,457      4,145  6.41
Junior Subordinated Debentures            31,965     1,422  8.90       9,410        412  8.76
                                      ----------   -------          --------    -------
Total interest-bearing liabilities     1,304,040    34,660  5.36     873,441     24,327  5.61
                                                   -------  ----                -------  ----
Noninterest-bearing liabilities           83,426                      63,362
Shareholders' equity                      43,887                      38,154
                                      ----------                    --------
Total liabilities and
  shareholders' equity                $1,431,353                    $974,957
                                      ==========                    ========
Net interest income before
  capitalized interest                              18,608                       15,187
                                                   -------                      -------
Interest rate spread                                        2.50%                        3.00%
                                                           ======                        =====
Net interest margin                                         2.74%                        3.31%
Interest expense capitalized                            15                          ---
                                                   -------                      -------
Net interest income                                $18,623                      $15,187
                                                   =======                      =======
Average interest-earning
  assets to average
  interest-bearing
  liabilities                             104.00%                     105.04%

</TABLE>

                                                                              21
<PAGE>

Rate and Volume Variances.  Net interest income is affected by changes in the
level of interest-earning assets and interest-bearing liabilities and changes in
yields earned on assets and rates paid on liabilities.  The following table sets
forth, for the periods indicated, a summary of the changes in interest earned
and interest paid resulting from changes in average asset and liability balances
and changes in average rates.  Changes attributable to the combined impact of
volume and rate have been allocated proportionately to change due to volume and
change due to rate.
<TABLE>
<CAPTION>

                                                                                          Three Months ended June 30,
                                                                                                1999 vs. 1998
                                                                                             Increase  (Decrease)
                                                                                   -----------------------------------------
                                                                                                     Change        Change
                                                                               Total                  Due to       Due to
                                                                              Change                  Volume        Rate
                                                                             --------               ---------     --------
                                                                                                  (In thousands)
Interest income on:
<S>                                                                        <C>                    <C>            <C>
  Loans receivable                                                            $5,877                  $7,112        $(1,235)
  Mortgage-backed securities                                                     915                   1,168           (253)
  Other                                                                          281                     306            (25)
                                                                              ------                  ------        -------
   Total interest income                                                       7,073                  $8,586         (1,513)
                                                                              ------                  ======        =======
Interest expense on:
  Deposits                                                                     3,799                  $4,757        $  (958)
  Borrowings                                                                     871                   1,076           (205)
  Junior Subordinated Debentures                                                 401                     381             20
                                                                              ------                  ------        -------
   Total interest expense                                                      5,071                  $6,214        $(1,143)
                                                                              ------                  ======        =======
Increase in net interest income                                               $2,002
                                                                              ======
</TABLE>
<TABLE>
<CAPTION>
                                                                                             Six Months ended June 30,
                                                                                                  1999 vs. 1998
                                                                                               Increase  (Decrease)
                                                                                      --------------------------------------
                                                                                                     Change          Change
                                                                               Total                 Due to          Due to
                                                                               Change                Volume           Rate
                                                                             --------              --------          -------
                                                                                                 (In thousands)
Interest income on:
<S>                                                                       <C>                    <C>              <C>
  Loans receivable                                                           $11,365                 $13,889         $(2,524)
  Mortgage-backed securities                                                   1,716                   2,142            (426)
  Other                                                                          673                     773            (100)
                                                                             -------                 -------         -------
   Total interest income                                                      13,754                 $16,804         $(3,050)
                                                                             -------                 =======         =======
Interest expense on:
  Deposits                                                                     7,362                 $ 8,356         $  (994)
  Borrowings                                                                   1,961                   2,246            (285)
  Junior Subordinated Debentures                                               1,010                   1,004               6
                                                                             -------                 -------         -------
   Total interest expense                                                     10,333                 $11,606         $(1,273)
                                                                             -------                 =======         =======
Increase in net interest income                                              $ 3,421
                                                                             =======
</TABLE>

                                                                              22
<PAGE>

Results of Operations

Net Income.  Net income for the second quarter, 1999 was $1.5 million as
compared to net income of $1.3 million for the second quarter, 1998, an increase
of 15.2%. Before the extraordinary item in the second quarter, 1998, net income
was $1.6 million. Net interest income and noninterest income increased $2.0
million and $0.3 million, respectively, for the three months ended June 30, 1999
over the prior year period. The provision for loan losses increased $0.7 million
from the same prior year period and noninterest expense increased $1.7 million
to $7.9 million for the quarter from $6.2 million from the prior year quarter.

Net income for the six-month period ended June 30, 1999 was $2.9 million as
compared to net income of $3.3 million for the first six months of 1998. Before
the extraordinary item in 1998, net income for the first six months was $3.5
million. Net interest income and noninterest income increased $3.4 million and
$0.1 million, respectively, for the six months ended June 30, 1999 over the
prior year period. The provision for loan losses increased $0.9 million from the
same prior year period and noninterest expense increased $3.8 million to $15.5
million for the six-month period ended June 30, 1999 from $11.7 million from the
prior year period.

Year-to-date earnings in 1998 were affected by an extraordinary item of
($245,000) in the second quarter pertaining to the early retirement of $4.9
million of 10% Subordinated Notes which were scheduled to mature December 31,
2001. This amount represents the write-off of the unamortized issuance costs and
the prepayment premium resulting from the early retirement, net of income taxes.

Our net interest margin decreased forty-seven and fifty-seven basis points to
2.76% and 2.74% for the three and six-month periods ended June 30, 1999,
respectively, as compared to 3.23% and 3.31% for the same periods in 1998. The
decrease in net interest margin resulted primarily from the decreased yield on
interest-earning assets.

Interest Income.  Total interest income increased 34.8% in both the three and
six-month periods ended June 30, 1999, respectively to $27.4 million and $53.3
million, as compared to $20.3 million and $39.5 million in the same periods in
1998. This increase primarily resulted from a 47.4% and 47.8% increase in
average interest-earning assets in the three and six-month periods ended June
30, 1999 as compared to the prior year. Average earning assets increased as a
result of our strategy of increasing assets as long as assets with acceptable
portfolio characteristics are available. The increase in interest income
attributable to the increase in the average balance of interest-earning assets
was partially offset by the decline in the weighted average yield. The decline
in the weighted average yield is due mostly to relative mix of interest-earning
assets and the narrowing of spreads on nonresidential loans caused by
competition from other lenders.

Interest Expense.  Total interest expense increased 39.9% and 42.4% to $17.7
million and $34.6 million for the three and six-month periods ended June 30,
1999, respectively, as compared to $12.7 million and $24.3 million for the same
periods in 1998. Interest expense increased due to a higher average balance of
interest-bearing liabilities outstanding which was partially offset by a
decreased cost of funds compared to the same periods in 1998. In accordance with
our strategy to fund growth in assets primarily with deposits, the average
balance of interest-bearing deposits increased 46.8% and 45.0% for the three and
six-month periods ending June 30, 1999 as compared to the prior year periods.
Due to a decrease in the market interest rates paid to increase deposit
balances,

                                                                              23
<PAGE>

our cost of funds decreased to 5.32% and 5.36% for the three and six-month
periods ended June 30, 1999 as compared to the prior year periods.

Provision for Loan Losses.  The provision for loan losses increased $0.7 million
for the second quarter, 1999, and $0.9 million for the six-month period ended
June 30, 1999 as compared to the same periods in 1998. Management increased the
provision due to the ongoing analysis of the appropriate allowance for loan
losses as the Bank continues to grow and increase its amount of loans, and not
as a response to any material change in the level of nonperforming loans or
charge-offs. We expect to continue to increase the allowance for loans losses as
the loan portfolio continues to increase and in response to changes in the
portfolio mix. The allowance for losses on loans at June 30, 1999 was $8.1
million or 0.67% of total loans, as compared to $6.9 million, or 0.66% of total
loans at December 31, 1998.

Noninterest Income.  Total noninterest income increased 17.1% and 4.1% to $2.2
million and $3.7 million for the three and six-month periods ended June 30, 1999
as compared to $1.9 million and $3.5 million for the prior year periods.

Gain on sale of loans was $774,000 in the three-month period ended June 30,
1999, as compared to $767,000 during the same period in 1998. For the six-month
period ended June 30, 1999, gain on sale of loans was $1.2 million as compared
to $1.5 million for the prior year period. The primary reason for the decline in
the first half of 1999 was a decline in the prices available in the market which
was due to the slight rise in long term interest rates experienced in 1999
compared to the same period in 1998. The proceeds of residential loan sales in
the first six months of 1999 were $73.5 million as compared to $113.6 million in
the same period in 1998.

Net loan servicing income increased 53.6% to $367,000 in the three-month period
ended June 30, 1999 as compared to the same period in 1998 and 46.3% to $701,000
for the six months ended June 30, 1999 as compared to the prior year period. The
increase in loan servicing fees was a result of the strategy to increase fee
income. The portfolio of loans serviced for others increased to $1.6 billion at
June 30, 1999 as compared to $1.5 billion at December 31, 1998. Purchases of
loan servicing rights and origination of loan servicing more than offset payoffs
and the amortization of existing loans serviced. Metropolitan remains committed
to this line of business and continues to evaluate new acquisitions.
Metropolitan will only acquire the rights to service portfolios where the loan
characteristics and pricing are consistent with management's long-term
profitability objectives.

Service charges on deposit accounts increased $96,000 to $316,000 in the three-
month period ended June 30, 1999 compared to the same period in 1998 and
$158,000 to $588,000 for the six months ended June 30, 1999 as compared to the
prior year periods. The primary reasons for the increase were the overall growth
in deposit accounts and increases in deposit account prices for fees during the
first half of 1999.

Loan option income was $168,000 in the three and six-month periods ended June
30, 1999 as compared to $257,000 and $277,000 in the three and six-month periods
ending June 30, 1998. This income was dependent upon the amount of loans for
which options were written and the price negotiated, both of which are affected
by market conditions. In these transactions, Metropolitan purchased loans and
sold nonrefundable options to a third party to purchase these same loans at a
later date. At the time the transaction is complete, Metropolitan recognizes a
non-refundable fee as income. Metropolitan has not purchased any of these loans
in 1999.

                                                                              24
<PAGE>

There were no gains or losses on sale of securities in the first half of 1999 as
compared to a loss of $29,000 and a gain of $38,000 for the three and six-month
periods ended June 30, 1998. The loss in the second quarter, 1998 was a result
of the sale of a Collateralized Mortgage Obligation ("CMO"). The net gain in the
first half of  1998 was the result of the sale of securities originally
purchased to satisfy regulatory liquidity requirements which were no longer
necessary for that purpose due to revisions to those requirements.

Other noninterest income increased $155,000 and $264,000 in the three and six-
month periods ended June 30, 1999 compared to the same period in the previous
year. This increase was primarily due to increased fee income generated from the
increased level of business and increased rental income in the first six months
of 1999.

Noninterest Expense.  Total noninterest expense increased to $7.9 million and
$15.5 million in the three and six-month periods ended June 30, 1999 as compared
to $6.2 million and $11.7 million for the same periods in 1998.

Personnel related expenses increased $1.0 million and $2.1 million in the three-
month and six-month periods ended June 30, 1999 as compared to the same periods
in 1998. These increases were primarily a result of increased staffing levels to
support expanded activities such as trust services, new retail sales offices
locations, and new mortgage origination offices.

Occupancy costs increased $322,000 and $568,000 in the three and six-month
periods ended June 30, 1999, over the same periods in 1998. This increase was
generally the result of two additional full service retail sales offices and
three mortgage origination offices. As part of the plan to expand mortgage
banking operations, residential loan production offices were opened in the Akron
and  Canton areas and a residential construction office was opened in the
Columbus market. We expect to continue to open additional loan production and
retail sales offices.

Data processing expense increased $219,000 and $341,000 in the three and six-
month periods ended June 30, 1999 as compared to the same periods in 1998. This
increase was the result of expenses incurred for consulting services and Year
2000 testing, and data processing costs related to new retail sales and mortgage
origination offices.

State franchise taxes increased $92,000 and $185,000 in the three and six-month
periods ended June 30, 1999, over the same periods in 1998. The primary reason
for this increase is the increase in capital at the Bank, which is the basis for
the tax.

Other operating expenses, which include miscellaneous general and administrative
costs such as loan servicing, loan processing costs, business development, check
processing and ATM expenses, increased $154,000 and $514,000 for the three and
six-month periods ended June 30, 1999 as compared to the same periods in 1998.
These increases were generally the result of increases in expenses pertaining to
increased business activities, real estate owned expenses, and increased costs
for professional services.

Provision for Income Taxes.  The provision for income taxes decreased $49,000
and $432,000 for the three and six-month periods ended June 30, 1999 as compared
to the same periods in 1998. The primary reason for the decrease in the
provision was the decreased level of taxable income over the prior year. The
effective tax rates were 36.1% and 36.0% for the three and six-month periods
ended June 30, 1999 as compared to 36.7% and 37.1% for the same periods in 1998.

                                                                              25
<PAGE>

Asset Quality

Metropolitan's goal is to maintain the above average asset quality of its loan
portfolio through conservative lending policies and prudent underwriting.
Detailed reviews of the loan portfolio are undertaken regularly to identify
potential problem loans or trends early and to provide for adequate estimates of
potential losses. In performing these reviews, management of Metropolitan
considers, among other things, current economic conditions, portfolio
characteristics, delinquency trends, and historical loss experiences.
Metropolitan normally considers loans to be nonperforming when payments are 90
days or more past due or when the loan review analysis indicates that
repossession of the collateral may be necessary to satisfy the loan. In
addition, Metropolitan considers loans to be impaired when, in management's
opinion, it is probable that the borrower will be unable to meet the contractual
terms of the loan. When loans are classified as nonperforming, an assessment is
made as to the collectibility of the unpaid interest. Interest determined to be
uncollectible is reversed from interest income and future interest income is
recorded only if the loan principal and interest due is considered collectible
and is less than the estimated fair value of the underlying collateral.

The table below provides information concerning Metropolitan's nonperforming
assets and the allowance for losses on loans as of the dates indicated. All
loans classified by management as impaired were also classified as
nonperforming.

<TABLE>
<CAPTION>
                                                                June 30,                       December 31,
                                                                  1999                             1998
                                                                --------                       ------------
                                                                      (Dollars in thousands)
<S>                                                  <C>                             <C>
Nonaccrual loans                                                 $ 9,676                           $12,231
Loans past due greater than
  90 days or impaired, still accruing                                441                               460
                                                                 -------                           -------
Total nonperforming loans                                         10,117                            12,691
Real estate owned                                                  9,958                             5,534
                                                                 -------                           -------
Total nonperforming assets                                       $20,075                           $18,225
                                                                 =======                           =======
Allowance for losses on loans                                    $ 8,089                           $ 6,909
                                                                 =======                           =======

Nonperforming loans to total loans                                  0.85%                             1.23%
Nonperforming assets to total assets                                1.31%                             1.34%
Net charge-offs to average loans                                    0.19%(1)                          0.16%(1)
Provision for loan losses to
   average loans                                                    0.41%(1)                          0.31%(1)
Allowance for losses on loans to
   total nonperforming loans at
   end of period                                                   79.95%                            54.44%
Allowance for losses on loans to
   Total loans at end of period                                     0.67%                             0.66%

(1) Annualized for comparative purposes.
</TABLE>

                                                                              26
<PAGE>

Nonperforming assets at June 30, 1999 increased $1.9 million to $20.1 million as
compared to $18.2 million at December 31, 1998.  The increase in nonperforming
assets was consistent with growth in the various loan categories. This increase
was spread among the loan categories, with the greatest increase being
experienced in consumer loans. The decrease in nonaccrual loans and related
increase in real estate owned was the result of the transfer of a $4.0 million
loan for a waterpark in Southern California to real estate owned during the
second quarter of 1999.

In addition to the nonperforming assets included in the table above, we identify
potential problem loans which are still performing but have a weakness which
causes us to classify those loans as substandard for regulatory purposes. There
was $5.6 million of loans in this category at June 30, 1999, an increase of $2.5
million from December 31, 1998. Management believes the Bank is well secured
against loss.

Financial Condition

Total assets amounted to $1.53 billion at June 30, 1999, as compared to $1.36
billion at December 31, 1998, an increase of $165.2 million, or 12.1%. The
increase in assets was concentrated in loans and was funded primarily with
deposit growth of $121.1 million, increased borrowings of $31.0 million, and the
Trust Preferred of $16.0 million.

Securities available for sale increased $17.8 million to $37.2 million at June
30, 1999 compared to $19.4 million at December 31, 1998. The increase was
primarily due to the purchase of a $10.0 million FreddieMac Note and a $10.0
million FannieMae medium term note in the first quarter to meet regulatory
liquidity requirements.

Loans receivable, including loans held for sale, increased $158.3 million, or
15.3%, to $1.2 billion at June 30, 1999 from $1.0 billion at December 31, 1998.
This increase was primarily due to increases in residential single family loans
of $33.8 million, multifamily loans of $41.4 million, and consumer loans of
$39.7 million. These increases resulted from increases in the demand for
adjustable rate loans as rates have risen during the first two quarters of 1999.

Real estate owned, net increased to $10.0 million at June 30, 1999, an increase
of $4.4 million from December 31, 1998. This increase was primarily the result
of the transfer of a $4.0 million loan to real estate owned from loans in the
second quarter. This loan is secured by a waterpark in Southern California.

Premises and equipment, net increased $4.9 million to $24.0 million at June 30,
1999. This increase was the result of the acquisition of land to be used for the
new corporate headquarters, architectural costs associated with the design of
the new headquarters, the purchase of computer equipment to accommodate
continued growth, and office expansion. The new corporate headquarters is
expected to be completed in the fourth quarter, 2000.

Other assets include an investment in a limited partnership which services
residential real estate loans. The loans in the partnership's servicing
portfolio prepaid more quickly than anticipated in 1998 due to the lower level
of long-term interest rates. The general partner of the limited partnership
advised the Bank that, as a result of this prepayment activity and to comply
with certain debt covenants financing the partnership, it restructured the
underlying portfolio in April of 1999. As a result of these events, the Bank's
investment has been permanently

                                                                              27
<PAGE>

impaired and a writedown of $120,000 was taken during the period ended June
30, 1999. The Bank continues to monitor its investment in this asset, however
there can be no guarantee that the remaining value of $880,000 can be fully
realized.

Total deposits were $1.2 billion at June 30, 1999, an increase of $121.1
million, or 11.5%, over the balance of $1.10 billion at December 31, 1998. Of
this increase, $51.0 million was attributable to a greater balance of out-of-
state time deposits. The increase resulted from management's marketing efforts,
continued growth at newer retail sales offices, increased custodial checking
balances, and payment of competitive rates to increase certificate of deposit
balances.

Borrowings increased $31.0 million, or 14.4%, from December 31, 1998 to June 30,
1999. The increase was the result of increases in FHLB advances which were
utilized in addition to deposits to fund the asset growth discussed above.

In addition, Trust Preferred securities increased $16.0 million in the second
quarter, 1999. Metropolitan used the net proceeds from the Trust Preferred
offering to repay the $12.0 million outstanding balance on the commercial bank
line of credit and for a $5.0 million capital contribution to the Bank to
support growth. The remainder is available for working capital at the
Corporation.

Liquidity and Capital Resources

Liquidity.  The term "liquidity" refers to our ability to generate adequate
amounts of cash for funding loan originations, loan purchases, deposit
withdrawals, maturities of borrowings, and operating expenses. Our primary
sources of internally generated funds are principal repayments and payoffs of
loans, cash flows from operations, and proceeds from sales of assets. External
sources of funds include increases in deposits and borrowings, and public or
private offerings by Metropolitan.

The Corporation's primary sources of funds currently are dividends from the
Bank, which are subject to restrictions imposed by federal bank regulatory
agencies and debt and equity offerings. The Corporation's primary use of funds
is for interest payments on its existing debt. At June 30, 1999, the
Corporation, excluding the Bank, had cash and readily convertible investments of
$10.7 million.

The Bank is required by regulation to maintain a liquidity ratio (average daily
balance of liquid assets to average daily balance of net withdrawable accounts
and short-term borrowings) of 4%. The Bank's liquidity ratio for June, 1999 was
4.15%. Historically, Metropolitan has maintained its liquidity close to the
required minimum since the yield available on qualifying investments is lower
than alternative uses of funds and is generally not at an attractive spread over
incremental cost of funds.

While principal repayments and FHLB advances are fairly stable sources of funds,
deposit flows and loan prepayments are greatly influenced by prevailing interest
rates, economic conditions, and competition. Metropolitan regularly reviews cash
flow needed to fund its operations and believes that the existing resources are
adequate for its foreseeable requirements.

                                                                              28
<PAGE>

At June 30, 1999, $151.3 million, or 12.9%, of Metropolitan's deposits were in
the form of certificates of deposit of $100,000 and over. If a large number of
these certificates of deposits matured at approximately the same time and were
not renewed, there could be an adverse effect on Metropolitan's liquidity.
Metropolitan monitors maturities to attempt to minimize the potential adverse
effect on liquidity.

When evaluating sources of funds, we consider the cost of various alternatives
such as local retail deposits, FHLB advances and other wholesale borrowings. One
option considered and utilized in the past has been the acceptance of out-of-
state time deposits from individuals and entities, predominantly credit unions.
These deposits typically have balances of $90,000 to $100,000 and have a term of
one year or more. They are not accepted through brokers. At June 30, 1999,
approximately $217.3 million, or 18.5% of our accounts were held by these
individuals and entities. If we were unable to replace these deposits upon
maturity, there could be an adverse effect on our liquidity. We monitor
maturities to attempt to minimize any potential adverse effect on liquidity.

We have access to wholesale borrowings based on the availability of eligible
collateral. The FHLB makes funds available for housing finance based upon the
blanket or specific pledge of certain one- to four-family loans and various
types of investment and mortgage-backed securities. The Bank had borrowing
capacity at the FHLB under its blanket pledge agreement of approximately $143
million at June 30, 1999, of which $140 million was utilized. The financial
market makes funds available through reverse repurchase agreements by accepting
various investment and mortgage-backed securities as collateral. The Bank had
borrowings through reverse repurchase agreements of approximately $80 million at
June 30, 1999, which utilized substantially all of the Bank's eligible
collateral.

Capital. The Office of Thrift Supervision ("OTS") imposes capital requirements
on savings associations.  Savings associations are required to meet three
minimum capital standards: (i) a leverage requirement, (ii) a tangible capital
requirement, and (iii) a risk-based capital requirement.  Such standards must be
no less stringent than those applicable to national banks. In addition, the OTS
is authorized to impose capital requirements in excess of these standards on
individual associations on a case-by-case basis.

The Bank's regulatory capital ratios at June 30, 1999 were in excess of the
capital requirements specified by OTS regulations as shown by the following
table:

                 Tangible Capital    Core Capital   Risk-based Capital
                ------------------  --------------  ------------------
                                 (Dollars in thousands)
Capital amount
Actual          $102,565  6.71%     $102,677  6.72%  $107,980  8.51%
Required          22,922  1.50        61,128  4.00    101,536  8.00
                --------  ----      --------  ----   --------  ----
Excess          $ 79,643  5.21%     $ 41,549  2.72%  $  6,444  0.51%
                ========  ====      ========  ====   ========  ====

The Bank is also subject to capital adequacy requirements under the Federal
Deposit Insurance Corporation Improvement Act of 1991. The additional capital
adequacy ratio imposed on the Bank in this evaluation is the Tier 1 risk-based
capital ratio which at June 30, 1999 was 8.09%, compared to the required ratio
of 4%.

We anticipate that under the current regulations, the Bank will continue to meet
its minimum capital requirements in the foreseeable future.  However, events
beyond the control of the Bank, such as increased interest rates or a

                                                                              29
<PAGE>

downturn in the economy, could adversely affect future earnings and
consequently, the ability of the Bank to meet its future capital requirements.

Year 2000

The year 2000 issue refers to computer programs being written using two digits
rather than four to define an applicable year. A company's hardware, date driven
automated equipment or computer programs that have a two digit field to define
the year may recognize a date using "00" as the year 1900 rather than the year
2000. This faulty recognition could result in a system failure, disruption of
operations, or inaccurate information or calculations. Similar to other
companies, we face the challenge of ensuring that all of our computer related
functions will work properly from the year 2000 and beyond.

We have completed the assessment, planning, and remediation phases of our year
2000 program. We have also completed the testing of our internal equipment and
software. We expect to retest our equipment and software during the remainder of
1999. As part of our year 2000 program, we have fully upgraded and tested our
computer systems which service the majority of our customers accounts. As a
result of these upgrades, we believe that these systems are year 2000 ready. We
have completed our testing and remediation of our interface systems with third
parties. We believe that all of these internal components will be adequate to
provide quality service to our customers without interruption by January 1,
2000. We continue to test our non-critical systems and expect to retest our
interface systems with third parties during the remainder of 1999.

In addition to internal resources, we are utilizing external resources to
implement our year 2000 program. We have contracted with outside consultants to
verify our assessment of our year 2000 problems and to assist us with our
remediation efforts.

We may experience an increase in problem loans and credit losses if borrowers
fail to respond to year 2000 issues. In addition, higher funding costs may
result if consumers react to publicity about the issue by withdrawing deposits.
In response to these concerns, we formed a task force. The task force has
conducted a survey of significant credit customers to determine their year 2000
readiness and to evaluate the level of potential credit risk to us. These
customers have assured us that they are or will be year 2000 compliant. We have
also implemented a customer awareness program to provide deposit customers with
an understanding of our year 2000 readiness.

On an ongoing basis, we are contacting our key suppliers and third parties with
whom we conduct business to determine their year 2000 readiness. We have put in
place a program to monitor third party progress on year 2000 issues during 1999.
Despite our efforts, we can make no assurances that the critical third parties
with whom we do business will adequately address their year 2000 issues. If our
suppliers and customers are not year 2000 compliant by January 1, 2000, their
noncompliance could materially affect our business, results of operations and
financial condition.

We have developed a contingency plan that focuses on reducing any disruption
that might be created by third parties with whom we do business being year 2000
noncompliant. We have also created a task force to document and test a business
resumption plan. This plan was in place and tested by June 30, 1999. We expect
to continue testing this plan throughout the remainder of 1999.

                                                                              30
<PAGE>

We believe that our worst case scenario involves the inability of electric
utility companies to service our various offices due to year 2000 problems. If
the electric utility companies cannot provide power to a significant number of
our offices, our business and operations could be materially disrupted.

In management's opinion, any incremental costs or potential loss of revenues
would not have a material impact on our financial condition, operations, or
cash flows. To date, we have spent $54,000 for incremental services directly
related to ensuring year 2000 readiness. In addition, we have spent $206,000
to upgrade computer hardware and software which was necessary to ensure year
2000 readiness. We do not expect future expenditures to upgrade computer
hardware and software to be material.

Recent Accounting Developments

In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Statement of Financial
Accounting Standard No. 133 addresses the accounting for derivative instruments
and certain derivative instruments embedded in other contracts, and hedging
activities. The statement standardizes the accounting for derivative instruments
by requiring that an entity recognize those items as assets or liabilities in
the statement of financial position and measure them at fair value. This
statement was to be effective for all fiscal years beginning after June 15,
1999. The adoption date of Statement No. 133 was subsequently deferred by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Date of FASB Statement No. 133." Under Statement No. 137 issued
in June of 1999, the effective date was delayed to all fiscal quarters beginning
after June 15, 2000.

In October, 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise." SFAS No. 134 will, in 1999, allow mortgage loans
held for sale that are subsequently securitized to be classified as trading,
available for sale, or in certain circumstances held to maturity. Currently,
these securitized mortgage loans must be classified as trading. We do not expect
these statements to have a material effect on the Corporation's consolidated
financial position or results of operation.

Forward Looking Statements

Certain statements contained in this report that are not historical facts are
forward looking statements that are subject to certain risks and uncertainties.
When used herein, the terms "anticipates," "plans," "expects," "believes," and
similar expressions as they relate to Metropolitan or its management are
intended to identify such forward looking statements. Metropolitan's actual
results, performance or achievements may materially differ from those expressed
or implied in the forward looking statements. Risks and uncertainties that could
cause or contribute to such material differences include, but are not limited
to, general economic conditions, interest rate environment, competitive
conditions in the financial services industry, changes in law, governmental
policies and regulations, and rapidly changing technology affecting financial
services.

                                                                              31
<PAGE>

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Metropolitan, like other financial institutions, is subject to market risk.
Market risk is the risk that a company can suffer economic loss due to changes
in the market values of various types of assets or liabilities. As a financial
institution, we make a profit by accepting and managing various types of risks.
The most significant of these risks are credit risk and interest rate risk. The
principal market risk for us is interest rate risk. Interest rate risk is the
risk that changes in market interest rates will cause significant changes in net
interest income because interest-bearing assets and interest-bearing liabilities
mature at different intervals and reprice at different times.

We manage interest rate risk in a number of ways. Some of the tools used to
monitor and quantify interest rate risk include:

   .  annual budgeting process;

   .  quarterly review of certificate of deposit maturities by day;

   .  monthly forecast of balance sheet activity;

   .  monthly review of listing of liability rates and maturities by month;

   .  monthly shock report of effect of sudden interest rate changes on net
          interest income;

   .  monthly shock report of effect of sudden interest rate changes on net
          value of portfolio equity; and

   .  monthly analysis of rate and volume changes in historic net interest
          income.

We have established an asset and liability committee to monitor interest rate
risk. This committee is made up of senior officers from finance, lending and
deposit operations. The committee meets at least quarterly, reviews our current
interest rate risk position, and determines strategies to pursue for the next
quarter. The activities of this committee are reported to the Board of Directors
of the Bank quarterly. Between meetings the members of this committee are
involved in setting rates on deposits, setting rates on loans and serving on
loan committees where they work on implementing the established strategies.

Like many financial institutions, we have exposure to potential declines in net
interest income from rising interest rates. This is because Metropolitan has
more short-term interest rate sensitive liabilities than short-term interest
rate sensitive assets. One of the ways we monitor interest rate risk
quantitatively is to measure the potential change in net interest income based
on various immediate changes in market interest rates. The following table shows
the change in net interest income for immediate sustained parallel shifts of 1%
and 2% in market interest rates for year-end 1998 and the most recent quarter.

                                                                              32
<PAGE>

                                      Expected change in
                                      net interest income
                                      -------------------
Change in Interest Rate       June 30, 1999      December 31, 1998
-------------------------  -------------------   -----------------

         +2%                     -21.9%               -19.1%
         +1%                     -10.9%               - 9.6%
         -1%                     + 9.7%               + 8.8%
         -2%                     +19.5%               +17.7%

The change in net interest income from a change in market rates is a short-term
measure of interest rate risk. The results above indicate that we have a
significant short-term exposure to rising rates and that the exposure increased
modestly during the first six months of 1999. The increased sensitivity is
largely due to the higher overall level of interest rates at June 30, 1999 as
compared to December 31, 1998.

Another quantitative measure of interest rate risk is net portfolio value
("NPV"), the net present value of existing assets, liabilities, and off-balance
sheet contracts, resulting from various immediate sustained shifts in market
interest rates. This concept is also known as net portfolio value and is the
methodology used by the Office of Thrift Supervision in measuring interest rate
risk. The following table shows the net portfolio value for immediate sustained
parallel shifts of 1% and 2% in market interest rates for year-end 1998 and the
most recent quarter.

                                      Net portfolio value
                                      --------------------
Change in Interest Rate       June 30, 1999      December 31, 1998
-------------------------  --------------------  ------------------

          +2%                      4.2%                 4.6%
          +1%                      5.4%                 5.9%
          -1%                      8.3%                 8.8%
          -2%                     10.1%                10.6%

The change in net portfolio value is a long-term measure of interest rate risk.
It assumes that no significant changes in assets or liabilities held would take
place if there were a sudden change in interest rates. Because we monitor
interest rate risk regularly and actively manage that risk, these projections
serve as a worst case scenario assuming no reaction to changing rates. The
results above indicate that long-term interest rate risk has declined modestly
over the first six months of 1999.

Our strategies to limit interest rate risk from rising interest rates are as
follows:

   .   originate one- to four-family adjustable rate loans for the portfolio;

   .   originate one- to four-family fixed rate loans for sale;

   .   originate the majority of business loans to float with prime rates;

                                                                              33
<PAGE>

   .   increase core deposits which have low interest rate sensitivity;

   .   increase certificates of deposit with maturities over one year;

   .   borrow funds with maturities greater than a year; and

   .   increase the volume of loans serviced since they rise in value as
       rates rise.

We also follow strategies that increase interest rate risk in limited ways
including:

   .   originating and purchasing fixed rate multifamily and commercial real
       estate loans limited to ten year maturities; and

   .   originating and purchasing fixed rate consumer loans with terms from
       two to fifteen years.

We feel that the current level of interest rate risk is acceptable for several
reasons. The risk is weighted toward the long-term where changes in assets and
liabilities can be made if rates do rise. We have a history of growth of 20% to
30% in assets over the past five years. As long as growth can be maintained at
20% per year interest rate risk can be rapidly diluted by growth in short term
and adjustable rate assets funded by long term liabilities. If we grow at a rate
significantly lower than 20%, we could still decrease interest rate risk by
taking actions such as selling fixed rate assets and investing in short-term
assets or assets with short repricing periods. However, this could result in
losses on the sale of assets or a decrease in the yield on assets. We feel that
the likelihood of large increases in market rates is low at this time. An
analysis of the average quarterly change in the Treasury yield curve from 1988
to 1997 indicates that a parallel curve shift of 1.5% or more is an event that
has less than a 0.1% chance of occurrence. In addition, the asset and liability
committee has developed strategies designed to reduce our exposure to rising
interest rates. Management anticipates that the current level of interest rate
risk will decline modestly during the second half of 1999.

We are also aware that any method of measuring interest rate risk including the
two used above has certain shortcomings. For example, certain assets and
liabilities may have similar maturities or repricing dates but their repricing
rates may not follow the general trend in market interest rates. Also, as a
result of competition, the interest rates on certain assets and liabilities may
fluctuate in advance of changes in market interest rates while rates on other
assets and liabilities may lag market rates. In addition, any projection of a
change in market rates requires that prepayment rates on loans and early
withdrawal of certificates of deposits be projected and those projections be
inaccurate. We focus on the change in net interest income and the net portfolio
value as a result of immediate and sustained parallel shifts in interest rates
as a balanced approach to monitoring interest rate risk when used with budgeting
and the other tools noted above.

At the present time we do not hold any trading positions, foreign currency
positions, or commodity positions. Equity investments are approximately 1% of
assets and half of that amount is held in Federal Home Loan Bank stock which can
be sold to the Federal Home Loan Bank of Cincinnati at par. Therefore, we do not
consider any of these areas to be a source of significant market risk.

                                                                              34
<PAGE>

PART II. OTHER INFORMATION

Items 1, 2, 3, and 5 are not applicable.

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

The Annual Meeting of Shareholders of Metropolitan Financial Corp. was held on
April 27, 1999, at 9:00 a.m. ("the Annual Meeting") at 6001 Landerhaven Drive,
Mayfield Heights, Ohio.

At the Annual Meeting, the shareholders of Metropolitan considered and voted
upon proposals to (i) elect Malvin E. Bank, Robert M. Kaye, David G. Lodge, and
David P. Miller as directors of Metropolitan to serve for the term expiring at
the Annual Meeting of Shareholders to be held in the year 2002, and (ii) ratify
the appointment of Crowe, Chizek and Company LLP as independent auditors for the
fiscal year ending December 31, 1999. The shares represented at the Annual
Meeting in person or by proxy were voted as follows with respect to each of the
proposals:

<TABLE>
<CAPTION>
Proposal #1                                             For     Against  Abstain  Non-votes
                                                     ---------  -------  -------  ---------
Election of Directors
<S>                                                  <C>        <C>      <C>      <C>
   Malvin E. Bank                                    7,400,159   22,110      ---    334,124
   Robert M. Kaye                                    7,397,493   24,776      ---    334,124
   David G. Lodge                                    7,411,929   10,340      ---    334,124
   David P. Miller                                   7,412,259   10,010      ---    334,124

Proposal #2                                             For     Against  Abstain  Non-votes
                                                     ---------   ------  -------    -------
   Ratification of appointment of Crowe,
   Chizek and Company LLP                            7,330,299   90,980      990    334,124
</TABLE>


                                                                              35
<PAGE>

Item 6.     Exhibits and Reports on Form 8-K

a. Exhibits


       Exhibit
        Number      Description
        ------      -----------
         3.1        Amended and Restated Articles of Incorporation of
                    Metropolitan Financial Corp. (filed as Exhibit 2 to
                    Metropolitan's Form 8-A filed October 15, 1996 and
                    incorporated herein by reference).

         3.2        Amended and Restated Code of Regulations of Metropolitan
                    Financial Corp. (filed as Exhibit 3 to Metropolitan's Form
                    8-A filed October 15, 1996 and incorporated herein by
                    Reference).

         4.1        Indenture of the Corporation relating to the Junior
                    Subordinated Debentures dated May 14, 1999 (Incorporated by
                    reference from Form S-1, dated May 11, 1999).

         4.2        Amended and Restated Trust Agreement of Metropolitan
                    Capital Trust I dated May 14, 1999 (Incorporated by
                    reference from Form S-1, dated May 11, 1999).

         4.3        Guarantee of the Corporation relating to the Trust
                    Preferred Securities dated May 14, 1999 (Incorporated by
                    reference from Form S-1, dated May 11, 1999).

         4.4        Agreement as to Expenses and Liabilities dated May 14,
                    1999 (Incorporated by Reference from Form S-1, dated May 11,
                    1999).

        10.1        The Restated Loan Agreement by and between the Huntington
                    National Bank and the Corporation dated as of May 28, 1999
                    (incorporated herein by reference to Exhibit 99.1 To the
                    Corporation's Form 10-Q filed May 14, 1998)

          27        Financial Data Schedule(1)

         (1)        Filed only in electronic format pursuant to item
                    601(b)(27) of Regulation S-K.

         b.         Reports on Form 8-K  No reports on Form 8-K were filed by
                    Metropolitan during the First six months of 1999.

                                                                              36
<PAGE>

                         METROPOLITAN FINANCIAL CORP.

                                  SIGNATURES

Pursuant to the requirements 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.

                                       METROPOLITAN FINANCIAL CORP.


                                       By:     /s/ David G. Lodge
                                          ------------------------------------
                                          David G. Lodge,
                                          President, Assistant Secretary and
                                          Assistant Treasurer,
                                          (principal financial
                                          and accounting officer)

                                          Date:  August 16, 1999

                                                                              37