<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-K

(Mark One)

[X]  Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
     Act of 1934

For the fiscal year ended December 31, 1997

[ ]  Transition report pursuant to Section 13 or 15 (d) of the Securities
     Exchange Act of 1934

For the transition period from _______________ to _________________

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 Identification No.)
Incorporation or Organization)

 6001 Landerhaven Drive          Mayfield Heights, Ohio            44124
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)
                                 (440) 646-1111
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

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

Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, without par value
-------------------------------
      (Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
                                             ---   ---

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

The aggregated market value of voting stock held by nonaffiliates of the
Registrant as of March 26, 1998 was $ 26,730,000.

As of March 26, 1998, there were 7,051,270 shares of the Registrant's Common
Stock issued and outstanding.

Documents incorporated by reference:

Portions of the 1997 Annual Report - Parts I and II Portions of the
Proxy Statement for the 1998 Annual Meeting - Part III


<PAGE>   2


                          METROPOLITAN FINANCIAL CORP.

                                 1997 FORM 10-K
                                TABLE OF CONTENTS
                                     PART I

<TABLE>
<CAPTION>

<S>                                                                                                     <C>
Item 1. Business.......................................................................................  3

Item 2.  Properties.................................................................................... 34

Item 3.  Legal Proceedings............................................................................. 34

Item 4.  Submission of Matters to a Vote of Security Holders........................................... 34

                                     PART II
Item 5.  Market For Registrant's Common Equity and Related Stockholder Matters......................... 35

Item 6.  Selected Financial Data....................................................................... 35

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations......... 35

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk................................... 35

Item 8.  Financial Statements and Supplementary Data................................................... 35

Item 9.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.......... 36

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant........................................... 36

Item 11. Executive Compensation........................................................................ 36

Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 36

Item 13. Certain Relationships and Related Transactions................................................ 36

                                     PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............................ 36
</TABLE>

                                       2

<PAGE>   3


                                     PART I

ITEM 1.    BUSINESS

GENERAL

         Metropolitan Financial Corp. ("Metropolitan" or the "Corporation") is a
savings and loan holding company incorporated in 1972 that is engaged in the
principal business of originating and purchasing mortgage and other loans
through its wholly-owned subsidiary, Metropolitan Savings Bank of Cleveland (the
"Bank"). Funds for lending and other investment activities are obtained
primarily from savings deposits, wholesale borrowings, principal repayments on
loans and the sale of loans. The activities of the Corporation are limited and
impact the results of operations primarily through interest expense on a
consolidated basis. Unless otherwise noted, all of the activities discussed
below are of the Bank. Metropolitan's corporate headquarters is located at 6001
Landerhaven Drive, Mayfield Heights, Ohio 44124.

         The Corporation's current majority shareholder is Robert M. Kaye of
Rumson, New Jersey. Mr. Kaye acquired the Corporation in 1987 and remained sole
shareholder until the initial public offering ("IPO") of the Corporation's
Common Stock in October, 1996. As a result of the IPO, Mr. Kaye currently owns
77.5% of the Corporation's outstanding Common Stock and has the ability to
control the outcome of various matters submitted to the shareholders for
approval, the ability to elect or remove all the directors of the Corporation
and has ultimate control of the Corporation and the Bank. In addition, Mr. Kaye
is Chairman of the Board and Chief Executive Officer of the Corporation and the
Bank.

         The Bank is a state chartered stock savings association established in
1958. At December 31, 1997, the Bank operated fifteen full service retail
offices throughout Eastern Cuyahoga, Summit, Lake and Geauga Counties. As of
December 31, 1997, the Bank also maintained four residential and
multifamily/commercial real estate loan production offices. In addition to its
principal business of originating and purchasing mortgage and other loans, the
Bank services a significant portfolio of mortgage loans for various investors.

         At December 31, 1997, Metropolitan had total assets of $925.0 million,
total deposits of $737.8 million and shareholders' equity of $36.7 million. The
deposits of the Bank are insured by the Federal Deposit Insurance Corporation
("FDIC") up to applicable limits.

         In addition to the Bank, Metropolitan has four other subsidiaries, each
of which are either directly or indirectly wholly-owned by Metropolitan:
MetroCapital Corporation; Kimberly Construction Company, Incorporated ("Kimberly
Construction"); Metropolitan Savings Service Corporation; and Metropolitan
Securities Corporation. Each of these subsidiaries, with the exception of
Kimberly Construction, is inactive. Currently, Kimberly Construction's sole
business function is to serve as a principal party to various construction
contracts entered into in connection with the construction of Bank premises.

LENDING ACTIVITIES

         General. Metropolitan primarily originates and purchases mortgage loans
secured by multifamily residential and commercial real estate. Metropolitan also
originates one- to four-family residential and construction loans, and to a
lesser extent, consumer and business loans. In order to minimize interest rate
risk, the majority of the residential real estate loans retained by Metropolitan
in its portfolio are adjustable rate mortgages ("ARMs").



                                       3
<PAGE>   4



      Loan Portfolio Composition. The following information presents the
composition of Metropolitan's loan portfolio, including loans held for sale, in
dollar amounts and in percentages (before deductions for loans in process,
deferred fees and discounts and allowance for losses on loans) as of the dates
indicated.

<TABLE>
<CAPTION>

                                                               DECEMBER 31,
                                ------------------------------------------------------------------------------------

                                         1997                      1996                         1995
                                   -------------------      ---------------------        ---------------------
                                   Amount      Percent      Amount        Percent        Amount        Percent
                                   ------      -------      ------        -------        ------        -------
                                                           (Dollars in thousands)
<S>                               <C>           <C>        <C>             <C>        <C>              <C>
REAL ESTATE LOANS:
  One- to four-family             $146,685      19.2%      $114,758        16.8%      $  76,259        15.0%
  Multifamily                      194,450       25.4       276,544         40.3        231,459         45.8
  Commercial                       166,593       21.8       135,635         19.8        109,403         21.5
  Construction and land            116,829       15.3        71,697         10.5         48,210          9.5
  Held for sale                     14,230        1.8         8,973          1.3          1,504          0.2
                                   -------     ------       -------       ------        -------       -----
    Total real estate loans        638,787       83.5       607,607         88.7        466,835         92.0
CONSUMER LOANS                      68,590        9.0        54,180          7.9         32,214          6.3
BUSINESS AND OTHER LOANS            57,496        7.5        23,508          3.4          8,703          1.7
                                   -------     ------       -------       ------        -------       ------
     Total loans                   764,873     100.0%       685,295       100.0%        507,752       100.0%
                                               ======                     ======                      ======
LESS:
  Loans in process                  46,833                   31,758                      23,373
  Deferred fees, premiums
     and discounts, net              4,533                    2,896                       1,764
  Allowance for losses on
     loans                           5,622                    4,175                      2, 765
                                  --------                 --------                    --------

TOTAL LOANS RECEIVABLE, NET       $707,885                 $646,466                    $479,850
                                  ========                 ========                    ========

<CAPTION>

                                                       DECEMBER 31,
                                ---------------------------------------------------------

                                         1994                             1993
                                 ---------------------           ------------------------
                                 Amount         Percent          Amount           Percent
                                 ------         -------          ------           -------

<S>                             <C>              <C>            <C>                 <C>
REAL ESTATE LOANS:
  One- to four-family           $112,840         25.2%          $  39,510           12.7%
  Multifamily                    187,928          41.9            166,221            53.2
  Commercial                      83,354          18.6             54,819            17.5
  Construction and land           38,270           8.5             30,894             9.9
  Held for sale                       84           0.0             10,391             3.3
                                 -------        ------            -------          ------
    Total real estate loans      422,476          94.2            301,835            96.6
CONSUMER LOANS                    25,946           5.8             10,687             3.4
BUSINESS AND OTHER LOANS             171           0.0                 50             0.0
                                 -------        ------            -------          ------
     Total loans                 448,593        100.0%            312,572          100.0%
                                                ======                             ======
LESS:
  Loans in process                19,338                           14,656
  Deferred fees, premiums
     and discounts, net            2,317                            1,998
  Allowance for losses on
     loans                                                          1,239
                                --------                         --------
                                   1,911
TOTAL LOANS RECEIVABLE, NET     $425,027                         $294,679
                                ========                         ========
</TABLE>




      Metropolitan had commitments to originate or purchase fixed and variable
rate loans of $22.3 million and $49.4 million, respectively, at December 31,
1997. In addition, Metropolitan had firm commitments to sell fixed rate loans of
$2.2 million at December 31, 1997.



                                       4
<PAGE>   5
      The following table shows the composition of Metropolitan's loan
portfolio, including loans held for sale, in dollar amounts and in percentages
(before deductions for loans in process, deferred fees and discounts and
allowance for losses on loans) by fixed and adjustable rates as of the dates
indicated.

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                      ----------------------------------------------------------------------------------
                                              1997                        1996                         1995
                                      ---------------------        ---------------------       ---------------------
                                      AMOUNT        PERCENT        AMOUNT        PERCENT       AMOUNT        PERCENT
                                      ------        -------        ------        -------       ------        -------
                                                                                               (Dollars in thousands)
<S>                                   <C>            <C>         <C>            <C>         <C>            <C>
FIXED RATE LOANS:
Real estate:
 One- to four-family                  $ 59,058       7.7%        $ 41,436       6.1%        $ 35,042       6.9%
 Multifamily                            60,136       7.9           88,529      12.9           71,909      14.2
 Commercial                             52,390       6.9           34,726       5.1           17,615       3.5
 Construction and land                  20,854       2.7              392       0.0               39       0.0
 Held for sale                           6,294       0.8            2,531       0.4            1,504       0.3
                                       -------      ----          -------      ----          -------      ----
 Total fixed rate real estate loans    198,732      26.0          167,614      24.5          126,109      24.9
Consumer                                61,307       8.0           46,725       6.8           32,214       6.3
Business and other                      19,575       2.6            5,650       0.8            2,744       0.5
                                       -------      ----          -------      ----          -------      ----
  Total fixed rate loans               279,614      36.6%         219,989      32.1%         161,067      31.7%
                                       -------      ====          -------      ====          -------      ====
ADJUSTABLE RATE LOANS:
Real estate:
 One- to four-family                    87,627     11.5%           73,322      10.7%          41,217       8.1%
 Multifamily                           134,314      17.6          188,015      27.5          159,550      31.4
 Commercial                            114,203      14.9          100,909      14.7           91,788      18.1
 Construction and land                  95,975      12.5           71,305      10.4           48,171       9.5
 Held for sale                           7,936       1.0            6,442       0.9
                                       -------      ----          -------      ----          -------      ----

  Total adjustable rate real estate
  loans                                440,055      57.5          439,993      64.2          340,726      67.1
Consumer                                 7,283       0.9            7,455       1.1

Business and other                      37,921       5.0           17,858       2.6            5,959       1.2
                                       -------      ----          -------      ----          -------      ----
  Total adjustable rate loans          485,259      63.4%         465,306      67.9%         346,685      68.3%
                                       -------      ====          -------      ====          -------      ====
LESS:
 Loans in process                       46,833                     31,758                     23,373
 Deferred fees, premiums
   and discounts, net                    4,533                      2,896                      1,764
 Allowance for losses on loans           5,622                      4,175                      2,765
   TOTAL LOANS RECEIVABLE, NET        $707,885                   $646,466                   $479,850
                                       =======                    =======                    =======

<CAPTION>
                                                            DECEMBER 31,
                                      -----------------------------------------------------
                                                 1994                         1993
                                         ---------------------        ---------------------
                                         AMOUNT        PERCENT        AMOUNT        PERCENT
                                         ------        -------        ------        -------
<S>                                   <C>            <C>           <C>            <C>
FIXED RATE LOANS:
Real estate:
 One- to four-family                  $ 46,418       10.4%         $ 20,448       6.5%
 Multifamily                            19,852        4.4             5,281       1.7
 Commercial                              7,948        1.8             8,325       2.7
 Construction and land
 Held for sale                              84        0.0            10,391       3.3
                                       -------       -----           ------     -----
 Total fixed rate real estate loans     74,302       16.6            44,445      14.2
Consumer                                25,946        5.8            10,687       3.4
Business and other                          20        0.0
                                       -------       -----           ------     -----
  Total fixed rate loans               100,268       22.4%           55,132     17.6%
                                       =======       ====            ======     ====
ADJUSTABLE RATE LOANS:
Real estate:
 One- to four-family                    66,422       14.8%           19,062       6.1%
 Multifamily                           168,076       37.5           160,940      51.5
 Commercial                             75,406       16.8            46,494      14.9
 Construction and land                  38,270        8.5            30,894       9.9
 Held for sale
                                       -------       -----           ------     -----
  Total adjustable rate real estate
  loans                                348,174       77.6           257,390      82.4
Consumer
Business and other                         151        0.0                50       0.0
                                       -------       -----           ------     -----
  Total adjustable rate loans          348,325       77.6%          257,440      82.4%
                                       -------       =====           ------     =====
LESS:
 Loans in process                       19,338                       14,656
 Deferred fees, premiums                                              1,998
   and discounts, net                    2,317
 Allowance for losses on loans           1,911                        1,239
   TOTAL LOANS RECEIVABLE, NET        $425,027                     $294,679
                                       =======                      =======
</TABLE>


                                       5

<PAGE>   6


      The following table illustrates the contractual maturity of Metropolitan's
loan portfolio, including loans held for sale at December 31, 1997. Loans which
have adjustable or renegotiable interest rates are shown as maturing in the
period during which the contract is due. The schedule does not reflect the
effects of possible prepayments, enforcement of due-on-sale clauses, or the
effect of the amortization of premium, discounts, or deferred loan fees.

<TABLE>
<CAPTION>

                        DUE IN ONE YEAR OR LESS(1)  DUE AFTER ONE YEAR         DUE AFTER FIVE YEARS          TOTAL
                        --------------------------  ------------------         --------------------          -----
                                                    THROUGH FIVE YEARS
                                                    ------------------
                                        WEIGHTED                 WEIGHTED                  WEIGHTED                 WEIGHTED
                            AMOUNT    AVERAGE RATE  AMOUNT     AVERAGE RATE   AMOUNT     AVERAGE RATE  AMOUNT     AVERAGE RATE
                            ------    ------------  ------     ------------   ------     ------------  ------     ------------
                                                                                                     (Dollars in thousands)
REAL ESTATE:
<S>                       <C>             <C>     <C>              <C>       <C>            <C>       <C>              <C>
 One-to Four-family       $    248        7.94%   $  3,658         8.13%     $147,332       7.41%     $151,238         7.43%
 Multifamily                23,410        8.97      49,291         8.85       121,749         8.36     194,450         8.56
 Commercial                 20,277        9.14      78,125         9.27        77,868         8.92     176,270         9.10
 Construction and land      84,002        9.60      24,861         9.56         7,966         9.47     116,829         9.58
CONSUMER                     8,560       13.76      20,568         9.77        39,462        11.09      68,590        11.03
BUSINESS                    20,822        9.39      14,839         9.30        21,835         8.62      57,496         9.08
                          --------                --------                   --------                 --------         ----
  Total                   $157,319        9.64%   $191,342                   $416,212         8.42%   $764,873         8.88%
                          ========                ========                   ========                 ========

(1)  Includes demand loans, loans having no stated maturity and overdraft loans
     of $0.6 million.
</TABLE>

     The total amount of loans due after December 31, 1998 which have
predetermined interest rates is $228.1 million, while the total amount of loans
due after such date which have floating or adjustable rates is $379.5 million.


                                       6
<PAGE>   7



LOAN ORIGINATIONS AND PURCHASES

          Metropolitan's strategy in recent years has been to increase
interest-earning assets, primarily by increasing the total loan portfolio, as
long as quality assets with the necessary portfolio characteristics were
available. This was accomplished by increasing origination capacity and
emphasizing purchases. The following table sets forth loan origination,
purchase, sale and repayment activities of Metropolitan for the periods
indicated.
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                                  -----------------------
                                                             1997           1996         1995
                                                             ----           ----         ----
                                                                   (Dollars in thousands)
<S>                                                        <C>           <C>           <C>
ORIGINATIONS BY TYPE:
ADJUSTABLE RATE:
Real Estate:
  One- to four-family                                      $  28,017     $  56,519     $  22,503
  Multifamily                                                 12,600        20,669        24,542
  Commercial                                                  29,304        14,667         5,919
  Construction and land                                       77,062        60,566        41,559
 Consumer                                                     12,719        10,062
 Business                                                     27,058        18,536         6,814
                                                           ---------     ---------     ---------
  Total adjustable rate                                      186,760       181,019       101,337
                                                           ---------     ---------     ---------
FIXED RATE:
Real Estate:
  One- to four-family                                         53,712        44,795        24,230
  Multifamily                                                  9,490        15,759        13,957
  Commercial                                                   1,300                       4,400
  Construction and land                                       25,333           328            37
 Consumer                                                     17,598        17,242        15,048
 Business                                                     15,003         4,249         2,915
                                                           ---------     ---------     ---------
  Total fixed rate                                           122,436        82,373        60,587
                                                           ---------     ---------     ---------
    Total loans originated                                   309,196       263,392       161,924
                                                           ---------     ---------     ---------
PURCHASES BY TYPE:
ADJUSTABLE RATE:
Real Estate:
  One- to four-family                                             90         1,835
  Multifamily                                                 19,433        45,184         3,694
  Commercial                                                  22,541        16,905        13,939
  Construction and land                                          347
 Consumer                                                                    5,342
 Business
                                                           ---------     ---------     ---------
  Total adjustable rate                                       42,411        69,356        17,633
                                                           ---------     ---------     ---------
FIXED RATE:
Real Estate:
  One- to four-family                                                        1,125        19,381
  Multifamily                                                 23,195        22,971        50,420
  Commercial                                                  46,729        21,296        15,879
  Construction and land                                        1,975
 Consumer                                                     16,900        12,224           387
 Business
                                                           ---------     ---------     ---------
  Total fixed rate                                           88 ,799       57 ,616        86,067
                                                           ---------     ---------     ---------
    Total loans purchased                                    131,210       126,972       103,700
                                                           ---------     ---------     ---------
SALES:
Real Estate:
  One- to four-family                                        (34,887)      (36,392)      (35,770)
  Multifamily                                                 (9,678)      (11,359)      (27,094)
  Commercial                                                 (20,782)       (7,808)       (1,835)
  Construction and land                                         (600)
                                                           ---------     ---------     ---------
    Total loan sales                                         (65,947)      (55,739)      (64,699)
                                                           ---------     ---------     ---------
Loans securitized                                            (98,325)      (14,476)      (53,795)
Principal repayments                                        (196,556)     (142,606)      (87,972)
                                                           ---------     ---------     ---------
  Total reductions                                          (360,828)     (212,821)     (206,466)
                                                           ---------     ---------     ---------
Increase (decrease) in other items, net                      (18,159)      (10,927)       (4,336)
                                                           ---------     ---------     ---------
NET INCREASE                                               $  61,419     $ 166,616     $  54,822
                                                           =========     =========     =========
</TABLE>


                                       7
<PAGE>   8



          Multifamily Residential Lending. Metropolitan places a major portfolio
lending effort on multifamily residential real estate loans. Multifamily loans
are originated by Metropolitan from referrals by present customers of the Bank
and mortgage and real estate brokers. Through its existing referral network and
advertising efforts, Metropolitan has become known for multifamily lending in
its primary multifamily lending markets of Ohio, Kentucky, Michigan,
Pennsylvania, and New Jersey. Although Metropolitan operates full service retail
sales offices solely in Northeast Ohio, it has loan origination offices in
Southern Ohio, Western Pennsylvania, and Southeastern Michigan.

          At December 31, 1997, Metropolitan's multifamily loans totalled $194.5
million, with an average loan size of approximately $543,000. Of this amount,
$89.7 million or 46.1% were originated by Metropolitan. Currently, Metropolitan
emphasizes the origination of ARMs with principal amounts of $2.0 to $6.0
million and balloon maturities of 10 years. The loans are adjustable on a one-,
three- or five-year schedule with amortization periods of 25 or 30 years. Rate
adjustments are based on the appropriate term U.S. Treasury securities plus a
margin. The loans are subject to a maximum individual aggregate interest rate
adjustment as well as a maximum aggregate adjustment over the life of the loan
(generally 6%). Due to increasing demand for fixed rate loans, Metropolitan has
allocated some funds for fixed rate programs, typically those with 7 to 10-year
maturities. The maximum loan to value ratio of Metropolitan's multifamily
residential loans is 75%.

          Metropolitan recognizes that multifamily residential property loans
generally involve a higher degree of risk than the financing of one- to
four-family residential real estate because they typically involve larger loan
balances to single borrowers or groups of related borrowers. The payment
experience on these loans is typically dependent upon the successful operation
of the related real estate project and is subject to certain risks including
excessive vacancy rates or inadequate rental income levels. In order to manage
and reduce these risks, Metropolitan uses strict underwriting standards in its
multifamily residential lending process.

          The loans originated in this area are typically secured by apartments
with generally under 75 residential units. The underwriting process includes a
site evaluation which considers such factors as location, access by roadways,
condition of the apartments and amenities. In addition, a Metropolitan employee
visits each location before a loan approval is made. The underwriting process
also involves an evaluation of the borrower, whether the borrower is an
individual or a group of individuals acting as a separate entity. The financial
statements of each of the individual borrowers are reviewed and personal
guarantees in an amount equal to the original principal amount of the loan are
generally obtained. The financial statements of individual guarantors are
reviewed by staff independent of the lending department. Another important
aspect of Metropolitan's underwriting of its multifamily residential loans is
the debt service coverage test of the property. Debt service coverage
requirements are determined based upon the individual characteristics of each
loan, and typically range from a ratio of 1.15:1 to 1.30:1. In order to factor
in the adjustable rate of the multifamily loans, the debt service coverage is
calculated based on the maximum interest rate of the loan.

          At December 31, 1997, $104.8 million or 53.9% of Metropolitan's
multifamily residential loan portfolio was purchased. Prior to purchasing these
loans, Metropolitan utilizes a similar underwriting process with substantially
the same standards as for its originated loans. In some cases, when Metropolitan
considers the purchase of a portfolio with a considerable number of moderate
balance loans, an independent contract inspector may be utilized for property
inspections. Real estate located in Ohio secures 52.8% of Metropolitan's
multifamily residential loan portfolio. Underlying real estate for the remaining
loans is primarily located in California, Michigan, Pennsylvania and New Jersey.

          Commercial Real Estate Lending. Although Metropolitan has always held
an investment in loans secured by commercial real estate, this portion of the
portfolio has increased, mainly through purchases, in the last three years. At
December 31, 1997, Metropolitan's loans secured by commercial real estate
totalled $166.6 million or 21.8% of Metropolitan's total portfolio, with an
average loan size of $677,000. Of this amount, $51.6 million or 31.0% was
originated by Metropolitan and $115.0 million or 69.0% represented loans
purchased from a variety of sources, predominantly other financial institutions.
The $115.0 million of purchased commercial real estate loans were acquired by
Metropolitan since 1992.

          Loans secured by commercial real estate are purchased by Metropolitan
generally when they are in the primary lending markets being targeted by
Metropolitan, are generally secured by retail strip shopping centers or office
buildings, and meet Metropolitan's yield and term requirements. In 1997,
Metropolitan began to introduce more geographic diversity into the portfolio
based on its desire to acquire seasoned loans. Management believes a certain
amount of geographic diversity is important to maintaining good asset quality.

          Metropolitan recognizes that commercial real estate loans generally
involve a higher degree of risk than the financing of one- to four-family
residential real estate because these loans typically involve larger loan
balances to single borrowers or groups of related borrowers. The payment
experience on these loans is typically dependent upon the successful operation
of the related real estate project and is subject to certain risks including
excessive vacancy brought on by tenant turnover and inadequate rental income
levels. In addition,

                                       8
<PAGE>   9

the profitability of the business operating in the property may affect the
borrower's ability to make timely payments. In order to manage and reduce these
risks, Metropolitan focuses its lending on existing properties with a record of
satisfactory performance and targets retail strip centers and office buildings
with multiple tenants.

          Metropolitan originates commercial real estate loans secured by strip
shopping centers and small office buildings to a much lesser extent than it
purchases commercial real estate loans. Through customer referrals and real
estate brokers, Metropolitan lends on commercial real estate in Ohio,
Pennsylvania, Northern Kentucky, and Southeastern Michigan. These loans are ten
year balloon loans adjustable on a one-, three- or five-year schedule with
amortization of 25 years at a margin over the appropriate term U.S. Treasury
securities. The maximum loan to value ratio is 75%.


                                       9
<PAGE>   10



         The following table presents information as to the locations and types
of properties securing Metropolitan's multifamily and commercial real estate
portfolio as of December 31, 1997:

<TABLE>
<CAPTION>
                                       NUMBER
                                      OF LOANS      PERCENT     PRINCIPAL      PERCENT
                                      --------      -------     ---------      -------
                                                   (Dollars in thousands)
<S>                                      <C>         <C>        <C>              <C>
Ohio:
 Apartments                              157         26.0%      $102,668         28.4%
 Office buildings                         43          7.1         20,042          5.6
 Retail centers                           24          4.0         18,950          5.2
 Other                                    32          5.3          9,994          2.8
                                         ---        -----       --------        -----
  Total                                  256         42.4        151,654         42.0
                                         ---        -----       --------        -----
California:
 Apartments                               76         12.6         41,616         11.6
 Office buildings                          9          1.5          6,635          1.8
 Retail centers                           17          2.8         11,141          3.1
 Other                                    10          1.6          5,874          1.6
                                         ---        -----       --------        -----
  Total                                  112         18.5         65,266         18.1
                                         ---        -----       --------        -----
Pennsylvania:
 Apartments                               32          5.3          4,683          1.3
 Office buildings                          1          0.2             82
 Retail centers                            5          0.8         10,531          2.9
 Other                                     5          0.8          1,540          0.4
                                         ---        -----       --------        -----
  Total                                   43          7.1         16,836          4.6
                                         ---        -----       --------        -----
Michigan:
 Apartments                                3          0.5          6,227          1.7
 Office buildings                          6          1.0          6,844          1.9
 Retail centers                            7          1.2          9,291          2.6
 Other                                     2          0.3          6,913          1.9
                                         ---        -----       --------        -----
  Total                                   18          3.0         29,275          8.1
                                         ---        -----       --------        -----
Other states(1):
 Apartments                               90         14.9         39,256         10.9
 Office buildings                         25          4.1         22,988          6.4
 Retail centers                           23          3.8         20,292          5.6
 Other                                    37          6.2         15,476          4.3
                                         ---        -----       --------        -----
  Total                                  175         29.0         98,012         27.2
                                         ---        -----       --------        -----
                                         604        100.0%      $361,043        100.0%
                                         ===        =====       ========        =====
</TABLE>

(1)  Properties securing loans in other states are located in 26 other states,
     none of which exceed 5.0% of the outstanding principal balance of the total
     multifamily and commercial real estate portfolio.

         The following table presents aggregate information as to the type of
security as of December 31, 1997:

<TABLE>
<CAPTION>

                                                AVERAGE
                                      NUMBER    BALANCE
                                     OF LOANS  PER LOAN   PRINCIPAL    PERCENT
                                     --------  --------   ---------    -------
                                             (Dollars in thousands)
<S>                                     <C>    <C>         <C>          <C>
Apartments                              358       $543     $194,450     53.9%
Office buildings                         84        674       56,591     15.7
Retail centers                           76        924       70,205     19.4
Other                                    86        463       39,797     11.0
                                       ----                --------    -----
  Total                                 604       $598     $361,043    100.0%
                                       ====                ========    =====
</TABLE>


                                       10
<PAGE>   11


         One- to Four-family Residential Lending. In 1997, approximately 41.6%
of Metropolitan's one- to four-family residential loans were originated through
its full service retail sales offices. The remainder were originated by
commissioned loan officers. Metropolitan has focused its one- to four-family
residential lending efforts primarily on the origination of loans secured by
first mortgages on owner-occupied residences. As of December 31, 1997,
Metropolitan's one- to four-family residential mortgages totalled $146.7 million
or 19.2% of Metropolitan's loan portfolio.

         Metropolitan emphasizes the origination of conventional ARM loans for
retention in Metropolitan's portfolio and fixed rate loans suitable for sale in
the secondary market. In addition, Metropolitan offers fixed rate end loan
financing to borrowers building homes with Metropolitan's approved construction
loan builders. Metropolitan retains only a limited dollar amount of this fixed
rate end loan financing in its portfolio. The amount being originated and
subsequently retained is monitored very closely. Substantially all of
Metropolitan's one- to four-family residential mortgage loans originated for
retention in Metropolitan's portfolio are secured by property located in its
Northeast Ohio market area. At December 31, 1997, Metropolitan's fixed rate
residential mortgage loan portfolio totalled $59.1 million, or 7.7% of
Metropolitan's total loan portfolio.

         Metropolitan is presently originating three types of ARM products for
retention in its portfolio. The first product is a one-year adjustable ARM, the
interest rate being subject to change annually. The adjustments are based upon
the weekly average yield on U.S. Treasury securities adjusted to a constant
maturity of one year, and are generally limited to a 2% maximum annual interest
rate adjustment, as well as a maximum lifetime adjustment of 6%. The second
product, known as a five/one ARM, has the same index and caps as the one year
ARM; the five/one ARM, however, retains its initial interest rate for the first
five years of the loan and then begins to adjust annually in the sixth year. The
third product, the three-year ARM, allows for interest rate adjustments every
three years. The adjustments are based upon the weekly average yield on U.S.
Treasury securities adjusted to a constant maturity of three years, and are
generally limited to a 2% maximum interest rate adjustment per change, as well
as a maximum lifetime adjustment of 6%.

         Metropolitan's originated ARMs do not permit negative amortization of
principal and most of them are convertible into fixed rate mortgages. If
converted, they are typically sold in the secondary market. ARMs are originated
with terms to maturity of up to 30 years, and borrowers are qualified based upon
secondary market requirements.

         At December 31, 1997, $19.5 million, or 13.3% of Metropolitan's one- to
four-family residential loan portfolio was purchased. Prior to purchasing these
loans, Metropolitan utilizes an underwriting process with substantially the same
standards as for its originated loans.

         Construction Lending and Land Development. Metropolitan originates
construction loans on single family homes to local builders in Metropolitan's
primary lending market and to individual borrowers on owner-occupied properties.
Metropolitan also makes loans to builders for the purchase of fully-improved
single family lots and to developers for the purpose of developing land into
single family lots. Metropolitan's market area for construction lending is in
Northeastern Ohio, primarily in the counties of Cuyahoga, Lake, Geauga, Summit,
Medina, Portage, and Lorain. Metropolitan has one commissioned construction loan
originator in the high volume Columbus, Ohio construction market to originate
single family construction loans and improved lot loans.




                                       11
<PAGE>   12



         The following table presents the number, amount, and type of properties
securing Metropolitan's construction and land development loans at December 31,
1997:

<TABLE>
<CAPTION>
                                                      NUMBER OF LOANS       PRINCIPAL BALANCE
                                                      ---------------       -----------------
                                                           (Dollars in thousands)
RESIDENTIAL CONSTRUCTION LOANS:
<S>                                                        <C>              <C>
  Owner-occupied                                           33               $  12,003
  Builder presold                                          43                   6,502
  Builder spec/model                                      128                  25,736
  Allocated construction loans                             28                  24,579
  Lot loans                                                46                   5,284
  Development loans                                        23                  16,168
                                                          ---                --------
    Total residential construction loans                  301                  90,272
NONRESIDENTIAL CONSTRUCTION LOANS:
  Multifamily                                               1                   5,000
  Commercial                                                2                  10,200
                                                          ---                --------
    Total nonresidential construction loans                 3                  15,200
LAND LOANS                                                 14                  11,357
                                                          ---                --------
  Total                                                   318                $116,829
                                                          ===                ========
</TABLE>

         Metropolitan's risk of loss on a construction loan is largely dependent
upon the accuracy of the initial estimate of the property's value upon
completion of the project and the estimated cost of the project. The application
process includes a submission of the cost, specifications and plans.
Metropolitan also reviews the borrower's financial position and requires a
personal guarantee on all builder loans. All loans are based upon the appraised
value of the underlying collateral, as completed. Appraisals are completed by
qualified independent fee appraisers who have been approved by Metropolitan's
Board of Directors.

         Each type of loan has a maximum loan to value ratio which is
established by the contract price, cost estimate or appraised value, whichever
is less. The maximum loan to value ratio for each type of construction loan is
as follows: owner-occupied homes - 80%; builder presold homes - 80%; builder
models or speculative homes - 75%; lot loans - 75%; development loans - 70%
(development of single-family home lots for resale to builders) and 75%
(development of land for cluster or condominium projects which will be part of
an allocated construction loan).

         All of Metropolitan's construction loans that are made to builders are
made for relatively short terms (6 to 24 months) and are made with an adjustable
rate of interest. Owner-occupied loans are generally fixed rate. These loans
increase the yield on, and the proportion of interest rate sensitive loans in,
Metropolitan's portfolio.

         Allocated construction loans or lines of credit are used to build
single family homes only and cannot be used for any other purpose. All lines of
credit are secured by the homes that are built with the draws under such credit
agreements. Most of the homes built with the line of credit funds are presold
homes, and the number of spec and model homes allowed to be built is limited by
the financial strength of the builder. Lines of credit can only be utilized
where a builder owns a specific number of lots in a development. Draws are based
upon the percentage of completion, and at all times, funds remain to complete
the home. Disbursements are only made after receipt of a property inspection and
a mechanic's lien update from the title company.

         Metropolitan also originates construction loans on multifamily and
commercial real estate projects where Metropolitan intends to provide the
financing once construction is complete. These loans are underwritten in a
manner similar to originated and purchased multifamily residential and
commercial real estate loans described above. The two commercial real estate
construction loans are rehabilitation projects with existing tenants ensuring
satisfactory cash flow.

         Consumer Lending. The underwriting standards employed by Metropolitan
for consumer loans include a determination of the applicant's payment history on
other debts and an assessment of the applicant's ability to meet existing
obligations and payments on the proposed loan. Although creditworthiness of the
applicant is a primary consideration, the underwriting process also includes a
comparison of the value of the security, if any, in relation to the proposed
loan amount.

         Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or are secured by
rapidly depreciable assets, such as automobiles. At December 31, 1997, $58.2
million or 84.9% of Metropolitan's $68.6 million consumer loan portfolio was
secured. However, even in the case of secured loans, repossessed collateral for


                                       12
<PAGE>   13


a defaulted consumer loan may not provide an adequate source of repayment of the
outstanding loan balance due to the higher likelihood of damage, loss or
depreciation. In addition, consumer loan collections are dependent upon the
borrower's continuing financial stability, and thus are more likely to be
affected by adverse personal circumstances. Furthermore, the application of
various federal and state laws, including bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans in the event of default.

         In order to supplement the growth in the consumer loan portfolio,
Metropolitan has been purchasing loans through correspondent lenders and bulk
portfolios offered for sale. At December 31, 1997, $22.8 million, or 33.3% of
the outstanding balance of consumer loans was purchased. These loans are
generally secured by second mortgages on one- to four-family homes, automobiles,
or manufactured housing. In 1997, Metropolitan acquired two packages of subprime
loans totalling $6.3 million (loans where the borrower's credit rating is below
an A grade). These loans require more intensive collection techniques; however,
the yield is significantly higher to cover these incremental costs.

         At December 31, 1997, Metropolitan's credit card portfolio had an
outstanding balance of $7.3 million with $22.7 million in unused credit lines.
Of the outstanding balance, $2.6 million related to cards originated by
Metropolitan and $4.7 million related to credit card relationships purchased by
Metropolitan.

         Business Lending. Metropolitan began offering business loans in 1994.
At December 31, 1997, Metropolitan had $57.5 million of business loans
outstanding, or 7.5% of Metropolitan's total loan portfolio, against available
lines on existing business loans totalling $73.0 million. Metropolitan's
business lending activities encompass loans with a variety of purposes and
security, including loans to finance accounts receivable, inventory and
equipment. Generally, Metropolitan's business lending has been limited to
borrowers headquartered, or doing business in, Metropolitan's retail market
area. These loans are generally adjustable interest rates at some margin over
the prime interest rate and some may be guaranteed by the Small Business
Administration.

         The following table sets forth information regarding the number and
amount of Metropolitan's business loans as of December 31, 1997:
<TABLE>
<CAPTION>
                                                                                   TOTAL
                                                              NUMBER                LOAN               OUTSTANDING
                                                             OF LOANS            COMMITMENT         PRINCIPAL BALANCE
                                                             --------            ----------         -----------------
                                                                        (Dollars in thousands)
<S>                                                              <C>                <C>                   <C>
LOANS SECURED BY:
 Accounts receivable, inventory and equipment                    194                $39,025               $28,705
 Second lien on real estate                                       36                  6,977                 5,805
 First lien on real estate                                        35                 23,064                19,915
 Specific equipment and machinery                                 25                  1,843                 1,843
 Titled vehicles                                                  31                    705                   705
 Stocks and bonds                                                  5                    227                    77
 Certificates of deposit                                           3                    196                   110
UNSECURED LOANS                                                   18                  1,011                   336
                                                                 ---                -------               -------
  Total                                                          347                $73,048               $57,496
                                                                 ===                =======               =======
</TABLE>

         Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income, and which are secured by real property whose value tends to be
more easily ascertainable, business loans are of higher risk and typically are
made on the basis of the borrower's ability to make repayment from the cash flow
of the borrower's business. As a result, the availability of funds for the
repayment of business loans may be substantially dependent upon the success of
the business itself. Furthermore, the collateral securing the loans may
depreciate over time, may be difficult to appraise and may fluctuate in value
based on the success of the business.


SECONDARY MARKET ACTIVITIES

         In addition to originating loans for its own portfolio, Metropolitan
participates in secondary mortgage market activities by selling whole loans, as
well as creating mortgage-backed securities, with the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
Secondary market sales allow Metropolitan to make loans during periods when
deposit flows decline, or are not otherwise available, and at times when
customers prefer loans with long-term fixed interest rates which Metropolitan
does not choose to originate for its own portfolio. Metropolitan's primary focus
in its mortgage banking operations is on the sale of fixed rate one- to
four-family residential mortgage loans.

                                       13
<PAGE>   14


         The secondary market for mortgage loans is comprised of institutional
investors who purchase loans meeting certain underwriting specifications with
respect to loan-to-value ratios, maturities and yields. Subject to market
conditions, Metropolitan tailors certain real estate loan programs to meet the
specifications of FHLMC and FNMA, two of the largest institutional investors.
Metropolitan may retain a portion of the loan origination fee paid by the
borrower and receive annual servicing fees as compensation for retaining
responsibility for and performing the servicing of all loans sold to
institutional investors. See "--Loan Servicing Activities." The sale of
substantially all loans to FHLMC and FNMA is nonrecourse to Metropolitan.

         The terms and conditions under which such sales are made depend upon,
among other things, the specific requirements of each institutional investor,
the type of loan, the interest rate environment and Metropolitan's relationship
with the institutional investor. In the case of one- to four-family residential
loans, Metropolitan periodically obtains formal commitments primarily with FHLMC
and FNMA. Pursuant to these commitments, FHLMC or FNMA is obligated to purchase
a specific dollar amount of whole loans over a specified period of time. The
terms of the commitments range from ten to sixty days. The pricing will vary,
depending upon the length of each commitment. Loans are classified as held for
sale while Metropolitan is negotiating the sale of specific loans which meet
selected criteria to a specific investor.

         During the third quarter of 1997, Metropolitan completed the
securitization of $93.0 million of multifamily loans with FNMA under a newly
developed program which uses insurance to provide the credit enhancement
necessary to achieve a AAA rating. The loans are serviced as mortgage-backed
securities for FNMA. Up to this point, Metropolitan has retained ownership of
the securities in that portfolio. In addition to resulting in a decrease in
loans receivable and a related increase in mortgage-backed securities, the
securitization has had several other benefits to Metropolitan, including the
following: i) improvement in the credit risk profile of the Bank's balance sheet
by converting whole loans into mortgage-backed securities guaranteed by FNMA;
ii) reduction of the required level of risk-based capital; and iii) addition of
high quality collateral which can be pledged for borrowings in the secondary
market to fund future loan growth.

         Metropolitan also sells whole loans or participations in multifamily
and commercial real estate loans to private investors and retains the right to
service the loans. The majority of Metropolitan's sales of multifamily and
commercial real estate loans are made pursuant to individually negotiated whole
loan or participation sales agreements for individual loans or for a package of
such loans. During 1997, Metropolitan sold $9.9 million of multifamily and
commercial real estate participations. The Bank may seek out a participant when
a loan would otherwise exceed the loan-to-one borrower limit. Other loans have
been sold to manage geographic concentration or interest rate risk. In addition,
Metropolitan sells multifamily and commercial real estate loans that were
purchased under a loan option program. See "--Loan Option Income."

LOAN SERVICING ACTIVITIES

     At December 31, 1997, Metropolitan's overall servicing portfolio was $1.6
billion. Of that amount, loans serviced for others totalled $1.2 billion. The
following table summarizes the portfolio by investor and source:

<TABLE>
<CAPTION>
                                                          ORIGINATED              PURCHASED         PORTFOLIO
                                                           SERVICING              SERVICING         SERVICING               TOTAL
                                                           ---------              ---------         ---------               -----
                                                                                     (Dollars in thousands)
<S>                                                          <C>                    <C>                <C>                <C>
One-to Four-family:
 Metropolitan portfolio                                                                               $138,099           $  138,099
 FHLMC                                                      $178,751               $469,465                                 648,216
 FNMA                                                         55,974                321,013                                 376,987
 Private investors                                                                   10,050                                  10,050
                                                            --------               --------           --------           ----------
   Total One- to Four-family                                 234,725                800,528            138,099            1,173,352
                                                            --------               --------           --------           ----------
Multifamily and Commercial:
 Metropolitan portfolio                                                                                303,961              303,961
 FHLMC                                                         4,925                  3,676                                   8,601
 FNMA                                                        107,057                 23,340                                 130,397
 Private investors                                            13,339                  2,705                                  16,044
                                                            --------               --------           --------           ----------
   Total Multifamily and Commercial                          125,321                 29,721            303,961              459,003
                                                            --------               --------           --------           ----------
     Total                                                  $360,046               $830,249           $442,060           $1,632,355
                                                            ========               ========           ========           ==========
</TABLE>

         Metropolitan generally services the loans that it originates. When
Metropolitan sells loans to an investor, such as FHLMC or FNMA, it generally
retains the servicing rights for the loans. Servicing fee income is generated
from the loans sold to investors. In order


                                       14
<PAGE>   15


to further increase Metropolitan's servicing fee income, the Bank has
aggressively pursued purchases of servicing portfolios from other originating
institutions. These purchased servicing portfolios are primarily FHLMC and FNMA
single family loans that are geographically located within the eastern half of
the nation. At December 31, 1997, Metropolitan's purchased servicing portfolio
was $830.2 million and the related balance of purchased mortgage servicing
rights was $7.7 million.

         Approximately 72.9% of the overall servicing portfolio (by dollar
volume) is comprised of loans sold to investors, primarily FHLMC and FNMA.
Metropolitan receives fee income for servicing these sold loans at various
percentages based upon unpaid principal balances of the loans serviced.
Servicing fees are collected and retained by Metropolitan out of monthly
mortgage payments.

         Loan servicing functions include collecting and remitting loan
payments, accounting for principal and interest, holding escrow (impound) funds
for payment of taxes and insurance, making rate and payment changes to
contractually adjustable loans, managing loans in payment default, processing
foreclosure and other litigation activities to recover mortgage debts,
conducting property inspections and risk assessment for investment loans and
general administration of loans for the investors to whom they are sold, and for
Metropolitan as mortgagee.

LOAN OPTION INCOME

         During 1995, Metropolitan developed a program to purchase loans and
sell loan options in order to take advantage of its underwriting capabilities,
increase net interest income and increase non-interest income. In these
transactions, Metropolitan purchases loans and sells nonrefundable options to a
third party to purchase these same loans at a specified price within a specified
time period. The Bank, prior to purchasing the loans that will be subject to the
options, utilizes an underwriting process with substantially the same standards
as in its origination process. In the event the option is not exercised,
Metropolitan would sell the underlying loans or transfer them to the Bank's
portfolio at its fair value at the date of the transfer. A nonrefundable option
fee is negotiated based on a percentage of the principal amount of the loans
involved. The third party acquiring the option is a loan broker who markets the
loans to potential buyers who may be willing to pay a higher price for the
loans. To date, Metropolitan has entered into these option transactions with one
loan broker. At December 31, 1997, there were no loans held for sale in
connection with outstanding options and $320,000 has been recognized in income
in connection with these loan options during the year then ended.

LOAN DELINQUENCIES AND NONPERFORMING ASSETS

         When a borrower fails to make a required payment on a loan,
Metropolitan attempts to cause the delinquency to be cured by contacting the
borrower. In the case of real estate loans, a late notice is sent 15 days after
the due date. If the delinquency is not cured by the 30th day, contact with the
borrower is made by phone. Additional written and verbal contacts are made with
the borrower between 30 and 90 days after the due date. If the delinquency
continues for a period of 90 days, Metropolitan usually institutes appropriate
action to foreclose on the property. If foreclosed, the property is sold at
public auction and may be purchased by Metropolitan. Delinquent consumer loans
are handled in a generally similar manner, except that initial contacts are made
when the payment is 10 days past due and appropriate action may be taken to
collect any loan payment that is delinquent for more than 30 days.
Metropolitan's procedures for collection efforts, repossession and sale of
consumer collateral are subject to various requirements under state and federal
consumer protection laws.


                                       15
<PAGE>   16





         The following table sets forth information concerning delinquent loans
at December 31, 1997, in dollar amounts and as a percentage of each category of
Metropolitan's loan portfolio. The amounts presented represent the total
remaining principal balances of the related loans, rather than the actual
payment amounts which are overdue.
<TABLE>
<CAPTION>

                                                                    LOANS DELINQUENT FOR:
                                        60-89 DAYS                     90 DAYS AND OVER             TOTAL DELINQUENT LOANS
                                        ----------                     ----------------             ----------------------

                                                  PERCENT OF                          PERCENT OF                   PERCENT OF
                            NUMBER       AMOUNT  LOAN CATEGORY    NUMBER   AMOUNT   LOAN CATEGORY    NUMBER  AMOUNT  LOAN CATEGORY
                            ------       ------  -------------  ------    ------    -------------    ------  ------  --------
                                                                           (Dollars in thousands)
<S>                            <C>    <C>           <C>            <C>    <C>          <C>              <C>  <C>       <C>
Real Estate
 One- to four-family           6      $   460       0.31%          5      $   792      0.53%            11   $1,252    0.84%
 Multifamily
 Commercial                                                        3          198      0.11              3      198     0.11
 Construction and land
Consumer                      83          821       1.20         324        1,946      2.84            407    2,767     4.04
Business                       1          239       0.42           6          211      0.37              7      450     0.79
                              --       ------                    ---       ------                      ---   ------
  Total                       90       $1,520       0.20%        338       $3,147      0.41%           428   $4,667     0.61%
                              ==       ======                    ===       ======                      ===   ======
</TABLE>


                                       16

<PAGE>   17


          Nonperforming assets include all nonaccrual loans, loans past due
greater than 90 days still accruing and real estate owned. Interest is not
accrued on loans contractually past due 90 days or more as to interest or
principal payments and as to which payment of principal and interest in full is
not expected unless in the judgment of management the loan is well secured, and
no loss in principal or interest is expected.

          When a loan reaches nonaccrual status, interest accruals are
discontinued and prior accruals are reversed. The classification of a loan on
nonaccrual status does not necessarily indicate that the principal is
uncollectible in whole or in part. A determination as to collectibility is made
by the management of Metropolitan on a case-by-case basis. Metropolitan
considers both the adequacy of the collateral and the other resources of the
borrower in determining the steps to be taken to collect nonaccrual loans. The
final determination as to these steps is made on a case-by-case basis.
Alternatives that are considered are commencing foreclosure, collecting on
guarantees, restructuring the loan or instituting collection lawsuits.

The following table summarizes non-performing assets by category as of the dates
indicated.
<TABLE>
<CAPTION>
                                                                          AT DECEMBER 31,
                                                     1997            1996              1995            1994            1993
                                                     ----            ----              ----            ----            ----
                                                                       (Dollars in thousands)
<S>                                               <C>             <C>               <C>             <C>             <C>
Nonaccruing loans
 One-to four-family                               $   792         $   950           $   293         $   337         $   475
 Multifamily                                                          871             2,138           1,585             549
 Commercial real estate                               198           2,032               391             150             691
 Construction and land development                                                       15              15           1,051
 Consumer                                           1,562             802               266             153              53
 Business                                             211             268
                                                   ------          ------            ------          ------          ------
  Total nonaccruing loans                           2,763           4,923             3,103           2,240           2,819
Loans past due greater than 90
  days still accruing                                 384             271               204             128             277
                                                   ------          ------            ------          ------          ------
  Total nonperforming loans                         3,147           5,194             3,307           2,368           3,096
Real estate owned                                   2,037             177               258              53             941
                                                   ------          ------            ------          ------          ------
  Total nonperforming assets                       $5,184          $5,371            $3,565          $2,421          $4,037
                                                   ======          ======            ======          ======          ======

Nonperforming loans to total loans                  0.44%           0.80%             0.69%           0.55%           1.08%
Nonperforming assets to total
  assets                                            0.56%           0.70%             0.60%           0.51%           1.08%
</TABLE>

          For the years ended December 31, 1997 and 1996, gross interest income
which would have been recorded had the nonaccruing loans been current in
accordance with their original terms amounted to $151,000 and $439,000,
respectively. The amounts that were included in interest income on such loans
were $132,000 and $85,000 for the years ended 1997 and 1996, respectively.

          Nonperforming assets were $5.2 million at December 31, 1997, a
decrease of $0.2 million from $5.4 million at December 31, 1996. During the same
period, total net loans receivable increased $64.1 million to $707.9 million at
December 31, 1997. Also during 1997, nonaccrual loans decreased $2.2 million to
$2.8 million, while at the same time, real estate owned increased $1.9 million
to $2.0 million. This reflects the progression of nonperforming loans at
December 31, 1996 to real estate owned during 1997. Two properties accounted for
the majority of this increase, a strip shopping center in the Philadelphia,
Pennsylvania area valued at $1.0 million and a commercial condominium warehouse
near Chicago, Illinois valued at $0.5 million. Metropolitan is actively
marketing both properties through local real estate agents and no losses are
expected. At December 31, 1997, all loans classified by management as impaired
were included in nonperforming loans.

          Nonperforming consumer loans increased to $1.6 million in 1997 due in
part to the acquisition of subprime consumer loans. These loans are secured by
manufactured housing or are unsecured. The yield on this portfolio is
substantially higher to compensate for the increased costs of collection and the
cost to carry nonperforming loans. Management expects a higher level of
nonperforming consumer loans to continue due to this portfolio.

          At December 31, 1997, Metropolitan had potential problem loans
totalling $4.9 million which were classified by management as substandard and
were not included in the table above. Although these loans were current or not
seriously delinquent, there is some unfavorable development involving each loan
which, if not corrected, could result in the loan changing to nonaccrual status
and/or a loss


                                       17
<PAGE>   18


being incurred. Metropolitan is in contact with these borrowers and monitors
their status closely. The largest loan in that category was a $4.0 million
participation in a $9.0 million loan secured by a water park in Southern
California. The loan was 30 days past due at December 31, 1997 and the borrower
is in the process of refinancing the loan and obtaining additional working
capital. If the borrower does not refinance this property with another lender,
then the borrower's ability to repay the loan will be contingent on the
operating success of the park during 1998, its first full year of operation.


ALLOCATION OF ALLOWANCE FOR LOSSES ON LOANS

          Because some loans may not be repaid in full, an allowance for losses
on loans is maintained. The allowance is maintained by management at a level
considered adequate to cover possible losses that are currently anticipated
based on past loss experience, general economic conditions, information about
specific borrower situations, including their financial position and collateral
values, and other factors and estimates which are subject to change over time.
While management may periodically allocate portions of the allowance for
specific problem loans, the whole allowance is available for any loan
charge-offs that occur. A loan is charged off against the allowance by
management as a loss when deemed uncollectible, although collection efforts
continue and future recoveries may occur.


                                       18
<PAGE>   19





          The following table sets forth an allocation of the allowance for
losses on loans among categories as of the dates indicated based on Management's
estimate of possible losses that are currently anticipated based largely on past
loss experience. Since the factors influencing such estimates are subject to
change over time, management believes that any allocation of the allowance for
losses on loans into specific categories lends an appearance of precision which
does not exist. In practice, the allowance is utilized as a single unallocated
allowance available for all loans. The allowance can also be reallocated among
different loan categories if actual losses differ from expected losses and based
upon changes in management's expectation of future losses. The following
allocation table should not be interpreted as an indication of the actual
amounts or the relative proportion of future charges to the allowance.


<TABLE>
<CAPTION>

                               1997                1996                      1995                    1994
                               ----                ----                       ---                    ----
                                  PERCENT OF           PERCENT OF                PERCENT OF              PERCENT OF
                                     EACH                EACH                       EACH                    EACH
                                  CATEGORY TO          CATEGORY TO               CATEGORY TO             CATEGORY TO
                         AMOUNT   TOTAL LOANS AMOUNT   TOTAL LOANS   AMOUNT      TOTAL LOANS  AMOUNT      TOTAL LOANS
                         ------   ------------------   -----------   ------      -----------  ------      -----------

                                                                                (Dollars in thousands)

<S>                    <C>            <C>    <C>            <C>     <C>              <C>     <C>              <C>
One-to four-family     $    237       19.8%  $    228       17.1%   $    172         15.2%   $    189         25.2%

Multifamily                 482       25.4      1,020       40.8         887         45.8         733         41.9

Commercial real
  estate                  1,400       23.0        937       20.3         676         21.5         358         18.6

Construction and
  land                      353       15.3        193       10.5         167          9.5          99          8.5

Consumer                  2,132        9.0      1,182        7.9         512          6.3         340          5.8

Business                    456        7.5        197        3.4          74          1.7           1

Unallocated                 562                   418                    277                      191
                       --------   -----  ------------      -----    --------        -----    --------        -----
Total                  $  5,622   100.0% $      4,175      100.0%   $  2,765        100.0%   $  1,911        100.0%
                       ========   =====  ============      =====    ========        =====    ========        =====



<CAPTION>

                               1993
                                ----
                                     PERCENT OF
                                       EACH
                                    CATEGORY TO
                        AMOUNT      TOTAL LOANS
                        ------      -----------



<S>                    <C>              <C>
One-to four-family     $     93         16.0%

Multifamily                 494
                                        53.2
Commercial real
  estate                    314
                                        17.5
Construction and
  land                       90
                                         9.9
Consumer                    124
                                         3.4
Business

Unallocated                 124
                       --------        -----
Total                  $  1,239        100.0%
                       ========        =====
</TABLE>






                                       19


<PAGE>   20



      With the uncertainties that could adversely impact the overall quality of
Metropolitan's loan portfolio, management of Metropolitan considers an adequate
allowance for losses on loans essential. The unallocated allowance is considered
adequate to cover losses from the existing loans that have not demonstrated
problems such as late payments, financial difficulty of the borrower or
deterioration of collateral values. The risks associated with off-balance sheet
commitments are insignificant in the opinion of management of Metropolitan and
therefore, no allowance for such commitments is provided.


      The following table provides an analysis of Metropolitan's allowance for
losses on loans for the periods indicated. In each period, the provision for
loan losses was based on an analysis of individual credits, prior and current
loss experience, overall growth in the portfolio and current economic
conditions.
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                              1997              1996            1995               1994              1993
                                              ----              ----            ----               ----              ----
                                                                   (Dollars in thousands)
<S>                                             <C>               <C>             <C>                <C>               <C>
BALANCE AT BEGINNING OF PERIOD
                                            $4,175            $2,765          $1,911             $1,239            $  725
Charge-offs:
 One- to four-family                            32                22              23                 23                50
 Multifamily                                   494               119                                 64               100
 Commercial real estate                                                           27                                   74
 Construction and land
 Consumer                                      363                95              56                 14                 5
 Business                                       10
                                            ------            ------          ------             ------            ------
  Total charge-offs                            899               236             106                101               229
                                            ------            ------          ------             ------            ------
Recoveries:
 One- to four-family                                                               1                  1                 3
 Multifamily                                                                                          6
 Commercial real estate
 Construction and land
 Consumer                                        6                11
 Business
                                            ------            ------          ------             ------            ------
Total recoveries                                 6                11               1                  7                 3
                                            ------            ------          ------             ------            ------
Net charge-offs                                893               225             105                 94               226
Provision for loan losses                    2,340             1,635             959                766               740
                                            ------            ------          ------             ------            ------
BALANCE AT END OF PERIOD                    $5,622            $4,175          $2,765             $1,911            $1,239
                                            ======            ======          ======             ======            ======
Net charge-offs to average
  loans                                      0.13%             0.04%           0.02%              0.03%             0.09%
Provision for loan losses to
  average loans                              0.35%             0.28%           0.21%              0.21%             0.29%
Allowance for losses on loans
  to total non-performing loans            108.47%            77.73%          83.61%             80.70%            40.02%
  at end of period
Allowance for losses on loans
  to total loans at end of period            0.79%             0.64%           0.57%              0.45%             0.43%
</TABLE>


                                       20
<PAGE>   21


INVESTMENT PORTFOLIO

         Metropolitan maintains its investment portfolio in accordance with
policies adopted by the Board of Directors that consider the regulatory
requirements and restrictions which dictate the type of securities that can be
held. As a member of the Federal Home Loan Bank ("FHLB") System, the Bank is
required to hold a minimum amount of FHLB stock based upon asset size and mix.
As the Bank grows, management anticipates this investment will increase.

         The following table summarizes the amounts and the distribution of
Metropolitan's securities held as of the dates indicated:
<TABLE>
<CAPTION>
                                                                                      AT DECEMBER 31,
                                                                  ----------------------------------------------------
                                                                       1997                1996                1995
                                                                       ----                ----                ----
                                                                                (Dollars in thousands)
SECURITIES :
<S>                                                                   <C>                <C>                  <C>
 Mutual funds                                                         $  1,706           $  2,009             $10,364
 Tax-exempt bond                                                         4,740
 U.S. Treasury securities                                                                   6,065              12,442
 FNMA preferred stock                                                                       5,100
 FHLB stock                                                              5,350              3,989               3,569
                                                                        ------             ------              ------
  Total                                                                $11,796            $17,163             $26,375
                                                                       =======            =======             =======
OTHER INTEREST-EARNING ASSETS:
 Interest-bearing deposits with banks                                   $1,961             $2,745              $4,788
 Term repurchase agreements                                              6,397              6,000
                                                                        ------             ------              ------
  Total                                                                 $8,358             $8,745              $4,788
                                                                        ======             ======              ======
</TABLE>

         The following table sets forth the contractual maturities and
approximate weighted average yields of Metropolitan's securities at December 31,
1997.
<TABLE>
<CAPTION>
                                                          DUE IN
                                    ----------------------------------------------------
                                        ONE YEAR OR LESS         MORE THAN TEN YEARS                   TOTAL
                                                                 (Dollars in thousands)
<S>                                          <C>                         <C>                          <C>
Mutual Funds                                 $1,706                                                    $1,706
Tax-exempt bond                                                          $4,740                         4,740
FHLB stock                                    5,350                                                     5,350
                                             ------                      ------                       -------
  Total                                      $7,056                      $4,740                       $11,796
                                             ======                      ======                       =======

Weighted average yield                         6.86%                       7.75%                         7.22%
</TABLE>

MORTGAGE-BACKED SECURITIES PORTFOLIO

         The following table sets forth Metropolitan's mortgage-backed
securities portfolio at the dates indicated. All mortgage-backed securities are
classified as available for sale.
<TABLE>
<CAPTION>
                                                                          AT DECEMBER 31,
                                                       -------------------------------------------------
                                                               1997              1996              1995
                                                               ----              ----              ----
                                                                          (Dollars in thousands)
<S>                                                         <C>               <C>               <C>
FNMA pass-through certificates                              $97,146           $19,775           $22,549
GNMA pass-through certificates                                8,037             9,700            11,348
FHLMC participation certificates                             37,714            26,713             4,715
Other                                                           270               484               543
                                                           --------           -------           -------
  Total                                                    $143,167           $56,672           $39,155
                                                           ========           =======           =======
</TABLE>


                                       21
<PAGE>   22


      The following table sets forth the contractual maturities and approximate
weighted average yields of Metropolitan's mortgage-backed securities at December
31, 1997.

<TABLE>
<CAPTION>
                                                                       DUE IN
                                              ---------------------------------------------------------
                                                ONE YEAR TO
                                                 FIVE YEARS     FIVE TO TEN YEARS     OVER TEN YEARS           TOTAL
                                                                         (Dollars in thousands)
<S>                                                   <C>                  <C>                <C>             <C>
FNMA pass-through certificates                        $  9,880             $78,420            $  8,846        $  97,146
GNMA pass-through certificates                             108                   7               7,922            8,037
FHLMC participation certificates                        19,274                                  18,440           37,714
Other                                                                                              270              270
  Total available for sale                             $29,262             $78,427             $35,478         $143,167

Weighted average yield                                   7.00%               7.30%               7.09%             7.18%
</TABLE>


SOURCES OF FUNDS

         The Bank's primary sources of funds are deposits, amortization and
repayment of loan principal, borrowings, sales of mortgage loans, sales or
maturities of mortgage-backed securities, securities, and short-term
investments. Deposits are the principal source of Metropolitan's funds for
lending and investment purposes. The following paragraphs provide a brief
description of the types of accounts offered by Metropolitan:

         Passbook and Statement Savings Accounts. Savings may be invested in and
withdrawn from regular passbook, tiered passbook and statement savings accounts
without restriction. Interest on tiered passbook accounts is compounded monthly
and credited monthly. Interest on regular passbook and statement savings
accounts is compounded quarterly and credited quarterly.

         Checking Accounts. Metropolitan offers two interest-bearing checking
and one noninterest-bearing checking account for consumers. The non-interest
checking requires no minimum balance and has no monthly service fees. The rate
paid on the interest checking account is dependent upon the balance in the
account. Monthly service charges can be waived on personal interest-bearing
checking accounts by maintaining either a $1,000 minimum balance or greater than
$5,000 minimum balance in another deposit account or establishing a direct
deposit relationship. All accounts have no minimum maturity or penalty for early
withdrawal and no restrictions on the size and frequency of the withdrawals or
additional deposits. Metropolitan regularly reviews the interest rate paid on
the interest-bearing checking accounts and adjusts the rate based on cash flow
projections and market interest rates.

         In connection with loan servicing activities, Metropolitan maintains
custodial checking accounts for principal and interest payments collected for
investors monthly and for tax and insurance escrow balances. This remains a
recurring but relatively short-term source of funds for the Bank given the level
of loans serviced for others.

         Metropolitan offers a commercial checking account that is noninterest
bearing and is assessed monthly service charges based upon transaction activity
levels.

         Certificates of Deposit. Metropolitan offers fixed rate, fixed term
certificates of deposit. Terms are from seven days to five years, and there are
no regulatory rate ceilings. Certificates of deposit require a penalty for
withdrawal prior to maturity dates. These accounts generally bear the highest
interest rates of any deposit product offered by Metropolitan. Interest rates
offered on certificates of deposit are regularly reviewed and adjusted based on
cash flow projections and market interest rates.

      Metropolitan has from time to time accepted certificates of deposit from
out-of-state individuals and entities, predominantly credit unions. These
deposits typically have balances of $90,000 to $100,000 and have a term of one
year or more. They are not accepted through brokers. At December 31, 1997,
approximately $57.7 million of certificates of deposits, or 12.1% of
Metropolitan's certificate of deposit accounts, were held by these individuals
and entities.

     Individual Retirement Accounts ("IRA"). Metropolitan offers IRAs. Funds may
be invested in a passbook account or any certificate of deposit offered by
Metropolitan.



                                       22
<PAGE>   23






         The following table sets forth information regarding trends in
Metropolitan's average deposits for the periods indicated.

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                           ---------------------------------------------------------------------------------

                                                            1997                                     1996
                                             -----------------------------------      -------------------------------------
                                                                                            (Dollars in thousands)
                                             Average     Percent of                      Average     Percent of
                                              Amount        Total      Rate Paid          Amount        Total      Rate Paid
                                              ------        -----      ---------          ------        -----      ---------
<S>                                          <C>          <C>         <C>              <C>              <C>          <C>
Noninterest-bearing demand deposits(1)         $ 38,837         5.8%                    $ 31,248         5.5%
Interest bearing deposits:
 Demand deposits                                 39,965          5.9      2.66%           36,273          6.4         2.64%
 Savings deposits                               170,362         25.2      4.56%          169,866         30.2         4.79%
 Time deposits                                  426,450         63.1      5.93%          325,960         57.9         5.83%
                                                -------       ------                     -------       ------
   Total interest-bearing deposits              636,777         94.2      5.36%          532,099         94.5         4.97%
                                                -------       ------                     -------       ------
     Total average deposits                    $675,614       100.0%                    $563,347       100.0%
                                                =======       =====                      =======       =====


<CAPTION>
                                                            DECEMBER 31,
                                          --------------------------------------

                                                          1995
                                           --------------------------------------

                                             Average      Percent of
                                             Amount          Total       Rate Paid
                                             ------          -----       ---------
<S>                                       <C>                <C>         <C>
Noninterest-bearing demand deposits(1)     $  24,636          5.3%
Interest bearing deposits:
 Demand deposits                              37,695           8.1         2.57%
 Savings deposits                            118,475          25.5         4.76%
 Time deposits                               283,186          61.1         5.98%
                                             -------        ------
   Total interest-bearing deposits           439,356          94.7         5.07%
                                             -------        ------
     Total average deposits                 $463,992        100.0%
                                             =======        =====
</TABLE>








(1)  Includes principal and interest custodial accounts and taxes and insurance
     custodial accounts for loans serviced for FHLMC, FNMA and private
     investors.


                                       23


<PAGE>   24




     Deposits increased 18.6% to $737.8 million at December 31, 1997 consistent
with the overall growth of the Bank. The growth was primarily in time deposits
which increased 27.3% to $478.0 million. During the same period, the Bank
experienced overall growth in other types of savings accounts.

     The following table shows rate and maturity information for Metropolitan's
certificates of deposit as of December 31, 1997.

<TABLE>
<CAPTION>
                                            2.00-4.99%          5.00-6.99%          7.00-8.99%        TOTAL    PERCENT OF TOTAL
                                            ----------          ----------          ----------        -----    ----------------
                                                                    (Dollars in thousands)
CERTIFICATE  ACCOUNTS  MATURING IN
QUARTER ENDING:
<S>                                             <C>               <C>                  <C>         <C>              <C>
March 31, 1998                                  $4,910            $105,548             $ 1,650     $112,108         23.5%
June 30, 1998                                      138             100,797                 335      101,270          21.2
September 30, 1998                                  11              52,568                           52,579          11.0
December 31, 1998                                   17              49,763                  50       49,830          10.4
March 31, 1999                                      54              65,906                 478       66,438          13.9
June 30, 1999                                       21              35,829                  71       35,921           7.5
September 30, 1999                                                   4,679                            4,679           1.0
December 31, 1999                                                   23,678               1,552       25,230           5.3
March 31, 2000                                                       1,999               4,996        6,995           1.5
June 30, 2000                                                        4,512                  27        4,539           0.9
September 30, 2000                                                     803               7,916        8,719           1.8
December 31, 2000                                                    2,312               1,121        3,433           0.7
Thereafter                                                           5,402                 882        6,284           1.3
                                                ------            --------             -------     --------         -----
 Total                                          $5,151            $453,796             $19,078     $478,025         100.0%
                                                ======            ========             =======     ========         =====

Percent of total                                  1.1%               94.9%                4.0%       100.0%
</TABLE>




          The following table sets forth the remaining maturity for time
deposits of $100,000 or more at the date indicated.

<TABLE>
<CAPTION>
                                                       DECEMBER 31, 1997
                                                       -----------------
                                                  (Dollars in thousands)
<S>                                                      <C>
Three months or less                                     $18,142
Over three through six months                             16,197
Over six through twelve months                            18,210
Over twelve months                                        34,335
                                                         -------
  Total                                                  $86,884
                                                         =======
</TABLE>

          In addition to deposits, Metropolitan relies on borrowed funds. The
following describes Metropolitan's current borrowings:

          Subordinated Note Offerings. In 1993 and early 1994, Metropolitan
issued subordinated notes with an aggregate principal balance of $4.9 million
through a private placement offering ("1993 subordinated notes"). The interest
rate on the 1993 subordinated notes is 10%, which is paid quarterly and
principal will be repaid when the notes mature on December 31, 2001.
Metropolitan may redeem the 1993 subordinated notes, in whole or in part, at any
time by paying the outstanding principal amount plus accrued interest and a
prepayment premium. The prepayment premium was 10% of the principal amount
prepaid if such prepayment was made during the first year following the issuance
of the 1993 subordinated notes and the prepayment premium reduces 1% for each
year the 1993 subordinated notes are outstanding. If the 1993 subordinated notes
are prepaid more than seven years after issuance, the prepayment premium is 3%.
The 1993 subordinated notes may also be repurchased in privately negotiated
transactions. The 1993 subordinated notes are unsecured.

          In December 1995, Metropolitan issued subordinated notes with an
aggregate principal balance of $14.0 million through a public offering ("1995
subordinated notes"). The interest rate on the notes is 9.625%, which is paid
monthly and principal will be repaid




                                       24
<PAGE>   25


when the notes mature on January 1, 2005. The 1995 subordinated notes are not
redeemable, in whole or in part, by Metropolitan prior to December 1, 1998.
After December 1, 1998, the 1995 subordinated notes may be redeemed by
Metropolitan at a declining premium which begins at 3% of the prepaid principal
amount. After December 1, 2000, the 1995 subordinated notes may be prepaid at
par plus accrued interest. The 1995 subordinated notes may also be repurchased
in privately negotiated or open market transactions. The 1995 subordinated notes
are also unsecured.

          Line of Credit. In October 1996, the Corporation amended an existing
line of credit agreement with the Huntington National Bank ("The Huntington Loan
Agreement"). The Huntington Loan Agreement is a revolving line of credit for the
first 24 month period and then it converts to a 36 month term note. The maximum
permitted borrowing amount is $4.0 million. The terms of the Huntington Loan
Agreement require interest only payments for 24 months, then quarterly principal
payments based on a 60-month amortization with a balloon payment due in May
2001. The interest rate during the first 24 months is tied to LIBOR or
Huntington National Bank prime at Metropolitan's option. After conversion to a
term loan in May 1998, the interest rate is prime. As collateral for the
Huntington Loan Agreement, Mr. Kaye, Chairman and Chief Executive Officer of
Metropolitan, has agreed to pledge a portion of his shares of Common Stock of
Metropolitan in an amount at least equal in value to 200% of any outstanding
balance. At December 31, 1997, the outstanding balance under the Huntington Loan
Agreement was $1.5 million.

          FHLB Advances. The FHLB makes funds available for housing finance to
eligible financial institutions like Metropolitan. The FHLB generally limits
advances to 25% of assets with a total borrowing limit of 40% of assets from all
borrowing sources. Advances are collateralized by any combination of the
following assets and collateralization rates: one- to four-family first mortgage
loans, not past due greater than 90 days, pledged on a blanket basis at 150% of
the advance amount, specifically identified mortgage loans at 125% of the
advance amount and various types of investment and mortgage-backed securities at
rates ranging from 101-110% of the advance amount. FHLB stock owned by the Bank
is pledged as additional collateral but is not available as primary collateral.
The aggregate balance of assets pledged as collateral for FHLB advances at
December 31, 1997 was $147.0 million.

          Reverse Repurchase Agreements. From time to time the Bank borrows
funds by using its investment or mortgage-backed securities to issue reverse
repurchase agreements. This type of borrowing provides an alternative source of
funds to FHLB borrowings and at times, more favorable rates. The aggregate
balance of mortgage-backed securities pledged as collateral for reverse
repurchase agreements at December 31, 1997 was $77.8 million.

          The following table sets forth the maximum month-end balance of
borrowings during the periods indicated.
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                   --------------------------------------------------------------
                                        1997                   1996                  1995
                                   ----------------       ---------------      ------------------
                                                      (DOLLARS IN THOUSANDS)
<S>                                        <C>                   <C>                    <C>
MAXIMUM MONTH-END BALANCE:
FHLB advances                              $73,700               $75,150                $51,000
Term loan                                                                                 3,280
Qualifying subordinated debt                                                              1,200
1993 subordinated notes                      4,874                 4,874                  4,874
1995 subordinated notes                     14,000                14,000                 14,000
Line of credit                               4,000                                        5,000
Reverse repurchase agreements               74,496                23,500                  9,000
</TABLE>





                                       25


<PAGE>   26

The following table sets forth the average balance during the periods indicated,
end of period balances at the date indicated, and interest rates during the
period then ended.

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                         --------------------------------------------------------------
                                                              1997                   1996                  1995
                                                         ----------------       ---------------      ------------------
                                                                            (Dollars in thousands)
<S>                                                              <C>                   <C>                    <C>
AVERAGE BALANCE:
FHLB advances                                                    $59,325               $50,546                $28,467
Term Loan                                                                                                         485
Qualifying Subordinated Debt                                                                                      923
1993 subordinated notes                                            4,874                 4,874                  4,874
1995 subordinated notes                                           14,000                14,000                    690
Line of credit                                                       114                                        3,834
Reverse repurchase agreements                                     38,843                 4,480                  7,591
ENDING BALANCE:
FHLB advances                                                    $41,000               $59,500                $28,000
Term loan
Qualifying subordinated debt
1993 subordinated notes                                            4,874                 4,874                  4,874
1995 subordinated notes                                           14,000                14,000                 14,000
Line of credit                                                     1,500
Reverse repurchase agreements                                     74,496                23,500
WEIGHTED AVERAGE INTEREST RATE:
FHLB advances                                                      5.65%                 5.43%                  6.18%
Term Loan                                                                                                        8.79
Qualifying Subordinated Debt                                                                                    11.78
1993 subordinated notes                                            10.47                 10.47                  10.47
1995 subordinated notes                                            10.48                 10.48                  10.48
Line of credit                                                      8.98                                         8.67
Reverse repurchase agreements                                       5.73                  5.61                   6.10

</TABLE>



COMPETITION

          Metropolitan faces strong competition, both in originating real estate
and other loans and in attracting deposits. Competition in originating real
estate loans comes primarily from other savings institutions, commercial banks,
mortgage companies, credit unions, finance companies and insurance companies.
The Bank competes for loans principally on the basis of the interest rates and
loan fees it charges, the type of loans it originates and the quality of
services it provides to borrowers. Some of the Bank's competitors, however, have
higher lending limits and substantially greater financial resources than the
Bank.

          The Bank attracts its deposits through its retail sales offices,
primarily from the communities in which those retail sales offices are located;
therefore, competition for those deposits is principally from other savings
institutions, commercial banks, credit unions, mutual funds and brokerage
companies located in the same communities. The Bank competes for these deposits
by offering a variety of deposit accounts at competitive rates, convenient
business hours, and convenient branch locations.


                                       26

<PAGE>   27

EMPLOYEES

          At December 31, 1997, Metropolitan had a total of 281 employees,
including part-time employees. The Corporation's employees are not represented
by any collective bargaining group. Management considers its employee relations
to be excellent.


ADDITIONAL INFORMATION INCORPORATED BY REFERENCE

          Additional information required by Guide 3 is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Five Year Summary of Selected Data of the Annual Report.


REGULATION AND SUPERVISION


INTRODUCTION

          Metropolitan is registered as a savings and loan holding company
within the meaning of the Home Owners' Loan Act (the "HOLA"). As a savings and
loan holding company, Metropolitan is subject to the regulations, examination,
supervision, and reporting requirements of the Office of Thrift Supervision
("OTS"). The Bank, an Ohio-chartered savings and loan association, is a member
of the FHLB System, and its deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") through the Savings Association Insurance Fund
("SAIF"). The Bank is subject to examination and regulation by the OTS, the FDIC
and the Ohio Superintendent of Savings and Loan Associations and to regulations
regarding such matters as capital standards, mergers, establishment of branch
offices, subsidiary investments and activities, and general investment
authority. Such examination and regulation is intended primarily for the
protection of depositors.

          The descriptions of the statutes and regulation which are applicable
to Metropolitan and the Bank and the effects thereof which are set forth below
and elsewhere in this document do not purport to be a complete description of
such statutes and regulations and their effects on Metropolitan or the Bank or
to identify every statute and regulation that may apply to Metropolitan or the
Bank.

METROPOLITAN

          As a savings and loan holding company, Metropolitan is subject to
certain restrictions with respect to its activities and investments. Among other
things, Metropolitan is generally prohibited, either directly or indirectly,
from acquiring control of any other savings association or savings and loan
holding company, without prior approval of the OTS, and from acquiring more than
5% of the voting stock of any savings association or savings and loan holding
company which is not a subsidiary of Metropolitan.

       Similarly, OTS approval must be obtained prior to any person's acquiring
control of the Bank or Metropolitan. Control is conclusively presumed to exist
if, among other things, a person acquires more than 25% of any class of voting
stock of the institution or holding company or controls in any manner the
election of a majority of the directors of the institution or the holding
company. Control is rebuttably presumed to exist if, among other things, a
person acquires more than 10% of any class of voting stock (or 25% of any class
of stock) and is subject to any certain specified "control factors."


THE BANK

          General. The OTS also has enforcement authority over all savings
associations. This enforcement authority includes the ability to impose
penalties for and to seek correction of violations of laws and regulations and
unsafe or unsound practices by assessing civil money penalties, issuing cease
and desist or removal and prohibition orders against an institution, its
directors, officers or employees and other persons, or initiating injunctive
actions.

          As a lender and a financial institution, the Bank is subject to
various regulations promulgated by the Federal Reserve Board including, without
limitation, Regulation B (Equal Credit Opportunity), Regulation D (Reserves),
Regulation E (Electronic Fund Transfers), Regulation F (Interbank Liabilities),
Regulation Z (Truth in Lending), Regulation CC (Availability of Funds), and
Regulation DD (Truth in Savings). As lenders of loans secured by real property,
and as owners of real property, financial institutions, including the




                                       27
<PAGE>   28


Bank, are subject to compliance with various statutes and regulations applicable
to property owners generally, including statutes and regulations relating to the
environmental condition of the property.

          Insurance of Accounts and Regulation by the FDIC. The Bank is a member
of the SAIF, which is administered by the FDIC. Deposits are insured up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the United States Government. As insurer, the FDIC imposes deposit
insurance premiums and is authorized to conduct examinations of and to require
reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured
institution from engaging in any activity the FDIC determines by regulation or
order to pose a serious risk to the FDIC. The FDIC also has the authority to
initiate enforcement actions against savings associations, after giving the OTS
an opportunity to take such action, and may terminate the deposit insurance if
it determines that the institution has engaged or is engaging in unsafe or
unsound practices, or is in an unsafe or unsound condition.

          Under the FDIC risk-based deposit insurance assessment system, all
insured depository institutions are placed into one of nine categories and
assessed insurance premiums based upon their level of capital and supervisory
evaluation. Under the system, institutions classified as well-capitalized and
requiring little supervision would pay the lowest premium while institutions
that are classified as undercapitalized and considered of substantial
supervisory concern would pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment period.

          With respect to the SAIF, the FDIC is authorized to increase
assessment rates, on a semi-annual basis, if it determines that the reserve
ratio of the SAIF will be less than the designated reserve ratio of 1.25% of
SAIF-insured deposits. In setting these increased assessments, the FDIC must
seek to restore the reserve ratio to that designated reserve level, or such
higher reserve ratio as established by the FDIC. In addition, the FDIC may
impose special assessments on SAIF members to repay amounts borrowed from the
United States Treasury or for any other reason deemed necessary by the FDIC.

          Similarly, with respect to deposits which are insured by the Bank
Insurance Fund ("BIF"), the FDIC is authorized to adjust the insurance premium
rates in order to maintain the reserve ratio of the BIF at 1.25% of BIF-insured
deposits. In setting the BIF assessment rates, the FDIC must maintain the
reserve ratio at that designated reserve level, or such higher reserve ratio as
established by the FDIC. BIF and SAIF assessment rates, however, have not
remained comparable. During fiscal 1996, BIF members generally paid lower
premiums than SAIF-insured institutions, placing SAIF-insured institutions whose
deposits are exclusively or primarily SAIF-insured at a competitive
disadvantage.

          As a result of this disparity in insurance premium rates, on September
30, 1996 the President signed into law the Omnibus Bill which included
provisions designed to recapitalize the SAIF and to mitigate the BIF/SAIF
premium disparity. The Omnibus Bill required the FDIC to impose a special
assessment on SAIF-insured deposits held by institutions as of March 31, 1995 in
order that the SAIF achieve the designated reserve ratio. Accordingly, the FDIC
assessed and the Bank paid a $2.9 million special assessment from working
capital of the Bank.

          Now that the SAIF has reached it required reserve ratio following the
one-time assessment, the FDIC has reduced the annual assessment rates for
SAIF-insured institutions. Effective January 1, 1997, the SAIF assessment rates
are identical to those for BIF-insured institutions.

          The Omnibus Bill also requires the repayment of Financing Corporation
("FICO") bonds to be shared by both SAIF- and BIF-insured institutions. Prior to
the enactment of this legislation, only a portion of the SAIF assessment was
used to repay the $780 million in annual FICO interest payments. However, as of
January 1, 1997, BIF institutions are required to pay a portion of the FICO
interest payments, as well. For the first three years, the BIF assessment rates
for FICO payments are 20% of those for SAIF institutions. Thus, SAIF
institutions, such as the Bank, will continue to be subject to a greater burden
than BIF institutions. The rates established by the FDIC to implement this
requirement for all FDIC-insured institutions are 6.44 basis points on SAIF
deposits and 1.29 basis points on BIF deposits. However, after January 1, 2000,
assessments on BIF-insured institutions will be made on the same basis as
SAIF-insured institutions. It is estimated that the payments of such assessments
will be 2.43 basis points on deposits. It is important to note that these
assessments are only for FICO interest payments and that further premiums could
be assessed in order to maintain the BIF and SAIF funds at the required 1.25%
reserve ratio.

          In addition, the Omnibus Bill requires the merger of the BIF and SAIF
into a single insurance fund no later than January 1, 1999 if there are no
savings associations at that date. In connection with the merger of the BIF and
the SAIF, SAIF-insured institutions could be forced to convert to state bank
charters or national bank charters. If such a proposal became law, the
Corporation would become a bank holding company and be subject to regulation by
the Federal Reserve Board, which imposes capital requirements on bank holding
companies. The Corporation is not currently subject to capital requirements.

                                       28
<PAGE>   29


          Regulatory Capital Requirements. The capital regulations of the OTS
issued thereunder (the "Capital Regulations") establish a "leverage limit," a
"tangible capital requirement" and a "risk-based capital requirement." In
addition, the OTS may establish, on a case by case basis, individual minimum
capital requirements for a savings association which vary from the requirements
that would otherwise apply under the Capital Regulations. The OTS has not
established such individual minimum capital requirements for the Bank.

          A savings association which fails to meet one or more of the
applicable capital requirements is subject to various regulatory limitations and
sanctions, including a prohibition on growth and the issuance of a capital
directive by the OTS requiring the following: an increase in capital; reduction
of rates paid on savings accounts; cessation of or limitations on deposit-taking
and lending; limitations on operational expenditures; an increase in liquidity;
and such other actions deemed necessary or appropriate by the OTS. In addition,
a conservator or receiver may be appointed under certain circumstances.

          The leverage limit currently requires a savings association to
maintain "core capital" of not less than 3% of adjusted total assets. The OTS
has taken the position, however, that the prompt corrective action regulatory
scheme (See"-Prompt Corrective Action") has effectively raised the leverage
ratio requirement for all but the most highly-rated institutions to 4% since an
institution is "undercapitalized" for such purpose if, among other things, its
leverage ratio is less than 4% (3% for MACRO 1 rated institutions).

          The tangible capital requirement requires a savings association to
maintain "tangible capital" in an amount not less than 1.5% of adjusted total
assets.

          The risk-based capital requirement generally provides that a savings
association must maintain total capital in an amount at least equal to 8.0% of
its risk-weighted assets. The risk-based capital regulations are similar to
those applicable to national banks. The regulations assign each asset and
certain off-balance sheet assets held by a savings association to one of four
risk-weighting categories, based upon the degree of credit risk associated with
the particular type of asset.

          Savings associations are required to incorporate interest rate risk in
their capital calculations for determining compliance with capital requirements.
Interest rate risk is measured by the decline in "net portfolio value" that
would result from a hypothetical 200 basis point increase or decrease in market
interest rates, whichever is lower, divided by the estimated economic value of
assets. An institution whose measured interest rate exposure exceeds 2% must
deduct an amount equal to one-half of the difference between its measured
interest rate risk and 2%, multiplied by the estimated economic value of its
total assets, from total capital in determining whether it meets its risk-based
capital requirement.

          Banking regulators continue to indicate their desire to raise capital
requirements applicable to financial institutions beyond their current levels.
No prediction can be made as to whether and when higher capital requirements
would be imposed and, if so, to what levels and on what schedule.

          Each bank regulatory agency and the OTS review each of their capital
standards every two years to determine whether those standards require
sufficient capital to facilitate prompt corrective action to prevent or minimize
loss to the deposit insurance funds. Each bank regulatory agency and the OTS
revise each of their risk-based capital standards to ensure that those standards
take adequate account of interest rate risk, concentration of credit risk and
the risk of non-traditional activities.



                                       29

<PAGE>   30



          At December 31, 1997, the Bank complied with each of the tangible
capital, the core capital and the risk-based capital requirements. The following
table presents the Bank's regulatory capital position at December 31, 1997.

<TABLE>
<CAPTION>
                                                                           PERCENT OF
                                                        AMOUNT         REGULATORY ASSETS(1)
                                                        ------         -------------------
                                                            (Dollars in thousands)
<S>                                                     <C>                      <C>
Tangible capital                                        $49,901                  5.43%
Tangible capital requirement                             13,777                  1.50
                                                        -------                  ----
Excess                                                  $36,124                  3.93%
                                                        =======                  ====

Core capital                                            $50,215                  5.47%
Core capital requirement(2)                              36,738                  4.00
                                                        -------                  ----
Excess                                                  $13,477                  1.47%
                                                        =======                  ====

Risk-based capital                                      $54,343                  8.39%
Risk-based capital requirement                           51,836                   8.00
                                                        -------                  ----
Excess                                                  $ 2,507                  0.39%
                                                        =======                  ====
</TABLE>

     (1)  Represents the percentage of adjusted total assets for tangible and
          core capital purposes and the percentage of risk-weighted assets for
          risk-based capital purposes.

     (2)  The "prompt corrective action" regulatory scheme (See "-Prompt
          Corrective Action") has effectively raised the leverage requirement to
          4% for all but the most highly-rated institutions since an institution
          is considered "undercapitalized" for such purposes if, among other
          things, it has a leverage ratio of under 4% (3% for MACRO 1 rated
          institutions).


          Prompt Corrective Action. Banks and savings associations are
classified into one of five categories based upon capital adequacy, ranging from
"well-capitalized" to "critically undercapitalized" and require (subject to
certain exceptions) the appropriate federal banking agency to take prompt
corrective action with respect to an institution which becomes
"undercapitalized" and to take additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized."

          The federal banking agencies have issued a joint rule for this purpose
under which, in general, an institution is: "well capitalized" if it has total
risk-based capital of 10% or greater, Tier 1 risk-based capital of 6% or
greater, leverage ratio of 5% or greater, and is not subject to an order or
other supervisory directive to meet and maintain a specific capital level for
any capital measure; "adequately capitalized" if it has total risk-based capital
of 8% or greater, Tier 1 risk-based capital of 4% or greater, and leverage ratio
of 4% or greater (3% or greater if rated Composite 1 under the MACRO rating
system); "undercapitalized" if it has total risk-based capital of less than 8%,
Tier 1 risk-based capital of less than 4%, or a leverage ratio of less than 4%
(3% if rated Composite 1 under the MACRO rating system); "significantly
undercapitalized" if it has total risk-based capital of less than 6%, Tier 1
risk-based capital of less than 3%, or a leverage ratio of less than 3%; and
"critically undercapitalized" if it has a ratio of tangible equity to total
assets equal to or less than 2%. Based on these requirements, the Bank is an
"adequately capitalized" institution.

          The appropriate federal banking agency has the authority to
reclassify, a well-capitalized institution as adequately capitalized, and to
treat an adequately capitalized or undercapitalized institution as if it were in
the next lower capital category, if it is determined, after notice and an
opportunity for a hearing, to be in an unsafe or unsound condition or to have
received and not corrected a less-than-satisfactory rating for any of the
categories of asset quality, management, earnings or liquidity in its most
recent examination. As a result of such reclassification or determination, the
appropriate federal banking agency may require an adequately capitalized or
under-capitalized institution to comply with certain mandatory and discretionary
supervisory actions. A significantly undercapitalized savings association may
not be reclassified, however, as critically undercapitalized.

          Restrictions on Dividends and Other Capital Distributions. Savings
association subsidiaries of holding companies generally are required to provide
their OTS Regional Director not less than thirty days' advance notice of any
proposed declaration of a dividend on the association's stock. Any dividend
declared within the notice period, or without giving the prescribed notice, is
invalid.

          OTS regulations impose limitations upon certain "capital
distributions" by savings associations, including cash dividends, payments to
repurchase or otherwise acquire an association's shares, payments to
shareholders of another institution in a cash-out merger




                                       30
<PAGE>   31


and other distributions charged against capital. The regulation establishes a
three-tiered system of regulation, with the greatest flexibility being afforded
to well-capitalized associations.

          An association that has capital immediately prior to, and on a pro
forma basis after giving effect to, a proposed capital distribution that is at
least equal to its fully phased-in capital requirement is considered a Tier 1
institution ("Tier 1 Institution"). An association that has capital immediately
prior to, and on a pro forma basis after giving effect to, a proposed capital
distribution that is at least equal to its minimum regulatory capital
requirement but less than its fully phased-in capital requirement, is considered
a Tier 2 institution ("Tier 2 Institution"). An association that does not meet
its minimum regulatory capital requirement immediately prior to, or on a pro
forma basis after giving effect to, a proposed capital distribution is
considered a Tier 3 institution ("Tier 3 Institution"). The OTS retains
discretion to treat a Tier 1 Institution as a Tier 2 or Tier 3 Institution if
the OTS determines that the institution is in need of more than normal
supervision and has provided the institution with notice to that effect.

          A Tier 1 Institution may, after prior notice but without the approval
of the OTS, make capital distributions during a calendar year up to the higher
of: (i) 100% of its net income to date during the calendar year plus the amount
that would reduce the association's "surplus capital ratio" (the excess over its
fully phased-in capital requirement) to one-half of its surplus capital ratio at
the beginning of the calendar year or (ii) 75% of its net income over the most
recent four-quarter period. Any additional capital distributions would require
prior regulatory non-objection. A Tier 2 Institution may, after prior notice but
without the approval of the OTS, make capital distributions in accordance with
the following schedule: if the association's capital satisfies the risk-based
capital standard applicable to the association as of January 1, 1993, the
association may make distributions up to 75% of its net income over the most
recent four-quarter period, and, if the association's capital satisfies the
risk-based capital standard applicable as of January 1, 1991, it may make
distributions up to 50% of its net income over the most recent four-quarter
period. A Tier 3 Institution is not authorized under the regulation to make any
capital distributions unless it receives prior written approval from the OTS or
in accordance with the express terms of an approved capital plan.

          The OTS retains the authority to prohibit any capital distribution
otherwise authorized under the regulation if the OTS determines that the capital
distribution would constitute an unsafe or unsound practice. The regulation also
states that the capital distribution limitations apply to direct and indirect
distributions to affiliates, including those occurring in connection with
corporate reorganizations.

          Under the "prompt corrective action" provisions ( See "--Prompt
Corrective Action"), an FDIC-insured institution may not make a "capital
distribution" (which includes, among other things, cash dividends and stock
purchases) if, after making the distribution, the institution would be
"undercapitalized" for such purposes.

          The OTS has proposed regulations that would revise the current capital
distribution restrictions. The proposal eliminates the current tiered structure
and the safe-harbor percentage limitations. In their current form, the proposed
regulations would not apply to the Bank as it is owned by a holding company.
Under the proposal, a savings association may make a capital distribution
without notice to the OTS provided that it has a MACRO 1 or 2 rating, is not in
troubled condition, and would remain adequately capitalized (as defined in the
OTS prompt corrective action regulations) following the proposed distribution.
Savings associations that would remain adequately capitalized following the
proposed distribution but do not meet the other noted requirements must notify
the OTS 30 days prior to declaring a capital distribution. The OTS stated it
will generally regard as permissible that amount of capital distributions that
do not exceed 50% of the institution's excess regulatory capital plus net income
to date during the calendar year. A savings association may not make a capital
distribution without prior approval of the OTS and the FDIC if it is
undercapitalized before, or as a result of, such a distribution. A savings
association will be considered in troubled condition if it has a MACRO rating of
4 or 5, is subject to an enforcement action relating to its safety and soundness
or financial viability, or has been informed in writing by the OTS that it is in
troubled condition. As under the current rule, the OTS may object to a capital
distribution if it would constitute an unsafe or unsound practice. No assurance
may be given as to whether or in what form the regulations may be adopted.

          Liquidity. Federal regulations currently require savings associations
to maintain, for each calendar month, an average daily balance of liquid assets
(including cash, certain time deposits, bankers' acceptances, and specified
United States Government, state or federal agency obligations) equal to at least
4% of the ending or average daily balance of deposit accounts with maturities
less than a year plus short-term borrowings during the preceding calendar month.
This liquidity requirement may be changed from time to time by the OTS to an
amount within a range of 4% to 10% of such accounts and borrowings depending
upon economic conditions and the deposit flows of savings associations. Monetary
penalties may be imposed for failure to meet liquidity ratio requirements. At
December 31, 1997, the liquidity ratio of the Bank was 14.6%, which exceeded the
applicable requirement.

          Qualified Thrift Lender Test. Pursuant to the Qualified Thrift Lender
("QTL") test, a savings institution must invest at least 65% of its portfolio
assets in "qualified thrift investments" on a monthly average basis on a rolling
12-month "look-back" basis. Portfolio



                                       31
<PAGE>   32





assets are an institution's total assets less goodwill and other intangible
assets, the institution's business property, and a limited amount of the
institution's liquid assets.

          A savings association's failure to remain a QTL may result in: (i)
limitations on new investments and activities; (ii) imposition of branching
restrictions; (iii) loss of FHLB borrowing privileges; and (iv) limitations on
the payment of dividends. If a savings institution that is a subsidiary of a
savings and loan holding company fails to regain QTL status within one year of
its loss of such status, the holding company must register as and will be deemed
to be a bank holding company subject to, among other things, the business
activity restrictions and capital regulations of the Bank Holding Company Act.

          The Bank's qualified thrift investments were in excess of 69.2% of its
portfolio assets as of December 31, 1997.

          Ohio Regulation. As a savings and loan association organized under the
laws of the State of Ohio, the Bank is subject to regulation by the Ohio
Division of Financial Institutions (the "Division"). Regulation by the Division
affects the Bank's internal organization as well as its savings, mortgage
lending, and other investment activities. Periodic examinations by the Division
are usually conducted on a joint basis with the OTS. Ohio law requires that the
Bank maintain federal deposit insurance as a condition of doing business.

          Under Ohio law and regulations, an Ohio association may invest in
loans and interests in loans, secured or unsecured, of any type or amount for
any purpose, subject to certain requirements including but not limited to: loans
secured by liens on income-producing real estate may not exceed 20% of an
association's assets; all loans for educational purposes may not exceed 5% of an
association's assets; consumer loans, commercial paper and corporate debt
securities may not exceed 20% of an association's assets; and loans for
commercial, corporate, business or agricultural purposes may not exceed 10% of
an association's assets (subject to certain exceptions). In addition, no
association may make loans for the acquisition and development of undeveloped or
partially developed land for primarily residential use to one borrower in excess
of 2% of assets of the association. The total investment in commercial paper or
corporate debt of any issuer cannot exceed 1% of an association's assets, with
certain exceptions.

          Ohio law authorizes Ohio-chartered associations to, among other
things: (i) invest up to 15% of assets in the capital stock, obligations and
other securities of service corporations organized under the laws of Ohio, and
an additional 20% of net worth may be invested in loans to majority owned
service corporations; (ii) invest up to 10% of assets in corporate equity
securities, bonds, debentures, notes, or other evidence of indebtedness; (iii)
exceed limits otherwise applicable to certain types of investments (other than
investments in service corporations) by between 3% and 10% of assets, depending
upon the level of the institution's permanent stock, general reserves, surplus
and undivided profits; and (iv) invest up to 15% of assets in any loans or
investments not otherwise specifically authorized or prohibited, subject to
authorization by the institution's board of directors.

          An Ohio association may invest in such real property or interests
therein as its board of directors deems necessary or convenient for the conduct
of the business of the association, but the amount so invested may not exceed
the net worth of the association at the time the investment is made.
Additionally, an association may invest an amount equal to 10% of its assets in
any other real estate. This limitation does not apply, however, to real estate
acquired by foreclosure, conveyance in lieu of foreclosure or other legal
proceedings in relation to loan security interests.

          Notwithstanding the above powers authorized under Ohio law and
regulation, a state-chartered savings association, such as the Bank, is subject
to certain limitations on its permitted activities and investments under federal
law which may restrict the ability of an Ohio-chartered association to engage in
activities and make investments otherwise authorized under Ohio law.

          Ohio has adopted a statutory limitation on the acquisition of control
of an Ohio savings and loan association which requires the written approval of
the Division prior to the acquisition by any person or entity of a controlling
interest in an Ohio association. Control exists, for purposes of Ohio law, when
any person or entity, either directly or indirectly, or acting in concert with
one or more other persons or entities, owns, controls, holds with power to vote,
or holds proxies representing, 15% or more of the voting shares or rights of an
association, or controls in any manner the election or appointment of a majority
of the directors.

          Under certain circumstances, interstate mergers and acquisitions
involving associations incorporated under Ohio law are permitted by Ohio law. A
savings and loan association or savings and loan holding company with its
principal place of business in another state may acquire a savings and loan
association or savings and loans holding company incorporated under Ohio law if
laws of such other state permit an Ohio savings and loan association or an Ohio
holding company reciprocal rights.

                                       32
<PAGE>   33


          Ohio law requires prior written approval of the Ohio Superintendent of
a merger of an Ohio association with another savings and loan association or a
holding company affiliate.


FEDERAL AND STATE TAXATION

          The following discussion of tax matters is intended only as a summary
and does not purport to be a comprehensive description of the tax rules
applicable to the Corporation or the Bank.

          Savings associations such as the Bank are generally taxed in the same
manner as other corporations. For taxable years beginning prior to January 1,
1996, savings associations such as the Bank which met certain definitional tests
primarily relating to their assets and the nature of their supervision and
business operations ("qualifying thrifts") were permitted to establish a reserve
for bad debts and to make annual additions thereto, which additions may, within
specified formula limits, have been deducted in arriving at their taxable
income. The Bank's deduction with respect to "qualifying real property loans,"
which are generally loans secured by certain interests in real property, may
have been computed using an amount based on the Bank's actual loss experience,
or a percentage equal to 8% of the Bank's taxable income, computed with certain
modifications and reduced by the amount of any permitted additions to the
reserve for nonqualifying loans (the "percentage of taxable income method"). The
Bank's deduction with respect to nonqualifying loans was computed under the
experience method, which essentially allows a deduction based on the Bank's
actual loss experience over a period of several years. Each year the Bank
selected the most favorable way to calculate the deduction attributable to an
addition to the tax bad debt reserve.

          Legislation enacted during 1996 repealed the existing reserve method
of accounting for bad debt reserves for tax years beginning after December 31,
1995. As a result, savings associations will no longer be able to calculate
their deduction for bad debts using the percentage of taxable income method.
Instead, savings associations will be required to compute their deduction based
on specific charge offs during the taxable year or, if the savings association
or its control group had assets of not more than $500 million, based on actual
loss experience over a period of years. This legislation also requires a savings
association (or its controlled group) with assets of more than $500 million to
recapture into income over a six-year period their post-1987 additions to their
bad debt tax reserves for qualifying real property loans and nonqualifying
loans, thereby generating additional tax liability. A savings association (or
its controlled group) with assets of not more than $500 million are required to
recapture their bad debt tax reserve to the extent it exceeds the greater of (i)
the applicable bad debt tax reserve as of the close of the last taxable year
beginning before January 1, 1988, or (ii) what the savings association's
applicable bad debt tax reserve would have been at the close of its last taxable
year beginning before January 1, 1996 under the experience method. The recapture
may be suspended for up to two years if, during those years, the savings
association satisfies a residential loan requirement.

          Under prior law, if the Bank failed to satisfy the qualifying thrift
definitional tests in any taxable year, it would be unable to make additions to
its bad debt reserve. Instead, the Bank would be required to deduct bad debts as
they occur and would additionally be required to recapture its bad debt reserve
deductions ratable over a multi-year period. Among other things, the qualifying
thrift definitional tests required the Bank to hold at least 60% of its assets
as "qualifying assets." Qualifying assets generally include cash, obligations of
the United States or any agency or instrumentality thereof, certain obligations
of a state or political subdivision thereof, loan secured by interests in
improved residential real property or by savings accounts, student loans and
property used by the Bank in the conduct of its banking business. Under current
law, a savings association will not be required to recapture its pre-1988 bad
debt reserves if it ceases to meet the qualifying thrift definitional tests.

          In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to an alternative minimum
tax. An alternative minimum tax is imposed at a tax rate of 20% on alternative
minimum taxable income ("AMTI"), which is the sum of a corporation's regular
taxable income (with certain adjustments) and tax preference items, less any
available exemption. Adjustments and preferences include depreciation deductions
in excess of those allowable for alternative minimum tax purposes, tax-exempt
interest on most private activity bonds issued after August 7, 1986 (reduced by
any related interest expense disallowed for regular tax purposes), and, for 1990
and succeeding years, 75% of the excess of adjusted current earnings ("ACE")
over AMTI. ACE equals pre-adjustment AMTI (i) increased or decreased by certain
ACE adjustments, which include tax-exempt interest on municipal bonds,
depreciation deductions in excess of those allowable for ACE purposes and, in
certain cases, the dividend received deduction, and (ii) determined without
regard to the ACE adjustment and the alternative tax net operating loss. The
alternative minimum tax is imposed to the extent it exceeds the corporation's
regular income tax, and alternative tax net operating losses can offset no more
than 90% of AMTI. The payment of alternative minimum tax will give rise to a
minimum tax credit which will be available with an indefinite carry forward
period to reduce federal income taxes in future years (but not below the level
of alternative minimum tax arising in each of the carry forward years). For
taxable years beginning after 1986 and before 1996, corporations, including
savings associations such as the


                                       33
<PAGE>   34


Bank, are also subject to an environmental tax equal to 0.12% of the excess of
AMTI for the taxable year (determined without regard to alternative tax net
operating losses and the deduction for the environmental tax) over $2 million.

          Metropolitan, the Bank and other includable subsidiaries file
consolidated federal income tax returns on a December 31 calendar year basis
using the accrual method of accounting. Metropolitan, the Bank and other
includable subsidiaries have been audited by the Internal Revenue Service
through December 31, 1994.

          The Bank is subject to the Ohio corporate franchise tax. As a
financial institution, the Bank computes its franchise tax based on its net
worth. Under this method, the Bank will compute its Ohio corporate franchise tax
by multiplying its net worth (as determined under generally accepted accounting
principles) as specifically adjusted pursuant to Ohio law, by the applicable tax
rate, which is currently 1.5%. As an Ohio-chartered savings and loan
association, the Bank also receives a credit against the franchise tax for a
portion of the state supervisory fees paid by it.

          The Corporation is subject to an Ohio corporation franchise tax
payable in an amount equal to the greater of a specified percentage of net
income (currently 5.1% of the first $50,000 and 8.9% of the remainder, with an
additional add-on tax not to exceed $5,000) or a specified percentage of net
worth (currently approximately 0.6%, plus an add-on tax). In calculating net
income for this purpose, dividends from wholly-owned subsidiaries, such as the
Bank, would be excluded. In addition, in calculating net worth, the
Corporation's investment in the Bank would be excluded for this purpose.


ITEM 2.     PROPERTIES

          Metropolitan's corporate headquarters, which is leased under a
long-term lease agreement, is located at 6001 Landerhaven Drive, Mayfield
Heights, Ohio 44124. The Bank operates fifteen branch locations, seven of which
are leased under long-term lease agreements with various parties. The other
eight branches, located in Cleveland, Euclid, Willoughby Hills, Mayfield
Heights, Macedonia, Cleveland Heights, Hudson, and Aurora, are owned by
Metropolitan. In addition, Metropolitan owns land in Twinsburg, Auburn, Stow,
and Medina, and land and a building in Willoughby, as planned sites for future
full service retail offices. The Bank also leases office space for its loan
production offices in Detroit, Cincinnati, North Olmsted, and Pittsburgh.


ITEM 3.     LEGAL PROCEEDINGS

          The Corporation is involved in various legal proceedings incidental to
the conduct of its business. The Corporation does not expect that any such
proceedings will have a material adverse effect on the Corporation's financial
position or results of operations.


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

          No matter was submitted to a vote of the shareholders of the
Corporation during the fourth quarter of the fiscal year covered by this
Report, through the solicitation of proxies or otherwise.













                                       34
<PAGE>   35


                                     PART II

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

          Metropolitan's Common Stock, no par value ("Common Stock"), the only
outstanding class of equity securities of Metropolitan, is traded on the Nasdaq
National Market System. There are 20,000,000 shares of Common Stock authorized
and 7,051,270 shares issued and outstanding. The first day of trading in the
Corporation's Common Stock was October 29, 1996. Prior to this date, no trading
occurred in the Corporation's Common Stock. Detailed in the table below is the
quarterly high and low price for the Corporation's Common Stock during 1997
(adjusted for a two-for-one split completed in the fourth quarter of fiscal
1997):
<TABLE>
<CAPTION>
                                             High              Low
<S>                                       <C>               <C>
Fourth quarter 1996                       $  5.75           $ 5.13
First quarter 1997                           5.63             5.38
Second quarter 1997                          8.25             5.38
Third quarter 1997                          10.13             7.88
Fourth quarter 1997                         16.25             9.50
</TABLE>

          Metropolitan paid no dividends during the past three years and has no
intention of paying dividends in the foreseeable future. In addition, the terms
of the 1993 Subordinated Notes, which mature December 31, 2001, prohibit the
Corporation from paying any cash dividend while the 1993 Subordinated Notes are
outstanding. The Indenture dated as of December 1, 1995 between the Corporation
and Boatmen's Trust Company (currently Bank of New York, as successor trustee)
covering the 1995 Subordinated Notes and the Huntington Loan Agreement prohibit
the Corporation from paying a dividend or other distribution on its equity
securities unless the Corporation's ratio of tangible equity to total assets
exceeds 7%.

          The approximate number of record common shareholders at March 2, 1998
was 1,123. Robert M. Kaye, previously the sole shareholder, controls 5,467,270
shares or 77.5% of the amount outstanding.


ITEM 6.     SELECTED FINANCIAL DATA

          Information in response to this item is set forth in the sections
captioned FIVE YEAR SUMMARY OF SELECTED DATA on pages 5 and 6 of the
Corporation's 1997 Annual Report to Shareholders which are incorporated herein
by reference.


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

          Information in response to this item is set forth in the section
captioned MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS on pages 7 through 20 of the Corporation's 1997 Annual
Report to Shareholders which are incorporated herein by reference.


ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Information in response to this item is set forth in the section
captioned Quantitative and Qualitative Disclosures About Market Risk on pages 17
through 19 of the Corporation's 1997 Annual Report to Shareholders which are
incorporated herein by reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The consolidated financial statements together with the report thereon
of Crowe, Chizek and Company LLP, dated February 20, 1998, appearing on pages 22
through 51 of the Corporation's 1997 Annual Report to Shareholders under the
sections captioned REPORT OF INDEPENDENT AUDITORS , CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION, OPERATIONS, SHAREHOLDERS' EQUITY, AND CASH FLOWS AND NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, are incorporated herein by reference.



                                       35


<PAGE>   36

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

          None


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          The information required in response to this item is set forth in the
sections captioned ELECTION OF DIRECTORS through and including the subsection
captioned Executive Officer Who is Not a Director on pages 1 through 4, and
section 16(a) Beneficial Ownership Reporting Compliance on Page 16, of the
Corporation's definitive Proxy Statement for the Meeting of Shareholders to be
held April 28, 1998 and is incorporated herein by reference.
The Corporation filed its proxy statement on March 27, 1998.


ITEM 11. EXECUTIVE COMPENSATION

          The information required in response to this Item is set forth in the
sections captioned Director Compensation, Compensation Committee Interlocks and
Insider Participation, and EXECUTIVE COMPENSATION AND OTHER INFORMATION on pages
5 and 11 through 12 of the Corporation's definitive Proxy Statement for the 1998
Annual Meeting of Shareholders to be held April 28, 1998, and is incorporated
herein by reference. The Corporation filed its proxy statement on March 27,
1998.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The information required in response to this Item is set forth in the
sections captioned SECURITIES OWNERSHIP OF MANAGEMENT and SECURITIES OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS on pages 10 and 11 of the Corporation's definitive
Proxy Statement for the 1998 Annual Meeting of Shareholders to be held April 28,
1998, and is incorporated herein by reference. The Corporation filed its proxy
statement on March 27, 1998.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The information required in response to this Item is set forth in the
sections captioned Compensation Committee Interlocks and Insider Participation,
and Certain Transactions on pages 5 and 6 of the Corporation's definitive Proxy
Statement for the 1998 Annual Meeting of Shareholders to be held April 28, 1998
and is incorporated herein by reference. The Corporation filed its proxy
statement on March 27, 1998.


                                     PART IV

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

                  (a) EXHIBITS, FINANCIAL STATEMENTS, AND FINANCIAL STATEMENT
                      SCHEDULES.
<TABLE>
<CAPTION>

                      1.FINANCIAL STATEMENTS                                                     PAGE NO.*
                        --------------------                                                     ---------
<S>                     <C>                                                                     <C>
                           Report of Independent Auditors                                            22

                           Consolidated Statements of Financial Condition                            23

                           Consolidated Statements of Operations                                     24

                           Consolidated Statements of Shareholders' Equity                           25

</TABLE>

                                       36
<PAGE>   37

<TABLE>
<S>                     <C>                                                                     <C>
                           Consolidated Statements of Cash Flows                                     26

                           Notes to Consolidated Financial Statements                                28

                  2. FINANCIAL STATEMENT SCHEDULES

                           Parent Company Financial Statements                                       48
</TABLE>

          * Incorporated by reference from the indicated page of the
Corporation's 1997 Annual Report to Shareholders filed as Exhibit 13 to this
Form 10-K.

                  3. EXHIBITS

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

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

                              10.1      Incentive Pay Plan. **

                              10.2      Metropolitan Financial Corp. 1997 Stock
                                        Option Plan (filed as Exhibit A to
                                        Metropolitan's Definitive Proxy
                                        Statement, filed March 27,1998, and
                                        incorporated herein by reference).**

                              13        1997 Annual Report to Shareholders.

                              21        List of subsidiaries of Metropolitan
                                        (filed as Exhibit 21 to Metropolitan's
                                        Form 10-K, filed March 28, 1996 and
                                        incorporated herein by reference).

                              24        Powers of Attorney.

                              27        Financial Data Schedule.

                              99.1      Specimen Subordinated Note relating to
                                        the 9 5/8% Subordinated Notes due
                                        January 1, 2005 (found at Sections 2.2
                                        and 2.3 of the Form of Indenture filed
                                        as Exhibit 4.1 to Metropolitan's
                                        Amendment No. 1 to Registration
                                        Statement on Form S-1, filed November
                                        13, 1995 and incorporated herein by
                                        reference).

                              99.2      Form of Indenture entered into December
                                        1, 1995 between the Corporation and
                                        Boatmen's Trust Company (filed as
                                        Exhibit 4.1 to Metropolitan's Amendment
                                        No. 1 to Registration Statement on Form
                                        S-1, filed November 13, 1995 and
                                        incorporated herein by reference).

                              99.3      Specimen Subordinated Note relating to
                                        the 10% Subordinated Notes due December
                                        31, 2001 filed as Exhibit 99.1 to
                                        Metropolitan's Registration Statement on
                                        Form S-1, filed October 20, 1995 and
                                        incorporated herein by reference).

                              99.4      The Restated Loan Agreement by and
                                        between the Huntington National Bank and
                                        the Corporation dated as of October 16,
                                        1996 (filed as Exhibit 99.4 to
                                        Metropolitan's Amendment No. 1 to
                                        Registration Statement on Form S-1,
                                        filed October 18, 1996 and incorporated
                                        herein by reference).

                                       37
<PAGE>   38


** Indicates that the exhibit is a management contract or a compensatory plan or
   arrangement.

                  (b) Reports on Form 8-K.

                             On November 12, 1997 the Corporation filed a
                             Current Report on Form 8-K to report, under Item 5,
                             that on October 28, 1997, its Board of Directors
                             authorized a 2-for-1 split of the Corporation's
                             common stock, to be effected in the form of a 100%
                             stock dividend to shareholders of record on
                             November 24, 1997.


                                       38
<PAGE>   39


                                   SIGNATURES

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

         METROPOLITAN FINANCIAL CORP.



                             By: /s/ David G. Lodge
                                ------------------------------------------
                                      David G. Lodge,
                                      President,
                                      Assistant Secretary,
                                      Assistant Treasurer, and Director

                             Date:     March 30, 1998
                                  ----------------------------------------

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



                             By: /s/ David G. Lodge
                                ------------------------------------------
                                      David G. Lodge,
                                      President,
                                      Assistant Secretary, Assistant Treasurer,
                                      and Director (Principal Financial and
                                      Accounting Officer)

                             Date:      March 30, 1998
                                  ----------------------------------------


                              Robert M. Kaye, Chairman of the Board and Director
                              (Principal Executive Officer); Malvin E. Bank,
                              Secretary, Assistant Treasurer, and Director;
                              David P. Miller, Treasurer, Assistant Secretary
                              and Director; Robert R. Broadbent, Director;
                              Marjorie M. Carlson, Director; Lois K. Goodman,
                              Director; Marguerite B. Humphrey, Director; James
                              A. Karman, Director; Ralph D. Ketchum, Director;
                              Alfonse M. Mattia, Director.



                              By:     /s/ David G. Lodge
                                  ----------------------------------------
                                      David G. Lodge
                                      Attorney-in-Fact

                             Date:      March 30, 1998
                                  ----------------------------------------




                                       39


<PAGE>   40







                                  EXHIBIT INDEX

Exhibit
Number     Description
-------   -----------

3.1       Articles of Incorporation of Metropolitan,(incorporated by reference
          to Exhibit 3.1 to Metropolitan's Registration Statement on Form S-1
          filed with the Securities and Exchange Commission on October 20,1995
          (Registration No.33-98380), as amended).

3.2       Code of Regulations of Metropolitan (incorporated by reference to
          Exhibit 3.2 to Metropolitan's Registration Statement on Form S-1 filed
          with the Securities and Exchange Commission on October 20, 1995
          (Registration No. 33-98380),as amended).

10.1      Incentive Pay Plan

10.2      Metropolitan Financial Corp. 1997 Stock Option Plan (filed as Exhibit
          A to Metropolitan's Definitive Proxy Statement, filed March 27, 1998,
          and incorporated herein by reference).

13        1997 Annual Report to Shareholders.

21        List of subsidiaries of Metropolitan(filed as Exhibit 21 to
          Metropolitan's Form 10-K. filed March 28, 1996 and incorporated herein
          by reference).

24        Powers of Attorney.

27        Financial Data Schedule.

99.1      Specimen Subordinated Note relating to the 9 5/8% Subordinated Notes
          due January 1, 2005 (found at Sections 2.2 and 2.3 of the Form of
          Indenture filed as Exhibit 4.1 to Metropolitan's Amendment No. 1 to
          Registration Statement on Form S-1, filed November 13, 1995 and
          incorporated herein by reference).

99.2      Form of Indenture entered into December 1, 1995 between the
          Corporation and Boatmen's Trust Company (filed as Exhibit 4.1 to
          Metropolitan's Amendment No. 1 to Registration Statement on Form S-1,
          filed November 13, 1995 and incorporated herein by reference).

99.3      Specimen Subordinated Note relating to the 10% Subordinated Notes due
          December 31, 2001 filed as Exhibit 99.1 to Metropolitan's Registration
          Statement on Form S-1, filed October 20, 1995 and incorporated herein
          by reference).

99.4      The Restated Loan Agreement by and between the Huntington National
          Bank and the Corporation dated as of October 16, 1996 (filed as
          Exhibit 99.4 to Metropolitan's Amendment No. 1 to Registration
          Statement on Form S-1, filed October 18, 1996 and incorporated herein
          by reference).