<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                  FORM 10 - Q/A
                                (AMENDMENT NO. 1)


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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002


                        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.)

22901 Millcreek Blvd.,   Highland Hills, Ohio                       44122
---------------------------------------------                -------------------
  (Address of Principal Executive Offices)                       (Zip Code)

                                 (216) 206-6000
              -----------------------------------------------------
              (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 9, 2002, there were 16,145,192 common shares of the Registrant
issued and outstanding.






<PAGE>



                  METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
                                 FORM 10-Q/A
                           QUARTER ENDED JUNE 30, 2002

                                TABLE OF CONTENTS
                                -----------------

PART I.    FINANCIAL INFORMATION                                          PAGE

Item 1.  Financial Statements:

  Consolidated Statements of Financial Condition
  as of June 30, 2002 and December 31, 2001                                 3

  Consolidated Statements of Operations for the three and
  six months ended June 30, 2002 and 2001                                   4

  Condensed Consolidated Statements of Cash Flows
  for the six months ended June 30, 2002 and 2001                           5

  Consolidated Statements of Changes in Shareholders' Equity for
  the three and six months ended June 30, 2002 and 2001                     6

  Notes to Consolidated Financial Statements                              7-19

  Independent Accountants' Review Report                                   20

Item 2.  Management's Discussion and Analysis of
Financial Condition and Results of Operations                             21-33

Item 3. Quantitative and Qualitative Disclosures About
Market Risk                                                               33-35

PART II.   OTHER INFORMATION

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

SIGNATURE                                                                  37


















                                                                               2
<PAGE>



                  METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                       JUNE 30,                DECEMBER 31,
                                                                         2002                      2001
                                                                     -----------               -----------
                                                                     (RESTATED)
ASSETS
<S>                                                                  <C>                       <C>
Cash and due from banks                                              $    38,488               $    46,699
Interest-bearing deposits in other banks                                   3,053                       577
Securities available for sale                                            122,288                    94,354
Securities held to maturity                                                  325                    14,829
Mortgage-backed securities available for sale                            174,405                   167,313
Loans held for sale                                                       47,446                   169,320
Loans receivable, net                                                    999,997                   974,452
Federal Home Loan Bank stock                                              17,279                    16,889
Premises and equipment, net                                               29,973                    62,831
Premises and equipment held for sale                                      31,397                     8,669
Loan servicing rights, net                                                18,467                    22,951
Accrued income, prepaid expenses and other assets                         23,531                    24,233
Real estate owned, net                                                     5,128                     2,791
Goodwill and other intangible assets                                       2,633                     2,512
                                                                     -----------               -----------
     Total assets                                                    $ 1,514,410               $ 1,608,420
                                                                     ===========               ===========

LIABILITIES
Noninterest-bearing deposits
                                                                     $   123,377               $   146,055
Interest-bearing deposits                                                949,679                   996,339
                                                                     -----------               -----------
     Total deposits                                                    1,073,056                 1,142,394
Borrowings                                                               326,310                   340,897
Other liabilities                                                         20,302                    35,862
Guaranteed preferred beneficial interests in the
   Company's junior subordinated debentures                               43,750                    43,750
                                                                     -----------               -----------
     Total liabilities                                                 1,463,418                 1,562,903

SHAREHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized,
   none issued                                                              --                        --
Common stock, no par value, 30,000,000 shares
   authorized, 16,142,987 and 8,128,663 shares
   issued and outstanding, respectively                                     --                        --
Additional paid-in capital                                                42,073                    20,978
Retained earnings                                                         11,771                    26,100
Accumulated other comprehensive loss                                      (2,852)                   (1,561)
                                                                     -----------               -----------
  Total shareholders' equity                                              50,992                    45,517
                                                                     -----------               -----------
     Total liabilities and shareholders' equity                      $ 1,514,410               $ 1,608,420
                                                                     ===========               ===========
</TABLE>

See accompanying notes to consolidated financial statements.





                                                                               3
<PAGE>



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

<Table>
<Caption>
                                                                         THREE MONTHS ENDED JUNE 30,       SIX MONTHS ENDED JUNE 30,
                                                                         ---------------------------       -------------------------
                                                                           2002              2001            2002             2001
                                                                           ----              ----            ----             ----
                                                                        (RESTATED)                        (RESTATED)
INTEREST INCOME
<S>                                                                    <C>             <C>             <C>             <C>
  Interest and fees on loans                                           $     19,072    $     25,342    $     39,053    $     52,340
  Interest on mortgage-backed securities                                      2,460           3,414           4,972           6,775
  Interest and dividends on other investments                                 1,565           1,314           2,840           2,590
                                                                       ------------    ------------    ------------    ------------
    Total interest income                                                    23,097          30,070          46,865          61,705
INTEREST EXPENSE
  Interest on deposits                                                        9,399          14,670          19,500          29,800
  Interest on borrowings                                                      5,194           5,997          10,491          12,415
  Interest on Junior Subordinated Debentures                                  1,039             999           2,078           1,997
                                                                       ------------    ------------    ------------    ------------
    Total interest expense                                                   15,632          21,666          32,069          44,212
                                                                       ------------    ------------    ------------    ------------
NET INTEREST INCOME                                                           7,465           8,404          14,796          17,493
Provision for loan losses                                                     6,185           3,145           6,285           4,200
                                                                       ------------    ------------    ------------    ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                           1,280           5,259           8,511          13,293
NONINTEREST INCOME
  Net gain on sale of loans                                                   1,203           1,782           2,910           2,451
  Loan servicing loss, net                                                   (5,826)           (674)         (6,333)           (783)
  Service charges on deposit accounts                                           849             489           1,309             893
  Net gain on sale of securities                                                616           1,145           1,607           1,545
  Other operating income                                                      1,441           1,569           3,390           2,625
                                                                       ------------    ------------    ------------    ------------
    Total noninterest income                                                 (1,717)          4,311           2,883           6,731
NONINTEREST EXPENSE
  Salaries and related personnel costs                                        5,672           6,323          11,486          12,093
  Occupancy and equipment expense                                             1,636           2,016           3,298           3,783
  Federal deposit insurance premiums                                            332             340             659             687
  Data processing expense                                                       540             508             932             925
  Marketing expense                                                             256             302             478             581
  State franchise taxes                                                         (15)            244              45             488
  Amortization of intangibles                                                     3              62               6             131
  Loss on impairment of premises and equipment held for sale                  8,800            --             8,800            --
  Other operating expenses                                                    4,663           2,758           7,796           5,083
                                                                       ------------    ------------    ------------    ------------
    Total noninterest expense                                                21,887          12,553          33,500          23,771
                                                                       ------------    ------------    ------------    ------------
LOSS BEFORE INCOME TAXES                                                    (22,324)         (2,983)        (22,106)         (3,747)
Benefit for income taxes                                                     (7,834)           (905)         (7,777)         (1,246)
                                                                       ------------    ------------    ------------    ------------
NET LOSS                                                               $    (14,490)   $     (2,078)   $    (14,329)   $     (2,501)
                                                                       ============    ============    ============    ============

Basic and diluted loss per share                                       $      (0.90)   $      (0.26)   $      (1.16)   $      (0.31)
                                                                       ============    ============    ============    ============

Weighted average shares outstanding for basic
  earnings per share                                                     16,139,868       8,110,822      12,379,304       8,107,170
Effect of dilutive options                                                     --              --              --              --
                                                                       ------------    ------------    ------------    ------------

Weighted average shares outstanding for diluted
  earnings per share                                                     16,139,868       8,110,822      12,379,304       8,107,170
                                                                       ============    ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.





                                                                               4
<PAGE>



                  METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 SIX MONTHS ENDED JUNE 30,
                                                                                 -------------------------
                                                                              2002                       2001
                                                                              ----                       ----
                                                                          (RESTATED)
<S>                                                                       <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                      $    41,767               $    (9,313)

CASH FLOWS FROM INVESTING ACTIVITIES
  Disbursement of loan proceeds                                              (205,001)                 (117,115)
  Purchases of:
    Loans                                                                        (233)                  (46,187)
    Mortgage-backed securities                                                (52,222)                  (19,395)
    Securities available for sale                                            (138,802)                  (83,836)
    Mortgage servicing rights                                                  (1,753)                   (2,228)
    Premises and equipment                                                     (1,120)                   (6,679)
    Interest bearing deposits in other banks                                   (2,476)                     --
  Proceeds from maturities and repayments of:
    Loans                                                                     238,315                   205,812
    Mortgage-backed securities                                                 42,481                    17,766
    Securities available for sale                                             125,394                    23,000
    Securities held to maturity                                                   155                      --
  Proceeds from sale of:
    Loans                                                                       6,500                    49,336
     FHLB stock                                                                  --                       5,000
    Premises, equipment, and real estate owned                                  1,614                       348
                                                                          -----------               -----------
      Net cash used in investing activities                                    12,852                    25,822
                                                                          -----------               -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net change in deposit accounts                                              (69,338)                   56,350
  Proceeds from borrowings                                                     22,000                    20,000
  Repayment of borrowings                                                     (34,587)                  (31,328)
  Net activity on lines of credit                                                --                     (49,000)
  Proceeds from issuance of common stock                                       19,095                        46
                                                                          -----------               -----------
    Net cash provided by (used in) financing activities                       (62,830)                   (3,932)
                                                                          -----------               -----------

Net change in cash and cash equivalents                                        (8,211)                   12,577
Cash and cash equivalents at beginning of period                               46,699                    17,010
                                                                          -----------               -----------
Cash and cash equivalents at end of period                                $    38,488               $    29,587
                                                                          ===========               ===========


Supplemental disclosures of cash flow information:
Cash paid during the period for:
    Interest                                                              $    32,515               $    43,246
    Income taxes                                                                  402                     1,418
Transfer from loans receivable to real estate owned                             4,045                       593
Transfer from loans receivable to loans held for sale                           3,783                    60,759
Transfer from loans held for sale to loans receivable                          81,510                      --
Loans securitized                                                             142,719                   104,032
Net transfer from premises and equipment to premises and
    equipment held for sale                                                    22,728                      --
Exchange of loan for common stock                                               2,000                      --
</TABLE>

See accompanying notes to consolidated financial statements.





                                                                               5
<PAGE>



                  METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                      (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                                                                      ACCUMULATED
                                                                         ADDITIONAL                      OTHER           TOTAL
                                                           COMMON         PAID-IN        RETAINED    COMPREHENSIVE   SHAREHOLDERS'
                                                            STOCK         CAPITAL        EARNINGS    INCOME (LOSS)      EQUITY
                                                            -----         -------        --------    -------------      ------

<S>                                                        <C>            <C>            <C>           <C>            <C>
BALANCE MARCH  31, 2001                                    $   --         $ 20,907       $ 29,245      $ (2,089)      $ 48,063
Comprehensive income (loss):
  Net income                                                                               (2,078)                      (2,078)
  Change in unrealized gain on securities, net
    of tax and net of reclassification of gain
    of $744,000 from net income                                                                             823            823
                                                                                                                      --------
Total comprehensive income (loss)                                                                                       (1,255)
Issuance of shares of common stock
  Stock purchase plan-8,181 shares                                              21                                          21
                                                                          --------       --------      --------       --------

BALANCE JUNE 30, 2001                                      $   --         $ 20,928       $ 27,167      $ (1,266)      $ 46,829
                                                                          ========       ========      ========       ========


BALANCE DECEMBER 31, 2000                                  $   --         $ 20,882       $ 29,668      $ (1,091)      $ 49,459
Comprehensive income (loss):
  Net income                                                                               (2,501)                      (2,501)
  Change in unrealized gain on securities, net
    of tax and net of reclassification of gain
    of $1,004,000  from net income                                                                         (175)          (175)
                                                                                                                      --------
Total comprehensive income (loss)                                                                                       (2,676)
Issuance of shares of common stock:
  Stock purchase plan-13,144 shares                                             46                                          46
                                                                          --------       --------      --------       --------

BALANCE JUNE 30, 2001                                      $   --         $ 20,928       $ 27,167      $ (1,266)      $ 46,829
                                                                          ========       ========      ========       ========
<CAPTION>

                                                                                                      ACCUMULATED
                                                                         ADDITIONAL                      OTHER           TOTAL
                                                           COMMON         PAID-IN        RETAINED    COMPREHENSIVE   SHAREHOLDERS'
                                                            STOCK         CAPITAL        EARNINGS    INCOME (LOSS)      EQUITY
                                                            -----         -------        --------    -------------      ------

<S>                                                        <C>            <C>            <C>           <C>            <C>
BALANCE MARCH 31, 2002                                     $   --         $ 42,050       $ 26,261      $ (3,581)      $ 64,730
Comprehensive income (loss):
  Net loss (RESTATED)                                                                     (14,490)                     (14,490)
  Change in unrealized gain on securities, net
    of tax                                                                                                  729            729
                                                                                                                      --------
Total comprehensive income (loss) (RESTATED)                                                                           (13,761)
Issuance of shares of common stock
  Stock purchase plan-6,357 shares                                              23                                          23
                                                                          --------       --------      --------       --------

BALANCE JUNE 30, 2002 (RESTATED)                           $   --         $ 42,073       $ 11,771      $ (2,852)      $ 50,992
                                                                          ========       ========      ========       ========


BALANCE DECEMBER 31, 2001                                  $   --         $ 20,978       $ 26,100      $ (1,561)      $ 45,517
Comprehensive income (loss):
  Net loss (RESTATED)                                                                     (14,329)                     (14,329)
  Change in unrealized gain on securities, net
    of tax                                                                                               (1,291)        (1,291)
                                                                                                                      --------
Total comprehensive income (loss) (RESTATED)                                                                           (15,620)
Net proceeds from issuance of shares of
  common stock:
  Stock offerings-8,000,000 shares                                          21,050                                      21,050
  Stock purchase plan-14,322 shares                                             45                                          45
                                                                          --------       --------      --------       --------
BALANCE JUNE 30, 2002 (RESTATED)                           $   --         $ 42,073       $ 11,771      $ (2,852)      $ 50,992
                                                                          ========       ========      ========       ========
</TABLE>




                                                                               6
<PAGE>



                  METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise indicated, dollar amounts in tables are in thousands, except
per share data.

Metropolitan Financial Corp. (the "Company") is a savings and loan holding
company and an Ohio corporation. The Company is engaged in the business of
originating one to four family, multifamily and commercial real estate loans
primarily in Ohio and Pennsylvania and purchasing multifamily and commercial
real estate loans throughout the United States. The Company offers full service
banking services to communities in Northeast Ohio where its additional lending
activities include originating construction, business and consumer loans. The
accounting policies of the Company 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 financial statements include all adjustments and
disclosures which the Company considers necessary for a fair presentation of (a)
the results of operations for the three- and six-month periods ended June 30,
2002 and 2001; (b) the financial condition at June 30, 2002 and December 31,
2001; (c) the statement of cash flows for the six-month periods ended June 30,
2002 and 2001; and (d) the statement of changes in shareholders' equity for the
three- and six-month periods ended June 30, 2002 and 2001. The results of
operations for the three- and six-month periods ended June 30, 2002 are not
necessarily indicative of the results that may be expected for any other period.
The annual report for the Company for the year ended December 31, 2001, contains
consolidated financial statements and related notes, which should be read in
conjunction with the accompanying consolidated financial statements.

The Company is restating its financial statements as of or for the periods ended
June 30, 2002. These restatements are a result of the use of incorrect
prepayment speed assumptions in the estimation of the value of the Company's
mortgage servicing rights. The review and restatement is described in greater
detail in Note 13.

A summary of significant accounting policies follows:

         CONSOLIDATION POLICY: The Company and its wholly-owned subsidiaries,
MetroCapital Corporation, Metropolitan Capital Trust I, Metropolitan Capital
Trust II, Metropolitan I Corporation and its subsidiary, and Metropolitan Bank
and Trust Company (the "Bank") and its subsidiaries, are included in the
accompanying consolidated financial statements. All significant intercompany
balances have been eliminated.

         USE OF ESTIMATES: In preparing financial statements, management must
make estimates and assumptions. These estimates and assumptions affect the
amounts reported for assets, liabilities, revenues, and expenses as well as the
disclosures provided. Future results could differ from current estimates. Areas
involving the use of management's estimates and assumptions primarily include
the allowance for losses on loans, the valuation of loan servicing rights, the
value of loans held for sale, fixed assets held for sale, fair value of certain
securities, the carrying value and amortization of intangibles, the value of
real estate owned, the determination and carrying value of impaired loans, and
the fair value of financial instruments. Estimates that are more susceptible to
change in the near term include the allowance for loan losses, the valuation of
loan servicing rights, the value of loans held for sale, the value of real
estate owned, and the fair value of certain securities.

         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 or loss by the weighted
average shares outstanding. Diluted earnings per share has been computed by
dividing net income or loss by the diluted weighted average shares outstanding.
Diluted weighted average shares were calculated assuming the exercise of stock
options less the treasury shares assumed to be purchased using the average
market price of the Company's stock. Stock options totaling 1,437,494 and
1,168,878, respectively were not considered in computing diluted earnings per
common share for June 30, 2002 and 2001 because they were antidilutive.

         NEW ACCOUNTING PRONOUNCEMENTS: A new accounting standard requires all
business combinations to be recorded using the purchase method of accounting for
any transaction initiated after June 30, 2001. Under the purchase









                                                                               7
<PAGE>

method, all identifiable tangible assets and intangible assets and liabilities
of the acquired company must be recorded at fair value at date of acquisition,
and the excess of cost over fair value of net assets acquired is recorded as
goodwill. Identifiable intangible assets must be separated from goodwill.
Identifiable intangible assets with finite useful lives will be amortized under
the new standard, whereas goodwill, both amounts previously recorded and future
amounts purchased, ceased being amortized starting in 2002. Periodic impairment
testing will be required for goodwill with impairment being recorded if the
carrying amount of goodwill exceeds its implied fair value.

2.  SUPERVISORY AGREEMENT

On July 8, 2002, the Office of Thrift Supervision ("OTS") issued a Supervisory
Directive (the "Supervisory Directive") to the Company and the Bank. The
Supervisory Directive, requires the Boards of Directors of the Bank and the
Company to act immediately to take corrective action to address certain
weaknesses and to halt certain unsafe and unsound practices, regulatory
violations, and violations of the Supervisory Agreement ,dated July 26, 2001
(the "Supervisory Agreement"), between the Bank, the OTS, and the Ohio Division
of Financial Institutions ("ODFI").

The Supervisory Directive includes the following provisions:

       1.     The Bank is prohibited from making "unauthorized payments", as
              defined in the Supervisory Directive, that directly or indirectly
              benefit Robert M. Kaye, a director and the former Chairman and
              Chief Executive Officer of the Company and the Bank.

       2.     The Bank must obtain reimbursement for unauthorized payments made
              to or for the benefit of Mr. Kaye and related parties since
              January 1, 1992, and suspend all future payments to Mr. Kaye and
              related parties of any kind until such time as there has been a
              full accounting of such payments and the Bank has been fully
              reimbursed, if appropriate.

       3.     The Bank must retain an independent certified public accounting
              firm acceptable to the OTS to conduct a review and accounting of
              all payments that the Bank has made since January 1, 1992, to or
              for the direct or indirect benefit of Robert M. Kaye and related
              parties. The accounting firm must submit to the Audit Committee of
              the Bank's Board and to the OTS a written report relating to its
              review identifying, among other things, any payments that are
              suspected of being unauthorized payments. Based on the information
              in the report, the Audit Committee of the Bank's Board must
              determine the amount of any unauthorized payments, subject to the
              review and concurrence of the OTS. The Bank must then submit to
              Mr. Kaye a written demand for repayment of any unauthorized
              payments.

              The Supervisory Directive sets various deadlines for completion of
              the foregoing matters.

       4.     To facilitate compliance with the targets and deadlines specified
              in the Supervisory Agreement, the Bank must retain a qualified
              marketing agent, acceptable to the OTS, to manage the Bank's
              efforts to sell its artwork collection. The OTS noted that the
              Supervisory Agreement (as modified) required the Bank to reduce
              its investment in artwork by $1.3 million by March 31, 2002, and
              that the Bank had failed to meet the March 31, 2002 requirement.

       5.     The Bank must take appropriate actions to reduce its investment in
              fixed assets so that the Bank's investment in fixed assets (other
              than artwork) is no more than 25% of core capital by December 31,
              2002, as required by the Supervisory Agreement.

       6.     The Bank is prohibited from engaging in any transactions with a
              particular out-of-state bank on whose board Mr. Kaye sits.

       7.     The Bank is prohibited from originating and purchasing commercial
              real estate loans secured by property in California until the Bank
              adopts and implements a written plan for diversification of credit
              risk that is acceptable to the OTS.





                                                                               8
<PAGE>

       8.     The Bank is prohibited from engaging in any transactions with the
              Company or any of its affiliates without prior approval of the
              OTS.

       9.     Without prior OTS approval, the Company is prohibited from paying
              any dividends, or making any other payments except those that it
              was obligated to make pursuant to written contracts in effect on
              July 5, 2002, and payment of expenses incurred in the ordinary
              course of business.

       10.    The Company is prohibited from making any payment or engaging in
              any transaction that would have the effect of circumventing any of
              the restrictions imposed on the Bank in the Supervisory Directive.

The Company has engaged, with OTS approval, an independent audit firm, which is
currently reviewing the payments specified above in accordance with the
Supervisory Directive.

The Company and the Bank have commenced taking actions to comply with the
remainder of the Supervisory Directive, including the sale of artwork, and
expect to comply with the Supervisory Agreement and the Supervisory Directive.

The provisions of the Supervisory Directive do not prohibit the Company from
using its unconsolidated resources to make scheduled contractual payments to
Metropolitan Capital Trust I ("Trust I") and Metropolitan Capital Trust II
("Trust II"). Payments by the Company to Trust I and Trust II are used by the
trusts to pay dividends on the cumulative trust preferred securities of Trust I
and Trust II. The Supervisory Directive does not prohibit Trust I and Trust II
from paying dividends on their respective cumulative trust preferred securities.

On July 26, 2001, the Company entered into a separate Supervisory Agreement with
the OTS (the "Company Supervisory Agreement"), which required the Company to
prepare and adopt a plan for raising capital that uses sources other than
increased debt or additional dividends from the Bank. On January 31, 2002, the
Company initiated an offer of common stock for sale under a rights offering and
a concurrent offering to the public. Management used the net proceeds of the
2002 offerings to raise the capital required by the Company Supervisory
Agreement.

Additionally, the Bank entered into the Supervisory Agreement between the Bank,
the OTS and the ODFI, which requires the Bank to do the following:

       -      Develop a capital improvement and risk reduction plan by September
              28, 2001, which date was extended to December 28, 2001;

       -      Achieve or maintain compliance with core and risk-based capital
              standards at the "well-capitalized" level, including a risk-based
              capital ratio of 10% by December 31, 2001, which date was extended
              to March 31, 2002. The Bank had achieved a "well capitalized"
              level at March 31, 2002 and maintained that level at June 30,
              2002;

       -      Reduce investment in fixed assets (other than artwork) to no more
              than 25% of core capital by December 31, 2002;

       -      Attain compliance with board approved interest rate risk policy
              requirements;

       -      Reduce volatile funding sources, such as brokered and out-of-state
              deposits;

       -      Increase earnings;

       -      Improve controls related to credit risk; and

       -      Restrict total assets to not more than $1.7 billion.




                                                                               9
<PAGE>

Any major deviations from the plan require prior OTS approval. Both supervisory
agreements also contain restrictions on adding, entering into employment
contracts with, or making golden parachute payments to directors and senior
executive officers and in changing responsibilities of senior officers.

During January 2002, the regulatory authorities approved the capital and risk
reduction plan submitted by the Company.

If the Company or the Bank is unable to comply with the terms and conditions of
the Supervisory Directive or the supervisory agreements, the OTS and the ODFI
could take additional regulatory action, including the issuance of a cease and
desist order requiring further corrective action such as raising additional
capital, obtaining additional or new management, requiring the sale of assets
and a reduction in the overall size of the Company, imposing operating
restrictions on the Bank and restricting dividends from the Bank to the Company.
These additional restrictions could make it impossible to service existing debt
of the Company.

3. SECURITIES

The amortized cost, gross unrealized gains and losses and fair values of
investment securities available for sale and held to maturity at June 30, 2002
and December 31, 2001 are as follows:
<TABLE>
<CAPTION>

                                                              JUNE 30, 2002
                                       ------------------------------------------------------------
                                                           GROSS          GROSS
                                         AMORTIZED      UNREALIZED     UNREALIZED          FAIR
                                           COST            GAINS          LOSSES          VALUE
                                          ------           -----          ------          -----
AVAILABLE FOR SALE
<S>                                    <C>             <C>             <C>             <C>
Mutual funds                           $      5,936                                    $      5,936
Freddie Mac preferred stock                   7,500                    $       (562)          6.938
Fannie Mae notes                              5,002    $         25                           5,027
Federal Home Loan Bank note                   9,999              53                          10,052
Treasury notes and bills                     80,144             388                          80,532
Tax-exempt municipal bond                    13,803                                          13,803
Mortgage-backed securities                  175,213             407          (1,215)        174,405
                                       ------------    ------------    ------------    ------------
                                            297,597             873          (1,777)        296,693

HELD TO MATURITY
Revenue bond                                    325               8                             333
                                       ------------    ------------                    ------------
                                                325               8            --               333
                                       ------------    ------------    ------------    ------------
   Total securities                    $    297,922    $        881    $     (1,777)   $    297,026
                                       ============    ============    ============    ============
</TABLE>



                                                                              10
<PAGE>



<TABLE>
<CAPTION>

                                                           DECEMBER 31, 2001
                                   --------------------------------------------------------------
                                                           GROSS          GROSS
                                         AMORTIZED      UNREALIZED     UNREALIZED        FAIR
                                           COST            GAINS          LOSSES        VALUE
                                          ------           -----          ------        -----
AVAILABLE FOR SALE
<S>                                <C>             <C>             <C>             <C>
Mutual funds                       $      5,784                                    $      5,784
Freddie Mac preferred stock               7,500                    $       (750)          6,750
Fannie Mae notes                         10,003                            (129)          9,874
Treasury notes and bills                 72,056    $         74            (184)         71,946
Mortgage-backed securities              165,508           1,895             (90)        167,313
                                   ------------    ------------    ------------    ------------
                                        260,851           1,969          (1,153)        261,667

HELD TO MATURITY
Tax-exempt municipal bond                14,349                          (2,737)         11,612
Revenue Bond                                480              15                             495
                                   ------------    ------------                    ------------
                                         14,829              15          (2,737)         12,107
                                   ------------    ------------    ------------    ------------
   Total securities                $    275,680    $      1,984    $     (3,890)   $    273,774
                                   ============    ============    ============    ============
</TABLE>

The tax-exempt municipal bond represents a single issue secured by a multifamily
property. The bond was reclassified to available for sale as of June 30, 2002,
due to management's decision to market this security when the property, which
serves as collateral for the bond, becomes fully occupied. In conjunction with
this reclassification, it was determined that there was a permanent impairment
to the bond's fair value and a realized loss of $550 thousand was booked.

4. LOANS RECEIVABLE

The composition of the loan portfolio at June 30, 2002 and December 31, 2001 is
as follows:
<TABLE>
<CAPTION>

                                                                        JUNE 30, 2002          DECEMBER 31, 2001
                                                                        -------------          -----------------
Real estate loans
<S>                                                                     <C>                       <C>

   Construction Loans:
      One- to four-family                                               $   165,992               $   150,705
      Multifamily                                                             9,073                     6,360
      Commercial                                                              4,854                     2,134
      Land                                                                   80,187                    74,305
      Loans in process                                                      (90,500)                  (80,214)
                                                                        -----------               -----------
         Construction loans, net                                            169,606                   153,290

   Permanent loans:
      One- to four-family                                                   150,084                   171,813
      Multifamily                                                           263,341                   224,542
      Commercial                                                            181,999                   164,786
                                                                        -----------               -----------
         Total real estate loans                                            765,030                   714,431
Consumer loans                                                              123,342                   138,698
Business and other loans                                                    128,487                   133,684
                                                                        -----------               -----------
         Total loans                                                      1,016,859                   986,813
Premiums on loans, net                                                        5,814                     6,969
Deferred loan fees, net                                                      (1,998)                   (2,080)
Allowance for losses on loans                                               (20,678)                  (17,250)
                                                                        -----------               -----------
        Total loans receivable                                          $   999,997               $   974,452
                                                                        ===========               ===========
</TABLE>


Activity in the allowance for losses on loans for the periods ended June 30,
2002 and 2001 is as follows:




                                                                              11
<PAGE>
<TABLE>
<CAPTION>

                                                                SIX MONTHS ENDED JUNE 30,
                                                                -------------------------
                                                                  2002                2001
                                                                 -----                ----
<S>                                                             <C>                 <C>
               Balance at the beginning of the period           $ 17,250            $ 13,951
               Provision for loan losses                           6,285               4,200
               Charge-offs                                        (2,969)             (1,234)
               Recoveries                                            112                 111
                                                                --------            --------
               Balance at end of period                         $ 20,678            $ 17,028
                                                                ========            ========

</Table>

Nonperforming loans are as follows at:
<TABLE>
<CAPTION>
                                                                 JUNE 30,          DECEMBER 31,
                                                                   2002               2001
                                                                  -----               ----
<S>                                                             <C>                <C>
   Loans past due over 90 days still on accrual                 $   191            $    85
   Nonaccrual loans                                              31,396             30,602
</TABLE>

Management analyzes loans both on an individual and collective 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 loan contract based on
current information and events. Loans which are past due two payments or less
and that management feels are probable of being restored to current status
within 90 days are not considered to be impaired loans. All impaired loans are
included in nonperforming loans.

Information regarding impaired loans is as follows:
<TABLE>
<CAPTION>

                                                                     JUNE 30,                  DECEMBER 31,
                                                                       2002                       2001
                                                                       -----                      ----
<S>                                                                  <C>                        <C>
Balance of impaired loans                                            $ 14,277                   $ 15,260
Less portion for which no allowance
  for losses on loans is allocated                                      2,375                      3,147
                                                                     --------                   --------
Balance of impaired loans for which
  an allowance for loan losses is allocated                          $ 11,902                   $ 12,113
                                                                     ========                   ========
Portion of allowance for losses on loans
  allocated to the impaired loan balance                             $  3,276                   $  3,476
                                                                     ========                   ========

<CAPTION>

                                                                            SIX MONTHS ENDED JUNE 30,
                                                                            -------------------------
                                                                       2002                        2001
                                                                       ----                        ----
<S>                                                                  <C>                        <C>
Average investment in impaired loans
  during the period                                                  $ 14,553                   $ 11,082
                                                                     ========                   ========
Interest income recognized during
  impairment                                                         $    449                   $    230
                                                                     ========                   ========
Interest income recognized on a
  cash basis during the period                                       $    449                   $    230
                                                                     ========                   ========
</TABLE>


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, 2002 and December 31, 2001 are summarized as follows:



                                                                              12
<PAGE>


<TABLE>
<CAPTION>


                                                                   JUNE 30,               DECEMBER 31,
                                                                      2002                   2001
                                                                    -----                    ----
<S>                                                              <C>                        <C>
Mortgage loan portfolios serviced for:
  Freddie Mac                                                    $1,512,755                 $1,292,009
  Fannie Mae                                                        532,746                    617,305
  Other                                                             249,402                    294,559
                                                                 ----------                 ----------
    Total loans serviced for others                              $2,294,903                 $2,203,873
                                                                 ==========                 ==========
</TABLE>


Custodial balances maintained in noninterest-bearing checking accounts in
connection with the foregoing loan servicing were approximately $37.6 million
and $48.5 million at June 30, 2002 and December 31, 2001, respectively.

The following is an analysis of the changes in the cost of loan servicing rights
for the six-month periods ended June 30, 2002 and 2001:
<TABLE>
<CAPTION>

                                                                      SIX MONTHS ENDED JUNE 30,
                                                                      -------------------------
                                                                     2002                     2001
                                                                     -----                    ----
                                                                  (RESTATED)
<S>                                                               <C>                       <C>
Balance at the beginning of the period                            $    22,951               $    20,597
Acquired or originated                                                  4,846                     5,443
Provision for impairment                                               (4,008)                     --
Amortization                                                           (5,322)                   (3,566)
                                                                  -----------               -----------
Balance at the end of the period                                  $    18,467               $    22,474
                                                                  ===========               ===========
</TABLE>

The following is an analysis of the changes in the valuation allowance for
impairment of loan servicing rights for the six-month period ended June 30,
2002. No impairment was recorded for the six-month period ended June 30, 2001:
<TABLE>
<CAPTION>

                                                                      SIX MONTHS ENDED JUNE 30,
                                                                      -------------------------
                                                                      2002                     2001
                                                                     -----                     ----

                                                                  (RESTATED)
<S>                                                               <C>                       <C>
Balance at the beginning of the period                            $      (863)                      N/A
Write-offs of impaired rights                                            --                         N/A
Provision for impairment                                               (4,008)                      N/A
                                                                  -----------               -----------
Balance at the end of the period                                  $    (4,871)                      N/A
                                                                  ===========               ===========
</TABLE>



6. DEPOSITS

Deposits consist of the following:
<TABLE>
<CAPTION>
                                                                      JUNE 30, 2002               DECEMBER 31, 2001
                                                                      -------------               -----------------
                                                                   AMOUNT        PERCENT         AMOUNT        PERCENT
                                                                   ------        -------         ------        -------
<S>                                                             <C>               <C>          <C>              <C>
Noninterest-bearing checking accounts                           $  123,377          11%        $  146,055          13%
                                                                ----------                     ----------

Interest-bearing checking accounts                                 206,305          19            198,414          17
Passbook savings and statement savings                              90,876           9             82,619           7
Certificates of deposit                                            652,498          61            715,306          63
                                                                ----------     -------         ----------     -------
  Total interest-bearing deposits                                  949,679          89            996,339          87
                                                                ----------     -------         ----------     -------
                                                                $1,073,056         100%        $1,142,394         100%
                                                                ==========     =======         ==========     =======
</TABLE>




                                                                              13
<PAGE>

At June 30, 2002, scheduled maturities of certificates of deposit were as
follows:

                    YEAR                                WEIGHTED AVERAGE
                   ENDED              AMOUNT              INTEREST RATE
                   -----              ------              -------------

                    2002             $270,861                 3.55%
                    2003              267,295                 3.78
                    2004               55,720                 4.55
                    2005               11,466                 5.45
                    2006               26,389                 5.30
                 Thereafter            20,767                 5.07
                                     --------
                                     $652,498                 3.85%
                                     ========


         Brokered and out-of-state deposits decreased from $127.8 million at
December 31, 2001 to $90.0 million at June 30, 2002.

7. BORROWINGS

Borrowings consist of the following at June 30, 2002 and December 31, 2001:

<TABLE>
<CAPTION>
                                                           JUNE 30, 2002       DECEMBER 31, 2001
                                                           -------------       -----------------
                                                         AMOUNT      RATE      AMOUNT       RATE
                                                         ------      ----      ------       ----
<S>                                                     <C>           <C>     <C>           <C>
Federal Home Loan Bank Advances                         $266,350      5.2%    $278,912      6.2%
Reverse repurchase agreements                             41,000      5.9       41,000      5.9
Commercial bank note maturing December 31, 2002            5,000      4.8        5,000      4.8
Loan from majority stockholder                                --       --        2,000      0.0
Subordinated debt maturing January 1, 2005                13,960      9.6       13,985      9.6
                                                       ---------             ---------
                                                        $326,310              $340,897
                                                        ========             =========
</TABLE>


At June 30, 2002, scheduled payments on borrowings are as follows:

                                                WEIGHTED AVERAGE
              YEAR ENDED            AMOUNT       INTEREST RATE
              ----------            ------       -------------
                 2002              $55,369            4.45%
                 2003               69,257            5.81
                 2004               69,605            6.15
                 2005               98,112            5.01
                 2006                4,292            6.61
              Thereafter            29,675            6.40
                                   -------
                 Total            $326,310            5.48%
                                  ========

At June 30, 2002, Federal Home Loan Bank advances are collateralized by all of
the Company's FHLB stock, one- to-four-family first mortgage loans, multifamily
loans, and securities with aggregate carrying values of approximately $17.3
million, $154.0 million, $192.3 million, and $109.9 million, respectively.

During 1995, the Company issued subordinated notes ("1995 Subordinated Notes")
totaling $14.0 million. Interest on the notes is paid quarterly and principal
will be repaid when the notes mature January 1, 2005. Total issuance costs of
approximately $1.2 million are being amortized on a straight-line basis over the
life of the notes. The notes are unsecured. Effective November 30, 2000, the
notes may be redeemed at par at any time.

The Company has a note payable to a commercial bank. At June 30, 2002, the
current balance outstanding was $5.0 million. The loan matures December 31,
2002. As collateral for the loan, the Company's largest shareholder, Robert
Kaye, has agreed to pledge his common stock of the Company , which exceeds 50%
of the outstanding stock of the

                                                                              14
<PAGE>


Company. In addition, Mr. Kaye has agreed to pledge any additional shares of the
Company he may acquire in the future. The loan agreement with the commercial
bank has a covenant requiring a minimum return on assets for the previous nine
months. If the Company fails to meet this covenant the loan could become
immediately due and payable. If that happened the 1995 Subordinated Notes would
also become due and payable. The Company has met this requirement or the
commercial bank has waived compliance with this requirement for all periods
through June 30, 2002. The commercial bank also agreed to delete the minimum
return on assets requirement on July 22, 2002.As part of the latest agreement,
the Company was also required to make and has made a $1.0 million principal
payment on July 25, 2002.

In December 2001, the Company entered into a loan agreement with Robert Kaye,
its majority shareholder, a non-interest bearing loan in the principal amount of
$2.0 million. The Company repaid the loan to Mr. Kaye with proceeds from the
stock offerings in March 2002.


8. OFF-BALANCE SHEET ACTIVITIES

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, 2002, the Bank had fixed and variable rate commitments to
originate and/or purchase loans (at market rates) of approximately $80.1 million
and $97.2 million, respectively. In addition, the Bank had firm commitments to
sell loans totaling $65.5 at June 30, 2002. The Bank's commitments to originate
and purchase loans are for loans with rates ranging from 4.75% to 19.9% and
commitment periods up to one year.

The Bank maintains two standby letters of credit at the Federal Home Loan Bank
of Cincinnati for the benefit of Fannie Mae as secondary security for credit
risk on multifamily loans securitized in prior years. These standby letters of
credit, aggregating approximately $8.6 million, do not accrue interest and are
renewed on an annual basis.

The Bank has entered into two interest rate swap contracts to hedge variable
rate advances with each having a notional amount of $20.0 million. Both
contracts mature within five years and have the same counterparty, a nationally
recognized broker/dealer. The Bank receives from the contracts variable interest
based on one-month or three-month LIBOR, respectively. The Bank in turn pays to
the counterparty interest at fixed rates of 6.450% and 6.275%, respectively. The
counterparty has the option to terminate the interest rate swap in the event
LIBOR exceeds certain rates set on specific dates per the terms of the
contracts. The market value of the two swap contracts at June 30, 2002 was an
unrealized loss of $3.4 million.

9. SEGMENT REPORTING

The Company's operations include two major operating segments. A description of
these segments is as 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 the Bank's 24 retail sales offices
                  in Northeastern Ohio. The market for lending is Ohio and the
                  surrounding states. 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 loans are concentrated in
                  Northeastern Ohio.

                  MORTGAGE BANKING--Mortgage banking is the segment of the
                  Company's 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 Ohio and Western
                  Pennsylvania. In general, fixed rate loans are originated for
                  sale and adjustable rate loans may be originated for sale or
                  may be retained in the portfolio. Loans that the Bank services
                  include loans originated and retained by the Bank, loans
                  originated by

                                                                              15
<PAGE>

                  the Bank but sold to others with servicing rights retained by
                  the Bank, and servicing rights to loans originated by others
                  but purchased by the Bank. The servicing rights the Bank
                  purchases may be for loans located in a variety of states and
                  the loans are typically serviced for Fannie Mae or Freddie
                  Mac.

                  PARENT AND OTHER--This consists of the remaining segments of
                  the Company's business. It includes corporate treasury,
                  interest rate risk, and financing operations, which do not
                  generate revenue from outside customers. 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 this category.

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

<TABLE>
<CAPTION>
                                                      AS OF OR FOR THE SIX MONTHS ENDED JUNE 30, 2002
                                           -----------------------------------------------------------------
                                            RETAIL AND
                                            COMMERCIAL        MORTGAGE           PARENT
                                              BANKING          BANKING          AND OTHER           TOTAL
                                           -----------       -----------       -----------       -----------
                                                              (RESTATED)                          (RESTATED)
<S>                                        <C>               <C>               <C>               <C>
OPERATING RESULTS:
Net interest income                        $    11,509       $     7,137       $    (3,850)      $    14,796
Provision for losses on loans                    5,631               654              --               6,285
                                           -----------       -----------       -----------       -----------
Net interest income after
  provision for loan losses                      5,878             6,483            (3,850)            8,511
Noninterest income                               2,807            (1,099)            1,175             2,883
Direct noninterest expense                      10,012             5,094             1,395            16,501
Allocation of overhead                          11,267             5,732                              16,999
                                           -----------       -----------       -----------       -----------
Net income (loss) before income taxes      $   (12,594)      $    (5,442)      $    (4,070)      $   (22,106)
                                           ===========       ===========       ===========       ===========
FINANCIAL DATA:
Segment assets                             $   863,072       $   360,007       $   296,197       $ 1,519,276
Depreciation and amortization                    3,301             3,145               713             7,159
Expenditures for additions
  to premises and equipment                        861               259                               1,120
</TABLE>

<TABLE>
<CAPTION>

                                                     AS OF OR FOR THE SIX MONTHS ENDED JUNE 30, 2001
                                           -----------------------------------------------------------------
                                            RETAIL AND
                                            COMMERCIAL        MORTGAGE           PARENT
                                              BANKING          BANKING          AND OTHER           TOTAL
                                           -----------       -----------       -----------       -----------

<S>                                        <C>               <C>               <C>               <C>
OPERATING RESULTS:
Net interest income                        $     8,502       $     9,556       $      (565)      $    17,493
Provision for losses on loans                    3,893               307              --               4,200
                                           -----------       -----------       -----------       -----------
Net interest income after
  provision for loan losses                      4,609             9,249              (565)           13,293
Noninterest income                               3,814             2,942               (25)            6,731
Direct noninterest expense                      10,126             4,266               983            15,375
Allocation of overhead                           5,907             2,489                               8,396
                                           -----------       -----------       -----------       -----------
Net (loss) income before income taxes      $    (7,610)      $     5,436       $    (1,573)      $    (3,747)
                                           ===========       ===========       ===========       ===========
FINANCIAL DATA:
Segment assets                             $ 1,071,260       $   441,586       $   178,401       $ 1,691,247
Depreciation and amortization                    1,908             2,771               474             5,153
Expenditures for additions
  to premises and equipment                      6,039               640                               6,679
</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 measurement of performance for
the operating segments is based on the organizational structure of the Company
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.

                                                                              16
<PAGE>

The Company 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 assets of the Company.


10. RIGHTS AND COMMON STOCK OFFERINGS

On March 22, 2002, the Company closed its offering to current shareholders of
non-transferable rights to purchase shares of Company common stock and also a
concurrent offering of shares of common stock in a public offering. The purpose
of these offerings was to raise funds to increase the equity capital of the Bank
as required under the July 26, 2001 supervisory agreements signed with the OTS
and ODFI and to make the December 2001 principal payment on the commercial bank
note. These offerings generated gross proceeds of $22.0 million, substantially
exceeding the $13.0 million minimum established for the offerings. As a result
of the offerings, the Bank's regulatory capital ratios are now in excess of the
"well-capitalized" capital requirements as of June 30, 2002.


11. PREMISES AND EQUIPMENT HELD FOR SALE

At June 30, 2002 premises and equipment held for sale included certain parcels
of land and buildings and various works of art owned by the Company. During
June, 2002, the Company reclassified these properties as held for sale.
Previously, the Company had planned to sell other properties whose fair value
met or exceeded carrying value. However, after reevaluating the strategic
options available to the Company and the Supervisory Directive management
decided to revise its plan to sell properties and, therefore, moved certain
additional properties into held for sale and removed other properties from held
for sale. In conjunction with the reclassification of these properties, the
Company determined that the carrying value of certain properties was less than
the estimated net proceeds expected from the sale of these properties.
Accordingly, the Company recognized an $8.8 million loss on the valuation
impairment of these properties. The fair value of these properties was estimated
based on either a present value analysis of the current and expected revenues
and expenses based on the properties being considered as income producing or
third party purchase offers. Management has not obtained an independent
appraisal in arriving at these values. Any future valuation of these assets may
result in additional adjustment in their carrying values. No valuation allowance
has been recorded on the art held for sale based on an appraisal, which
indicates the art's fair value exceeds its current carrying value.


12. MANAGEMENT'S PLANS

During the periods presented in 2002 and 2001, the Company recorded net losses.
Despite large losses, management believes that based on these charges, the
Company is becoming better positioned to return to profitability in the future.
Additionally, the Company is in the process of selecting an investment banking
firm to assist it in evaluating strategic alternatives.

These recent results were in large part the result of: a decline in the
Company's net interest margin, which was caused by declines in market interest
rates to historically low levels when the Company's assets were repricing more
quickly than funding sources; higher overhead levels as a result of previous
growth initiatives; an increase in the amortization of servicing rights and
impairment charges of servicing rights due to a decline in the value of these
rights as a direct result of declines in long-term interest rates to historical
lows; management's increases in the provisions for loan losses related to
specific allocations for certain commercial business and commercial real estate
loans and an overall increase in the allocation for these loan categories based
on increases in problem credits identified within these portfolios; and an
impairment charge related to the Company's classifying commercial real estate as
held for sale.

Management believes that it is taking the necessary actions to increase the
Company's net interest margin primarily through reducing its funding costs.
Historically, the Company has depended more than its competitors on brokered
deposits and out of state certificates of deposit as a source of funds. These
funds typically have a higher cost than local

                                                                              17
<PAGE>


market deposits. During the six months ended June 30, 2002, management reduced
brokered deposits by $37.8 million from the level at December 31, 2001. In
addition, management has decreased the Company's borrowings by $14.6 million at
June 30, 2002 from the amount at December 31, 2001, which borrowings have also
been a higher cost source of funds than deposit accounts. Finally, a significant
amount of the Company's longer term, higher cost funding continues to mature and
reprice in the current lower interest rate environment. Management also is
taking steps to increase interest income by converting non-earning assets to
earning assets. Management's decision to increase the amount of commercial real
estate held for sale and the impairment charge related to this decision was a
direct result of management's plan to decrease fixed assets.

Management also has taken actions to decrease the non-interest expenses of the
Company. The Company has engaged a consulting firm, which is assisting in
identifying opportunities for efficiencies. The Company's actions taken to date
pursuant to this effort have reduced salaries and related personnel costs and
occupancy costs in 2002 compared to the same periods in 2001.

Management believes that it has made progress in identifying the losses in the
loan portfolio and taking appropriate action to improve future credit quality.
These actions include expanding the scope of the loan review function and
revising the credit underwriting standards of the Company. Addressing problem
credits is a high priority for management. Management feels it has appropriately
provided for the risk in the portfolio and based on its current knowledge does
not anticipate future increases in the allowance of the magnitude recorded
during the second quarter of 2002.

To date, the Company continues to meet its credit obligations. In addition, the
Bank met the capital requirements to be considered "well capitalized" and the
levels required by the Supervisory Agreement.


13. RESTATEMENT

Subsequent to the issuance of the June 30, 2002 financial statements, management
determined that the prepayment speed assumptions used in valuing mortgage
servicing rights at June 30 were not correct. The Company revised the
assumptions and engaged an independent firm to value the servicing rights. Based
on the effect of the corrected assumptions and the independent appraisal, the
Company determined that mortgage servicing rights at June 30, 2002 were
overstated by $4.9 million. As a result, net income was overstated by $3.4
million (after tax) and the Company has accordingly restated its financial
statements for the three months ended June 30, 2002. There is no material effect
on earlier periods.


A summary of the effects of the restatement follows (in thousands, except per
share data):


                       CONSOLIDATED STATEMENT OF CONDITION

                                                         AS OF JUNE 30, 2002
                                          AS PREVIOUSLY REPORTED        RESTATED
                                          ----------------------        --------
Loan servicing rights, net                            $   23,333      $   18,467
    Total assets                                       1,519,276       1,514,410
Other liabilities                                         21,817          20,302
    Total liabilities                                  1,464,933       1,463,418
Retained earnings                                         15,122          11,771
    Total shareholders' equity                            54,343          50,992
     Total liabilities and shareholders' equity       $1,519,276      $1,514,410


                                                                              18
<PAGE>



                     CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                               THREE MONTHS ENDED JUNE 30, 2002   SIX MONTHS ENDED JUNE 30, 2002
                               --------------------------------   ------------------------------
                                   AS PREVIOUSLY                    AS PREVIOUSLY
                                      REPORTED      RESTATED         REPORTED       RESTATED
<S>                                   <C>            <C>            <C>            <C>
Noninterest income
  Net gain on sale of loans           $  1,523       $  1,203       $  3,230       $  2,910
  Loan servicing loss, net              (1,492)        (5,826)        (1,999)        (6,333)
  Net gain on sale of securities           828            616          1,819          1,607
    Total noninterest income             3,149         (1,717)         7,749          2,883
Loss before income taxes               (17,458)       (22,324)       (17,240)       (22,106)
Benefit for income taxes                (6,319)        (7,834)        (6,262)        (7,777)
Net loss                              $(11,139)      $(14,490)      $(10,978)      $(14,329)
Basic and diluted loss per share      $  (0.69)      $  (0.90)      $  (0.89)      $  (1.16)
</TABLE>


                                                                              19
<PAGE>





INDEPENDENT ACCOUNTANTS' REPORT



Board of Directors and Shareholders
Metropolitan Financial Corp.
Highland Hills, Ohio


We have reviewed the consolidated statement of financial condition of
Metropolitan Financial Corp. as of June 30, 2002, the related consolidated
statements of operations and statement of changes in shareholders' equity for
the quarter and year-to-date periods ended June 30, 2002 and 2001, and the
consolidated statements of cash flows for the year-to-date periods ended June
30, 2002 and 2001. These financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the AICPA.
A review of interim financial information consists principally of
applying analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.  Accordingly, we do not
express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the  accompanying financial statements for them to be in
conformity with accounting principles generally accepted  in the United States
of America.




                                                 Crowe, Chizek and Company LLP

Cleveland, Ohio
October 21, 2002
<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,
                                                ---------------------------           -------------------------
                                                   2002               2001             2002              2001
                                                   ----               ----             ----              ----
                                                 (RESTATED)                                           (RESTATED)

<S>                                              <C>               <C>              <C>               <C>
Net income (loss) (in thousands)                 $  (14,490)       $   (2,078)      $  (14,329)       $   (2,501)
Basic and diluted earnings (loss) per share      $    (0.90)       $    (0.26)      $    (1.16)       $    (0.31)
Return on average assets                              (3.77)%           (0.49)%          (1.86)%           (0.30)%
Return on average equity                             (87.37)%          (17.52)%         (49.97)%          (10.40)%
Noninterest expense to average assets                  5.70%             2.96%            4.34%             2.82%
Efficiency ratio                                     380.72%           107.95%          189.46%           104.24%
Net interest margin                                    2.12%             2.14%            2.08%             2.24%
</TABLE>

<TABLE>
<CAPTION>
                                                          JUNE 30,             DECEMBER 31,           JUNE 30,
                                                           2002                    2001                 2001
                                                        ----------             -----------           --------
                                                        (RESTATED)
<S>                                                   <C>                   <C>                  <C>
Total assets (in thousands)                           $    1,514,410        $    1,608,420       $    1,691,247
Shareholders' equity (in thousands)                           50,992                45,517               46,829
Shareholders' equity to total assets                            3.37%                 2.83%                 2.77%
Shares outstanding                                        16,142,987             8,128,663            8,112,996
Book value per share                                  $         3.16        $         5.60        $         5.77
Tangible book value per share                         $         3.00        $         5.29        $         5.45
Closing share price of common stock                   $         3.59        $         3.05        $         3.80
Nonperforming assets to total assets (1)                        2.42%                 2.09%                 2.11%
Allowance for losses on loans to total loans (1)                1.97%                 1.49%                 1.39%
Net charge-offs to average loans (2)                            0.54%                 0.26%                 0.18%
</TABLE>

(1)    Ratios are based on period end balances.
(2)    Annualized for comparative purposes.



                                                                              21



<PAGE>



OVERVIEW

The Company's 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 the Company's income is net interest income, the difference between the
interest that is earned on interest-earning assets, such as loans and
securities, and the interest paid on interest-bearing liabilities, such as
deposits and borrowings. The Company's operations are also affected by
noninterest income, such as loan servicing fees, servicing charges on deposit
accounts, and gains or losses on the sales of loans and securities. The
Company's principal operating expenses, aside from interest expense, consist of
compensation and employee benefits, occupancy costs, and general and
administrative expenses.

The Company is restating its financial statements as of or for the periods ended
June 30, 2002. These restatements are a result of the use of incorrect
prepayment speed assumptions in the estimation of the value of the Company's
mortgage servicing rights. The review and restatement is described in greater
detail in Note 13.


RESULTS OF OPERATIONS

Net Income. The Company reported a net loss of $14.5 million for the second
quarter of 2002, or $0.90 per share. This is an increase of $12.4 million over
the net loss of $2.1 million or $0.26 per share for the second quarter of 2001.
The net loss for the six months ended June 30, 2002 was $14.3 million, or $1.16
per share, an increase of $11.8 million from the net loss of $2.5 million, or
$0.31 per share for the six months ended June 30, 2001. Although the losses for
the second quarter and the six months ended June 30, 2002 were similar, the per
share losses were different due to the stock offering in March which increased
the Company's capitalization.

The primary reasons for the increase in the net loss for both the three- and
six-month periods ended June 30, 2002 are: a permanent impairment charge of $8.8
million taken against the Company's premises and equipment; an increase in the
loan loss reserve of $6.2 million for the second quarter and $6.3 million for
the six months ended June 30, 2002; and increased net losses from loan servicing
to $5.8 million and $6.3 million for the three and six months ended June 30,
2002, respectively, due to increased amortization and continued impairment of
loan servicing rights in a declining interest rate environment. These increases
in expenses were partially offset by an increased tax benefit generated from the
operating loss.

Net interest income decreased to $7.5 million and $14.8 million for the three
and six months June 30, 2002, respectively from $8.4 million and $17.5 million
in their respective periods in 2001. Noninterest income decreased in the second
quarter of 2002 to a net loss of $1.7 million from income of $4.3 million in
the same period in 2001. Noninterest income for the six months ended June 30,
2002 decreased to $2.9 million from $6.7 million for the same period in 2001.
Noninterest expense increased to $21.9 million and $33.5 million for the three
and six months ended June 30, 2002, respectively.

Interest Income. Total interest income for the quarter ended June 30, 2002 was
$23.1 million, a decrease of 23.2%, from the second quarter of 2001. Total
interest income for the first six months of 2002 decreased 23.0% from the same
period in 2001 to $46.9 million. There are two primary reasons for the decline
in interest income over 2001. First, yields on interest-earning assets declined
to 6.59% and 6.62% in the three-and six-month periods ended June 30, 2002,
respectively, from 7.68% and 7.91% for the same periods in 2001. Secondly,
average-earning assets declined in 2002 from 2001. Average earning assets for
the second quarter of 2002 decreased 10.2% to $1.407 billion from $1.568 billion
in the second quarter of 2001. Average earning assets for the six months ended
June 30, 2002 decreased 8.8% to $1.426 billion from $1.563 billion for the same
period in 2001. The decrease in average earning assets contributed $4.6 million
and $8.6 million of the decrease in interest income for the three and six months
ended June 30, 2002, respectively. The decline in the yield on earning assets
for the three months ended June 30, 2002 compared to the same period in the
prior year was primarily due to declines in the level of short term interest
rates from 2001 to 2002. As interest rates have continued to level off, the
decline in yields has gradually narrowed.

                                                                              22
<PAGE>

Interest Expense. Total interest expense decreased 27.8% to $15.6 million, and
27.5% to $32.1 million, for the three- and six-month periods ended June 30,
2002, respectively, from $21.7 million and $44.2 million for the same periods in
2001. Interest expense for the three and six months ending June 30, 2002
decreased generally due to a lower average balance of interest-bearing
liabilities outstanding and a lower cost of funds compared to the prior year
quarter. The average balance of interest-bearing deposits decreased $108.7
million and $84.0 million, or 10.1 % and 7.9 %, for the three- and six-month
periods ended June 30, 2002, respectively, as compared to the same periods in
2001. This decrease includes a significant decrease in out of state and brokered
certificates of deposit, which generally carry a higher interest rate. Average
borrowings decreased $68.5 million and $76.1 million, or 17.6% and 18.7%, for
the three- and six-month periods ended June 30, 2002, respectively, as compared
to the same periods in 2001. The Company's cost of funds decreased to 4.71% and
4.78% for the three and six months ending June 30, 2002, respectively, as
compared to 5.79% and 5.94% for the same periods in 2001. The lower cost of
funds contributed $3.6 million and $7.8 million to the decrease in interest
expense for the three and six months ended June 30, 2002, respectively.

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.

                                                                              23
<PAGE>



<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED JUNE 30,
                                                       -----------------------------------------------------------------------------
                                                                        2002                                 2001
                                                       -----------------------------------    --------------------------------------

                                                          AVERAGE                                                 AVERAGE
                                                          BALANCE       INTEREST      RATE          BALANCE       INTEREST    RATE
                                                          -------       --------      ----          -------      --------     ----
                                                        (Restated)
Interest-earning assets:
<S>                                                     <C>              <C>         <C>         <C>              <C>          <C>
Loans receivable                                        $1,050,633       $19,072     7.26%       $1,277,603       $25,342      7.93%
Mortgage-backed securities                                 158,396         2,460     6.21%          204,307         3,414      6.68%
Other                                                      198,292         1,565     3.31%           86,002         1,314      6.26%
                                                        ----------       -------                 ----------       -------
Total interest-earning assets                            1,407,321        23,097     6.59%        1,567,912        30,070      7.68%
                                                                         -------                                  -------
Noninterest-bearing assets                                 134,116                                  127,689
                                                        -----------                              ----------
Total assets                                            $1,541,437                               $1,695,601
                                                        ==========                               ==========

Interest-bearing liabilities:
Deposits                                                $  967,513         9,399     3.90%       $1,076,052        14,670      5.47%
Borrowings                                                 320,459         5,194     6.50%          388,922         6,108      6.30%
Junior Subordinated Debentures                              43,750         1,039     9.50%           43,750           999      9.13%
                                                        ----------      --------                 ----------       -------
Total interest-bearing liabilities                       1,331,722        15,632     4.71%        1,508,724        21,777      5.79%
                                                                        --------                                  ------
Noninterest-bearing liabilities                            143,196                                  139,431
Shareholders' equity                                        66,519                                   47,446
                                                        ----------                               ----------
Total liabilities and
  shareholders' equity                                  $1,541,437                               $1,695,601
                                                        ==========                               ==========
Net interest income before
  capitalized interest                                                     7,465                                    8,293
                                                                        --------                                  -------
Interest rate spread                                                                 1.88%                                     1.89%
Net interest margin                                                                  2.12%                                     2.14%
Interest expense capitalized (1)                                             --                                       111
                                                                        --------                                  -------
Net interest income                                                     $  7,465                                  $ 8,404
                                                                        ========                                  =======
Average interest-earning
  assets to average
  interest-bearing
  liabilities                                               105.68%                                  103.92%

(1)Capitalized construction interest in 2001.
</TABLE>


                                                                              24

<PAGE>




<TABLE>
<CAPTION>
                                                                              SIX MONTHS ENDED JUNE 30,
                                                  -----------------------------------------------------------------------------
                                                                    2002                                    2001
                                                  ----------------------------------     ---------------------------------------

                                                    AVERAGE                                              AVERAGE
                                                    BALANCE       INTEREST     RATE       BALANCE        INTEREST      RATE
                                                    -------       --------     ----       -------        --------      ----
                                                  (Restated)
<S>                                              <C>               <C>         <C>      <C>              <C>           <C>
Interest-earning assets:
Loans receivable                                 $1,077,778        $39,053     7.25%    $1,279,791       $52,340       8.18%
Mortgage-backed securities                          160,458          4,972     6.20%       199,782         6,775       6.78%
Other                                               187,477          2,840     3.34%        83,224         2,590       6.54%
                                                 ----------        -------              ----------       -------
Total interest-earning assets                     1,425,713         46,865     6.62%     1,562,797        61,705       7.91%
                                                                   -------                               -------
Noninterest-bearing assets                          129,220                                123,485
                                                 ----------                             ----------
Total assets                                     $1,554,933                             $1,686,282
                                                 ==========                             ==========

Interest-bearing liabilities:
Deposits                                         $  977,135         19,500     4.02%    $1,061,133        29,800       5.66%
Borrowings                                          329,968         10,491     6.41%       406,061        12,754       6.33%
Junior Subordinated Debentures                       43,750          2,078     9.50%        43,750         1,997       9.13%
                                                 ----------        -------              ----------       ------
Total interest-bearing liabilities                1,350,853         32,069     4.78%     1,510,944        44,551       5.94%
                                                                   -------                               -------
Noninterest-bearing liabilities                     146,251                                127,221
Shareholders' equity                                 57,829                                 48,117
                                                 ----------                             ----------
Total liabilities and
  shareholders' equity                           $1,554,933                             $1,686,282
                                                 ==========                             ==========
Net interest income before
  capitalized interest                                              14,796                                17,154
                                                                   -------                               -------
Interest rate spread                                                           1.84%                                   1.97%
Net interest margin                                                            2.08%                                   2.24%
Interest expense capitalized (1)                                       --                                    339
                                                                   -------                                 -----
Net interest income                                                $14,796                               $17,493
                                                                   =======                               =======
Average interest-earning
  assets to average
  interest-bearing
  liabilities                                        105.54%                               103.43%
</TABLE>

(1)Capitalized construction interest in 2001.


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.

                                                                              25
<PAGE>



                                            THREE MONTHS ENDED JUNE 30,
                                                   2002 VS. 2001
                                                 INCREASE (DECREASE)
                                      --------------------------------------
                                                     CHANGE         CHANGE
                                      TOTAL          DUE TO        DUE TO
                                      CHANGE         VOLUME         RATE
                                     --------       --------       --------
                                                (IN THOUSANDS)

INTEREST INCOME ON:
  Loans receivable                   $ (6,270)      $ (4,244)      $ (2,026)
  Mortgage-backed securities             (954)          (726)          (228)
  Other                                   251            393           (142)
                                     --------       --------       --------
    Total interest income              (6,973)      $ (4,577)      $ (2,396)
                                     --------       ========       ========
INTEREST EXPENSE ON:
  Deposits                           $ (5,271)      $ (1,480)      $ (3,791)
  Borrowings                             (914)        (1,075)           161
  Junior Subordinated Debentures           40           --               40
                                     --------       --------       --------
    Total interest expense             (6,145)      $ (2,555)      $ (3,590)
                                                    ========       ========
Decrease in net interest income      $   (828)
                                     ========


                                             SIX MONTHS ENDED JUNE 30,
                                                   2002 VS. 2001
                                                 INCREASE (DECREASE)
                                      --------------------------------------
                                                     CHANGE         CHANGE
                                      TOTAL          DUE TO        DUE TO
                                      CHANGE         VOLUME         RATE
                                     --------       --------       --------
                                                (IN THOUSANDS)


INTEREST INCOME ON:
  Loans receivable                   $(13,287)      $ (7,715)      $ (5,572)
  Mortgage-backed securities           (1,803)        (1,254)          (549)
  Other                                   250            410           (160)
                                     --------       --------       --------
    Total interest income             (14,840)      $ (8,559)      $ (6,281)
                                     --------       ========       ========
INTEREST EXPENSE ON:
  Deposits                           $(10,300)      $ (2,212)      $ (8,088)
  Borrowings                           (2,263)        (2,421)           158
  Junior Subordinated Debentures           81           --               81
                                     --------       --------       --------
    Total interest expense            (12,482)      $ (4,633)      $ (7,849)
                                                    ========       ========
Decrease in net interest income      $ (2,358)
                                     ========


Provision for Loan Losses. The provision for loan losses increased to $6.2
million and $6.3 million for the three- and six-month periods ended June 30,
2002, respectively, as compared to $3.1 million and $4.2 million for the same
periods in 2001. Management increased the provision for loan losses primarily
due to a credit quality deterioration of $11 million in the commercial business
loan portfolio and a further deterioration of $5.2 million in the commercial
real estate loan portfolio. Additionally, increased risk in the business and
commercial real estate markets caused the Company to increase the factors used
in determining the loan loss provision for these classified loan categories. As
a result, the allowance for losses on loans at June 30, 2002 was $20.7 million,
or 1.97%, of total loans, as compared to $17.3 million, or 1.49%, of total loans
at December 31, 2001.

Noninterest Income. Total noninterest income decreased 139.5% to a net loss of
$1.7 million for the second quarter of 2002, as compared to $4.3 million of
income for the same period in 2001. Noninterest income for the six months ended
June 30, 2002, decreased 56.7% to $2.9 million from $6.7 million in the same
period in 2001.

Gain on sale of loans was $1.2 million and $2.9 million in the three- and
six-month periods ended June 30, 2002, respectively, as compared to $1.8 million
and $2.5 million during the same periods in 2001. The primary reason for the
increase in the first six months of 2002 as compared with the same period in
2001 was a decrease in interest rates in mid to late 2001 and early 2002 which
has caused an increase in refinance activity resulting in increased residential
mortgage loan origination volumes and, therefore, an increase in loans available
to sell. The reason for the decrease in the second quarter is that the Company
is no longer selling any multi-family and commercial real estate loans. The
proceeds from sales of residential loans held for sale in the first six months
of 2002 were $431.0 million as compared to $91 million in

                                                                              26
<PAGE>


the same period in 2001. Proceeds from the sale of multifamily and commercial
real estate loans were $6.5 million for the first six months of 2002 as compared
to $49.3 million for the same period in 2001.

There were losses from net loan servicing of $5.8 million in the three-month
period ended June 30, 2002 as compared to losses of $674 thousand for the same
period in 2001. For the six-month period ended June 30, 2002, losses on net loan
servicing were $6.3 million as compared to losses of $783 thousand for the same
time period in 2001. The primary reason for the higher losses was the increased
amortization and impairment of servicing rights due to an increase in prepayment
of loans in 2002 compared to the same period in 2001. The portfolio of loans
serviced for others increased to $2.3 billion at June 30, 2002 as compared to
$2.2 billion at December 31, 2001.

Service charges on deposit accounts increased 73.6% and 46.6% to $849 thousand
and $1.3 million in the three- and six-month periods ended June 30, 2002
compared to $489 thousand and $893 thousand for the same periods in 2001. The
primary reason for the significant increase is due to new fee-generating
programs that the Company implemented during 2002.

The Company had $616 thousand and $1.6 million in gains on the sale of
securities in the three- and six-month periods ended June 30, 2002, respectively
as compared to $1.1 million and $1.5 million for the same periods in 2001. In
both periods substantially all of the gains were the result of securitizing one
to four family loans and simultaneously selling those securities.

Other operating income decreased to $1.4 million in the three-month period ended
June 30, 2002 compared to $1.6 million for the same period in the previous year.
For the six months ended June 30, 2002 other operating income increased to $3.4
million as compared to $2.6 million for the same period in the prior year. The
decrease in the second quarter of 2002 was directly attributable to a $550
thousand one-time permanent impairment charge on the tax-exempt municipal bond
the Company holds. Excluding this one-time charge, other operating income
increased in the second quarter by 26.8% to $2.0 million.

Noninterest Expense. Total noninterest expense increased to $21.9 million in the
three-month period ended June 30, 2002 as compared to $12.6 million for the same
period in 2001. For the first six months of 2002 total noninterest expense was
$33.5 million as compared to $23.8 million in 2001. A significant portion of the
increase is due to a one-time impairment charge of $8.8 million taken against
premises and equipment.

Personnel related expenses decreased $651 thousand and $607 thousand in the
three- and six-month periods ended June 30, 2002, respectively, as compared to
the same periods in 2001. These decreases are due to a 12% reduction in
headcount, achieved primarily through attrition in the last year. The Company
announced an efficiency program during the second quarter of 2002 that will
further reduce headcount and continue to reduce the Company's personnel related
expenses.

Occupancy costs decreased $380 thousand and $485 thousand in the three- and
six-month periods ended June 30, 2002, respectively, over the same periods in
2001. Since no new offices have been opened in 2002 the Company's occupancy
costs have stabilized over the last 12 months. The Company is not planning to
open any new facilities in the near future, which will allow occupancy costs to
remain stable.

Data processing expense increased $32 thousand and $7 thousand in the three- and
six-month periods ended June 30, 2002, respectively, as compared to the same
periods in 2001. Data processing costs have stabilized in 2002 after seeing
significant growth in 2001 due to the Bank's systems conversion in September
2000. Data processing costs should remain stable in the foreseeable future.

Marketing expense decreased $46 thousand and $103 thousand in the three- and
six-month periods ended June 30, 2002, respectively, compared to the same
periods in the prior year. Marketing costs in 2002 are limited to more routine
activities as compared to prior years.

State franchise taxes decreased $259 thousand and $443 thousand in the three-
and six-month periods ended June 30, 2002, respectively, as compared to the same
periods in 2001. The primary reason for the decrease was a refund from the

                                                                              27
<PAGE>

State of Ohio that was received in May of 2002 and a refinement of the
allocation of taxes among the various states where the Bank conducts business.

At June 30, 2002 premises and equipment held for sale included certain parcels
of land and buildings and various works of art owned by the Company. During
June, 2002, the Company reclassified these properties as held for sale.
Previously, the Company had planned to sell other properties whose fair value
met or exceeded carrying value. However, after reevaluating the strategic
options available to the Company and the Supervisory Directive management
decided to revise its plan to sell properties and, therefore, moved certain
additional properties into held for sale and removed other properties from held
for sale. In conjunction with the reclassification of these properties, the
Company determined that the carrying value of certain properties was less than
the estimated net proceeds expected from the sale of these properties.
Accordingly, the Company recognized an $8.8 million loss on the valuation
impairment of these properties. The fair value of these properties was estimated
based on either a present value analysis of the current and expected revenues
and expenses based on the properties being considered as income producing or
third party purchase offers. Management has not obtained an independent
appraisal in arriving at these values. Any future valuation of these assets may
result in additional adjustment in their carrying values. No valuation allowance
has been recorded on the art held for sale based on an appraisal, which
indicates the art's fair value exceeds its current carrying value.

Other operating expenses, which include miscellaneous general and administrative
costs such as loan servicing, loan processing costs, business development, check
processing, ATM expenses, and expenses pertaining to real estate owned and
professional expenses, increased $1.9 million and $2.7 million for the three-
and six-month periods ended June 30, 2002, respectively, as compared to the same
period in 2001. These increases were generally the result of increases in
expenses pertaining to real estate owned and legal expense.

On June 6, 2002, the Company announced that it was undergoing a restructuring
plan that would be concluded by year-end. The Company currently projects
annualized cost savings of $3.0 million as a result of improved process
efficiencies and personnel reductions. The Company originally expected to incur
costs in connection with the restructuring, primarily personnel related, of $0.5
million to $1.0 million, to be taken in the third quarter of 2002. Since most of
the personnel reductions were the result of attrition, the Company now expects
restructuring costs not to exceed $200 thousand.

Provision for Income Taxes. The Company's income tax benefit increased $6.9
million and $6.5 million for the three and six months ended June 30, 2002,
respectively, as compared to the prior year period. The primary reason for the
increase in the benefit was due to the fact that the Company had a larger
pre-tax loss during the three- and six-month periods ended June 30, 2002 as
compared to the same periods in the prior year.



ASSET QUALITY

The Bank undertakes detailed reviews of the loan portfolio regularly to identify
potential problem loans or trends and to provide for adequate estimates of
probable losses. In performing these reviews, management considers, among other
things, current economic conditions, portfolio characteristics, delinquency
trends, and historical loss experiences. The Company normally consider 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, a loan is considered 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,
the Company assesses the collectibility of the unpaid interest. Interest
determined to be uncollectible is reversed from interest income. 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 following table provides information concerning the Company'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.

                                                                              28
<PAGE>



                                                     JUNE 30,       DECEMBER 31,
                                                       2002             2001
                                                    ----------       ----------

Nonaccrual loans                                    $   31,396       $   30,602
Loans past due greater than
  90 days or impaired, still accruing                      191               85
                                                    ----------       ----------
Total nonperforming loans                               31,587           30,687
Real estate owned                                        5,128            2,791
                                                    ----------       ----------
Total nonperforming assets                          $   36,715       $   33,478
                                                    ==========       ==========
Allowance for losses on loans                       $   20,678       $   17,250
                                                    ==========       ==========

Nonperforming loans to total loans                        3.02%            2.68%
Nonperforming assets to total assets                      2.42%            2.09%
Net charge-offs to average loans(1)                       0.54%            0.26%
Provision for loan losses to average loans(1)             1.18%            0.53%
Allowance for losses on loans to total
  nonperforming loans at end of period                   65.46%           56.21%
Allowance for losses on loans to
  total loans at end of period                            1.97%            1.49%

(1) Annualized for comparative purposes

Nonperforming loans at June 30, 2002 increased $900 thousand to $31.6 million as
compared to $30.7 million at December 31, 2001. Real estate owned increased $2.3
million over the same period. These changes were primarily due to a transfer of
$3.1 million of loans to real estate owned during the first quarter of 2002. On
March 26, 2001, based on financial projections provided by the borrowers on
March 12, 2001, $14.7 million of business loans to several entities affiliated
with each other were put on nonaccrual and calculated to be impaired in the
amount of $3.5 million. These loans are business loans secured by junior liens
on several nursing homes and assisted living centers. The borrowers did not make
any payments on these loans during the first quarter of 2001. The estimate of
the impairment was the result of comparing the book value of the loans to the
present value of cash flows expected to be received based on the most likely
workout scenario. In May 2001, the borrowers began making interest payments on
these loans. These loans were brought current as of June 30, 2002 through
payments by the borrowers and a reduction in the rates charged on these loans.
However, due to the continuing weakness of the borrowers, these loans are still
considered impaired and nonperforming at June 30, 2002. Management determined
the amount of the impairment of these loans to be $3.2 million as of June 30,
2002. Management will charge off these balances if it becomes clear that the
borrowers have exhausted all possible efforts to improve the value of the
underlying collateral through enhancement of the businesses' operating
performance or the possibility of the borrowers obtaining alternate sources of
financing.

The provision for loan losses increased for the three-month period ended June
30, 2002 as compared to the same period in 2001. Management increased the loan
loss provision primarily due to a credit quality deterioration of $11 million in
the commercial business loan portfolio and a further deterioration of $5.2
million in the commercial real estate loan portfolio. Additionally, increased
risk in the business and commercial real estate markets caused the Company to
increase the factors used in determining the loan loss provision for these
classified loan categories.

In addition to the nonperforming assets included in the table above, the Company
identifies potential problem loans, which are still performing but have a
weakness which causes it to classify those loans as substandard for regulatory
purposes. There were $5.1 million of loans in this category at June 30, 2002
compared to $1.3 million of such loans at December 31, 2001.


                                                                              29
<PAGE>



FINANCIAL CONDITION

Total assets amounted to $1.514 billion at June 30, 2002 as compared to $1.608
billion at December 31, 2001, a decrease of $94 million. The decrease in assets
was concentrated in loans and was partially offset by increases in securities.
Under the supervisory agreement, the Company has committed that quarter end
assets for the Bank will not exceed $1.702 billion during the term of the
agreement.

Securities available for sale increased $27.9 million to $122.2 million at June
30, 2002 as compared to $94.3 million at December 31, 2001. The reasons for the
increase were the transfer of $13.8 million in tax-exempt bonds to available for
sale from held to maturity and the purchase of $138.3 million of U.S. agency
notes and bills partially offset by $125.3 million of maturities of U.S. agency
notes and bills.

Loans receivable, net increased $25.5 million, or 2.6%, to 1.0 billion at June
30, 2002 from $974.5 million at December 31, 2001. This increase was due to
transfers of commercial and multi-family loans of $81.5 million from held for
sale to loans receivable. This was partially offset by decreases due to loan
sales and repayments in the first six months of 2002.

Loans held for sale decreased $121.9 million to $47.4 million at June 30, 2002
from $169.3 million at December 31, 2001. The primary reasons for the decrease
in this category are the loans sales that have occurred in the first three
months of 2002 and the decision to transfer all multi-family and commercial real
estate loans from the loans held for sale category back into the loan portfolio,
due to an improvement in the Bank's capital position.

Federal Home Loan Bank stock increased $390 thousand to $17.3 million at June
30, 2002 as compared to the December 31, 2001 balance. The reason for the
increase was the payment of stock dividends to the Bank from the Federal Home
Loan Bank.

Loan servicing rights, net, decreased $4.5 million to $18.5 million at June 30,
2002, as compared to $23.0 million at December 31, 2001. The primary reason for
the decrease was the continuing decrease in interest rates through June 2002.
The decreasing rates have increased the impairment of the value of the servicing
rights to $4.0 million as well as the amortization of the servicing rights to
$5.3 million in the first six months of 2002. This more than offset the $4.8
million of servicing rights that were originated or acquired during the first
six months of 2002.

Real estate owned increased $2.3 million, or 83.7%, to $5.1 million at June 30,
2002. The primary reason for the increase was the $3.1 million transfer into
real estate owned of two properties in the first quarter of 2002. This was
partially offset by a $709 thousand additional provision taken in the first six
months.

Total deposits were $1.073 billion at June 30, 2002, a decrease of $69.3 million
from the balance of $1.142 billion at December 31, 2001. The decrease resulted
principally from decreased certificates of deposit balances of $62.8 million,
including a decrease of $37.8 million of out of state and brokered certificates
of deposit, and non-interest bearing checking accounts of $20.9 million, which
were partially offset by an increase of $15.9 million of interest-bearing
checking and savings accounts. During 2001 and continuing through the first
quarter of 2002, the Bank increased the proportion of certificates of deposit
due to mature more than one year in the future in order to reduce interest rate
risk.

Borrowings decreased $14.6 million, or 4.3%, from December 31, 2001 to June 30,
2002. The decrease was the result of the paydown of Federal Home Loan Bank
advances and the $2.0 million repayment of the loan to the Company's majority
shareholder.



LIQUIDITY AND CAPITAL RESOURCES

Liquidity. The term "liquidity" refers to the ability to generate adequate
amounts of cash for funding loan originations, loan purchases, deposit
withdrawals, maturities of borrowings, and operating expenses. The Bank's
primary sources of


                                                                              30
<PAGE>

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
securities offerings by the Company.

The Company'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 Company's primary use of funds is for
interest payments on its existing debt. At June 30, 2002, the Company, excluding
the Bank, had cash and readily convertible investments of $7.0 million. This
includes $672 thousand the Company holds in liquid assets as a requirement of
the subordinated notes due January 1, 2005.

The Company was required to make a $1.0 million principal payment on its
commercial bank note payable on July 25, 2002 so that the commercial bank would
waive the minimum return on assets covenant on the note payable. The remaining
$4.0 million balance is due on December 31, 2002. The Company is currently in
negotiations to refinance the commercial bank note to extend the final principal
payment beyond December 31, 2002. In addition, the Company made the quarterly
scheduled $1.0 million interest payments on the Guaranteed Preferred Beneficial
Interest in the Company's Junior Subordinated Debentures on July 1, 2002. After
making these payments and paying other normal business expenses, the Company,
excluding the Bank, had cash and readily convertible investments of $4.7 million
as of July 31, 2002.

The Bank's liquidity ratio (average daily balance of liquid assets to average
daily balance of net withdrawable accounts and short-term borrowings) for the
quarter ending June 30, 2002 was 23.42%. Historically, the Company has
maintained its liquidity close to 4.0% 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. However, the balance of liquid
assets during the first six months of 2002 was substantially higher because the
volume of loan payoffs was high while the demand for loans was only high for
one-to four-family fixed rate loans, which are sold after they are originated.
At June 30, 2002, the Bank had approximately $41.5 million in cash, $52.2
million in U.S. Treasury securities and $17.7 million in Fannie Mae and Ginnie
Mae mortgage-backed securities, which were available to sell or to pledge to
meet liquidity needs.

While principal repayments and Federal Home Loan Bank advances had been fairly
stable sources of funds, deposit flows and loan prepayments are greatly
influenced by prevailing interest rates, economic conditions, and competition.
the Company regularly reviews cash flow needed to fund its operations and
adjusts loan and deposit rates as needed to balance cash available with cash
needs.

We had access to wholesale borrowings based on the availability of eligible
collateral. The Federal Home Loan Bank makes funds available for housing finance
based upon the blanket or specific pledge of certain one- to four-family and
multifamily loans and various types of investment and mortgage-backed
securities. The Bank had borrowing capacity at the Federal Home Loan Bank under
its blanket pledge agreement of approximately $20 million at June 30, 2002.

At June 30, 2002, $267.0 million, or 24.8%, of the Company's deposits were in
the form of certificates of deposit of $100,000 and over. The Company has also
accepted 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. At June 30, 2002, approximately $9.0 million,
or 0.8%, of deposits were held by these individuals and entities. Of these
out-of-state time deposits, $2.3 million were also included in the $100,000 and
over time deposits discussed above. During 2001, the Bank received regulatory
approval and began accepting brokered deposits. At June 30, 2002, brokered
deposits totaled $81.0 million. The total of all certificates of deposits from
brokers, out-of-state sources, and other certificates of deposit of $100,000 and
over was $273.8 million at June 30, 2002, or 25.5%, of total deposits. The
supervisory agreement requires that the Bank reduce its reliance on volatile
funding sources, including but not limited to, brokered and out-of-state
deposits. Brokered and out-of-state deposits have decreased from $127.8 million
at December 31, 2001 to $90.0 million at June 30, 2002. The supervisory
agreement does not call for a specific amount of reduction or a specific time
frame in which to make the reduction. Since many of these depositors are not
located near the Bank's retail sales offices and do not have other accounts,
these deposits tend to be less stable and less likely to renew if the Company's
rates are not competitive with national rates. The Company's dependence on these
wholesale types of deposits creates the risk that the Company might experience a
liquidity shortage if it stopped issuing or renewing these types of certificates
of deposit or that it would have to pay high rates to renew or replace these
funds which would

                                                                              31
<PAGE>

negatively impact profitability. In order to minimize these risks, the Company
monitors the maturity of these types of funds so their maturities are staggered.
The Company also deals with several brokers and compares rates among them to
help ensure the Company is paying competitive rates. However, based on the
Federal Home Loan Bank collateral requirements, the Bank may have to use
brokered or out-of-state certificates of deposit for liquidity purposes. If a
liquidity shortage occurs despite all of these steps, the Company has the
ability to generate additional liquidity beyond the cash and securities
mentioned above by stopping the issuance of commitments to make new loans and
selling some or all of the $47.4 million of loans the Company owns that are
classified as held for sale at June 30, 2002. Such a liquidation of loans held
for sale could have a negative impact on net interest income.

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 $41.0 million
at June 30, 2002.

Capital. The OTS imposes capital requirements on savings associations. Savings
associations are required to meet three minimum capital standards: (i) a core
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, 2002 were
in excess of the "well capitalized" capital requirements. The following table
summarizes the Bank's position against the "well capitalized" requirements:

                                                WELL CAPITALIZED
                                                ----------------
                                                          PERCENT OF
                                            AMOUNT           ASSETS
                                            ------           ------
Tangible Capital: (RESTATED)
      Actual                               $104,364            6.90%
      Requirement                            30,265            2.00
                                           --------           -----
      Excess (Deficiency)                  $ 74,099            4.90%
                                           ========           =====
Core Capital: (RESTATED)
      Actual                               $104,364            6.90%
      Requirement                            75,661            5.00
                                           --------           -----
      Excess (Deficiency)                  $ 28,703            1.90%
                                           ========           =====
Risk-based Capital: (RESTATED)
      Actual                               $118,314           10.24%
      Requirement                           115,541           10.00
                                           --------           -----
      Excess (Deficiency)                  $  2,773            0.24%
                                           ========           =====


FORWARD LOOKING STATEMENTS

Certain statements contained in this report that are not historical facts are
forward-looking statements, as defined in the Private Securities Litigation
Reform Act of 1995, that are subject to assumptions, risks and uncertainties.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include the words "believe,"
"expect," "anticipate," "likely," "intend," "plan," "estimate" or words of
similar meaning, or future or conditional verbs such as "will," "would,"
"should," "could" or "may." Actual results could differ materially from those
contained in or implied by such forward-looking statements for a variety of
factors including:

         -        changes in interest rates;

         -        continued weakening in the economy and other factors that
                  would materially impact credit quality trends, real estate
                  lending and the ability of the Bank to generate loans;

         -        business and other factors affecting the economic outlook of
                  individual borrowers of the Bank and their ability to repay
                  loans as agreed;


                                                                              32
<PAGE>


         -        the ability of the Company and the Bank to timely meet their
                  obligations under their respective supervisory agreements;

         -        the status of the relevant markets in which the Company and
                  the Bank may sell various assets;

         -        increase in the dollar amount of nonperforming loans held by
                  the Bank;

         -        increased competition, which raises rates paid on demand and
                  time deposits offered by the Bank;

         -        adverse developments of a material nature in collection and
                  other lawsuits involving the Bank;

         -        delay in or inability to execute strategic initiatives
                  designed to grow revenues and/or manage expenses;

         -        changes in law imposing new legal obligations or restrictions
                  or unfavorable resolution of litigation;

         -        the ability of the Bank to continue to use the Federal Home
                  Loan Bank as a source of liquidity; and

         -        changes in accounting, tax, or regulatory practices or
                  requirements.

Management decisions are subjective in many respects and susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter business
strategy or capital expenditure plans that may, in turn, affect the results of
operations. In light of the significant uncertainties inherent in the
forward-looking information included in this prospectus, you should not regard
the inclusion of such information as the Company's representation that it will
achieve any strategy, objectives or other plans. The forward-looking statements
contained in this prospectus speak only as of the date of this prospectus as
stated on the front cover, and the Company has no obligation to update publicly
or revise any of these forward-looking statements.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company, 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, a profit is made 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 the Company 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.

The OTS currently looks to the Thrift Bulletin 13a, issued December 1, 1998, to
evaluate interest rate risk at institutions they supervise. The OTS categorizes
interest rate risk as minimal, moderate, significant, or high based on a
combination of the projected Net Portfolio Value ("NPV") after a 200 basis point
change in interest rates and the size of that change in NPV due to a 200 basis
point change in interest rates.

The Company manages 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 forecasting process;

         -        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;

                                                                              33
<PAGE>


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

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

         -        semi-monthly forecast of balance sheet activity.

         -        weekly review of certificate of deposit offering rates and
                  maturities by day; and

The Bank has established an asset and liability committee to monitor interest
rate risk. This committee has representation from finance, lending and deposit
operations. This committee meets at least twice a month, reviews the current
interest rate risk position, and determines strategies to pursue for both long-
and short-term horizons. The activities of this committee are reported to the
Board of Directors of the Bank. 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.

One of the ways the Bank monitors 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 2001 and the most recent quarter. The results for a
downward parallel shift of 2% at June 30, 2002 and December 31, 2001 are not
meaningful because some rates such as the Federal Funds Rate are already less
than 2%

                           EXPECTED CHANGE IN NET INTEREST INCOME
                           --------------------------------------
CHANGE IN INTEREST RATE      JUNE 30, 2002  DECEMBER 31, 2001
-----------------------      -------------  -----------------

              +2%                   +4%           +7%
              +1%                   +2%           +3%
              -1%                   -1%           -1%
              -2%                   N/A           N/A

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 at December 31,
2001 the Company had exposure to falling rates but would benefit from rising
rates. The expected change in net interest income at June 30, 2002 was impacted
by a shift in the balance sheet towards short-term liabilities. During the
quarter, short-term interest-earning assets decreased in dollar amount to a
greater extent than short-term interest-bearing liabilities. The net result was
a reduction of the benefit in a rising rate scenario. The Company's exposure to
falling rates has remained unchanged.

Another quantitative measure of interest rate risk is the change in the market
value of all financial assets and liabilities based on various immediate
sustained shifts in market interest rates. This concept is also known as NPV and
is the methodology used by the OTS in measuring interest rate risk.

The following table shows the change in net portfolio value for immediate
sustained parallel shifts of 1% and 2% in market interest rates for year-end
2001 and the most recent quarter. The results for a downward parallel shift of
2% at June 30, 2002 and December 31, 2001 are not meaningful because some rates
such as the Federal Funds Rate are already less than 2%

                                     EXPECTED CHANGE IN NET PORTFOLIO VALUE
CHANGE IN INTEREST RATE              JUNE 30, 2002    DECEMBER 31, 2001
-----------------------              -------------    -----------------
                                      (RESTATED)
               +2%                     -14%                 -16%
               +1%                      -7%                 -8%
               -1%                      -1%                 +0%
               -2%                      N/A                 N/A

                                                                              34
<PAGE>

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 interest rate
risk is monitored regularly and the Company actively manages that risk, these
projections serve as a worst-case scenario assuming no reaction to changing
rates. The results above indicate that exposure to rising rates as measured by
post-shock NPV has decreased while exposure to falling rates has increased
marginally. Under Thrift Bulletin 13a, the Company falls in the minimal interest
rate risk category as of June 30, 2002, based upon current sensitivity to
interest rate changes and the current level of regulatory capital.

The Company's strategies to limit interest rate risk from rising interest rates
are as follows:

         -        originate one- to four-family loans primarily for sale;

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

         -        increase core deposits, which have low interest rate
                  sensitivity;

         -        borrow funds with maturities greater than a year;

         -        borrow funds with maturities matched to new long-term assets
                  acquired;

         -        consider the use of derivatives to reduce interest rate risk
                  when economically practical.

The Company also follows strategies that increase interest rate risk in limited
ways including:

         -        originating and purchasing fixed rate multifamily and
                  commercial real estate loans limited to five year maturities
                  or five year terms to repricing; and

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

The Company is 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 may be
inaccurate. The Company focuses on the change in net interest income and the
change in 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 the Company does not hold any trading positions, foreign
currency positions, or commodity positions. Equity investments are approximately
1.6% of assets and 71.4% 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,
the Company does not consider any of these areas to be a source of significant
market risk.


PART II. OTHER INFORMATION

Items 1, 2, 3, 4, and 5 are not applicable.


                                                                              35
<PAGE>


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

      a. Exhibits
         Exhibit
         Number   Description
         ------   -----------

         10.1     Second Addendum to Sixth Amendment to the Restated Loan
                  Agreement by and between The Huntington National Bank, Robert
                  M. Kaye as guarantor and the Company dated as of January 7,
                  2002 (filed as Exhibit 10.9 to the Company's Form 10-K filed
                  on March 26, 2002 and incorporated herein by reference).

         10.2     Third Addendum to Sixth Amendment to the Restated Loan
                  Agreement by and between The Huntington National Bank, Robert
                  M. Kaye as guarantor and the Company dated as of July 22, 2002
                  (filed as Exhibit 10.2 to the Company's Form 10-Q filed on
                  August 15, 2002 and incorporated herein by reference).

         10.3     Employment Agreement by and between the Company and Marcus
                  Faust, Executive Vice President and Chief Financial Officer
                  dated as of June 5, 2002.

         99.1     Certification of Chief Executive Officer and Chief Financial
                  Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.

    b.            Reports on Form 8-K. - On June 24, 2002, the Company filed an
                  Item 5 on Form 8-K announcing that Kenneth R. Lehman had been
                  named to the Board of Directors of Metropolitan Financial
                  Corp.



                                                                              36
<PAGE>



                          METROPOLITAN FINANCIAL CORP.

                                    SIGNATURE

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/Kenneth T. Koehler
                                  ---------------------------------------------
                                     Kenneth T. Koehler,
                                     President & Chief Operating Officer
                                     (on behalf of the Registrant)

                              By:  /s/Marcus Faust
                                  ---------------------------------------------
                                     Marcus Faust,
                                     Executive Vice President & Chief Financial
                                     Officer

                              By:  /s/Timothy W. Esson
                                  ---------------------------------------------
                                     Timothy W. Esson,
                                     Vice President-Finance for the Bank
                                     (as Principal Accounting Officer)


                                     Date:  October 22, 2002

                                                                             37