SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
[ ]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended                 December 31, 1997
                          ------------------------------------------------------

                                     - OR -

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                   to
                                ---------------      -----------------

Commission file number:   0-27126
                          -------
                          First Colorado Bancorp, Inc.
             (Exact name of Registrant as specified in its charter)

                Colorado                                       84-1320788
--------------------------------------                       -------------------
       (State or other jurisdiction of                       (I.R.S. employer
      of incorporation or organization)                      identification no.)

  215 S. Wadsworth Boulevard, Lakewood Colorado                   80226
  ---------------------------------------------                   -----
   (Address of principal executive offices)                     (Zip code)

Registrant's telephone number, including area code:           (303) 232-2121
                                                              --------------
Securities registered pursuant to Section 12(b) of the Act:       None
                                                              --------------
Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of class)

         Indicate  by check mark  whether  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  Registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  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. [ ]

         Registrant's  voting stock trades on the Nasdaq  National Market System
under the symbol "FFBA." The aggregate  market value of the voting stock held by
non-affiliates  of registrant,  based upon the closing price of such stock as of
March 24, 1998 ($28.4375 per share), was $478.5 million.

         As of March 24, 1998,  registrant had 16,826,798 shares of Common Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Parts II and IV -- Portions of  registrant's  Annual Report to Stockholders
     for the fiscal year ended December 31, 1997.

2.   Part III -- Portions of registrant's  Proxy Statement for Annual Meeting of
     Stockholders to be held on May 4, 1998.


<PAGE>



                                     PART I

Item 1.  Business
-----------------

Business of the Company

         First Colorado Bancorp,  Inc. (the "Company") is a Colorado corporation
organized in September  1995,  at the direction of the Board of Directors of the
First  Federal Bank of Colorado  (the "Bank") to  facilitate  the  conversion of
First Savings Capital,  M.H.C. (the "Mutual Holding Company") from the mutual to
stock form of ownership  and to acquire and hold all of the capital stock of the
Bank  (collectively,   the  "Conversion  and  Reorganization").   Prior  to  the
consummation  of the Conversion and  Reorganization,  the Mutual Holding Company
was the majority stockholder of the Bank and upon consummation of the Conversion
and  Reorganization,  the Mutual  Holding  Company  was merged with and into the
Bank.  The  Company  acquired  the Bank as a wholly  owned  subsidiary  upon the
consummation  of the  Conversion  and  Reorganization  on December 29, 1995.  In
connection with the Conversion and  Reorganization,  the Company sold 13,403,798
shares of its  common  stock to the public in an initial  public  offering  (the
"Offering") and issued 6,619,539  shares in exchange for the outstanding  shares
of the Bank  held by  persons  other  than the  Mutual  Holding  Company.  As of
December 31, 1997, the Company had total assets of $1.6 billion,  total deposits
of $1.2 billion,  and stockholders'  equity of $209.3 million, or 13.5% of total
assets.

         The primary  activity of the Company is holding the common stock of the
Bank. The Company is therefore a unitary savings and loan holding  company.  The
Company has no significant  assets other than all of the  outstanding  shares of
Bank Common Stock,  the note  evidencing the Company's $10.5 million loan to the
Bank's  Employee  Stock  Ownership  Plan  ("ESOP")  and the  portion  of the net
proceeds from the Offering retained by the Company,  which have been invested in
a $3.6  million  loan to the  Bank  and in  deposits  in the Bank and in a stock
repurchase  program resulting in the repurchase of 3.7 million shares of Company
common stock for $58.9 million (3.3 million  shares with a cost of $53.6 million
at December 31, 1997).  The Company  neither owns nor leases any  property,  but
instead uses the  premises,  equipment and furniture of the Bank. At the present
time,  the Company  does not intend to employ any persons  other than  executive
officers  who are also  executive  officers of the Bank,  and the  Company  will
utilize the support  staff of the Bank from time to time.  Additional  employees
will be hired as  appropriate  to the extent the Company  expands or changes its
business in the future.

         Management believes that the holding company structure will provide the
Company with additional flexibility to diversify, should it decide to do so, its
business  activities through existing or newly formed  subsidiaries,  or through
acquisitions  of or mergers  with other  financial  institutions  and  financial
services  related  companies.

Proposed Merger with Commercial Federal Corporation

         On March 9, 1998,  the  Company  approved  an  Agreement  of Merger and
Reorganization  ("Merger Agreement") with Commercial Federal Corporation whereby
the Company will merge with Commercial Federal Corporation and each share of the
Company's  common stock will be  exchanged  for a certain  amount of  Commercial
Federal  Corporation  common stock in accordance with the Merger  Agreement (the
"Merger"). The Merger will be submitted for approval by the stockholders of the

                                        1

<PAGE>



Company at a special  meeting of  stockholders  anticipated  to be held later in
1998.  There can be no  assurance  that all  conditions  contained in the Merger
Agreement  (including approval by the stockholders of the Company and Commercial
Federal Corporation, and regulatory approval) will be met.

Business of the Bank

         The  Bank  is a  federally-chartered  stock  savings  bank,  originally
chartered  by the  State  of  Colorado  as the  Cooperative  Building  and  Loan
Association   on  April  25,  1885.  In  connection   with  the  Conversion  and
Reorganization,  the Bank  changed its name from First  Federal  Savings Bank of
Colorado  to its  current  name  and  became a wholly  owned  subsidiary  of the
Company. The Bank is believed to be the oldest savings institution headquartered
in Colorado.  A federal  charter was granted to the Bank in 1934,  the same year
that deposit accounts became  federally  insured and the Bank became a member of
the Federal Home Loan Bank ("FHLB")  System.  The Bank's deposits are insured by
the Federal Deposit Insurance Corporation ("FDIC") under the Savings Association
Insurance  Fund  ("SAIF"),  and the Bank is  regulated  by the  Office of Thrift
Supervision ("OTS").

         The  principal  business  of the  Bank  is the  acceptance  of  savings
deposits from the general  public and the  origination  and purchase of mortgage
loans for the purpose of  constructing,  financing  or  refinancing  one-to-four
family residences and other improved residential and commercial real estate. The
Bank is also active in the  origination of home equity loans.  The Bank's income
is derived  largely  from  interest  on  interest-earning  assets such as loans,
mortgage-backed securities and investments.  Its principal expenses are interest
paid on deposits and  borrowings,  operating  expenses and  provisions  for loan
losses.

Year 2000 Compliance

         The Company recognizes that the arrival of the Year 2000 poses a unique
worldwide  challenge to the ability of all systems to recognize  the date change
from  December  31,  1999 to January  1, 2000 and,  like  other  companies,  has
assessed and is repairing its computer  applications  and business  processes to
provide for their continued  functionality.  An assessment of external  entities
which it interfaces with, such as vendors,  counterparties,  customers,  payment
systems, and others, is ongoing.  Until such assessments are complete, it is not
possible  to predict  the affect on the  Company of  noncompliance  by  external
entities.

         The Company expects that the principal  costs will be those  associated
with the  remediation and testing of its computer  applications.  This effort is
under way and is  following  a  process  of  inventory,  scoping  and  analysis,
modification,  testing and certification, and implementation. A major portion of
these costs will be met from existing  resources through a  reprioritization  of
technology development initiatives,  with the remainder representing incremental
costs.

         The Company does not anticipate  that the related overall costs will be
material to any single year.

Market Area and Competition

         The Bank is authorized to make real estate loans  throughout the United
States. The Bank's primary lending area is the Denver  metropolitan area and the
Western  Slope of  Colorado  communities  served by the Bank's  offices in Grand
Junction, Delta and Montrose. The Bank has no significant loan concentrations in
any one part of its primary lending area.


                                        2

<PAGE>



         The  Colorado  real  estate  market  was  generally  depressed  in  the
mid-to-late  1980's. The market,  however,  has shown improvement in the 1990's,
but whether the  recovery  will  continue is  dependent  upon  general  economic
conditions, not just in Colorado, but in the United States as a whole.

         The  Bank  faces  strong  competition  in  its  attraction  of  savings
deposits,  which  are its  primary  source  of  funds  for  lending,  and in the
origination of real estate loans.  The Bank's  competition for savings  deposits
and loans  historically  has come from other thrift  institutions and commercial
banks  located in the Bank's  market area.  The Bank also competes with mortgage
banking  companies for real estate  loans,  and faces  competition  for investor
funds from  short-term  money market  securities  and corporate  and  government
securities.  During recent periods the Bank has also experienced  withdrawals of
deposit funds which it believes are being invested in the stock market.

         The Bank  considers its primary market area to consist of the following
Colorado counties: Denver, Adams, Arapahoe,  Jefferson,  Boulder, Douglas, Mesa,
Delta and Montrose.

         The Bank competes for loans by charging  competitive interest rates and
loan fees,  remaining  efficient  and  providing a wide range of services to its
customers.  The  Bank's  goal is to be the best  "consumer  bank" in the area it
serves. The Bank offers all consumer banking services such as checking accounts,
certificates of deposit,  retirement  accounts,  consumer and mortgage loans and
ancillary  services such as safe deposit boxes,  convenient offices and drive-up
facilities,  automated teller machines, credit cards, check guarantee cards, and
overdraft  protection.  These  services help the Bank compete for deposits.  The
Bank  offers  competitive  rates on  deposits  but does not  attempt  to pay the
highest rates in its market area.

         Based upon total assets,  the Bank was the largest  thrift  institution
based in the State of Colorado as of December 31, 1997. As of December 31, 1997,
one other thrift  institution and 46 commercial banks were  headquartered in the
Denver  metropolitan  area.  The Bank also  competes  with several  other larger
financial  institutions,  headquartered  outside  of  Colorado,  which  maintain
offices in the Bank's market area. These competitors may be able to offer better
loan  rates  from  time to time  due to their  size,  financial  resources,  and
competitive strategy.

         Legislative  and  regulatory  measures  in the  past two  decades  have
significantly expanded the range of services which thrift institutions can offer
the public, such as demand deposits,  trust services and consumer and commercial
lending.  These changes,  combined with increasingly  sophisticated  depositors,
have  dramatically  increased  competition  for  savings  dollars  among  thrift
institutions and other types of investment entities,  as well as with commercial
banks in  regard to  loans,  checking  accounts  and  other  types of  financial
services.  In addition,  large  conglomerates and investment  banking firms have
entered the market for financial  services.  Such  legislation has increased the
competition  between commercial banks and thrift  institutions by allowing banks
to acquire healthy thrift institutions, imposing similar capital requirements on
banks  and  thrift  institutions,  and  placing  certain  investment  and  other
regulatory  restrictions  on  thrift  institutions  which are  similar  to those
imposed on banks. Thus, in the future, the Bank, like other thrift institutions,
will face increased  competition to provide savings and lending services and, in
order to remain competitive,  will have to be innovative and knowledgeable about
its market, as well as to continue to exert effective controls over its costs.


                                        3

<PAGE>



Investment Strategy

         The Bank has adopted an  investment  strategy  designed to help control
the Bank's  interest rate risk,  while  maintaining  profitability  and reducing
credit risk. The Bank invests its funds  primarily in mortgage loans  receivable
and mortgage  products,  such as  mortgage-backed  securities  and  asset-backed
securities. The Bank's strategy is to first invest its funds in loans secured by
real estate  located in its primary market area. The Bank's first priority is to
originate  adjustable rate mortgage ("ARM") loans,  predominately on residential
properties and to a lesser extent on commercial real estate,  whenever  possible
for its own  portfolio.  The Bank also  originates for its own portfolio 15 year
fixed-rate residential mortgages on which interest is paid on a bi-weekly basis.
These mortgages have a relatively  short average life of approximately 12 years,
and help reduce the Bank's long term interest rate risk. When interest rates are
rising, the demand for ARM loans increases. When the Bank is unable to originate
a sufficient amount of ARM loans or 15 year fixed-rate  mortgage loans, the Bank
purchases  ARM  loans in the  secondary  market.  When  whole  ARM loans are not
available in the  secondary  market,  the Bank's  third  priority is to purchase
mortgage-backed  securities  backed  by ARM loans or other  acceptable  mortgage
collateral.  Pending such  purchases,  the Bank invests its funds in  short-term
investments,  such  as  U.S.  government  and  agency  securities,  asset-backed
securities,  non-government  securities and corporate bonds rated AAA or higher,
and certificates of deposit.

         The Bank's net interest income will vary, depending upon the difference
between  the amount of income that it  receives  from its loan,  mortgage-backed
securities  and  investment  portfolios  and its cost of  funds.  A  significant
portion of the Bank's loan portfolio consists of long-term real estate loans and
mortgage-backed  securities with interest rate features which, while variable to
some degree,  do not vary as rapidly or to the same extent as the Bank's cost of
funds.  Consequently,  the Bank is  vulnerable  to future  increases in interest
rates which, if significant, may have a material adverse affect on its financial
condition and results of operations.

         In order to reduce the Bank's interest rate risk exposure, the Bank has
sold  essentially  all fixed-rate 30 year mortgage loans it originates  into the
secondary   market.   The  Bank  has  also   developed  its  consumer   lending,
concentrating  in the area of home equity  loans.  This  strategy is designed to
improve and  stabilize its  operational  results to counter the volatile cost of
its funds and the mismatch between its relatively  long-term,  fixed-rate assets
and  short-term,  rate sensitive  liabilities.  The principal  objective of this
strategy is to  restructure  assets to lessen the potential  adverse  effects of
interest rate volatility on earnings, while maintaining high quality (low credit
risk) assets and improving profits.

         For further information,  see "Management's Discussion of 1997 Results"
in the Annual Report to Stockholders for the year ended December 31, 1997.

Lending and Mortgage-Backed Securities Activities

         Loan and Mortgage-Backed  Securities Portfolio Composition.  The Bank's
loan and mortgage-backed  securities portfolio composition consists primarily of
conventional  fixed-rate  and  adjustable-rate  first  mortgage loans secured by
one-to-four family residences and, to a lesser extent,  multi-family  residences
and  commercial  real  estate.  As of December  31,  1997,  the Bank's total net
portfolio  of  loans  and  mortgage-backed  and  other  asset-backed  securities
outstanding  (the "loan  portfolio")  was $1,381.0  million,  of which  $1,213.1
million,  or 87.8% was secured by one-to-four family residential  dwellings.  At
that same date,  $74.6  million,  or 5.4% of the loan  portfolio  was secured by
multi-family  dwellings,  and $80.1  million,  or 5.8% of the loan portfolio was
secured by non-residential commercial real estate.


                                        4

<PAGE>



         The Bank is active  in  making  second  mortgage  loans on  one-to-four
family residential properties, which constituted $147.4 million, or 10.7% of the
loan  portfolio at December 31, 1997. To a lesser  extent,  the Bank  originates
construction loans, primarily for one-to-four family residential properties, and
at December 31, 1997, such loans  constituted  $16.1 million or 1.2% of the loan
portfolio.  The Bank does not actively offer  commercial  business loans, and at
December  31,  1997,  such  loans  constituted  $314,000  or  0.02%  of the loan
portfolio.

         Mortgage loans in the Bank's portfolio  generally  include  due-on-sale
clauses  that  provide  the  Bank  with the  contractual  right to deem the loan
immediately due and payable in the event that the borrower  transfers  ownership
of the property without the Bank's consent.

         The Bank also invests in mortgage and other asset-backed securities. As
of December 31, 1997, total  mortgage/asset-backed  securities aggregated $216.4
million, or 15.7% of the Bank's loan portfolio. A portion of the mortgage-backed
securities  portfolio  as of December 31, 1997 was insured or  guaranteed  as to
principal by the Federal Home Loan Mortgage Corporation  ("FHLMC"),  the Federal
National  Mortgage  Association  ("FNMA") or the  Government  National  Mortgage
Association ("GNMA").

                                        5

<PAGE>



         Analysis of Loan and Mortgage-Backed  Securities Portfolios.  Set forth
below is  selected  data  relating  to the  composition  of the Bank's  loan and
mortgage-backed  securities  portfolios  by type of loan and type of security on
the dates indicated.
<TABLE>
<CAPTION>
                                                                        As of December 31,
                             -------------------------------------------------------------------------------------------------------
                                   1993                  1994                 1995                  1996                1997
                             -----------------  --------------------- ------------------- ------------------------------------------
                             Balance   Percent     Balance    Percent    Balance Percent     Balance    Percent    Balance  Percent
                             -------   -------  ------------ -------- ---------- -------- ----------   -------- ----------- --------
Type of Loan:                                                       (Dollars in Thousands)
<S>                       <C>          <C>      <C>          <C>      <C>        <C>      <C>          <C>       <C>        <C>
Conventional,
VA and FHA real estate
 loans(1):
  Construction............  $ 16,822     1.62%   $  28,525     2.45%   $  30,731    2.47% $   27,931      2.08% $    16,098    1.17%
  One- to four-family.....   458,311    44.05      567,621     48.78     736,240   59.28     855,992     63.75      964,629   69.85
  Multi-family............    71,361     6.86       76,217      6.55      71,965    5.79      73,543      5.48       70,388    5.10
  Nonresidential..........    50,943     4.90       70,695      6.08      67,329    5.42      66,918      4.98       70,909    5.13
Commercial loans..........       174     0.02          271      0.02         491    0.04         283      0.02          314    0.02
Consumer loans:
  Savings account.........     4,392     0.42        3,731      0.32       4,657    0.37       5,252      0.39        5,028    0.36
  Home improvement........    12,737     1.22       19,053      1.64      23,356    1.88      30,403      2.27       30,516    2.21
  Automobile..............     5,270      .51        7,263      0.62       8,404    0.68      10.233      0.76        7,511    0.54
  Unsecured open-end......     1,537      .15        1,744      0.15       4,415    0.36       5,099      0.38        4,918    0.36
  Other...................       585      .05          937      0.08       1,090    0.09       1,498      0.11        3,813    0.28

Less:
  Loans in process........    (7,083)   (0.75)      (9,056)    (0.78)    (11,440)  (0.92)     (9,758)    (0.73)      (4,650)  (0.34)
  Deferred loan
    origination
    fees and costs........    (4,211)   (0.41)      (3,748)    (0.32)     (3,153)  (0.25)     (2,020)    (0.15)        (156)  (0.01)
  Allowance for
    loan losses...........    (3,575)   (0.34)      (3,310)    (0.28)     (2,926)  (0.24)     (3,850)    (0.29)      (4,716)  (0.34)
                           --------- --------   ---------     ------  ---------   -----   ---------     -----   ----------  ------

    Total loans, net......   606,543    58.30%     759,943    65.31%     931,159  74.97%   1,061,524    79.05%    1,164,602  84.33
                           ---------  -------    ---------   ------    ---------  -----    ---------   ------     --------- ------

Mortgage- and asset-
  backed securities, net..   433,870    41.70%     403,694    34.69%     310,886  25.03%     281,289    20.95%      216,382  15.67%
                           ---------   ------    ---------    -----    ---------  -----    ---------   ------     --------- ------
   Loans and mortgage -
     and asset-backed
     securities, net......$1,040,413   100.00%  $1,163,637   100.00%  $1,242,045 100.00%  $1,342,813   100.00%   $1,380,984 100.00%
                           =========   ======    =========   ======    ========= ======    =========   ======     ========= ======
</TABLE>
--------------------------
(1)      Includes first mortgage and home equity loans.

                                        6

<PAGE>



         One-to-Four Family Mortgage Loans. The Bank offers first mortgage loans
secured by one-to-four  family  residences in the Bank's  primary  lending area.
Typically,  such  residences  are single  family homes that serve as the primary
residence of the owner.  As of December 31, 1997,  87.8% of the Bank's loans and
mortgage-backed  and other  asset-backed  securities  receivable were secured by
one-to-four family residential real estate mortgages.  The Bank currently offers
ARM loans with  interest  rates that adjust every six months with a maximum rate
increase cap of 1% per adjustment, and a lifetime rate increase cap of 4% to 6%.
Some of these ARM loans are fixed for three or five years  with rates  adjusting
semi-annually  or annually  after the initial  term.  The interest  rates on the
Bank's ARM loans are based  primarily on the  one-year  U.S.  Treasury  Constant
Maturity  Treasury rate. As of December 31, 1997, six month,  one year and three
year ARM loans originated by the Bank constituted 79.4%,  17.0%, and 3.6% of the
originated ARM loan portfolio, respectively. ARM loans are originated for a term
of up to 30 years. The Bank generally originates  one-to-four family residential
mortgage  loans in amounts  up to 85% of the  appraised  value of the  mortgaged
property, but will consider loan-to-value ratios of up to 97% if the loan amount
exceeding the 85% loan-to-value ratio is insured by a private mortgage insurance
("PMI") company. The Bank usually charges an origination fee of 0.5% (1/2 point)
of the loan amount on one to-four family ARM loans. Even in the current economic
environment  which has caused a decrease in the overall level of interest rates,
the Bank continues to see  significant  interest in ARM loans.  The Bank retains
the ARM loans it originates for its loan portfolio.

         The Bank also offers 10, 12, 15 and 30 year fixed rate mortgage  loans.
Interest rates charged on fixed rate loans are competitively priced based on the
FNMA/FHLMC daily pricing of one-to-four family mortgages.  Loan origination fees
on these loans are generally 0.75% to 1.0% of the loan amount. One type of fixed
rate 15 year  mortgage  loan offered by the Bank is the  bi-weekly  loan,  which
features  bi-weekly  mortgage  payments.  These  bi-weekly  payments  cause  the
principal of the mortgage  loan to be repaid more  rapidly than  traditional  15
year mortgage loans and therefore cause the borrower to pay less interest during
the lifetime of the bi-weekly  loan than would be paid for a traditional 15 year
mortgage loan made at the same interest  rate.  The Bank  currently  retains all
loans with terms of less than 15 years to maturity,  regular amortized,  and all
15 year bi-weekly  loans,  for its loan portfolio and attempts to sell its fixed
rate non-biweekly  loans of 15 years and more and its bi-weekly loans with terms
of more than 15 years in the secondary market.

         The Bank originates second mortgage loans and home equity loans secured
by one-to-four family residences.  These loans generally are originated as fixed
rate loans with terms of from five to ten years.  An origination  fee is charged
on non-owner occupied  properties,  while most of these loans are originated for
costs only.  The loans are  generally  subject to an 80% combined  loan-to-value
limitation,  including any other outstanding mortgages or liens. The Bank's most
popular  second  mortgage loan is a ten year fixed rate loan which is originated
for retention in the Bank's loan portfolio.  Based upon experience,  these loans
have an average life of 6.6 years.  The Bank also originates a revolving line of
credit secured by one-to-four  family  residences.  As of December 31, 1997 home
equity loans constituted 10.7% of the Bank's loan portfolio.

         Multi-Family Mortgage Loans. The Bank originates,  to a limited extent,
fixed rate and adjustable rate multi-family  mortgage loans secured primarily by
apartment  buildings  located in its primary  lending  area.  As of December 31,
1997,  $74.6  million,  or  5.4%  of the  Bank's  loan  portfolio  consisted  of
multi-family  residential loans. These loans are generally made in amounts up to
75% of the appraised value of the mortgaged property.  In making such loans, the
Bank evaluates the mortgage  primarily on the net operating  income generated by
the real  estate  to  support  the debt  service.  The Bank also  considers  the
financial resources and income level of the borrower,  the borrower's experience
in owning or managing similar  property,  the  marketability of the property and
the Bank's lending experience, if any, with the

                                        7

<PAGE>



borrower.  An origination fee of 1% to 2% is usually charged on such loans.  The
largest multi-family loan as of December 31, 1997, had an outstanding balance of
$3.1  million and was  secured by a 182 unit  retirement  center  located in the
Denver metropolitan area.

         Commercial Real Estate. The Bank also originates commercial real estate
loans secured by properties  located  within its primary market area. The Bank's
commercial  real estate loans are permanent  loans secured by improved  property
such as office buildings,  retail stores,  including shopping malls,  industrial
facilities and other  non-residential  buildings.  The Bank generally originates
commercial real estate loans with terms of 10 to 15 years and balances generally
under $2.0  million.  As of December  31,  1997,  the Bank had loans  secured by
commercial  real  estate  totalling  $80.1  million,  or 5.8% of the Bank's loan
portfolio.  Eighteen of the commercial real estate loans had principal  balances
outstanding of over $1.0 million as of December 31, 1997. The largest commercial
real estate loan was secured by a bank building in Wheatridge,  Colorado, with a
loan balance of $3.7 million at December 31, 1997.  Commercial real estate loans
are  generally  originated  in amounts  ranging from 65% to 75% of the appraised
value of the mortgaged  property.  The Bank makes both adjustable and fixed rate
commercial real estate loans. The adjustable rate loans have amortization  terms
of up to 20 years,  and most have balloon  payments after 10 years.  The rate of
interest  on these  loans  is tied to  either  the  prime  rate or the  Constant
Maturity Treasury Index.  Fixed rate commercial real estate loans generally have
10 to 15 year terms, and some are balloon loans.

         Construction  Loans. The Bank's  construction  loan portfolio  consists
primarily of residential  construction loans with initial terms of six months to
one year.  Land  acquisition  and  development  loans are also made on a limited
basis. The  construction  loans made by the Bank have an adjustable rate tied to
the prime rate, adjusted monthly. Generally, such loans are repaid or refinanced
by  permanent  loans when the  property  is  completed  or sold.  A majority  of
construction  loans are made on properties that are presold.  Construction loans
constituted  $16.1 million,  or 1.2% of the Bank's loan portfolio as of December
31, 1997.

         Consumer  Loans.  Federal  savings  associations  are permitted to make
secured and unsecured  consumer loans up to 35% of their assets. In addition,  a
savings  association  has lending  authority  above the 35% category for certain
consumer loans, such as home equity loans,  property  improvement loans,  mobile
home loans and loans secured by savings accounts. Consumer loans, including home
improvement  loans,  amounted  to  51.8  million,  or 3.8%  of the  Bank's  loan
portfolio as of December 31, 1997.

         The Bank has engaged in consumer  lending for the past 18 years and had
a specialized consumer loan department for 12 years. The Bank's consumer lending
consists   primarily  of  home  equity  loans  secured  by  one-to-four   family
residential  properties.  These loans are described  above under "- One-to- Four
Family Mortgage Loans" and are included in the table  describing the Bank's loan
portfolio as loans secured by one-to-four family residential property.  The Bank
also offers unsecured consumer loans, unsecured lines of credit, savings account
loans, and automobile loans.

         Commercial  Business  Loans.  Regulations  authorize  the  Bank to make
secured or unsecured loans for commercial,  corporate, business and agricultural
purposes.  The aggregate amount of such loans  outstanding may not exceed 10% of
the Bank's assets.  In addition,  another 10% of total assets may be invested in
commercial  equipment  leasing.  The Bank  does not  actively  offer  commercial
business loans. As of December 31, 1997,  $314,000,  or 0.02% of the Bank's loan
portfolio was classified as commercial business loans.


                                        8

<PAGE>



         Loan Underwriting  Risks.  While commercial real estate,  construction,
commercial   business  and  consumer  loans  provide   benefits  to  the  Bank's
asset/liability management program and reduce exposure to interest rate changes,
such loans may entail  significant  additional  credit and  interest  rate risks
compared  to  residential   mortgage   lending.   Commercial   real  estate  and
construction  mortgage loans may involve large loan balances to single borrowers
or groups of related  borrowers.  In addition,  the payment  experience on loans
secured by income producing  properties is typically dependent on the successful
operation  of the  properties  and thus may be  subject  to a greater  extent to
adverse  conditions  in  the  real  estate  market  or in the  general  economy.
Construction lending is generally considered to involve a higher level of credit
risk than one-to-four  family  residential  lending due to the  concentration of
principal in a limited  number of loans and borrowers and the effects of general
economic  conditions on real estate developers and managers.  Construction loans
may  involve  additional  risks  attributable  to the fact that  loan  funds are
advanced upon the security of the project under construction.  Moreover, because
of the uncertainties  inherent in estimating  construction costs, delays arising
from labor problems, material shortages, and other unpredictable  contingencies,
it is relatively  difficult to evaluate accurately the total loan funds required
to  complete a  project,  and  related  loan-to-value  ratios.  Because of these
factors,  the analysis of  prospective  construction  loan projects  requires an
expertise that is different in significant  respects from the expertise required
for  residential  mortgage  lending.  The Bank seeks to minimize  these risks by
lending primarily to established  customers and generally restricting such loans
to its primary market area.  Consumer loans have  historically  tended to have a
higher rate of default than residential mortgage loans, although the Bank's loan
loss  experience to date on consumer  loans has been  favorable in comparison to
industry averages.

         There are, due to the  unseasoned  nature of ARM loans in the industry,
risks  resulting  from  increased  costs to the borrower as a result of periodic
repricing.  Despite  the  benefits  of ARM loans to the  Bank's  asset/liability
management  program,  ARMs pose  potential  additional  credit risks,  primarily
because as interest rates rise, the  underlying  payment by the borrower  rises,
increasing the potential for default. At the same time, the marketability of the
underlying property may be adversely affected by higher interest rates.

         Mortgage-Backed   and  Other   Asset-Backed   Securities.   The  Bank's
mortgage-backed   securities,   or   pass-through   certificates,   represent  a
participation interest in a pool of single-family  mortgages,  the principal and
interest  payments on which are passed from the  mortgage  originators,  through
intermediaries (generally  quasi-governmental  agencies) that pool and repackage
the participation  interest in the form of securities,  to investors such as the
Bank. Such  quasi-governmental  agencies that guarantee the payment of principal
and interest to investors  include the FHLMC,  GNMA, or the FNMA.  Pass- through
certificates  typically  are  issued  with  stated  principal  amounts,  and the
securities  are backed by pools of mortgages that have loans with interest rates
and  maturities  that are  within a  specified  range.  The  underlying  pool of
mortgages  can be composed  of either  fixed rate  mortgage  loans or ARM loans.
Mortgage-backed  securities are generally referred to as mortgage  participation
certificates or pass-through  certificates.  As a result, the interest rate risk
characteristics  of the  underlying  pool of  mortgages,  (i.e.,  fixed  rate or
adjustable  rate) as well as prepayment  risk, are passed on to the  certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying  mortgages.  Mortgage- backed securities issued by FHLMC, FNMA
and GNMA make up a majority  of the  pass-through  market.  Generally,  the Bank
purchases   mortgage-backed   securities   guaranteed   by  GNMA  and  FNMA  and
participation  certificates issued by the FHLMC. GNMA mortgage-backed securities
are  certificates  issued and backed by the GNMA and are secured by interests in
pools of mortgages which are fully insured by the Federal Housing Administration
("FHA") or partially  guaranteed by the Veterans'  Administration  ("VA"). FHLMC
mortgage-backed  securities are participation certificates issued and guaranteed
by the

                                        9

<PAGE>



FHLMC and secured by interests in pools of conventional  mortgages originated by
savings  associations.  See  "-  Investment  Activities"  regarding  the  Bank's
investment in structured notes.

         Mortgage-backed  securities  provide for monthly  payments of principal
and interest and  generally  have  contractual  maturities  ranging from five to
thirty years.  However, due to expected repayment terms being significantly less
than the underlying  mortgage loan pool  contractual  maturities,  the estimated
lives of these securities could be significantly shorter.

         The Bank also purchases  mortgage-backed  securities and collateralized
mortgage obligations ("CMOs") issued by government agencies, private issuers and
financial  institutions,  some of which are qualified under the Internal Revenue
Code of 1986,  as  amended  (the  "Code")  as Real  Estate  Mortgage  Investment
Conduits ("REMICs").  CMOs and REMICs (collectively CMOs) have been developed in
response to investor concerns regarding the uncertainty of cash flows associated
with the prepayment option of the underlying  mortgagor and are typically issued
by governmental agencies, governmental sponsored enterprises and special purpose
entities, such as trusts, corporations or partnerships, established by financial
institutions or other similar  institutions.  Some CMO instruments are most like
traditional  debt  instruments  because they have stated  principal  amounts and
traditionally  defined  interest-rate  terms.  Purchasers  of certain  other CMO
instruments  are entitled to the excess,  if any, of the issuer's  cash inflows,
including  reinvestment  earnings,  over the cash  outflows for debt service and
administrative   expenses.   These  mortgage  related  instruments  may  include
instruments  designated  as  residual  interests,   which  represent  an  equity
ownership  interest in the underlying  collateral,  subject to the first lien of
the  investors in the other classes of the CMO.  Certain  residual CMO interests
may be riskier  than many  regular CMO  interests  to the extent that they could
result in the loss of a portion of the original investment. Moreover, cash flows
from residual  interests are very sensitive to prepayments and, thus,  contain a
high degree of interest-rate risk.

         At December 31, 1997, all of the Bank's investment in CMOs consisted of
regular interests.  As of December 31, 1997, the Bank's CMOs did not include any
residual interests or interest-only or principal-only securities. As a matter of
policy,  the Bank does not invest in residual interests of CMOs or interest-only
and  principal-only  securities.  The CMOs held by the Bank at December 31, 1997
consisted  of floating  rate and fixed rate  tranches.  The  interest  rate of a
majority of the Bank's floating-rate securities adjusts monthly and provides the
institution with net interest margin protection in an increasing market interest
rate environment.  The securities are backed by mortgages on one-to-four  family
residential  real estate and have  contractual  maturities  up to 30 years.  The
securities  are  primarily  PACs and TACs  (Planned  and  Targeted  Amortization
Classes)  which are  designed  to  provide a  specific  principal  and  interest
cash-flow.

         Privately  issued CMOs tend to have greater  prepayment and credit risk
than those issued by  government  agencies or government  sponsored  enterprises
(e.g.,  FHLMC, FNMA, and GNMA) generally because they often are secured by jumbo
loans  (i.e.,  loans with  aggregate  outstanding  balances  above the limit for
purchases by FHLMC or FNMA).  At December  31,  1997,  the Bank had CMOs with an
aggregate carrying amount (including  discounts and premiums) of $163.6 million,
of which $135.0 million,  or 82.5% were privately issued. To minimize the credit
risk of private  issued  CMOs,  the Bank only  purchases  those CMOs rated AA or
better by one of the rating agencies.

         Mortgage-backed  securities  generally  yield less than the loans which
underlie  such  securities   because  of  their  payment  guarantees  or  credit
enhancements which offer nominal credit risk. In addition,  mortgage-backed  and
related  securities  are more liquid than  individual  mortgage loans and may be
used  to  collateralize  borrowings  of the  Bank in the  event  that  the  Bank
determined to utilize borrowings as a

                                       10

<PAGE>



source of funds.  Mortgage-backed  securities insured or guaranteed by the GNMA,
FNMA or the FHLMC (except interest-only  securities or the residual interests in
CMOs) are  weighted  at no more  than  20.0% for  risk-based  capital  purposes,
compared to a weight of 50.0% to 100.0% for residential loans.
See "Regulation of the Bank - Regulatory Capital Requirements."

         During the most recent declining  interest rate  environment,  the Bank
experienced   significant   prepayments  of  both  fixed-  and   adjustable-rate
mortgage-backed  securities.  Such circumstances generally make it difficult for
the Bank to  reinvest  the cash  flow  from  these  securities  into  comparable
yielding investments, thereby decreasing its yield.

         As  of   December   31,   1997,   government   insured  or   guaranteed
mortgage-backed  securities  and CMOs  amounted to $54.5  million or 3.9% of the
loan portfolio, and $161.9 million or 11.7% of the loan portfolio, respectively.
The CMOs  purchased  by the Bank are  generally  in the first or second  tranche
priorities with a two to five year average life based upon prepayment  schedules
and carried a weighted  average coupon of 6.53% and a weighted  average expected
maturity of 51 months as of December 31, 1997.

         In addition,  the Bank periodically  purchases  AAA-rated  asset-backed
securities,  generally  secured by credit card receivables and automobile loans.
The Bank's  investment  policy  limits the  maturity of these  securities  to an
average life of three years.  No  asset-backed  securities  were included in the
Bank's loan portfolio as of December 31, 1997.

         The   following   table   presents  the  Bank's   mortgage-backed   and
asset-backed   securities  at  the  dates   indicated.   Securities   classified
held-to-maturity and available-for-sale are carried at amortized cost and market
value, respectively.
<TABLE>
<CAPTION>
                                                                                       As of December 31,
                                                                         ----------------------------------------------
                                                                           1995               1996               1997
                                                                         --------         ----------           --------
                                                                                    (Dollars In Thousands)
<S>                                                                      <C>                <C>                <C>
Federal Home Loan Mortgage
   Corporation.................................................          $ 39,168           $ 47,366           $ 29,631
Federal National Mortgage Association..........................            23,263             30,862             23,787
Government National Mortgage Association ......................               520                419                285
Collateralized mortgage obligations and
   other mortgage-backed securities............................           243,024            200,004            161,505
Asset-backed securities........................................             2,292                 --                 --
                                                                         --------         ----------           --------
                                                                          308,267            278,651            215,208
Allowance for losses...........................................              (171)              (181)              (153)
Unamortized premiums, net......................................             2,790              2,819              1,327
                                                                         --------           --------           --------
     Total.....................................................          $310,886           $281,289           $216,382
                                                                          =======            =======            =======
</TABLE>



         During periods of rising  mortgage  interest rates, if the coupon rates
of the underlying  mortgages are less than the prevailing  market interest rates
offered  for  mortgage  loans,  refinancings  generally  decrease  and  slow the
prepayment of the underlying  mortgages and the related securities.  Conversely,
during periods of falling  mortgage  interest  rates, if the coupon rates of the
underlying  mortgages  exceed the prevailing  market  interest rates offered for
mortgage loans, refinancing generally increases and

                                       11

<PAGE>



accelerates  the  prepayment  of  the  underlying   mortgages  and  the  related
securities.  Under such  circumstances,  the Bank may be subject to reinvestment
risk because to the extent that the Bank's mortgage-related  securities amortize
or prepay  faster than  anticipated,  the Bank may not be able to  reinvest  the
proceeds of such repayments and prepayments at a comparable  rate. The declining
yields  earned during recent  periods is a direct  response to falling  interest
rates in fiscal 1993 and the first part of fiscal 1994 as well as to accelerated
prepayments.  At December 31,  1997,  of the $216.4  million of  mortgage-backed
securities   (including  CMOs),   $131.7  million  were  secured  by  fixed-rate
securities and $84.7 million were secured by adjustable-rate securities.

         Loans to One  Borrower.  Savings  associations  are subject to the same
limits as those  applicable  to national  banks,  which  under  current law have
lending  limits in an amount equal to 15% of unimpaired  capital and  unimpaired
surplus  on an  unsecured  basis  and  an  additional  amount  equal  to  10% of
unimpaired  capital  and  unimpaired  surplus  if the loan is secured by readily
marketable  collateral.  However, the Bank's policy has been to limit loans to a
single  borrower  to 10% of  capital  and to  require  approval  of the Board of
Directors for aggregation of loans to one borrower  greater than $1 million.  As
of December 31, 1997,  the Bank's loan to one borrower  limit was $20.9 million.
The lending limits to one borrower has not adversely affected the Bank's ability
to conduct its operations,  particularly because it does not typically make real
estate  development  and  construction  loans which carry  large  balances.  The
largest  aggregation  of loans to one  borrower  at  December  31, 1997 was $8.0
million   consisting  of  one  construction  loan,  five  land  acquisition  and
development  loans,  one office building loan and five single family loans.  The
second largest  aggregation of loans to one borrower was $6.1 million secured by
four office and retail  properties in the Denver  metropolitan  area.  The third
largest  aggregation  of loans to one borrower  was $5.9  million  secured by 10
office and retail properties in the Denver metropolitan area. The fourth largest
aggregation  of loans to one borrower was $5.8 million  secured by ten apartment
properties in Boulder,  Colorado.  The fifth largest aggregation of loans to one
borrower was $5.6 million  secured by four  apartment  properties  in the Denver
metropolitan area.

         Loan  Maturity  Schedule.   The  following  table  sets  forth  certain
information  as of December  31,  1997,  regarding  the dollar  amount of loans,
mortgage-backed  securities, and asset-backed securities in the Bank's portfolio
based on their maturities.  The table includes scheduled  principal payments and
estimated prepayments,  which totalled $250.9 million, $307.6 million and $341.0
million for the years ended  December 31, 1995,  1996,  and 1997,  respectively.
Demand  loans,  loans  having no stated  schedule  of  repayments  and no stated
maturity, and overdrafts are reported as due in one year or less. Adjustable and
floating  rate loans are included in the period in which they mature,  and fixed
rate loans are included in the period in which the final contractual  payment is
due.



                                       12

<PAGE>
<TABLE>
<CAPTION>
                                                                              At December 31, 1997
                                                ------------------------------------------------------------------------------------
                                                              Over One        Over            Over Five
                                                               Through        Three            Through
                                                  One Year      Three        Through             Ten       Over Ten
                                                   or Less      Years      Five Years           Years       Years          Total
                                                   -------      -----      ----------           -----       -----          -----
                                                                            (In Thousands)
<S>                                               <C>          <C>          <C>                <C>          <C>          <C>
1-4 family first mortgage loans:
  Adjustable rate..........................       $195,330     $219,757     $112,715           $122,784     $ 77,127    $   727,713
  Fixed rate...............................         85,530      113,357       83,680            101,074       22,689        406,330
Other residential and all
  nonresidential:
  Adjustable rate.........................           3,918        8,847       10,390             85,205        3,773        112,133
  Fixed rate...............................          5,290        3,024        3,562             18,899           --         30,775
Second mortgage and home equity loans......         20,397       32,206       26,290              9,301           --         88,194
Consumer loans.............................          7,732        9,868        1,374                256           --         19,230
Commercial business loans..................             98          216           --                 --           --            314
Deferred loan origination
  fees and costs...........................             --           --           --                 --           --          1,172
Allowance for loan and MBS loss............             --           --           --                 --           --         (4,877)
                                                   -------      -------     --------           --------     --------    ----------
  Loans and mortgage-backed
  and other asset-backed
  securities, net..........................       $318,295     $387,275     $238,011           $337,519     $103,589     $1,380,984
                                                   =======      =======      =======            =======      =======      =========
</TABLE>




         The  following  table  sets  forth the  dollar  amount of all loans and
mortgage-backed  and asset- backed  securities due after December 31, 1997, that
have  pre-determined  (or  fixed)  interest  rates and which  have  floating  or
adjustable interest rates.
                                         Fixed              Adjustable
                                         Rate                  Rate
                                         ----                  ----
                                                (In Thousands)
Real estate mortgage.............      $346,285               $640,598
Second mortgage..................        67,797                     --
Consumer.........................        11,498                     --
Commercial.......................           216                     --
                                        -------                -------

 Total...........................      $425,796               $640,598
                                        =======                =======


         Loan  Solicitation and Processing.  The Bank actively solicits mortgage
loan  applications  from existing or past customers,  customer  referrals,  real
estate brokers,  contractors, and call-ins and walk-ins to its offices. The Bank
has loan officers who originate mortgage,  consumer,  commercial real estate and
construction  loans.  The Bank also advertises in local newspapers for first and
second  mortgage  loans,  home equity and  consumer  loans.  One-to-four  family
residential  mortgage  loans are also  originated in areas of Colorado where the
Bank  does  not  have  offices  through  loan  originators  who are  independent
contractors and are compensated on a commission basis.  Since 1994, the Bank has
used  these  independent  contractors  to  originate  a  significant  volume  of
one-to-four  family  mortgage  loans  in  the  Denver  metropolitan  area.  Loan
applications  originated by independent  loan originators are in compliance with
the Bank's  underwriting  policies and procedures.  For the years ended December
31, 1995, 1996

                                       13

<PAGE>



and 1997, loans  originated  through  independent loan originators  approximated
$152.7 million, $135.6 million, and $145.8, respectively.

         Upon receipt of any loan  application  from a prospective  borrower,  a
credit  report  and  other   documentation   are  ordered  to  confirm  specific
information  relating to the loan  applicant's  employment,  income,  and credit
standing. An appraisal or other evaluation of the real estate intended to secure
the proposed loan is obtained. In connection with the loan approval process, the
Bank's loan officers analyze the loan  applications  and the property  involved.
All residential,  multi-family,  construction,  and commercial real estate loans
are  processed at the Bank's main  office,  while home equity and other types of
consumer loans may be processed at any of the Bank's offices.  Residential first
mortgage  loans  of  up  to  $400,000  may  be  approved  (with  varying  dollar
limitations) by one of seven underwriters  designated by the Board of Directors.
Residential  first mortgage loans over $400,000 also require the approval of the
Bank's  President or the Chief Executive  Officer.  Construction  and commercial
real  estate  loans up to $400,000  may be  approved  by a specific  senior vice
president;  loans for over  $400,000 up to $750,000 also require the approval of
the President.  Construction  and commercial real estate loans for over $750,000
require the approval of the Chief Executive Officer,  and those for $1.0 million
or more  require  the  approval  of the  Board  of  Directors  or the  Executive
Committee  of the  Board  of  Directors.  All  loans  purchased  by the Bank are
reviewed by senior lending  officers.  In connection with loans purchased by the
Bank, the Bank requires an appraisal,  in addition to the  information  required
for all loans originated by the Bank.

         Loan  applicants  are  promptly  notified  of the  decision of the Bank
orally or by a letter setting forth the terms and conditions of the decision. If
approved,  these terms and conditions  include the amount of the loan,  interest
rate  basis,  amortization  term,  a  brief  description  of real  estate  to be
mortgaged to the Bank, and the notice of requirement of insurance coverage to be
maintained  to protect  the Bank's  interest.  The Bank  requires  title,  fire,
casualty and flood (if applicable)  insurance on all properties  securing loans,
which  insurance  must be  maintained  during  the entire  term of the loan.  In
certain instances where the Bank is making a small second mortgage, and the Bank
holds the performing first mortgage,  it may not require a title policy, but the
Bank does  require  certain  informal  assurances  that there are no other liens
superior to the second mortgage.

         Loan Purchases and Sales. The Bank originates  adjustable rate and less
than 15 year fixed rate  residential  mortgage  loans,  commercial  real  estate
loans,  and  construction  loans for  retention in its loan  portfolio and sells
fixed rate  residential  mortgage  loans with terms of 15 years or longer in the
secondary  market.  These loans are sold without  recourse by the Bank. The Bank
also  purchases  mortgage-backed  securities  and  adjustable  rate  residential
mortgage loans in the secondary market.

         The Bank's  purchases in the secondary  market are  dependent  upon the
demand for mortgage credit in the local market area and the inflow of funds from
traditional  sources.  Purchases of loans  enable the Bank to utilize  available
funds more quickly and to obtain a yield higher than could generally be obtained
in the alternative  investment  vehicles.  The purchase of such loans is part of
the Bank's strategy to make its overall loan portfolio more sensitive to current
market conditions and interest rates.

         The Bank purchases owner-occupied  residential first mortgage ARM loans
that meet the Bank's  underwriting  standards,  which generally follow FHLMC and
FNMA  guidelines,  except  that the Bank  will  generally  purchase  loans up to
$500,000, which exceeds the limit up to which FHLMC and FNMA may purchase loans.
The majority of these loans  purchased are sold by the seller without  recourse.
It is the Bank's policy not to purchase loan packages secured by a concentration
of properties in a single subdivision or condominium project.

                                       14

<PAGE>




         The Bank reviews each purchased loan as if it were originating the loan
according to its underwriting standards. All loans must be documented, including
an original  appraisal that  substantiates  the value of the subject property at
the time of  origination  of the  loan.  The  Bank  obtains  from  the  seller a
duplicate copy of each original loan file, which generally  includes an executed
loan application and mortgage note,  financial  statements and credit reports of
the borrower,  appraisal and title insurance. The Bank may purchase a qualifying
loan  up to  $500,000  with  an  exposure  of up to 80%  based  on the  original
appraisal of the property.

         The Bank  purchases only ARM loans with interest rates that adjust on a
monthly,  semi-annual and annual basis. Most of the ARMs are indexed to interest
rates at a margin of 250 to 275 basis points above a recognized  index,  usually
the FHLB 11th District Cost of Funds or the One Year Constant Maturity Treasury.
This cost of funds index generally lags the current market  interest rates.  The
Bank does not purchase loans that provide for negative amortization.

         Most of the loans  purchased are secured by real estate located outside
of Colorado,  including California,  Wisconsin,  Illinois and the East Coast. At
December 31, 1997, the Bank's purchased loan portfolio totaled $69.2 million, or
5.9% of the loan  portfolio.  Of the  purchased  loan  portfolio at December 31,
1997, 12.4% are Colorado loans, while the majority,  78.7%, are California loans
(of which  approximately  0.7% were nonperforming at December 31, 1997) and 8.3%
are loans in the Midwestern United States.



                                       15

<PAGE>



         The  following   table  sets  forth  loans  and   mortgage-backed   and
asset-backed  securities  originated,  purchased,  sold,  and repaid  during the
periods indicated.
<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                     --------------------------------------------------------
                                                                         1995                  1996                 1997
                                                                       ---------             ---------           ---------
                                                                                    (In Thousands)
<S>                                                                   <C>                   <C>                 <C>
Loans receivable and mortgage-backed securities,
net at beginning of period.................................           $1,163,637            $1,242,045          $1,342,813
                                                                       ---------             ---------           ---------

Loans originated:
  One-to-four family residential...........................              232,136               235,352             237,374
  Multi-family residential and commercial real
       estate..............................................               10,660                35,504              28,715
  Construction loans.......................................               32,782                28,955              16,954
  Consumer loans...........................................               62,003                87,523              70,804
  Commercial loans.........................................                1,604                 1,549                 721
                                                                      ----------            ----------         -----------
    Total loans originated.................................              339,185               388,883             354,568
                                                                       ---------             ---------          ----------

Loans and MBS purchased:
  One-to-four family residential...........................               17,932                    --              29,808
  Consumer loans...........................................                   --                    --               5,221
  Mortgage-backed securities...............................                   --                34,149               2,220
                                                                     -----------            ----------          ----------
    Total loans and MBS purchased..........................               17,932                34,149              37,249
                                                                       ---------            ----------          ----------

Additions to revolving loans receivable                                    2,663                11,358               7,538
  and MBS, net.............................................

Loans sold:
  Whole loans sold.........................................               (6,468)              (25,258)            (15,283)
  Mortgage-backed securities...............................              (24,469)                   --                  --
                                                                      ---------           ------------           ---------
    Total loans and MBS sold...............................              (30,937)              (25,258)            (15,283)
                                                                      ----------           -----------          ----------

Loan and MBS principal repayments(1).......................             (250,899)             (307,554)           (340,980)

Other addition (reduction) to loans receivable and                           464                  (810)             (4,921)
                                                                      ----------             ---------         -----------
 MBS, net(2)...............................................
Net loan and MBS activity..................................               78,408               100,768              38,171
                                                                       ---------             ---------          ----------

Loans receivable and mortgage-backed
  securities, net at end of period.........................           $1,242,045            $1,342,813          $1,380,984
                                                                       =========             =========           =========
</TABLE>


----------------
(1)  Includes   principal   repayments  on   mortgage-backed   and  asset-backed
     securities.

                                       16

<PAGE>



(2)      Loans transferred to real estate owned or real estate in judgement, net
         of  amortization  of any  deferred  fees,  and net  change in loan loss
         reserves.

         Loan  Commitments.  The  Bank  generally  grants  commitments  to  fund
fixed-rate,  single-family  mortgage  loans  for  periods  of up to 30 days at a
specified term and interest  rate. The Bank also makes standby loan  commitments
for up to six months for which it receives a non-refundable commitment,  usually
equal to approximately 1% of the committed funds. These six month commitments do
not normally  specify a loan rate.  The Bank also  provides  standby  letters of
credit,  for which it  charges  fees based on 1% of the loan  amount.  The total
amount of the Bank's commitments to originate real estate loans, consumer loans,
and lines and letters of credit as of December 31, 1997 was $55.7 million.

         Loan Servicing and Servicing  Fees. The Bank retains  servicing on most
of the loans it sells to FHLMC and FNMA.  The Bank also  services all of its own
loans through a loan servicing  department  located at its main office. The loan
servicing  department  also oversees the adjustment  process on adjustable  rate
loans and performs clerical functions in regard to loan  foreclosures.  The loan
servicing   department  is  also   responsible  for  making   disbursements   on
construction  loans made by the Bank.  Site  inspections  are performed prior to
payment  of such  disbursements  in order  to  ascertain  that the  construction
process has progressed in accordance with the loan agreement.

         As of  December  31,  1995,  1996,  and 1997 the Bank  serviced  $144.1
million,  $145.6 million, and $132.2 million respectively,  of loans for others.
Loan servicing fees from the sold portfolio provided 0.34%,  0.16%, and 0.04% of
the Bank's net income for the fiscal years ended  December 31, 1995,  1996,  and
1997, respectively.

         Loan  Origination  and Other Fees.  In  addition to interest  earned on
loans, the Bank received loan origination and commitment fees for originating or
purchasing  loans.  Prior to January 1, 1988,  fees for  originating  loans were
deferred for amounts in excess of the Bank's estimated cost of origination. Fees
deferred  prior to 1988 are being  amortized to income over the average lives of
the related loans using the level-interest-yield method. Any unamortized fees on
loans sold are credited to income in the year the transaction  occurs. Loan fees
received and certain direct loan origination  costs incurred on or after January
1,  1988 are  deferred  and  recognized  as an  adjustment  of yield  using  the
level-interest-yield method over the contractual life of the loans.

         The  Bank's  loan   origination   fees   generally  are  1/2  point  on
adjustable-rate residential mortgages, 3/4 to 1 point for fixed-rate residential
mortgage  loans and 1 1/2 points for  construction  and  commercial  real estate
loans.  The total amount of deferred  loan fees and net unearned  discounts  and
premiums on loans  originated  and  purchased  as of December  31, 1997 was $0.2
million.

         The Bank also  receives  other fees and  charges  relating  to existing
loans, which include prepayment  penalties,  late charges, and fees collected in
connection with a change in borrower or other loan modifications. These fees and
charges have not constituted a material source of income.


                                       17

<PAGE>



         The following table shows loan fees and service charges received by the
Bank expressed as a percentage of gross and pre-tax income, as well as the total
amount of loan fees and service charges received by the Bank.
<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                      --------------------------------------
                                                                       1995           1996           1997
                                                                       ----           ----           ----
                                                                               (Dollars in Thousands)
<S>                                                                    <C>             <C>            <C>
Loan fees and service charges as a percentage
  of total interest income plus non-interest income..........          0.1%            0.2%           0.2%
Loan fees and service charges as a percentage of
  earnings before income taxes...............................          0.4%            0.8%           0.6%

Total loan fees and service charges..........................          $ 75            $167           $189

</TABLE>


         Non-Performing  Loans and Asset  Classification.  The Bank's collection
procedures provide that when a loan is 30 days or more delinquent,  the borrower
is contacted by mail and telephone and payment is requested.  If the delinquency
continues,  subsequent efforts will be made to contact the delinquent  borrower.
In certain instances, the Bank may modify the loan or grant a limited moratorium
on loan  payments to enable the  borrower  to  reorganize  his or her  financial
affairs. If the loan continues in a delinquent status for 60 days, the Bank will
initiate  foreclosure  proceedings.  Any  property  acquired  as the  result  of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until such time as it is sold or otherwise  disposed of by the Bank. At December
31, 1997, the Bank's real estate owned approximated  $225,000.  When real estate
owned is acquired,  it is recorded at the lower of the unpaid principal  balance
of the related loan or its fair market value.  Any write-down in the property is
charged to the allowance for REO losses.

         Loans are  reviewed on a regular  basis and are placed on a non accrual
status when, in the opinion of management, the collection of additional interest
is doubtful.  Residential mortgage loans are placed on a non-accrual status when
either  principal  or  interest  is 90 days or more  past  due.  Consumer  loans
generally  are  charged  off  when  the loan  becomes  over 90 days  delinquent.
Commercial  business and real estate loans are placed on nonaccrual  status when
the loan is 90 days or more past due.  Interest accrued and unpaid at the time a
loan is  placed  on  nonaccrual  status  is  charged  against  interest  income.
Subsequent  payments are either applied to the outstanding  principal balance or
recorded  as  interest  income,  depending  on the  assessment  of the  ultimate
collectibility of the loan.




                                       18

<PAGE>



         The following table sets forth  information  with respect to the Bank's
non performing assets for the periods indicated.  At such dates, the Bank had no
nonperforming loans (i.e., loans delinquent 90 days or more) accounted for on an
accrual basis.  During the periods  indicated the Bank had certain  restructured
loans within the meaning of Statement of Financial Accounting Standards ("SFAS")
No.  15.  Under  certain  economic  or legal  circumstances,  the Bank may grant
concessions to a borrower.  These concessions may include restructuring loans in
order to change  payment  terms,  reduce the stated  interest  rate,  reduce the
amount of interest  due, or extend the maturity  date.  The new or modified loan
constitutes  a  troubled  debt  restructuring  under  SFAS No.  15. The Bank has
adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan, and SFAS
No. 118,  Accounting by Creditors for Impairment of a Loan - Income  Recognition
and Disclosures.  Troubled debt restructurings involving a modification of terms
are accounted for in accordance with SFAS No. 114 and SFAS No. 118.
<TABLE>
<CAPTION>
                                                                                              As of December 31,
                                                                       -----------------------------------------------------------
                                                                           1993      1994           1995          1996       1997
                                                                       ------------  --------   ------------- ---------- ---------
                                                                                             (Dollars in Thousands)
<S>                                                                         <C>       <C>             <C>        <C>        <C>
Loans accounted for on a nonaccrual basis:
Mortgage loans:
 Permanent loans secured by one-to-four family dwelling units.......        $1,419    $  992          $1,706     $1,372     $1,966
 Commercial real estate and multi-family............................            --       199             205          5         --
 Non-mortgage loans:
   Commercial.......................................................            --        --              --         --         --
   Consumer.........................................................            60        49              49         80        147
                                                                                                                             -----

Total nonaccrual loans..............................................         1,479     1,240           1,960      1,457      2,113

Real estate owned and in judgment...................................         2,491     4,230           1,647      1,457        225

Nonaccruing federal funds sold......................................            --        --             382         --         --
                                                                            ------    ------          ------     ------     ------

Total nonperforming assets..........................................        $3,970    $5,470          $3,989     $2,914     $2,338
                                                                             =====     =====           =====      =====      =====

Troubled debt restructuring loans:
Mortgage loans:
  Permanent loans secured by one-to-four family dwelling units......        $   --    $   --          $   --     $   --     $   --
  Commercial real estate and multi-family...........................         7,465     5,250              --         --         --
                                                                             -----     -----           -----      -----      -----

Total restructured loans, net.......................................        $7,465    $5,250          $   --     $   --     $   --
                                                                             =====     =====           =====      =====      =====

Total nonaccrual loans to net loans receivable......................          0.24%     0.16%           0.21%      0.14%      0.18%

Total nonaccrual loans to total assets..............................          0.12%     0.10%           0.13%      0.10%      0.14%

Total nonperforming assets to total assets..........................          0.32%     0.42%           0.27%      0.19%      0.15%

Total restructured loans to total assets............................          0.61%     0.40%             --%        --%        --%

</TABLE>



         Management of the Bank regularly reviews the loan portfolio in order to
identify potential problem loans, and classifies any potential problem loan as a
special mention, substandard, doubtful, or

                                       19

<PAGE>



loss asset according to the OTS classification of asset  regulations.  Potential
problem  loans  that  had not  been  classified  or had  not  been  recorded  as
nonaccrual or troubled debt  restructuring were insignificant as of December 31,
1997.

         OTS  regulations  provide for savings  associations  to classify  their
loans  and  other  assets  as  substandard,  doubtful  or  loss  assets.  Assets
classified as substandard  are  inadequately  protected by the current net worth
and  paying  capacity  of  the  obligor  or the  pledged  collateral.  They  are
characterized by the distinct possibility that the association will sustain some
loss if the deficiencies are not corrected.  Assets  classified as doubtful have
all the  weaknesses  of those  classified  as  substandard  with the  additional
characteristic that the weaknesses make collection or liquidation in full highly
questionable   and  improbable.   Assets   classified  as  loss  are  considered
uncollectible  and of such little value that their continuance as assets without
the  establishment  of a specific  reserve is not warranted.  Assets that do not
currently expose a savings association to a sufficient degree of risk to warrant
classification  but do  possess  credit  deficiencies  or  potential  weaknesses
deserving management's close attention are designated "special mention." Special
mention assets have a potential  weakness or pose an unwarranted  financial risk
that, if not corrected,  could weaken the asset and increase risk in the future.
All classified assets are recorded at fair market value.

         Classified  Assets and Loss  Allowances.  The following  table provides
further  information  on the  Bank's  classified  and  nonperforming  assets and
allowances for losses on loans and REO.

<TABLE>
<CAPTION>
                                                                              As of December 31,
                                                                   ---------------------------------------
                                                                     1995            1996             1997
                                                                     ----            ----             ----
                                                                               (In Thousands)
<S>                                                                <C>             <C>              <C>
Substandard..............................................          $4,087          $8,603           $5,261
Loss.....................................................             778              --               --
                                                                   ------         -------          -------
    Total................................................          $4,865          $8,603           $5,261
                                                                    =====           =====            =====

Special Mention Assets...................................         $11,697          $6,138           $1,990
                                                                   ======           =====            =====

Allowance for losses on loans............................          $2,926          $3,850           $4,716
Allowance for losses on real estate owned................             912             691              523
                                                                    -----           -----            -----
    Total loss allowance.................................          $3,838          $4,541           $5,239
                                                                    =====           =====            =====
</TABLE>


         As of  December  31,  1997,  the Bank's  total  classified  and special
mention  assets with balances in excess of $500,000  totalled $5.2 million.  The
following is a summary of the Bank's  classified  assets with balances in excess
of  $500,000  as of  December  31,  1997,  or  later,  if such  information  was
available. All of the classified assets are either special mention,  substandard
or real  estate  owned.  The net  realizable  values or the fair values on these
classified  assets are  determined at least annually based on cash flow from the
properties and the condition of the local real estate market.


                                       20

<PAGE>



         Special Mention
         ---------------

         Denver Apartment  Complex.  The property is a 78 unit apartment complex
located in Denver, Colorado. The original balance on this loan was $1.3 million,
and the  origination  date was May 4, 1982. The loan is special  mention with an
interest rate of 7.6% and an outstanding balance of $1.15 million as of December
31, 1997.  The fair value of the property as of June 12, 1997 was $1.4  million.
The loan is classified because the loan rate was previously  modified to a below
market rate.  At December  31, 1997,  the loan was at a market rate and has been
performing since March 1992.

         Substandard
         -----------

         Dime Bank, FSB Pass Through Mortgage-Backed  Securities 1988 - 1A. This
mortgage-backed  security  was  issued  by  Dime  Bank,  FSB,  in  1988  and was
classified as special  mention during the first quarter of 1995. The Bank bought
a portion of the  security  with an  original  face  amount of $10.0  million in
November  1988 and a portion  with an original  face  amount of $5.5  million in
January 1990. The remaining  balances on these two portions of the security were
$2.6  million and $1.5  million,  respectively,  as of December  31,  1997.  The
securities  were  reclassified  substandard  during the  second  quarter of 1996
because  loans in  foreclosure  and real estate  owned  backing  the  securities
reached an unacceptable  level.  In addition,  Moody's has lowered the rating on
the security from an original rating of Aa2 to Baa1. Although credit support for
the  security has  diminished,  at January 23, 1998 there  apparently  was still
enough support to protect the senior piece of the security, which the Bank owns.
At December 31, 1997, the Bank had received all payments due on a timely basis.

         Allowance  for Losses on Loans.  In making loans,  the Bank  recognizes
that credit losses will be experienced and that the risk of loss will vary with,
among other things,  the type of loan being made,  the  creditworthiness  of the
borrower  over the term of the loan  and,  in the case of a  secured  loan,  the
quality of the security for the loan. The Bank's  management  evaluates the need
to establish  reserves against losses on loans and other assets each month based
on  estimated  losses on specific  loans and on any real estate held for sale or
investment  when a finding is made that a loss is estimable and  probable.  Such
evaluation  includes a review of all loans for which full collectibility may not
be reasonably assured and considers,  among other matters,  the estimated market
value of the  underlying  collateral of problem  loans,  prior loss  experience,
economic  conditions,  and overall portfolio  quality.  In addition,  management
provides a general  allowance for estimated loan losses that is not specifically
allocated to identified problem loans, based on several factors,  including loss
experience and business and economic conditions. These provisions for losses are
charged  against  earnings  in the  year  they  are  established.  Based on past
experience and future expectations, management feels that loan loss reserves are
adequate.  However, there can be no assurance that further additions will not be
made to the  allowance  for losses on loans or that such  losses will not exceed
the estimated amounts.

         As a result  of the  declines  in real  estate  market  values  and the
significant losses experienced by many financial institutions nationwide,  there
has been a greater  level of  scrutiny  by  regulatory  authorities  of the loan
portfolios  of  financial  institutions  nationwide,  undertaken  as part of the
examination  of the  institution  by the  FDIC,  OTS or other  federal  or state
regulators. Results of recent examinations indicate that these regulators may be
applying more conservative criteria in evaluating real estate values,  requiring
significantly  increased  provisions for loan losses. While the Bank believes it
has established its existing  allowance for loan losses in accordance with GAAP,
there  can be no  assurance  that  regulators,  in  reviewing  the  Bank's  loan
portfolio, will not request the Bank to significantly increase its allowance for
loan losses,  therefore  negatively affecting the Bank's financial condition and
earnings.


                                       21

<PAGE>



         The following table sets forth certain information regarding the Bank's
allowances for loan losses for the periods indicated.
<TABLE>
<CAPTION>
                                                                                   As of December 31,
                                                    ----------------------------------------------------------------------------
                                                         1993           1994            1995            1996           1997
                                                        ------         ------          -------         ------          -----
                                                                                        (Dollars in Thousands)
<S>                                                 <C>             <C>             <C>             <C>             <C>
Total loans outstanding(1) ......................   $   606,543     $   759,943     $   931,159     $ 1,061,524     $ 1,164,602
                                                    ===========     ===========     ===========     ===========     ===========

Average loans outstanding .......................   $   578,284     $   679,236     $   868,948     $   998,024     $ 1,110,336
                                                    ===========     ===========     ===========     ===========     ===========

Allowance for loan losses - beginning ...........   $     3,333     $     3,575     $     3,310     $     2,926     $     3,850
Acquired in Business Combination ................          --              --              --              --               269
Provision (credit) for loan losses(2) ...........           193            (411)           (495)          1,143            (739)
Recoveries ......................................           133             203             232              86           1,760
Charge-offs .....................................           (84)            (57)           (121)           (305)           (424)
                                                    -----------     -----------     -----------     -----------     -----------
Allowance for loan losses - ending ..............   $     3,575     $     3,310     $     2,926     $     3,850     $     4,716
                                                    ===========     ===========     ===========     ===========     ===========
Allowance for loan losses as a
  percentage of total loans outstanding .........          0.59%           0.44%           0.31%         0.36 %            0.40%
Allowance for loan losses as a
  percentage of non-performing loans ............           242%            267%            149%          264 %             223%
Net loans recovered (charged-off) as a percentage
  of average loans outstanding ..................          0.01%           0.02%           0.01%          (0.02)%          0.12%
</TABLE>


----------------
(1)      Excludes mortgage and other asset-backed securities.
(2)      The established  allowance for loan losses is predominately  related to
         real estate mortgage  loans.  As a result,  the activities of provision
         (credit) for losses, charge-offs, and recoveries are also predominately
         related to those same loans.


         The following table sets forth certain information regarding the Bank's
allowance for losses on real estate owned for the periods indicated.
<TABLE>
<CAPTION>
                                                                     As of December 31,
                                                --------------------------------------------------------
                                                   1993       1994         1995       1996        1997
                                                ---------   --------     --------   --------     -------
                                                                             (Dollars in Thousands)

<S>                                              <C>         <C>         <C>         <C>         <C>
Total real estate owned and in judgment, net .   $ 2,491     $ 4,230     $ 1,647     $ 1,457     $   225
                                                 =======     =======     =======     =======     =======

Allowance balances - beginning ...............   $ 1,907     $ 1,159     $ 1,105     $   912     $   691
Provision (credit) for losses ................       172         448         (95)          3        (114)
Charge-offs ..................................      (920)       (502)        (98)       (224)        (54)
                                                 -------     -------     -------     -------     -------
Allowance balances - ending ..................   $ 1,159     $ 1,105     $   912     $   691     $   523
                                                 =======     =======     =======     =======     =======

Allowance for losses on real estate owned
  and in judgment to net real estate owned
  and in judgment ............................        47%         26%         55%         47%        232%
</TABLE>




                                       22

<PAGE>



Investment Activities

         Income from  investment  securities  provides a  significant  source of
income for the Bank.  The Bank  maintains a portfolio of  investment  securities
such  as U.S.  government  and  agency  securities,  non-government  securities,
including corporate bonds and certificates of deposit securities (in addition to
the Bank's  mortgage-backed  and  asset-backed  securities  portfolio,  which is
discussed  above  under " -  Lending  Activities  -  Mortgage-Backed  and  Other
Asset-Backed  Securities".)  The  Bank is  required  by  federal  regulation  to
maintain a minimum  percentage of its  liquidity  base in the form of qualifying
long and short-term liquid assets.  Currently,  the liquidity requirement is 4%.
Qualifying  liquid  assets  include  certificates  of  deposit,  federal  funds,
banker's acceptances,  discount notes, commercial paper, time deposits and short
term  treasury and agency debt  securities,  all of which are subject to certain
creditworthiness  and ratings  criteria.  In  addition,  longer term  corporate,
agency  and  government   debt   securities  may  be  held  subject  to  similar
creditworthiness,  ratings and maturity  criteria.  As of December 31, 1997, the
Bank exceeded the 4% liquidity  requirement  with a liquidity ratio of 9.6%. The
balance of security  investments in excess of regulatory  requirements  reflects
management's  response to the  significantly  increasing  percentage  of savings
deposits  with short  maturities.  It is the intention of management to maintain
shorter  maturities in the Bank's investment  portfolio in order to better match
the interest rate sensitivities of its assets and liabilities.  However,  during
periods of rapidly declining  interest rates, the yield on such investments also
decline at a faster rate than does the yield on long-term investments.

         Investment  decisions are made within policy guidelines  established by
the Board of Directors  and the  Asset/Liability  Committee.  As of December 31,
1997, the Bank's investment portfolio,  including unamortized premiums, totalled
$79.9 million.

         At December 31, 1997, the Bank's  investments  included $9.1 million of
callable  Federal  Agency  instruments.  While  the  Bank  projects  that  these
instruments will be called before their stated maturity date, the Bank does have
the ability to hold these instruments to maturity.

         At  December  31,  1997,  the Bank  held no  step-up  bonds  which  are
considered structured notes by the OTS.

         The  Bank  classifies  its  investment,   mortgage-backed,   and  other
asset-backed securities in one of three categories: trading, available-for-sale,
or held-to-maturity.  Trading securities are bought and held principally for the
purpose of selling them in the near term.  Held-to-maturity securities are those
securities  in which the Bank has the  ability  and intent to hold the  security
until maturity. All other securities not included in trading or held-to-maturity
are classified as available-for-sale.

         Held to maturity  securities  are  recorded at cost,  adjusted  for the
amortization   or   accretion   of   premiums   or   discounts.    Trading   and
available-for-sale  securities  are recorded at fair value.  Unrealized  holding
gains and losses on trading  securities  are  included in  earnings.  Unrealized
holding gains and losses,  net of the related tax effect, on  available-for-sale
securities  are excluded from earnings and are reported as a separate  component
of  stockholders'  equity  until  realized.   Transfers  of  securities  between
categories  are recorded at fair value at the date of transfer.  Transfers  from
the held-to-maturity category are only appropriate in limited circumstances.

         Realized    gains   and   losses   for    securities    classified   as
available-for-sale  and held-to-maturity are recognized in earnings upon sale or
redemption at maturity. The specific identification method is used

                                       23

<PAGE>



to determine the cost of securities  sold.  Discounts or premiums are accredited
or amortized using the  level-interest-yield  method to the earlier of call date
or maturity of the related held-to-maturity security.

         The following table sets forth certain information regarding the Bank's
investments at the dates indicated.
<TABLE>
<CAPTION>

                                                                             As of December 31,
                                                    ---------------------------------------------------------------------
                                                        1993          1994          1995           1996          1997
                                                    ------------   -----------   -----------   -----------   ------------
                                                                               (In Thousands)
<S>                                                     <C>            <C>         <C>            <C>           <C>
Investment Securities:

U.S. government obligations......................       $ 20,999       $10,725     $   8,015      $     --      $     --
Federal agency obligations.......................         30,135        45,194        70,078        71,629         79,895
Obligations of state and political subdivisions..          1,004            --            --            --            --
Corporate notes..................................         25,188         5,016            --            --            --
Export/import notes..............................          4,062            --            --            --            --
Foreign bank obligations.........................            999         1,000            --            --            --
FHLMC stock......................................            372           249           418           552            --
FNMA stock.......................................            153           157           268           326            --
Other equity investments.........................             --            --            --           234            --
                                                       ---------     ---------     ---------     ---------   -----------

Total investment securities......................         82,912        62,341        78,779        72,741        79,895
                                                        --------        ------       -------       -------       -------

Other Investments:

FHLB of Topeka stock.............................          6,693         7,745         8,829         9,554        11,277
Federal funds sold...............................         25,800         1,000        80,483        15,000         8,100
Other interest-earning assets....................          4,159         7,828         6,097        12,777         8,587
Investment in property tax certificates..........             53            36            21             6            --
                                                        --------      --------      --------      --------   -----------

Total other investments..........................         36,705        16,609        95,430        37,337        27,964
                                                         -------        ------       -------       -------       -------
Total investments................................       $119,617       $78,950      $174,209      $110,078      $107,859
                                                         =======        ======       =======       =======       =======
</TABLE>

                                       24

<PAGE>



         The  following  table  sets forth  certain  information  regarding  the
carrying values,  weighted average yields and expected  maturities of the Bank's
investment securities portfolio as of December 31, 1997. Expected maturities may
differ from contractual  maturities,  because issuers may have the right to call
some  obligations  without  penalty.   Market  Value  adjustments   recorded  in
compliance  with SFAS No. 115 are now  considered  when computing the yields and
cost of securities.
<TABLE>
<CAPTION>
                                                            As of December 31, 1997
                        ----------------------------------------------------------------------------------------------------
                                                                                                       Total Investment
                        One Year or Less One to Five Years  Five to Ten Years   More Than Ten Years      Securities
                        Carrying Average Carrying Average   Carrying  Average     Carrying Average  Carrying Average Market
                          Value   Yield  Value    Yield       Value    Yield        Value   Yield    Value    Yield   Value
                         -------  ------ -------  -------    -------  -------     -------  -------  -------  ------- ------
                                                         (Dollars in Thousands)
<S>                     <C>      <C>    <C>        <C>       <C>      <C>       <C>       <C>      <C>       <C>    <C>
Investment
securities
held to maturity:
U.S. Government
  Obligations .......   $    --    --%     $  --     --%     $    --      --%    $    --     --%   $    --     --%  $    --
Federal Agency
  Obligations .......    73,944  5.79         --     --           --      --          --     --     73,942   5.79    73,952
Other
  Equity
  Investments .......        --    --         --     --           --      --          --     --         --     --        --
                        -------  ----    -------   ----      -------     ---     -------    ---    -------   ----    ------
     Total Held-To-
       Maturity
       Securities ...   $73,944  5.79%$       --     --%     $    --      --%    $    --     --%   $73,942   5.79%   $73,952
                        =======  ====    =======   ====      =======     ===     =======    ===    =======   ====    =======

Investment
Securities
Available-for-Sale:
U.S. Government
  Obligations .......   $    --    --%  $     --     --%     $    --     --%    $    --      --%   $    --      --%  $    --
Federal Agency
  Obligations .......     5,193  4.64        758   6.91           --     --          --      --      5,951    4.93     5,951
Other Equity
  Investments .......        --    --         --     --           --     --          --      --         --     --         --
                        -------  ----    -------   ----      -------   ----     -------     ---   --------   ----    -------
     Total Available-
       for-Sale
       Securities ...   $ 5,193  4.64%  $    758   6.91%     $    --     --%    $    --      --%   $ 5,951   4.93%  $  5,951
                        =======  ====    =======   ====      =======   ====     -======     ===    =======   ====    =======
     Total
       Investment
       Securities ...   $79,137  5.71%  $    758   6.91%     $  --       --%    $    --      --%   $79,895   5.73%  $ 79,903
                        =======   ====   =======   ====      =======   ====     =======     ===    =======  ====    ========
</TABLE>





                                       25

<PAGE>



Sources of Funds

         General.  Deposits are the major source of the Bank's funds for lending
and other investment purposes.  In addition to deposits,  the Bank derives funds
from loan and mortgage-backed securities principal repayments, and proceeds from
the sale of loans,  mortgage-backed  securities and investment  securities.  The
Bank has also  relied on  borrowings  from the FHLB of Topeka and as of December
31, 1997 had $122.4 million of such  borrowings  outstanding.  The Bank also has
derived funds from the issue of mortgage-backed bonds in 1988 and as of December
31, 1997 had $4.5 million of such bonds outstanding. See " - Borrowings" and " -
Subsidiaries and Joint Venture  Activity." Loan and  mortgage-backed  securities
payments are a relatively  stable  source of funds,  while  deposit  inflows are
significantly  influenced by general interest rates and money market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources. They also may be used on a longer term
basis for general business purposes.

         Deposits. The Bank offers a wide variety of deposit accounts,  although
a majority of such deposits are in fixed-term, market-rate certificate accounts.
Deposit account terms vary, primarily as to the required minimum balance amount,
the amount of time that the funds must  remain on  deposit,  and the  applicable
interest rate.

         Fixed-term  certificates  have been the primary sources of deposits for
the Bank and as of December 31, 1997, such certificates represented 58.2% of the
Bank's deposit accounts.  Fixed-term,  market-rate certificates with terms of 13
to 24 months are the largest individual source of deposit funds for the Bank and
as of December  31, 1997,  represented  237.4  million,  or 20.1% of the deposit
portfolio.  As of December  31,  1997,  $227.0  million,  or 19.2% of the Bank's
deposit  portfolio  consisted of money market rate deposit  accounts.  The third
largest  category  of  deposits  are  7  to  12  month  fixed-term   market-rate
certificates which constituted $205.4 million or 17.4% of the portfolio.

         The  Bank  also  offers  standardized  individual  retirement  accounts
("IRAs"),   as  well  as  qualified  defined  master  plans  for  self  employed
individuals. IRAs are marketed in the form of an 18-month variable interest rate
account  with a minimum  balance  of $1,000  with the rate  based on 90 day U.S.
Treasury  Bills and  three-year  fixed-rate  accounts with a minimum  balance of
$2,000,  with the rate based on three-year U.S.  Treasury Note. The rates adjust
quarterly.

         The Bank intends to continue to emphasize  retail  deposits,  including
checking,  certificates of deposit,  savings  accounts and IRAs. The Bank had no
brokered  certificates of deposit as of December 31, 1997.  Institutional  jumbo
certificates  of deposit may be solicited on a limited basis. As of December 31,
1997, the Bank had $33.4 million of Colorado State Deferred  Compensation  Funds
in deposit  accounts.  State employees can open accounts at the Bank and deposit
deferred compensation funds.

         The Bank  pays  interest  rates on its  certificate  accounts  that are
competitive in its market,  but does not attempt to pay the highest rates in its
market area. Interest rates on deposits are set bi-weekly by the Bank's division
managers committee, which consists of the Bank's seven senior officers, based on
a combination  of factors  including:  (i) the previous  week's deposit flows by
product;  (ii) a current survey of a selected group of competitors'  products of
similar term and type;  (iii) current  yields on U.S.  Treasury  offerings  with
terms  similar to the Bank's  products;  (iv) new  account  activity  during the
previous  week;  (v)  overall  cost of  deposits;  (vi)  external  data that may
influence interest rates, including securities markets trends, the policy of the
Board of Governors of the Federal Reserve System (the "Federal  Reserve Board"),
and federal government releases of statistics on national economic  performance,
inflation, and money supply; (vii) investment opportunities and loan demand; and
(viii) schedule of maturities by term.


                                       26

<PAGE>



         Deposit  Portfolio.  Deposits in the Bank as of December 31, 1997, were
represented by various types of savings programs described below.
<TABLE>
<CAPTION>
                                                                                                                   % of
                                  Original               Interest           Minimum                Balance         Total
Category                            Term                   Rate             Amount             (In Thousands)     Deposits
--------                            ----                   ----             ------             --------------     --------

<S>                                 <C>                   <C>            <C>                   <C>               <C>
NOW accounts                        None                   1.77%          $    100              $  116,764          9.87%
Regular savings                     None                   2.75                100                  94,490           7.99
Money market accounts               None                   4.22                100                 227,032          19.20
Noninterest deposits                None                     --                100                  56,575           4.78

Certificates of deposit:
Fixed term, fixed rate              1 - 3 months           4.91                500                  12,631           1.07
Fixed term, fixed rate              4 - 6 months           5.29                500                  58,204           4.92
Fixed term, fixed rate              7 - 12 months          5.60                500                 205,360          17.36
Fixed term, fixed rate              13 - 24 months         5.81                500                 237,445          20.08
Fixed term, fixed rate              25 - 36 months         5.57                500                  28,253           2.39
Fixed term, fixed rate              37 - 48 months         6.08                500                   7,259           0.61
Fixed term, fixed rate              49 - 120 months        6.21                500                 123,814          10.47
Fixed term, variable rate           25 - 36 months         6.23                500                   6,016           0.51
Jumbo certificates                                         5.94            100,000                   8,884           0.75
                                                                                                 ---------         ------
Total                                                                                           $1,182,727         100.00%
                                                                                                 =========         ======
</TABLE>


         Time Deposits by Rate and Time Maturity. The following table sets forth
the time deposits in the Bank classified by rates as of the dates indicated.
<TABLE>
<CAPTION>
                                                                   As of December 31,
                                             ---------------------------------------------------------------
                                                    1995                  1996                 1997
                                             -------------------   -------------------  --------------------
                                                                     (In Thousands)
Weighted Average Rate
<S>        <C>                                          <C>                  <C>                  <C>
   2.01 -  3.00%..........................              $      4             $       4            $       4
   3.01 -  4.00%..........................                12,942                    --                   --
   4.01 -  5.00%..........................               144,416               138,716               49,662
   5.01 -  6.00%..........................               327,268               401,190              557,749
   6.01 -  7.00%..........................               130,147               123,116               79,299
   7.01 -  8.00%..........................                11,911                   248                  161
   8.01 -  9.00%..........................                   875                   622                  651
   9.01 - 10.00%..........................                   665                   314                  334
  10.01% or more..........................                     5                     6                    6
                                                       ---------             ---------              -------
    Total.................................              $628,233              $664,216             $687,866
                                                         =======               =======              =======
</TABLE>




                                       27

<PAGE>



         Time  Deposit  Maturity  Schedule.  The  following  table sets forth by
various  rate  categories  the amount and the  periods to maturity of the Bank's
certificate accounts outstanding as of December 31, 1997.
<TABLE>
<CAPTION>
                                                                        As of December 31, 1997
                                                                           Amount Due Within
                                         ----------------------------------------------------------------------------------------
                                          Less than                                                  Greater than
                                           1 Year            1-2 Years            2-3 Years             3 Years          Total
                                         ----------          ---------            ---------           -----------      -------
                                                                           (In Thousands)
<S>                                     <C>                  <C>                 <C>                   <C>              <C>
Weighted Average Rate
  4.00% or less................         $        --          $       4           $       --            $       --       $      4
  4.01 - 5.00%.................              49,554                108                   --                    --         49,662
  5.01 - 6.00%.................             440,405             75,050               16,264                26,030        557,749
  6.01 - 7.00%.................               8,234              5,415               24,005                41,645         79,299
  7.01 - 8.00%.................                  63                 17                   81                    --            161
  8.01 - 9.00%.................                 110                541                   --                    --            651
  9.01 - 10.00%................                  --                334                   --                    --            334
  10.01% or more...............                  --                  6                   --                    --              6
                                            -------             ------               ------                ------        -------
    Total......................            $498,366           $ 81,475             $ 40,350               $67,675       $687,866
                                            =======            =======              =======                ======        =======
</TABLE>




         Jumbo  Certificate  Maturities.  The  following  table  indicates as of
December 31, 1997, the amount of the Bank's  certificates of deposit of $100,000
or more by time remaining until maturity.

          Maturity Period                                        Balance
          ---------------                                        -------
                                                              (In Thousands)

          Three Months or Less......................              $3,451
          Three Through Six Months..................               1,016
          Six Through Twelve Months.................               2,699
          Over Twelve Months........................               1,718
                                                                   -----
          Total.....................................              $8,884
                                                                   =====



                                       28

<PAGE>



         Deposit  Flow.  The  following  table  sets  forth the change in dollar
amount of savings  deposits in the various types of savings  accounts offered by
the Bank between the dates indicated.
<TABLE>
<CAPTION>
                                  Balance at   Percent    Balance at     Percent   Increase   Balance at    Percent    Increase
                                 December 31,    of      December 31,      of     (Decrease)  December 31,     of      (Decrease)
                                   1995       Deposits       1996       Deposits    1995-1996    1997       Deposits    1996-1997
                                ------------------------  ------------- ---------- ---------- ------------- ---------- ----------
                                                                                           (Dollars In Thousands)

<S>                               <C>             <C>      <C>              <C>     <C>        <C>           <C>       <C>
Noninterest bearing deposits....  $    45,393      4.20%    $   46,544       4.10%  $  1,151    $   56,575       4.78%    $10,031

NOW, Super NOW, and other
  transaction accounts..........      100,077      9.26        110,294       9.71     10,217       116,764       9.87       6,470
Money Market deposit accounts...      214,486     19.85        221,824      19.53      7,338       227,032      19.20       5,208
Regular savings accounts........       92,100      8.53         92,945       8.18        845        94,490       7.99       1,545
Less than 7 month fixed rate,
  fixed maturity deposits.......       70,868      6.56         67,004       5.90    (3,864)        70,835       5.99       3,831
7 - 12 month fixed rate,
  fixed maturity deposits.......       98,139      9.08        178,500      15.72     80,361       205,360      17.36      26,860
13 - 36 month fixed rate,
  fixed maturity deposits.......      271,949     25.18        245,158      21.58    (26,791)      265,698      22.46      20,540
13 - 36 month variable rate,
  fixed maturity deposits.......       62,431      5.78         44,022       3.88    (18,409)        6,016       0.51     (38,006)
Greater than 36 month fixed
  rate, fixed maturity
  deposits......................      119,491     11.06        121,437      10.69      1,946       131,073      11.08       9,636
Jumbo accounts and brokered
  deposits......................        5,355      0.50          8,095       0.71      2,740         8,884       0.75         789
                                   ----------    ------     ----------     ------     ------    ----------     ------     -------
     Total......................   $1,080,289    100.00%    $1,135,823    100.00%    $55,534    $1,182,727     100.00%    $46,904
                                    =========    ======      =========    ======      ======     =========     ======      ======
</TABLE>


                                        2

<PAGE>



         Deposit Activity. The following table sets forth the deposit activities
of the Bank for the periods indicated.
<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                   -------------------------------------------------------------------------------
                                                      1993             1994             1995              1996             1997
                                                     ------          -------           ------            ------           -----
                                                                        (In Thousands)

<S>                                                <C>            <C>                <C>              <C>               <C>
Deposits and accrued interest acquired.....        $162,236       $       --         $     --         $      --         $ 30,000

Deposits and accrued interest sold..........             --          (45,608)              --                --               --

Net deposits received,
   less deposits withdrawn..................          1,104              (25)          18,236            11,533          (29,208)

Interest credited...........................         30,975           32,537           43,366          $ 44,001         $ 46,112
                                                    -------           ------           ------           -------          -------

Net increase (decrease) in deposits.........       $194,315         $(13,096)         $61,602           $55,534         $ 46,904
                                                    =======          =======           ======            ======          =======
</TABLE>


         Borrowings.  Although  deposits are the Bank's primary source of funds,
the Bank's  policy  has been to utilize  borrowings  as an  alternative  or less
costly source of funds. The Bank obtains  advances from the FHLB of Topeka.  See
"Regulation  of the Bank - Federal Home Loan Bank  System."  These  advances are
collateralized  by the capital of the FHLB of Topeka  stock held by the Bank and
certain  of the  Bank's  mortgage  loans and  mortgage-backed  securities.  Such
advances are made pursuant to several  different credit programs,  each of which
has its own interest rate and range of  maturities.  The maximum amount that the
FHLB of Topeka will  advance to member  institutions,  including  the Bank,  for
purposes  other  than  meeting  withdrawals,  fluctuates  from  time  to time in
accordance  with the  policies  of the OTS and the FHLB of Topeka.  The  maximum
amount of FHLB of Topeka advances to a member  institution  generally is reduced
by borrowings from any other source. As of December 31, 1997, the Bank's FHLB of
Topeka advances totalled $122.4 million, representing 9.1% of total liabilities.
Of these  advances,  at December 31, 1997,  $38.4 million are at a rate of 5.95%
and  mature in 1998,  $4.0  million  are at a rate of 7.96% and  mature in 1999,
$32.0  million are at a rate of 6.93% and mature in 2000,  $1.0 million are at a
rate of 5.82% and mature in 2001,  and $47.0  million are at a rate of 6.21% and
mature in 2002.  The Bank has a blanket  pledge  with the FHLB of Topeka and has
pledged all of its stock in the FHLB and all otherwise unpledged or unencumbered
federal funds sold,  U.S.  agency  securities,  certain  qualifying  loans,  and
mortgage-backed securities to secure these advances as of December 31, 1997.

         In 1988, the Bank formed a finance subsidiary, First Savings Securities
Company  ("FSSC"),   for  the  sole  purpose  of  borrowing  funds  through  the
participation  in a REMIC issued by Ryland  Acceptance  Corporation.  REMICs are
bonds collateralized by mortgage-backed  securities. See "- Lending Activities -
Mortgage-Backed   and  Other  Asset-Backed   Securities"  for  a  more  detailed
discussion of REMICs and the risks related thereto. The original amount borrowed
through  the  REMIC  bond on March 1,  1988 and the  amounts  outstanding  as of
December 31, 1997 were $22.0 million and $4.5 million,  respectively.  The REMIC
bonds,  which  have  a  fixed  rate  of  interest  of  8.75%,  were  secured  by
mortgage-backed  securities  with carrying and market values of $4.9 million and
$5.2 million,  respectively,  as of December 31, 1997.  The original  bonds were
scheduled  to retire as follows:  $11.9  million in 2005,  $2.4 million in 2007,
$6.3 million in 2011 and $1.4 million in 2019; however, the actual timing of the
retirement  of the  REMIC  bonds is  dependent  upon  mortgage  prepayments  and
reinvestment  rates and,  as of  December  31,  1997,  all  remaining  bonds are
scheduled to mature in 2019. The increased  retirement of the REMIC bonds is due
to  accelerated  prepayments  of  the  underlying   mortgage-backed   securities
collateral due to the decrease in market interest rates.  Unamortized bond issue
costs amounted to $69,000 as of December 31, 1997.

                                       30

<PAGE>




         As of December  31,  1997,  the Bank had  unsecured  lines of credit in
place with two commercial  banks located in Colorado  through which the Bank may
borrow a total of $8.0 million.  The Bank utilizes  these lines of credit to buy
federal  funds in order to meet its short  term  liquidity  needs.  Longer  term
arrangements  for funds can be made with these  banks,  if needed,  on a secured
basis.

         The Bank has also borrowed funds in the past through the use of reverse
repurchase agreements,  although it did not have any such borrowings outstanding
during the fiscal years ended December 31, 1995, 1996, and 1997.

         The following tables set forth certain information regarding borrowings
by the Bank.

<TABLE>
<CAPTION>
                                                                        As of December 31,
                                                      -----------------------------------------------------------
                                                           1995                1996                   1997
                                                      --------------   --------------------   -------------------
<S>                                                        <C>                    <C>                    <C>
Weighted average rate paid on:
  FHLB advances.................................            6.549%                 6.285%                 6.369%
  REMIC issued..................................            8.750                  8.750                  8.750
  ESOP loan (1).................................            8.500                  8.750                  8.500
  Loan from Company (1).........................            5.540                  6.120                  6.000
</TABLE>

<TABLE>
<CAPTION>
                                                                     During the Year Ended December 31,
                                                         -------------------------------------------------------
                                                            1995                1996                   1997
                                                            ----                ----                   ----
                                                                          (In Thousands)
<S>                                                      <C>                    <C>                    <C>
Maximum amount of borrowings outstanding
at any month end during the period:
  FHLB advances.................................         $171,726               $138,415               $141,210
  REMIC issued..................................            6,743                  5,543                  5,009
  ESOP loan.....................................           13,404                 13,404                 12,063
  Loan from Company (1).........................           52,100                 52,100                  9,480

Maximum  amount  of  short-term  borrowings
outstanding  at any  month end with
respect to:
  FHLB advances.................................           77,555                 66,005                 59,405
</TABLE>


----------------
(1)     Payable to the Company.


Subsidiaries and Joint Venture Activity

         The Company has one wholly  owned  subsidiary,  the Bank.  The Bank has
three wholly owned subsidiary corporations, First Savings Investment Corporation
("FSIC"), First Savings Insurance Services ("FSIS") and First Savings Securities
Company ("FSSC").  The Bank is permitted to invest up to 2% of its assets in the
capital  stock of, or secured or unsecured  loans to,  subsidiary  corporations,
with an additional investment of 1% of assets when such additional investment is
utilized primarily for community development  purposes.  Under such limitations,
as of December 31, 1997, the Bank was  authorized to invest up to  approximately
$31.1 million in the stock of, or loans to, service corporations (based upon the
2%  limitation).  As of  December  31,  1997,  the net book  value of the Bank's
investment  in stock,  unsecured  loans,  and  conforming  loans in its  service
corporations was $3.2 million.


                                       31

<PAGE>



         First  Savings  Investment  Corporation.  The  Bank's  largest  service
corporation is FSIC,  with total assets of $2.6 million as of December 31, 1997.
The principal activities of this service corporation are investing in delinquent
real estate tax  certificates,  land  development,  and equity ownership of real
property.  The Bank is in the process of liquidating this service corporation in
an orderly manner,  which will take place over several years. Assets that remain
are as follows:

         (1)      In March 1995, 80,000 square feet of land with a book value of
                  $1.2 million, located adjacent to the main office of the Bank,
                  was transferred  from the Bank to FSIC. This land is leased to
                  General Mills  Restaurant  Group for the operation of an Olive
                  Garden Restaurant, which opened in April 1995.

         (2) Cash in the amount of $1.4 million.

         The Bank's net equity  investment  in FSIC as of December  31, 1997 was
$2.6 million.

         First Savings Insurance Services.  FSIS is a Colorado corporation which
in the past has been a  full-service  insurance  agency.  FSIS sold its casualty
insurance business in 1989, and now specializes in health,  life and credit life
insurance.  Beginning  in 1994,  FSIS began  offering  mutual  funds and annuity
products.  The Bank's net equity  investment  in FSIS at  December  31, 1997 was
$135,000.

         First  Savings  Securities  Company.  FSSC is a California  corporation
formed  expressly  to  participate  in  a  REMIC  issue  by  Ryland   Acceptance
Corporation  (see "-  Borrowings").  As of December 31, 1997,  the Bank had $4.5
million of borrowings  outstanding through the REMIC issue, which was secured by
$4.9 million of  mortgage-backed  securities.  As of December 31, 1997, FSSC had
$5.0  million  in assets  and a deficit  of $1.0  million.  FSSC  plans no other
activities in the immediate future.

         Under the OTS risk-based capital regulations,  a savings  association's
investments in and extensions of credit to any subsidiary  engaged in activities
not  permissible  for a national  bank must be deducted  from the  institution's
capital.  Because a  national  bank is not  permitted  to engage in real  estate
acquisition and development,  and the OTS has informed the Bank that investments
in  tax  certificates  are  not  permissible  for  national  banks,  the  Bank's
investment  in and loans to FSIC must be  deducted  from the  Bank's  capital in
calculating the minimum  required  capital ratios.  As of December 31, 1997, the
Bank's investments in and loans to subsidiaries required to be deducted from its
regulatory  capital  pursuant  to this  rule  were  $2.6  million,  all of which
consisted of investments and loans to FSIC.

Personnel

         As of December 31, 1997,  the Bank had 305 full-time  employees and 163
part-time  employees,  including 28 part-time security employees.  The employees
are not  represented  by a collective  bargaining  unit.  The Bank  believes its
relationship with its employees to be satisfactory.

Company Regulation

         General.  The  Company is a unitary  savings and loan  holding  company
subject to regulatory  oversight by the OTS. As such, the Company is required to
register  and  file  reports  with  the OTS and is  subject  to  regulation  and
examination by the OTS. In addition,  the OTS has enforcement authority over the
Company and its non-savings association  subsidiaries,  should such subsidiaries
be formed,  which also permits the OTS to restrict or prohibit  activities  that
are determined to be a serious risk to the subsidiary savings association.  This
regulation  and  oversight  is  intended  primarily  for the  protection  of the
depositors of the Bank and not for the benefit of stockholders of the Company.

                                       32

<PAGE>




         Qualified  Thrift  Lender Test.  As a unitary  savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank  satisfies  the Qualified  Thrift  Lender  ("QTL") test. If the Company
acquires  control of another savings  association as a separate  subsidiary,  it
would become a multiple savings and loan holding company,  and the activities of
the  Company  and any of its  subsidiaries  (other  than the  Bank or any  other
SAIF-insured   savings   association)   would  become  subject  to  restrictions
applicable to bank holding  companies unless such other  associations  each also
qualify  as a QTL  and  were  acquired  in a  supervisory  acquisition.  See  "-
Regulation of the Bank Qualified Thrift Lender Test."

         Restrictions on Acquisitions. The Company must obtain approval from the
OTS  before  acquiring  control  of any  other  SAIF-insured  association.  Such
acquisitions  are generally  prohibited if they result in a multiple savings and
loan holding company  controlling  savings  associations in more than one state.
However,  such  interstate  acquisitions  are permitted  based on specific state
authorization or in a supervisory acquisition of a failing savings association.

         Federal law  generally  provides that no "person,"  acting  directly or
indirectly or through or in concert with one or more other persons,  may acquire
"control," as that term is defined in OTS  regulations,  of a federally  insured
savings  institution  without  giving at least 60 days written notice to the OTS
and providing the OTS an  opportunity  to disapprove  the proposed  acquisition.
Such acquisitions of control may be disapproved if it is determined, among other
things,  that (i) the acquisition would substantially  lessen competition;  (ii)
the financial  condition of the acquiring  person might jeopardize the financial
stability  of  the  savings  institution  or  prejudice  the  interests  of  its
depositors;  or (iii) the  competency,  experience or integrity of the acquiring
person or the proposed  management  personnel  indicates that it would not be in
the  interest  of the  depositors  or the public to permit the  acquisitions  of
control by such person.

         Subject to appropriate regulatory approvals, a bank holding company can
acquire  control  of a  savings  association,  and  if  it  controls  a  savings
association,  merge or  consolidate  the assets and  liabilities  of the savings
association  with, or transfer  assets and  liabilities  to, any subsidiary bank
which is a member of the Bank  Insurance  Fund  ("BIF") with the approval of the
appropriate  federal  banking agency and the Federal  Reserve Board.  Generally,
federal  savings  associations  can  acquire  or  be  acquired  by  any  insured
depository institution.

         Federal  Securities Law. The Company is subject to filing and reporting
requirement by virtue of having its common stock registered under the Securities
Exchange  Act of  1934.  Furthermore,  Common  Stock  held  by  persons  who are
affiliates (generally officers,  directors,  and principal  stockholders) of the
Company may not be resold without registration or unless sold in accordance with
certain  resale  restrictions.  If the Company meets  specified  current  public
information  requirements,  each affiliate of the Company is able to sell in the
public  market,  without  registration,  a  limited  number  of  shares  in  any
three-month period.

Regulation of the Bank

         General. As a federally  chartered,  SAIF-insured  savings association,
the Bank is subject to  extensive  regulation  by the OTS and the FDIC.  Lending
activities  and other  investments  must comply with  various  state and federal
statutory  and  regulatory  requirements.  The Bank is also  subject  to certain
reserve requirements promulgated by the Federal Reserve Board.

         The OTS, in conjunction with the FDIC,  regularly examines the Bank and
prepares  reports for the  consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's

                                       33

<PAGE>



operations.  The Bank's  relationship  with its depositors and borrowers is also
regulated to a great extent by federal and state law, especially in such matters
as the  ownership  of savings  accounts  and the form and  content of the Bank's
mortgage documents.

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities  and  financial  condition,   in  addition  to  obtaining  regulatory
approvals  prior to entering into certain  transactions  such as mergers with or
acquisitions  of other savings  institutions.  This  regulation and  supervision
establishes a comprehensive  framework of activities in which an institution can
engage and is intended  primarily for the protection of the SAIF and depositors.
The  regulatory  structure  also  gives  the  regulatory  authorities  extensive
discretion in connection with their  supervisory and enforcement  activities and
examination  policies,  including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves.  Any change in such
regulations, whether by the OTS, the FDIC, or the Congress could have a material
adverse impact on the Company, the Bank, and their operations.

         Insurance of Deposit Accounts.  The Bank's deposit accounts are insured
by the SAIF to a maximum of $100,000 for each insured  member (as defined by law
and regulation).  The FDIC has the authority,  should it initiate proceedings to
terminate an institution's  deposit  insurance,  to suspend the insurance of any
such institution without tangible capital. However, if a savings association has
positive capital when it includes qualifying  intangible assets, the FDIC cannot
suspend deposit  insurance unless capital declines  materially,  the institution
fails to enter into and remain in  compliance  with an approved  capital plan or
the institution is operating in an unsafe or unsound manner.

         Regardless of an institution's capital level, insurance of deposits may
be  terminated  by the FDIC upon a finding that the  institution  has engaged in
unsafe or unsound  practices,  is in an unsafe or unsound  condition to continue
operations  or has violated  any  applicable  law,  regulation,  rule,  order or
condition imposed by the FDIC or the institution's primary regulator.

         The FDIC  charges an annual  assessment  for the  insurance of deposits
based on the risk a particular  institution poses to its deposit insurance fund.
Under this system,  a bank or thrift pays within a range of 23 cents to 31 cents
per  $100  of  domestic   deposits,   depending  upon  the  institution's   risk
classification.  This risk  classification is based on an institution's  capital
group and supervisory subgroup assignment.  In addition,  the FDIC is authorized
to  increase  such  deposit  insurance  rates,  on a  semi-annual  basis,  if it
determines  that such  action is  necessary  to cause the balance in the SAIF to
reach the designated  reserve ratio of 1.25% of  SAIF-insured  deposits within a
reasonable period of time. The FDIC also may impose special  assessments on SAIF
members to repay amounts borrowed from the U.S. Treasury or for any other reason
deemed  necessary by the FDIC.  The Bank's  federal  deposit  insurance  premium
expense for the year ended December 31, 1997, approximated $729,000.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted  assets,  (2) a leverage ratio (core capital) equal to
at least 3% of total  adjusted  tangible  assets,  and (3) a risk-based  capital
requirement equal to 8.0% of total risk-weighted assets.

         Savings  associations  with a greater than  "normal"  level of interest
rate  exposure  will,  in the future,  be subject to a deduction for an interest
rate risk ("IRR")  component  may be from  capital for  purposes of  calculating
their risk-based capital requirement. See "- Net Portfolio Value."


                                       34

<PAGE>



         As shown  below,  the Bank's  regulatory  capital  exceeded all minimum
regulatory capital requirements applicable to it as of December 31, 1997:

                                                             Percent of
                                                             Adjusted
                                          Amount              Assets
                                          ------              ------
                                           (Dollars in Thousands)
Tangible Capital:
Regulatory requirement..........        $ 23,239               1.50%
Actual capital..................         189,859              12.25
                                         -------              -----
      Excess....................        $166,620              10.75%
                                         =======              =====

Core Capital:
Regulatory requirement..........        $ 46,479               3.00%
Actual capital..................         194,110              12.49
                                         -------              -----
      Excess....................        $147,631               9.49%
                                         =======              =====

Risk-Based Capital:
Regulatory requirement..........        $ 66,355               8.00%
Actual capital..................         197,080              23.76
                                         -------              -----
      Excess....................        $130,725              15.76%
                                         =======              =====


         Net Portfolio  Value.  The OTS requires the  computation  of amounts by
which  the net  present  value  of an  institution's  cash  flows  from  assets,
liabilities, and off balance sheet items (the institution's net portfolio value,
or "NPV")  would  change in the event of a range of  assumed  changes  in market
interest rates.  The OTS also requires the  computation of estimated  changes in
net interest income over a four-quarter period. These computations  estimate the
effect of an  institution's  NPV and net interest  income of  instantaneous  and
permanent 1% to 4% increases  and  decreases in market  interest  rates.  In the
Bank's interest rate sensitive policy,  the Board of Directors has established a
maximum decrease in net interest income and maximum decreases in NPV given these
instantaneous changes in interest rates.

         An  institution's  interest  rate risk is measured as the change to its
NPV as a result of a  hypothetical  200 basis  point  change in market  interest
rates. A resulting  change in NPV of more than 2% of the estimated  market value
of its assets  will  require the  institution  to deduct from its capital 50% of
that  excess  change.  The rules  provide  that the OTS will  calculate  the IRR
component quarterly for each institution.


                                       35

<PAGE>



         The  following  table  presents the Bank's NPV at December 31, 1997, as
calculated  by  the  OTS  and  based  on  OTS  assumptions  utilizing  raw  data
voluntarily provided to the OTS by the Bank.
<TABLE>
<CAPTION>

    Change in Interest
   Rates in Basis Points
      (Rate Shock)(1)                   Net Portfolio Value                                  NPV as % of Assets
      ---------------     --------------------------------------------------           -----------------------------
                          $ Amount           $ Change             % Change             NPV Ratio            Change
                            ------             ------               ------             ---------            ------
                                       (Dollars in Thousands)
<S>                      <C>               <C>                      <C>                <C>                <C>
+400 bp                  $ 148,204         $ - 83,365                - 36%                10.01 %          - 456  bp

+300 bp                    172,897           - 58,673                - 25                11.44             - 313  bp
+200 bp                    195,966           - 35,604                - 15                12.72             - 185  bp
+100 bp                    215,990           - 15,579                 - 7                13.79             -  79  bp
0  bp                      231,569                 --                  --                14.57                --
-100 bp                    242,499             10,929                  +5                15.09             +  52  bp
-200 bp                    250,383             18,814                  +8                15.43             +  86  bp
-300 bp                    258,427             26,857                 +12                15.77             + 120  bp
-400 bp                    271,196             39,626                 +17                16.35             + 178  bp
</TABLE>

---------------
(1) Denotes rate shock used to compute interest rate risk capital component.


                                                                      As of
                                                                   December 31,
                                                                       1997
                                                                   ------------
RISK MEASURES:
200 Basis Point Rate Shock
Pre-Shock NPV Ratio:  NPV as % of Present Value of Assets..........    14.57 %
Exposure Measure:  Post-Shock NPV Ratio............................    12.72 %
Sensitivity Measure:  Change in NPV Ratio..........................    - 185 bp

CALCULATION OF CAPITAL COMPONENT:
Change in NPV as % of Present Value of Assets......................   - 2.24 %
Interest Rate Risk Capital Component...............................   $    0




                                       36

<PAGE>



         Computations  of  prospective  effects of  hypothetical  interest  rate
changes are based on numerous  assumptions,  including relative levels of market
interest rates, loan prepayments and deposit run-offs,  and should not be relied
upon  as  indicative  of  actual  results.  Further,  the  computations  do  not
contemplate  any  actions  the Bank may  undertake  in  response  to  changes in
interest rates.

         While the OTS has  deferred  for the present time the date on which the
Bank is subject to the interest rate risk component  reduction  discussed above,
the Bank remains subject to interest rate risk and, as can be seen above, rising
interest rates will reduce the Bank's NPV.

         Dividend and Other Capital  Distribution  Limitations.  OTS regulations
require  the  Bank  to  give  the OTS 30 days  advance  notice  of any  proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends to the Company.

         OTS regulations  impose  limitations upon all capital  distributions by
savings  institutions,  such  as  cash  dividends,  payments  to  repurchase  or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out  merger and other  distributions  charged against  capital.  The rule
establishes  three tiers of  institutions,  based primarily on an  institution's
capital  level.  An  institution  that  exceeds  all  fully  phased-in   capital
requirements  before  and  after  a  proposed  capital   distribution  ("Tier  1
institution")  and has not  been  advised  by the OTS that it is in need of more
than the normal  supervision can, after prior notice but without the approval of
the OTS, make capital  distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the  calendar  year plus the amount
that would reduce by one-half its "surplus  capital  ratio" (the excess  capital
over its fully phased-in capital  requirements) 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  require prior regulatory approval.  As of
December 31, 1997,  the Bank was a Tier 1  institution.  In the event the Bank's
capital fell below its fully  phased-in  requirement or the OTS notified it that
it was in need of more than  normal  supervision,  the  Bank's  ability  to make
capital distributions could be restricted. In addition, the OTS could prohibit a
proposed  capital  distribution  by any  institution,  which would  otherwise be
permitted by the regulation,  if the OTS determines that such distribution would
constitute an unsafe or unsound practice.

         In  addition,  the Bank may not  declare or pay a cash  dividend on its
capital stock if the effect thereof would be to reduce the regulatory capital of
the Bank below the amount required for the liquidation account to be established
pursuant to the Bank's Plan of  Conversion.  Finally,  a savings  association is
prohibited from making a capital distribution if, after making the distribution,
the  savings  association  would be  undercapitalized  (not  meet any one of its
minimum regulatory capital requirements).

         Qualified  Thrift  Lender Test.  Savings  institutions  must meet a QTL
test. If the Bank maintains an appropriate level of Qualified Thrift Investments
(primarily  residential  mortgages and related  investments,  including  certain
mortgage-related  securities) ("QTIs") and otherwise qualifies as a QTL, it will
continue  to enjoy  full  borrowing  privileges  from the  FHLB of  Topeka.  The
required  percentage of QTIs is 65% of portfolio  assets  (defined as all assets
minus  intangible  assets,  property used by the  institution  in conducting its
business and liquid  assets equal to 10% of total  assets).  Certain  assets are
subject to a  percentage  limitation  of 20% of portfolio  assets.  In addition,
savings associations may include shares of stock of the FHLBs, FNMA and FHLMC as
qualifying  QTIs. An  association  must be in compliance  with the QTL test on a
monthly basis in nine out of every 12 months.  As of December 31, 1997, the Bank
was in compliance with its QTL requirement  with 95.0% of its assets invested in
QTIs.

         A savings association that does not meet a QTL test must either convert
to a bank charter or comply with the following  restrictions  on its operations:
(i) the savings association may not engage in any

                                       37

<PAGE>



new activity or make any new  investment,  directly or  indirectly,  unless such
activity or investment is permissible  for a national  bank;  (ii) the branching
powers of the savings  association  shall be  restricted  to those of a national
bank; (iii) the savings association shall not be eligible to obtain any advances
from its FHLB; and (iv) payment of dividends by the savings association shall be
subject to the rules regarding payment of dividends by a national bank. Upon the
expiration of three years from the date the savings  association  ceases to be a
QTL, it must cease any activity and not retain any  investment  not  permissible
for a national bank and immediately repay any outstanding FHLB advances (subject
to safety and soundness considerations).

         Loans to One Borrower.  See "Lending Activities-Loans to One Borrower."

         Community  Reinvestment.  Under the Community Reinvestment Act ("CRA"),
as implemented by OTS  regulations,  a savings  association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire  community,  including  low and  moderate  income
neighborhoods.  The CRA does not  establish  specific  lending  requirements  or
programs  for  financial   institutions  nor  does  it  limit  an  institution's
discretion  to develop the types of products and  services  that it believes are
best  suited  to its  particular  community,  consistent  with the CRA.  The CRA
requires the OTS, in connection with its  examination of a savings  institution,
to assess the institution's  record of meeting the credit needs of its community
and to take such record into account in its  evaluation of certain  applications
by such institution.  Federal law requires public disclosure of an institution's
CRA  rating  and  requires  the  OTS  to  provide  a  written  evaluation  of an
institution's CRA performance  utilizing a four-tiered system. The Bank received
an "outstanding" rating as a result of its last evaluation in June 1996.

         Transactions With Affiliates.  Generally,  restrictions on transactions
with affiliates require that transactions  between a savings  association or its
subsidiaries  and  its  affiliates  be on  terms  as  favorable  to the  Bank as
comparable  transactions  with  non-affiliates.  In  addition,  certain of these
transactions  are restricted to an aggregate  percentage of the Bank's  capital;
collateral  in  specified  amounts  must  usually be provided by  affiliates  to
receive loans from the Bank.  Affiliates of the Bank include the Company and any
company  which would be under  common  control  with the Bank.  In  addition,  a
savings  association  may not lend to any affiliate  engaged in  activities  not
permissible  for a  bank  holding  company  or  acquire  the  securities  of any
affiliate  that  is not a  subsidiary.  The  OTS has  the  discretion  to  treat
subsidiaries of savings associations as affiliates on a case-by-case basis.

         The Bank's authority to extend credit to its officers,  directors,  and
10% shareholders,  as well as to entities that such persons control is currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Federal Reserve Board. Among other things,  these regulations
require such loans to be made on terms substantially similar to those offered to
unaffiliated individuals,  place limits on the amount of loans the Bank may make
to such persons  based,  in part, on the Bank's  capital  position,  and require
certain  approval  procedures  to  be  followed.  OTS  regulations,  with  minor
variation, apply Regulation O to savings associations.

         Liquidity  Requirements.  All  savings  associations  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings  associations.  At December 31, 1997,  the Bank's  required
liquid asset ratio is 4%.


                                       38

<PAGE>



         Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of
Topeka,  which is one of 12 regional FHLBs that  administers  the home financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of  Topeka  in an  amount  equal  to at least  1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year. At December 31, 1997,  the Bank had $11.3 million in
FHLB stock, which was in compliance with this requirement.

         Federal  Reserve  System.   The  Federal  Reserve  Board  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction  accounts (primarily  checking,  NOW, and Super
NOW checking accounts) and non-personal time deposits.  The balances  maintained
to meet the reserve  requirements  imposed by the Federal  Reserve  Board may be
used to satisfy  the  liquidity  requirements  that are  imposed by the OTS.  At
December  31,  1997,  the Bank was in  compliance  with the  applicable  reserve
requirements.

Federal and State Taxation

         The Company and the Bank report their  income on a calendar  year basis
using the  accrual  method of  accounting  and are  subject  to  federal  income
taxation  in the  same  manner  as  other  corporations  with  some  exceptions,
including,  particularly,  the Bank's reserve for bad debts discussed below. The
Company and its  subsidiaries,  including the Bank, file a consolidated  federal
income  tax  return.   Consolidated  returns  have  the  effect  of  eliminating
intercompany  distributions,   including  dividends,  from  the  computation  of
consolidated  taxable  income for the taxable  year in which such  distributions
occur.

         Thrift  institutions  are subject to the same  provisions as banks with
respect to deductions for bad debt. Only thrift institutions that are treated as
small banks may account for bad debts  under the reserve  method;  however  such
institutions  may only use the experience  method for  determining  additions to
their bad debt reserve.  Thrift institutions that are not treated as small banks
must use the specific  charge-off  method.  Under the  Internal  Revenue Code of
1986,  as amended  ("Code"),  the Bank is not  considered to be a small bank and
therefore the Bank uses the specific charge off method.

         In addition,  all thrift  institutions  must  continue to keep track of
their pre-1988  reserves because this amount remains subject to recapture in the
future under the Code. A thrift  institution,  such as the Bank, would generally
be required to recapture  into its taxable  income its pre-1988  reserves in the
case of certain excess distributions to, and redemptions of, shareholders (e.g.,
stock  repurchases).  The balance of the Bank's pre-1988  reserves  approximates
$12.0 million.

         In addition to their regular federal income tax liability, corporations
are also  subject to an  alternative  minimum  tax.  The  corporate  alternative
minimum  tax rate is 20%.  The tax is applied on  "alternative  minimum  taxable
income"  ("AMTI")  which  includes:   (1)  100%  of  the  excess  of  a  savings
association's  bad debt deduction over the amount allowable under the experience
method;  (2) 75% of the excess of the "adjusted current earnings" of the Company
over the AMTI; and (3) interest on certain tax-exempt bonds.


                                       39

<PAGE>



         The Revenue  Reconciliation  Act of 1993 added a new Section 475 to the
Code.  Section  475 is a  mark-to-market  tax law,  that is  different  from the
accounting  mark-to-market  SFAS  No.  115.  The term  "securities"  in the Code
includes not just traditional debt and equity securities, but mortgages as well.
For tax  purposes,  institutions  were  required  to identify  which  securities
qualified  for an  exemption by October 31,  1993.  A financial  institution  is
subject  to a  mark-to-market  rule  if  its  activities  bring  it  within  the
definition of a dealer in securities under Section 475(c)(1) of the Code.

         Non-thrift   members  are  not  subject  to  the  special  federal  tax
provisions for savings associations  described above. The Department of Treasury
issued a regulation  effective for taxable  years ended after  November 30, 1982
requiring savings  associations  which file  consolidated  income tax returns to
reduce  proportionately  their bad debt  deductions  for tax losses  incurred by
(functionally related) non-thrift members of the consolidated group.

         The State of Colorado has a corporate  income tax which  subjected  the
Bank's Colorado taxable income to tax at a 5.0% rate for the calendar year ended
December 31, 1996 and a 5.0% rate for the calendar year ended December 31, 1997.
Colorado  taxable income is computed by applying  certain  modifications  (e.g.,
state income tax deduction,  interest on U.S.  government  securities,  etc.) to
federal taxable income.

         The IRS has completed an  examination  of the Bank's federal income tax
returns for tax years  ending 1985  through  1990.  The Bank had made an advance
payment of $1.755 million to the IRS against possible  deficiencies arising from
this examination.  In 1995, all examination issues were settled,  resulting in a
tax assessment of $488,000. After application of the advance payment and related
interest  thereon,  the Bank received refunds  amounting to  approximately  $1.4
million.  The Bank has made all  appropriate  amendments  to its prior  Colorado
income tax returns related to this settlement.

                                       40

<PAGE>



Item 2.  Properties
-------------------

         The Bank's and the  Company's  executive  offices are located at 215 S.
Wadsworth Boulevard in Lakewood,  Colorado, a suburb of Denver. The Company does
not own any real  property but uses the offices and  facilities of the Bank from
time to time. The Bank conducts its business through 27 offices, 23 of which are
located  in the  Denver,  Colorado  area,  and four of which are  located on the
Western Slope of Colorado.

         The  following  table  sets  forth the  location  of each of the Bank's
offices,  the year the office  was first  acquired  or rented,  and the net book
value and square footage (excluding  basement) of each office. All of the Bank's
offices are owned,  with the exception of the Downtown  branch,  the Bonnie Brae
branch and the Montbello branch,  all located in Denver,  and the Grand Junction
Mesa Mall branch, located in Grand Junction, Colorado, as noted below.
<TABLE>
<CAPTION>
                                                                                Net Book
                                                       Year Facility          Value as of
                                                         Opened or            December 31,            Square
        Office Location                                   Acquired                1997               Footage
--------------------------------                         ----------              ------              -------

<S>                                                         <C>                <C>                   <C>
Main Office and Lakewood Branch:                            1973               1,059,550             38,420
215 S. Wadsworth Boulevard
Lakewood, Colorado

Arvada Branch:                                              1974                 580,370              6,820
5805 Carr Street
Arvada, Colorado

Arvada West Branch:                                         1994               1,068,580              3,811
12880 W. 64th Avenue
Arvada, Colorado

Aurora Branch:                                              1972                 390,020              6,820
1389 S. Havana
Aurora, Colorado

Bonnie Brae Branch(1):                                      1990                 164,970              1,152
750 S. University Boulevard
Denver, Colorado

Brighton Branch:                                            1990                 588,430             12,105
1795 Bridge Street
Brighton, Colorado

Cherry Creek Branch:                                        1979                 434,070              3,494
3610 E. First Avenue
Denver, Colorado

Columbine Branch:                                           1976                 451,940              3,494
6775 W. Ken Caryl
Littleton, Colorado

Commerce City Branch:                                       1990                 350,760              5,200
7326 Magnolia Street
Commerce City, Colorado
</TABLE>


                                       41

<PAGE>
<TABLE>
<CAPTION>
                                                                                Net Book
                                                       Year Facility          Value as of
                                                         Opened or            December 31,            Square
        Office Location                                   Acquired                1997               Footage
--------------------------------                         ----------              ------              -------

<S>                                                         <C>                <C>                   <C>
Delta Branch:                                               1993                    272,910              4,427
564 Main Street
Delta, Colorado

Downtown Branch(2):                                         1983                         --              3,040
216 Sixteenth Street
Denver, Colorado

Englewood Branch:                                           1962                    506,880              8,106
4301 S. Broadway
Englewood, Colorado

Golden Branch:                                              1983                    483,380              5,854
701 13th Street
Golden, Colorado

Greenwood Village Branch:                                   1994                  1,047,070              4,748
6050 S. Holly
Englewood, Colorado

Grand Junction Branch:                                      1993                    562,120              6,999
130 N. Fourth Street
Grand Junction, Colorado

Grand Junction - Mesa Mall Branch(3):                       1996                         --              2,473
2452 Patterson Road
Grand Junction, Colorado

Heather Gardens Branch:                                     1981                    695,580              4,075
13781 E. Yale Avenue
Aurora, Colorado

Highlands Ranch Branch:                                     1987                  1,691,810             11,108
7120 E. County Line Road
Highlands Ranch, Colorado

Highlands Ranch West Branch:                                1997                  1,729,590              3,811
9285 S. Broadway
Highlands Ranch, Colorado

Louisville Branch:                                          1978                    450,550              3,500
865 S. Boulder Road
Louisville, Colorado

Montbello Branch(4):                                        1995                    127,190(5)           1,300
4850 Chambers Road
Denver, Colorado
</TABLE>



                                       42

<PAGE>
<TABLE>
<CAPTION>
                                                                                Net Book
                                                       Year Facility          Value as of
                                                         Opened or            December 31,            Square
        Office Location                                   Acquired                1997               Footage
--------------------------------                         ----------              ------              -------

<S>                                                         <C>                <C>                   <C>
Montrose Branch:                                            1995                 1,186,570              3,811
1105 S. Townsend
Montrose, Colorado

North Denver Branch:                                        1954                   281,080              6,800
3460 W. 38th Avenue
Denver, Colorado

Smoky Hill Branch:                                          1994                 1,128,910              3,811
16778 Smoky Hill Road
Aurora, Colorado

South Denver Branch:                                        1989                 1,719,180              5,638
2050 S. Downing
Denver, Colorado

Thornton Branch:                                            1995                 1,065,370              3,811
12080 Colorado Boulevard
Thornton, Colorado

Westminister Branch:                                        1991                   888,310              3,656
9150 N. Sheridan
Westminister, Colorado
</TABLE>


----------------
(1)      The Bank owns the building and improvements at this location but leases
         the land.  The land lease runs until April 1, 2000 for rent of $800 per
         month.  There are two five-year  options to extend the term at a market
         rate to be negotiated.
(2)      Leased  branch with  original  lease term to expire in March 2003,  and
         three  five-year  options to extend term at market  rate.  Current base
         rent on the branch office is $6,333 per month.
(3)      Leased branch with original term to expire in November 2000,  and  five
         five-year options to extend the term at market rate.  Current  rent  is
         $2,567 per month.
(4)      Leased Branch with original  lease term to expire in November 1998, and
         two  two-year  options  at the  current  rate and a series of  two-year
         options  to extend  term at market  rate.  Current  rent on the  branch
         office is $2,582 per month.
(5)      Unamortized leasehold improvements.



         The Bank owns several  properties  adjoining  its  existing  facilities
which it is  holding  for  possible  future  expansion.  These are  included  in
buildings on the Company's consolidated financial statements and, as of December
31, 1997, amounted to $704,000. The Bank and its service corporation,  FSIC, own
several  properties  on the corner of Alameda  and  Wadsworth,  and  Alameda and
Yarrow,  adjoining  the  main  office  in  Lakewood,   Colorado.  These  consist
principally of a 1.5 acre vacant site, known as 280 S. Yarrow, and a property to
the  east  of  this  and  directly  south  of the  main  office,  consisting  of
approximately  100,000 square feet of land.  Eighty thousand square feet of this
land was leased in 1994 to General Mills  Restaurant  Group for the operation of
an Olive Garden Restaurant,  which opened in April 1995. To the east of the land
are two smaller properties on sites of about 10,000 square feet each. These lots
and  improvements  are leased.  The Bank also leases space to tenants at many of
its office  locations.  Net rental income from unaffiliated  tenants,  including
tenants  renting  property held for  development  of future branch  offices,  is
immaterial.

                                       43

<PAGE>




         The Bank performs its own data  processing  through its data processing
department  located in its main office and utilizes several  hardware  platforms
and a combination of internally  developed and purchased  software systems.  The
net book value of this data  processing  equipment  as of December  31, 1997 was
$943,000.  As of  December  31,  1997,  the net book  value of land,  buildings,
furniture,  and equipment  owned by the Bank and the Company,  less  accumulated
depreciation and amortization totalled $23.6 million.

Item 3.  Legal Proceedings
--------------------------

         In the normal  course of  business,  the Company is involved in various
legal actions arising from its lending and collection activities. In the opinion
of management,  the outcome of these legal actions will not significantly affect
the consolidated financial position of the Company.

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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the year ended December 31, 1997.

                                     PART II

Item 5.Market for the Registrant's Common Equity and Related Stockholder Matters
--------------------------------------------------------------------------------

         The  information  contained  under the  sections  captioned  "Corporate
Information"  and "Additional  Stockholder  Information" in the Company's Annual
Report to Stockholders  for the Year ended December 31, 1997 ("Annual  Report"),
is incorporated herein by reference.

Item 6.  Selected Financial Data
--------------------------------

         The information contained in the table captioned "Selected Consolidated
Financial  and  Other  Data" in the  Annual  Report  is  incorporated  herein by
reference.

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

         The  information  contained  in  the  section  captioned  "Management's
Discussion  of 1997  Results"  in the Annual  Report is  incorporated  herein by
reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

         Refer  to the  information  contained  in the  section  captioned  "Net
Portfolio Value" on Page 35 of this report.

         The information contained in the section captioned "Net Portfolio Value
- Market Risk" in the Annual Report is incorporated herein by reference.

         The information contained in the section captioned" Disclosures of Fair
Value of Financial  Instruments"  of Note 1 of Notes to  Consolidated  Financial
Statements as contained in the  Company's  Annual Report (which are listed under
Item 14 herein) is incorporated herein by reference.



                                       44

<PAGE>


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

         The consolidated  financial  statements  contained in the Annual Report
which are listed under Item 14 herein are incorporated herein by reference.

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  contained under the section  captioned  "Proposal I -
Election of  Directors"  in the  Company's  definitive  proxy  statement for the
Annual  Meeting of  Stockholders  to be held May 4, 1998 ("Proxy  Statement") is
incorporated  herein by  reference.  For  information  regarding  the  executive
officers of the Company,  see  "Proposal I - Election of Directors" in the Proxy
Statement.

         Because  the Common  Stock of the  Company is  registered  pursuant  to
Section  12(g) of the  Securities  Exchange Act of 1934  ("Exchange  Act"),  the
executive officers and directors of the Company and beneficial owners of greater
than 10% of the Bank's  Common Stock ("10%  beneficial  owners") are required to
file reports on Forms 3, 4, and 5 with the  Securities  and Exchange  Commission
("SEC")  disclosing  changes in beneficial  ownership of the Common  Stock.  SEC
rules require  disclosure in the Company's  Proxy Statement and Annual Report on
Form 10-K of the failure of an executive  officer,  director,  or 10% beneficial
owner of the Common Stock to file a Form 3, 4, or 5 on a timely basis.

Item 11.  Executive Compensation
--------------------------------

         The  information  contained under the section  captioned  "Director and
Executive  Compensation"  in the  Proxy  Statement  is  incorporated  herein  by
reference.

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

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this Item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal Holders Thereof" in the Proxy Statement.

         (b)      Security Ownership of Management

                  Information  required by this Item is  incorporated  herein by
                  reference to the sections  captioned  "Voting  Securities  and
                  Principal  Holders  Thereof"  and  "Proposal  I -- Election of
                  Directors" in the Proxy Statement.

         (c)      Management of the Company knows of no arrangements,  including
                  any pledge by any person of  securities  of the  Company,  the
                  operation of which may at a subsequent date result in a change
                  in control of the Registrant.


                                       45

<PAGE>



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

         The  information  required  by this  Item  is  incorporated  herein  by
reference  to  the  section   captioned   "Certain   Relationships  and  Related
Transactions" in the Proxy Statement.



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------

1.       Independent Auditors' Report

2.       Consolidated Financial Statements of First Colorado Bancorp, Inc.

         (a) Consolidated Statements of Financial Condition -- December 31, 1996
         and 1997 (b)  Consolidated  Statements  of  Operations  -- Years  ended
         December 31, 1995, 1996, and
                  1997
         (c)      Consolidated Statements of Stockholders' Equity -- Years ended
                  December 31, 1995, 1996, and 1997
         (d)      Consolidated  Statements of Cash Flows -- Years ended December
                  31, 1995, 1996, and 1997
         (e)      Notes to Consolidated Financial Statements

         All schedules  have been omitted as the required  information is either
         inapplicable  or  included  in  the  Notes  to  Consolidated  Financial
         Statements.
<TABLE>
<CAPTION>
3.       (a)   Exhibits
<S>               <C>      <C>
                  3(i)     Articles of Incorporation of First Colorado Bancorp, Inc.*
                  3(ii)    Bylaws of First Colorado Bancorp, Inc.*
                  4.1      Stock Certificate of First Colorado Bancorp, Inc.*
                  4.2      Preferred Share Purchase Rights Agreement**
                  10.1     Severance Agreement with Malcolm E. Collier, Jr.***
                  10.2     Form of Severance Agreement with Key Officers****
                  10.3     1992 Stock Option Plan****
                  10.4     1992 Management Recognition Plan****
                  10.5     1996 Stock Option Plan****
                  10.6     1996 Management Stock Bonus Plan****
                  13       Annual Report to Stockholders for the fiscal year ended December 31, 1997
                  21       Subsidiaries of the Registrant (Incorporated by reference to "Item I - Subsidiary
                           Activities.")
                  23       Consent of KPMG Peat Marwick LLP
                  27       Financial Data Schedule *****
</TABLE>



                                       46

<PAGE>



         (b)      Reports on Form 8-K

                  None.
---------------
<TABLE>
<CAPTION>
<S>      <C>
*        Incorporated by reference to the Registration Statement on Form S-1 (file no. 33-97228) declared
         effective by the SEC on November 13, 1995.
**       Incorporated  by reference to the  Registrant's  Current Report on Form
         8-K filed with the SEC on July 25, 1996.
***      Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K for the year ended December 31, 1995.
****     Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K for the year ended December 31, 1996.
*****    Filed electronically only.
</TABLE>



                                       47

<PAGE>



                                   SIGNATURES


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

                                          FIRST COLORADO BANCORP, INC.



Date: March 30, 1998                      By:  /s/Malcolm E. Collier, Jr.
                                               --------------------------
                                               Malcolm E. Collier, Jr.
                                               President, Chairman of the Board,
                                               and Chief Executive Officer
                                               (Duly Authorized Representative)


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


<TABLE>
<CAPTION>
<S>      <C>                                                  <C>      <C>
By:      /s/Brian L. Johnson                                  By:      /s/Malcolm E. Collier, Jr.
         -----------------------------------                           ------------------------------
         Brian L. Johnson                                              Malcolm E. Collier, Jr.
         Vice President and Treasurer                                  President, Chairman of the Board,
         (Principal Financial and Accounting                           and Chief Executive Officer
         Officer)                                                      (Principal Executive Officer)

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




By:      /s/Robert W. Richards                                By:      /s/Leeon E. Hayden
         -----------------------------------                           ------------------------------
         Robert W. Richards                                            Leeon E. Hayden
         Director                                                      Director

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




By:      /s/John J. Nicholl                                   By:      /s/E. William Foerster, Jr.
         -----------------------------------                           ------------------------------
         John J. Nicholl                                               E. William Foerster, Jr.
         Director                                                      Director

         Date:    March 30, 1998                              Date:    March 30, 1998
</TABLE>




<PAGE>


<TABLE>
<CAPTION>

<S>      <C>                                                  <C>      <C>
By:      /s/Stephen Burkholder                                By:      /s/Robert T. Person, Jr.
         -----------------------------------                           ------------------------------
         Stephen Burkholder                                            Robert T. Person, Jr.
         Director                                                      Director

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




By:      /s/James R. Wexels                                   By:      /s/Polly Baca
         -----------------------------------                           ------------------------------
         James R. Wexels                                               Polly Baca
         Director                                                      Director

         Date:    March 30, 1998                              Date:    March 30, 1998
</TABLE>