<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
           For the fiscal year ended June 30, 2001

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from_____________________ to_____________________
     Commission File Number      0-21163

                               CBES BANCORP, INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

           Delaware                                      43-1753244
----------------------------------          ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

         1001 North Jesse James Road, Excelsior Springs, Missouri      64024
--------------------------------------------------------------------------------
               (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:       (816) 630-6711
                                                   -----------------------------

           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 $.01 per share
                     --------------------------------------
                                (Title of class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X . NO ___.
         ---

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [_]

         The Registrant's revenues for the fiscal year ended June 30, 2001 were
$13.6 million.

         As of September 7, 2001, there were 1,031,851 shares issued and 875,805
shares outstanding of the Registrant's Common Stock. The aggregate market value
of the voting stock held by non-affiliates of the registrant, computed by
reference to the closing bid price of such stock on the Nasdaq Small Cap Market
as of September 7, 2001, was $10.4 million. (The exclusion from such amount of
the market value of the shares owned by any person shall not be deemed an
admission by the registrant that such person is an affiliate of the registrant.)

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

         Parts II and III of Form 10-KSB - Portions of Annual Report to
Stockholders for the fiscal year ended June 30, 2001.

         Part III of Form 10-KSB - Portions of Proxy Statement for 2001 Annual
Meeting of Stockholders.

<PAGE>


                                     PART I

Item 1.  Description of Business
--------------------------------

General
-------

         CBES Bancorp, Inc. ("CBES Bancorp" and, with its subsidiaries, the
"Company") was formed in June 1996 at the direction of Community Bank of
Excelsior Springs, a Savings Bank ("Community Bank" or the "Bank") for the
purpose of owning all of the outstanding stock of the Bank issued upon the
conversion of the Bank from the mutual to stock form (the "Conversion"). On
September 27, 1996, CBES Bancorp acquired all of the shares of the Bank in
connection with the completion of the Conversion. The Company's common stock is
quoted on the NASDAQ SmallCap Market under the symbol "CBES".

         Community Bank is a federally chartered savings bank headquartered in
Excelsior Springs, Missouri. Community Bank was originally chartered as a
Missouri savings and loan association in 1931 under the name Excelsior Springs
Savings and Loan Association. In 1991, the Bank changed its name to its current
form, and in 1995 the Bank amended its charter to become a federal mutual
savings bank. Its deposits are insured up to the maximum allowable amount by the
Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation (the "FDIC"). Through its main office in Excelsior Springs and its
branch offices in Kearney and Liberty, Community Bank primarily serves
communities located in Clay and Ray Counties and to a lesser extent in
surrounding counties in the State of Missouri. On August 13, 2001, the Bank
announced its intent to sell the Kearney branch to Kearney Trust Company,
subject to regulatory approval. At June 30, 2001, CBES Bancorp had total assets
of $151.7 million, deposits of $124.6 million and stockholders' equity of $14.7
million.

         Community Bank has been, and intends to continue to be, a
community-oriented financial institution offering selected financial services to
meet the needs of the communities it serves. The Bank attracts deposits from the
general public and historically has used such deposits, together with other
funds, primarily to originate one- to four-family residential mortgage loans,
construction and land loans for single-family residential properties, and
consumer loans consisting primarily of loans secured by automobiles. While the
Bank's primary business has been that of a traditional thrift institution,
originating loans in its primary market area for retention in its portfolio, the
Bank also has been an active participant in the secondary market, originating
residential mortgage loans for sale. At June 30, 2001, the Bank's total loan
portfolio was $117.2 million, of which 51.2% were one- to four-family
residential mortgage loans, 24.7% were construction and land loans (the vast
majority of which related to single-family residential properties), and 9.4%
were consumer loans. During the fiscal year ended June 30, 2001, the Bank
originated $22.0 million of fixed-rate one- to four-family residential mortgage
loans, of which $20.3 million, or 92.7%, were sold in the secondary market. See
"Lending Activities." To a lesser extent, the Bank invests in various investment
securities, including mortgage-backed securities, U.S. Government agency
securities and U.S. Treasury Bills.

         The executive office of the Company and the Bank is located at 1001
North Jesse James Road, Excelsior Springs, Missouri 64024 and their telephone
number is (816) 630-6711.

Supervisory Agreement
---------------------

         On August 4, 2000, the Bank entered into a Supervisory Agreement with
the Office of Thrift Supervision (the "OTS"). By signing the Supervisory
Agreement, the Bank has agreed to take certain actions in response to concerns
raised by the OTS. The Supervisory Agreement provides that the Bank shall take
necessary and appropriate actions to achieve compliance with various OTS
regulations related to lending standards, lending limitations, classification of
assets, appraisal standards and other matters. The Supervisory Agreement
provides that the Bank take certain corrective steps to improve its internal
asset review program. The Supervisory Agreement requires the Bank to establish
adequate allowance for loan losses and shall not reduce the allowance without
prior notice of no objection from the OTS. The Supervisory Agreement also
provides that the Bank refrain from making any new loan commitments with new
builders or subdivision developments without prior written notice of no
objection from the OTS. The Bank is also prohibited from increasing the number
of loans to current builders or subdivision developments without prior written
notice of no objection from the OTS.

<PAGE>

         In addition, the Supervisory Agreement provides that the Board of
Directors of the Bank must develop or revise its written policies and procedures
relating to real estate appraisals, loan underwriting and credit administration,
lending limits and related matters. The Supervisory Agreement also provides that
the Bank revise its internal audit procedures, shall update its contingency
disaster recovery plan, shall establish and implement certain budgetary
procedures and shall revise its bonus program. The Supervisory Agreement also
provides that the Bank shall refrain from making capital distributions without
OTS approval.

         The Supervisory Agreement is considered a formal written agreement with
the OTS. Failure to comply with the Supervisory Agreement can lead to further
enforcement actions by the OTS. The Bank believes that it has completed the
necessary steps to comply with the Supervisory Agreement and remains in
compliance with it at the present time. The restrictions imposed on the Bank's
construction lending activities has caused a significant decrease in the Bank's
activities in that area. The Supervisory Agreement will remain in effect until
terminated by the OTS.

Market Area and Competition
---------------------------

         Community Bank serves communities located in Clay and Ray Counties and
in surrounding counties in Missouri from its main office in Excelsior Springs
and its branch offices in Kearney and Liberty. Excelsior Springs, Kearney and
Liberty are located in Clay County, which is part of the Kansas City
Metropolitan Statistical Area. Excelsior Springs, Kearney and Liberty are small
towns. Clay County has a population estimated at 180,000 as of 1999. The
northern portion of Clay County is a combination of suburban and rural areas
containing a number of small towns, including Excelsior Springs and Kearney.
Southern Clay County is a rapidly developing suburban market, and is home to a
large number of people who commute to jobs in areas closer to Kansas City.

         Most of the employment in Clay County is provided by light
manufacturing, services and retail trade. Included among the largest employers
in Clay County are a number of hospitals (Liberty Hospital, Excelsior Springs
Medical Center, North Kansas City Hospital, and St. Luke's Northland Hospital),
local school districts and two community colleges. Employers in the
manufacturing sector include Ford Motor Company, Farmland Industries and Wilcox
Electric. In the immediate Excelsior Springs area, the largest employers are
American Italian Pasta, Precise Technology Incorporated, Douglas & Lomason and
Gilmour Manufacturing.

         The Bank's business and operating results are significantly affected by
the general economic conditions present in the Bank's market area. As of July
2001, the unemployment rate in Clay County was 2.8% and the unemployment rate in
Ray County was 5.1%.

         The Bank faces significant competition in attracting deposits from
commercial banks, other savings institutions and credit unions. The Bank faces
additional competition for deposits from short-term money market funds, from
other corporate and government securities funds and from brokerage funds and
insurance companies. The Bank also faces significant competition in the
origination of loans from savings institutions, mortgage banking companies,
credit unions and commercial banks.

Lending Activities
------------------

         General. The Bank has emphasized and will continue to emphasize the
origination of one- to four-family residential mortgage loans. In recent years,
subject to market conditions, the Bank has emphasized the origination for
portfolio of ARM loans and the origination and sale of fixed-rate and ARM
residential mortgage loans. From the mid-1990's until fiscal 2001 the Bank
increased its portfolio of residential construction loans. However, during the
past year, the construction loan portfolio decreased substantially. The Bank
also originates land loans secured by vacant land or building lots for which the
borrower intends to ultimately construct a residential property. The Bank also
plans to originate commercial real estate and multi-family residential loans
subject to the terms of the Supervisory Agreement. The Bank's non-mortgage loans
consist primarily of automobile loans. Pursuant to the Supervisory Agreement,
the Bank is restricted from making commercial real estate loans, without prior
written notice of no objection from the OTS.

         Under OTS regulations, a thrift institution's loans-to-one borrower
limit is generally limited to the greater of 15% of unimpaired capital and
surplus or $500,000. See "Regulation - Federal Regulation of Savings

                                       2

<PAGE>

Associations." At June 30, 2001, the maximum amount which the Bank could have
lent under this limit to any one borrower and the borrower's related entities
was approximately $2.5 million. At June 30, 2001, the Bank had no groups of
loans to related borrowers with outstanding balances in excess of this amount.
The Bank's largest lending relationship at June 30, 2001 was approximately $2.5
million in loans to a real estate investor on one- to four-family residential
properties and was secured by real estate located in Clay County, Missouri. At
June 30, 2001, all of these loans were performing in accordance with their
terms.

         Loan Portfolio  Composition.  Set forth below is data relating to the
composition of the Bank's loan portfolio by type of loan as of the dates
indicated.

<TABLE>
<CAPTION>
                                                                               At June 30,
                                                    ----------------------------------------------------------------------
                                                            2001                  2000                       1999
                                                    --------------------  ----------------------    ----------------------
                                                     Amount     Percent    Amount      Percent       Amount        Percent
                                                    --------   ---------  --------    ----------    --------       -------
                                                                         (Dollars in Thousands)
<S>                                              <C>           <C>        <C>         <C>           <C>              <C>
Real estate loans:
  One- to four-family residential..............  $ 59,982      51.18%     $ 84,645         45.33%   $ 71,353         43.74%
  Multi-family.................................     1,986       1.69         2,832          1.51       1,951          1.20
  Commercial...................................     9,490       8.10         7,388          3.96       5,496          3.37
  Land.........................................     5,798       4.95         7,183          3.85       6,485          3.98
  Construction.................................    28,910      24.66        66,000         35.35      63,319         38.81
                                                 --------     ------      --------        ------    --------       -------
 Total real estate loans.......................   106,166      90.58       168,048         90.00     148,604         91.10
                                                 --------     ------      --------        ------    --------       -------

Consumer loans:
  Direct automobile loans......................     5,539       4.72         9,421          5.04       9,174          5.62
  Indirect automobile loans....................     2,833       2.42         4,117          2.20       2,460          1.51
  Deposit accounts.............................       480       0.41           739          0.40         448          0.27
  Home improvement.............................        25       0.02            30          0.02           6            --
 Commercial loans..............................       510       0.43         1,372          0.73         257          0.16
  Other........................................     1,659       1.41         2,997          1.61       2,194          1.34
                                                 --------     ------      --------        ------    --------       -------
     Total consumer loans......................    11,046       9.42        18,676         10.00      14,539          8.90
                                                 --------     ------      --------        ------    --------       -------

     Total loan portfolio......................  $117,212     100.00%     $186,724        100.00%   $163,143        100.00%
                                                              ======                      ======                    ======

Less:
  Loans in process.............................     2,333                   19,355                    27,153
  Deferred loan origination fees and
    discounts on loans, net....................       250                      646                       604
  Allowance for loan losses....................     3,472                    2,924                       927
                                                 --------                 --------                  --------
    Total loans receivable, net................  $111,157                 $163,799                  $134,459
                                                 ========                 ========                  ========
</TABLE>

                                       3

<PAGE>


         The following table shows the composition of the Bank's loan portfolio
by fixed- and adjustable-rates at the dates indicated.

<TABLE>
<CAPTION>
                                                             At June 30,
                                   ----------------------------------------------------------------
                                              2001               2000                  1999
                                   --------------------  --------------------  --------------------
                                    Amount     Percent    Amount     Percent    Amount     Percent
                                   --------   ---------  --------   ---------  --------   ---------
                                                        (Dollars in Thousands)
<S>                                <C>        <C>        <C>        <C>        <C>        <C>
Fixed Rate Loans:
 Real estate:
  One- to four-family............. $  17,342      14.80% $  25,611      13.71% $  21,614      13.25%
  Multi-family....................       165       0.14        167       0.09         --         --
  Commercial......................     3,711       3.17      3,104       1.66      2,834       1.74
  Land............................     1,678       1.43      2,645       1.42      2,839       1.74
  Construction....................    26,952      22.99     66,000      35.35     63,319      38.81
                                   ---------  ---------  ---------  ---------  ---------  ---------
 Total real estate loans..........    49,848      42.53     97,527      52.23     90,606      55.54
                                   ---------  ---------  ---------  ---------  ---------  ---------

Consumer loans....................    11,046       9.42     18,278       9.79     14,232       8.72
                                   ---------  ---------  ---------  ---------  ---------  ---------

     Total fixed-rate loans.......    60,894      51.95    115,805      62.02    104,838      64.26
                                   ---------  ---------  ---------  ---------  ---------  ---------

Adjustable Rate Loans:
 Real estate:
  One- to four-family.............    42,640      36.38     59,034      31.62     49,739      30.49
  Multi-family....................     1,821       1.55      2,665       1.43      1,951       1.20
  Commercial......................     5,779       4.93      4,284       2.29      2,662       1.63
  Land............................     4,120       3.52      4,538       2.43      3,646       2.23
  Construction....................     1,958       1.67         --         --         --         --
                                   ---------  ---------  ---------  ---------  ---------  ---------
 Total real estate loans..........    56,318      48.05     70,521      37.77     57,998      35.55
                                   ---------  ---------  ---------  ---------  ---------  ---------

Consumer loans....................        --         --        398       0.21        307       0.19
                                                         ---------  ---------  ---------  ---------

     Total adjustable-rate loans..    56,318      48.05     70,919      37.98     58,305      35.74
                                   ---------  ---------  ---------  ---------  ---------  ---------

     Total loan portfolio.........   117,212     100.00%   186,724     100.00%   163,143     100.00%
                                              =========             =========             =========

Less:
  Loans in process................     2,333                19,355                27,153
  Deferred fees and discounts.....       250                   646                   604
  Allowance for losses............ $   3,472                 2,924                   927
                                   ---------             ---------             ---------
    Total loans receivable, net... $ 111,157             $ 163,799             $ 134,459
                                   =========             =========             =========
</TABLE>

         One- to Four-Family Mortgage Loans. The Bank's primary lending activity
is the origination of one- to four-family, owner-occupied, residential mortgage
loans secured by property located in the Bank's market area. Loans are generated
through the Bank's marketing efforts, its existing customers and referrals, real
estate brokers, builders and local businesses. The Bank generally has limited
its real estate loan originations to the financing of properties located within
its market area but will consider out-of-market loans. At June 30, 2001, the
Bank had $60.0 million, or 51.2% of its loan portfolio, invested in mortgage
loans secured by one- to four-family residences.

         The Bank originates fixed-rate residential one- to four-family loans
with terms of 15 and 30 years. Such loans may either be retained in portfolio or
sold in the secondary mortgage market depending on the yield on such loans and
the Bank's asset/liability management objectives. Currently, the Bank's policy
is to sell into the secondary market longer-term fixed-rate residential real
estate loans. As of June 30, 2001, $17.3 million, or 14.8% of the Bank's loan
portfolio, consisted of fixed-rate residential one- to four-family loans. The
Bank's fixed-rate mortgage loans amortize monthly with principal and interest
due each month. Residential real estate loans often remain outstanding for
significantly shorter periods than their contractual terms because borrowers may
refinance or prepay loans at their option.

         Fixed-rate residential one- to four-family loans originated for sale in
the secondary mortgage market are underwritten in conformity with the criteria
established by the Federal Home Loan Mortgage Corporation ("FHLMC") or other
investors for sale primarily to FHLMC or other investors. Such loans are sold on
a non-recourse basis. The Bank retains servicing rights on a portion of such
loans, depending upon customer preferences

                                       4

<PAGE>

and competitive conditions. For the fiscal year ended June 30, 2001, of the
$22.0 million in fixed-rate residential one- to four-family loans originated by
the Bank, $20.3 million of such loans, or 92.3%, were sold in the secondary
mortgage market.

         The Bank also offers ARM loans for terms ranging up to 30 years. The
Bank currently offers ARM loans that adjust every year, with interest rate
adjustment limitations up to two percentage points per year and with a cap of up
to six percentage points on total interest rate increases over the life of the
loan. In a rising interest rate environment, such rate limitations may prevent
ARM loans from repricing to market interest rates, which would have an adverse
effect on net interest income. ARM loans secured by residential one- to
four-family real estate totaled $42.6 million, or 36.4% of the Bank's total loan
portfolio at June 30, 2001. The origination of fixed-rate mortgage loans versus
ARM loans is monitored on an ongoing basis and is affected significantly by the
level of market interest rates, customer preference, the Bank's interest rate
gap position and loan products offered by the Bank's competitors. Particularly
in a relatively low interest rate environment, borrowers may prefer fixed-rate
loans to ARM loans. During the fiscal year ended June 30, 2001, the Bank
originated $22.0 million in fixed-rate residential mortgage loans and $2.9
million of ARM loans. Normally, the Bank's policy is to originate ARM loans for
portfolio. However, during fiscal 2001, the Bank sold one pool of ARM loans
totaling $9.9 million as a part of the Bank's asset/liability and capital
strategies, and currently has no ARM loans held for sale.

         The primary purpose of offering ARM loans is to make the Bank's loan
portfolio more interest rate sensitive. However, as the interest income earned
on ARM loans varies with prevailing interest rates, such loans do not offer the
Bank predictable cash flows as would long-term, fixed-rate loans. ARM loans
carry increased credit risk associated with potentially higher monthly payments
by borrowers as general market interest rates increase. It is possible,
therefore, during periods of rising interest rates, that the risk of
delinquencies and defaults on ARM loans may increase due to the upward
adjustment of interest costs to the borrower, resulting in increased loan
losses.

         The Bank's residential first mortgage loans customarily include
due-on-sale clauses, which are provisions giving the Bank the right to declare a
loan immediately due and payable in the event, among other things, that the
borrower sells or otherwise disposes of the underlying real property serving as
security for the loan. Due-on-sale clauses are a means of imposing assumption
fees and increasing the interest rate on the Bank's mortgage portfolio during
periods of rising interest rates.

         Regulations limit the amount that a savings association may lend
relative to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination. The Bank's lending
policies generally limit the maximum LTV ratio on fixed-rate and ARM loans to
80% of the lesser of the appraised value or the purchase price of the property
securing the loan in the case of loans secured by one- to four-family
owner-occupied properties. On conventional one- to four-family loans, the Bank
will lend up to a 95% LTV ratio; however, any loans with LTV ratios in excess of
80% generally require private mortgage insurance. The maximum LTV ratio on other
types of real estate loans is generally the lesser of 65% to 80% of the
appraisal value or the purchase price of the property.

         When underwriting residential real estate loans, the Bank reviews and
verifies each loan applicant's employment, income and credit history. The Bank's
policy is to obtain credit reports and financial statements on all borrowers and
guarantors, and to verify references. Properties securing real estate loans are
appraised by Bank-approved independent appraisers. Appraisals are subsequently
reviewed by the Bank's underwriter, as applicable. Management believes that
stability of income, past credit history and adequacy of the proposed security
are integral parts in the underwriting process. Generally, the applicant's total
monthly mortgage payment, including all escrow amounts, is limited to 28% of the
applicant's total monthly income. In addition, total monthly obligations of the
applicant, including mortgage payments, should not generally exceed 36% of total
monthly income. Written appraisals are generally required on real estate
property offered to secure an applicant's loan. The Bank requires fire and
casualty insurance on all properties securing real estate loans, as well as
title insurance.

         The Bank also originates for portfolio second mortgage/home equity
loans. These loans are generally limited to 85% or less of the appraised value
of the property securing the loan. These loans are originated as fixed or
adjustable-rate loans and generally have maximum terms of 10 years. At June 30,
2001, the Bank's second mortgage/home equity loans totaled $104,000, or 0.09% of
the Bank's loan portfolio.

                                       5

<PAGE>

         The Bank also originates for portfolio lines of credit secured by first
or second mortgages. These loans are primarily adjustable-rate loans, adjust
according to changes in prime interest rates, and may be originated up to an 85%
loan-to-value ratio, with a maximum term of five years. At June 30, 2001, the
Bank's lines of credit secured by first or second mortgages totaled $1.8
million, or 1.6% of the Bank's loan portfolio.

         Construction and Land Lending. The Bank invested a significant
proportion of its loan portfolio in the past in construction and land loans.
Prompted by increased residential development in Clay County in recent years,
such lending was a growing part of the Bank's loan portfolio. During the last
year, the construction loan portfolio has decreased substantially. Substantially
all of the Bank's construction and land loans are secured by residential
properties located in Clay County. The Supervisory Agreement provides that the
Bank refrain from making any new loan commitments with new builders or
subdivision developments without prior written notice of no objection from the
OTS. The Bank is also prohibited from increasing the number of loans to current
builders or subdivision developments without prior written notice of no
objection from the OTS. The Bank's current plans call for a continuation in
construction and land development lending, subject to compliance with the
Supervisory Agreement.

         The Bank originates four basic types of construction and land loans:

         1.   "Speculative" construction loans are made to home builders for the
              construction principally of one- to four-family residences and
              residential development projects and, to a lesser extent,
              multi-family residences. Speculative construction loans generally
              do not have a sale contract or permanent loan in place for the
              finished home, and the purchasers for the finished homes may be
              identified either during or following the construction period.

         2.   "Contract" construction loans are made to builders who have a
              signed contract to build a new home.

         3.   "Construction" loans are made to individuals who have contracted
              with a builder to construct their personal residence.

         4.   "Land development and acquisition" loans ("land loans") are made
              by the Bank to individuals and builders for the acquisition of
              land upon which the borrower can then build.

         The table below presents information on the Bank's construction and
land loans at June 30, 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                              At June 30, 2001           At June 30, 2000               At June 30, 1999
                                       ---------------------------- ---------------------------- ----------------------------
                                          Outstanding    Percent of   Outstanding     Percent of    Outstanding    Percent of
                                       Loan Balance/(1)/   Total    Loan Balance/(1)/   Total    Loan Balance/(1)/    Total
                                       ----------------  ---------- -----------------   -------- ----------------- ----------
                                                                         (Dollars in Thousands)
<S>           <C>                        <C>               <C>       <C>                 <C>     <C>                 <C>
Speculative - 1-4 family..............   $   20,104        57.92%    $   50,353          68.8%   $  51,461           66.6%
Speculative - Multifamily.............          901         2.60          2,925           4.0        2,261            2.9
Contract..............................        2,090         6.02            377           0.5        1,718            2.2
Construction - commercial.............        2,246         6.47          2,612           3.6        4,129            5.3
Construction - 1-4 family.............        2,101         6.05          4,018           5.5        3,750            4.9
                                         ----------    ---------     ----------    ----------    ---------    -----------
   Total construction.................       27,442        79.06         60,285          82.4       63,319           81.9
Land development and acquisition......        1,468         4.23          5,715           7.8        7,503            9.7
Land..................................        5,798        16.71          7,183           9.8        6,485            8.4
                                         ----------    ---------     ----------    ----------    ---------    -----------
      Total construction and land.....   $   34,708       100.00%    $   73,183        100.00%   $  77,307          100.0%
                                         ==========    =========     ==========    ==========    =========    ===========
</TABLE>

_____________
/(1)/Includes loans in process.


         At June 30, 2001, the Bank's $27.4 million of construction loans and
$7.3 million of land and land development loans represented 23.4% and 6.2%,
respectively, of total loans receivable. At the same time, the Bank's $21.0
million of speculative construction loans represented 17.9% of total loans
receivable. Speculative 1-4 family loans decreased $30.3 million from $50.4
million at June 30, 2000 to $20.1 million at June 30, 2001.


                                       6

<PAGE>

         Construction and land lending affords the Bank the opportunity to
achieve higher interest rates and fees with shorter terms to maturity than does
its single-family permanent mortgage lending. Construction and land lending,
however, is generally considered to involve a higher degree of risk than
single-family permanent mortgage lending due to (i) the concentration of
principal among relatively few borrowers and development projects, (ii) the
increased difficulty at the time the loan is made of estimating building costs
and the selling price of the residence to be built, (iii) the increased
difficulty and costs of monitoring the loan, (iv) the higher degree of risk
associated with residential sales activity in changing real estate market
conditions, and (v) the increased difficulty of working out problem loans.
Speculative construction loans have the added risk associated with identifying
an end-purchaser for the finished home. The Bank has sought to address these
risks by developing and adhering to underwriting policies, disbursement
procedures, and monitoring practices.

         While substantially all of the Bank's construction and land loans are
secured by properties located in southern Clay County, the Bank also seeks to
diversify its construction and land lending risks among several subdivisions. At
June 30, 2001, the Bank had speculative construction loans secured by properties
in 50 subdivisions of which 6 represented an exposure to a single subdivision of
more than $1.0 million. At June 30, 2001, the Bank had 11 borrowers for which
speculative construction loans outstanding totaled more than $1.0 million.

         One- to Four-Family Construction Loans. Loans for the construction of
one- to four-family residences are generally made for terms of 6 to 12 months.
The Bank's loan policy includes maximum loan-to-value ratios of up to 85% for
speculative construction loans and up to 80% for construction loans. Prior to
preliminary approval of a construction loan application, Bank personnel inspect
the site, review the existing or proposed improvements, identify the market for
the proposed project, analyze the pro forma data and assumptions on the project,
and satisfy themselves with the experience and expertise of the builder. After
preliminary approval has been given, the application is processed. Processing
includes obtaining credit reports, financial statements and tax returns on the
borrowers and guarantors, if any, an independent appraisal of the project, and
any other expert reports necessary to evaluate the proposed project.

         The Bank requires that construction loan proceeds be disbursed in
increments as construction progresses based upon inspections by Bank personnel.
To control the disbursement process, the Bank requires that builders and their
subcontractors and vendors submit invoices to the Bank for payment. In the event
of cost overruns, depending on the circumstances (i.e., whether due to "add-ons"
not included in the original plans or due to unanticipated changes in building
costs) the Bank may seek to require the borrower to deposit funds with the Bank
for additional disbursements, increase the loan amount on the basis of an
increased appraisal and disburse additional loan proceeds consistent with the
original loan-to-value ratio, or become more active in the monitoring and
progress of the project.

         The Bank regularly monitors the accuracy of assumptions made in its
construction loan business over time. In particular, the Bank tracks the
accuracy of its independent appraisers by comparing actual selling prices with
the appraised value estimated in connection with the loan approval.
Additionally, the Bank tracks the performance of its builder customers by
comparing actual costs with those estimated in the loan application. The Bank
monitors each subdivision where the Bank has speculative loans each month to see
that houses are selling promptly and to assure that the Bank does not get too
much of a loan concentration in any one subdivision. The Bank also adheres to a
very strict policy of inspecting each construction site prior to payment of
construction bills to reduce the Bank's risk during the construction process.

         Commercial and Multi-family Construction Loans. Occasionally, the Bank
originates loans for the construction of commercial buildings and multi-family
residences on terms similar to those on one- to four-family construction loans.
At June 30, 2001, the Bank had $0.9 million of speculative construction loans
secured by multi-family properties. The Bank plans on originating commercial or
multi-family construction loans, subject to compliance with the Supervisory
Agreement.

         Land Loans. At June 30, 2001, the Bank had total land loans of $5.8
million and land development loans of $1.5 million. In making land loans and
land development loans, the Bank follows similar underwriting policies as for
construction loans. The Bank originates land loans and land development loans
with similar terms and at similar rates as construction loans, except that the
initial term on conventional land loans is typically five to ten years as
opposed to the term of up to 12 months that is typical of construction loans.
The Bank plans on originating land development loans, subject to compliance with
the Supervisory Agreement.

                                       7

<PAGE>

         Multi-Family and Commercial Real Estate Lending. The Bank also
originates loans secured by multi-family and commercial real estate. At June 30,
2001, $11.5 million, or 9.8% of the Bank's loan portfolio consisted of
multi-family loans and commercial real estate loans.

         Multi-family and commercial real estate loans originated by the Bank
require prior written notice of no objection from the OTS. These loans may be
either fixed- or adjustable-rate loans with terms to maturity and amortization
schedules of up to 25 years. Rates on such ARM loans generally adjust every
three to five years to specified spreads over the corresponding U.S. Treasury
securities indices. Multi-family and commercial real estate loans are written in
amounts of up to 80% of the lesser of the appraised value of the property or the
sales price. These loans generally have prepayment penalties of 1 to 3% of the
principal balance outstanding.

         The Bank's commercial real estate portfolio consists primarily of loans
on small office buildings located in the Bank's primary market area.
Multi-family loans generally are secured by five or more dwelling units.
Appraisals on properties which secure multi-family and commercial real estate
loans are performed by an independent appraiser designated by the Bank before
the loan is made. All appraisals on multi-family and commercial real estate
loans are reviewed by the Bank's management. In underwriting such loans, the
Bank primarily considers the cash flows generated by the real estate to support
the debt service, the financial resources and income level of the borrower and
the Bank's experience with the borrower. In addition, the Bank's underwriting
procedures require verification of the borrower's credit history, an analysis of
the borrower's income, financial statements and banking relationships, a review
of the borrower's property management experience and references, and a review of
the property, including cash flow projections and historical operating results.
The Bank seeks to ensure that the property securing the loans will generate
sufficient cash flow to adequately cover operating expenses and debt service
payments.

         Multi-family and commercial real estate lending affords the Bank an
opportunity to receive interest at rates higher than those generally available
from one- to four-family residential lending. Nevertheless, loans secured by
such properties are generally larger, more difficult to evaluate and monitor
and, therefore generally, involve a greater degree of risk than one- to
four-family residential mortgage loans. Because payments on loans secured by
commercial real estate and multi-family properties are often dependent on the
successful operation or management of the properties, repayment of such loans
may be subject to adverse conditions in the real estate market or the economy.
If the cash flow from the project is reduced, the borrower's ability to repay
the loan might be impaired.

         Consumer Lending. Community Bank offers a variety of consumer loans,
including automobile and home improvement loans, second mortgage home equity
loans, lines of credit secured by first or second mortgage loans, and loans
secured by deposits. The Bank currently originates substantially all of its
consumer loans in its primary market area generally to its existing customers.
At June 30, 2001, the Bank's consumer loan portfolio totaled $11.0 million, or
9.4% of its loan portfolio.

         The primary component of the Bank's consumer loan portfolio consists of
automobile loans secured by both new and used cars and light trucks. The Bank
originates automobile loans on a direct basis, where the Bank extends credit
directly to the borrower. In prior years, the Bank originated automobile loans
on an indirect basis through automobile dealerships, but discontinued that type
of lending in October 2000.

         The Bank's automobile loans generally have terms that do not exceed
five years and carry a fixed-rate of interest. Generally, loans on new vehicles
are made in amounts up to 80% of dealer cost and loans on used vehicles are made
in amounts up to 80% of the vehicle's published NADA value. Collision and
comprehensive insurance and vendor single-interest coverage is required on all
automobile loans. At June 30, 2001, the Bank's indirect automobile loans totaled
$2.8 million, or 2.4% of the Bank's loan portfolio and direct automobile loans
totaled $5.5 million, or 4.7% of the Bank's loan portfolio.

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

                                        8

<PAGE>

         Consumer loans entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by rapidly depreciable assets, such as automobiles. Further, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At June 30, 2001, $359,000, or 3.25% of the portfolio in consumer
loans were non-performing. See "Asset Quality--Delinquent Loans and
Non-performing Assets." There can be no assurances, however, that delinquencies
will not increase in the future.

                                       9

<PAGE>

Loan Maturity Schedule

         The following schedule illustrates the contractual maturity and
weighted average rates of the Bank's total loan portfolio at June 30, 2001.
Mortgages which have adjustable or renegotiable interest rates are shown as
maturing in the period during which the contract is due. The schedule does not
reflect the effects of scheduled payments, possible prepayments or enforcement
of due-on-sale clauses. The total amount of loans due after June 30, 2002 that
have predetermined interest rates is $25.5 million, and that have floating or
adjustable rates is $55.7 million.

<TABLE>
<CAPTION>
                                                                                Real Estate
                                       ---------------------------------------------------------------------------------------------
                                                                  Multi-Family
                                       One- to Four-Family       and Commercial             Land                  Construction
                                       -------------------      ---------------     ----------------------     ---------------------
                                                 Weighted               Weighted                 Weighted                  Weighted
                                                  Average                Average                  Average                   Average
                                       Amount      Rate         Amount    Rate       Amount        Rate        Amount        Rate
                                       ------      ----         ------    ----       ------        ----        ------        ----
                                                                                                 (Dollars in Thousands)
<S>                                   <C>        <C>          <C>       <C>         <C>          <C>           <C>         <C>
Due During Years Ending June 30,
--------------------------------
2002 ..............................   $  2,130     8.70%      $    860    8.95%     $ 2,017        7.92%      $ 28,910       8.70%
2003 ..............................      1,404     9.18          1,226    8.74           30        8.94             --         --
2004 ..............................        750     9.31          1,045    8.55            5        7.88             --         --
2005 and 2006 .....................      1,318     8.58            412    8.32           58        9.46             --         --
2007 to 2011 ......................      2,631     8.54            853    8.09          349        8.43             --         --
2012 to 2026 ......................     11,121     8.30          1,824    8.55        1,092        8.50             --         --
2027 and following ................     40,629     7.85          5,256    8.68        2,247        8.54             --         --
                                      --------   ------       --------  ------      -------      ------       --------      -----
                                      $ 59,982     8.06%      $ 11,476    8.62%     $ 5,798        8.32%      $ 28,910       8.70%
                                      ========                ========              =======                   ========

<CAPTION>
                                                 Consumer                    Total
                                             --------------------     -------------------
                                                        Weighted                Weighted
                                                         Average                 Average
                                               Amount      Rate       Amount       Rate
                                               ------      ----       ------       ----
<S>                                          <C>        <C>         <C>         <C>
Due During Years Ending June 30,
--------------------------------
2002 ..............................          $  2,046     10.33%    $ 35,963       8.75%
2003 ..............................             1,416     10.50        4,076       9.50
2004 ..............................             2,194     10.19        3,994       9.59
2005 and 2006 .....................             5,296      9.75        7,084       9.44
2007 to 2011 ......................                84      9.02        3,917       8.44
2012 to 2026 ......................                10     12.99       14,047       8.35
2027 and following ................                --        --       48,131       7.97
                                             --------     -----     --------       ----
                                             $ 11,046     10.04%    $117,212       8.47%
                                             ========               ========
</TABLE>

                                       10

<PAGE>

Origination of Loans

         Loan originations are developed from continuing business with
depositors and borrowers, soliciting realtors, builders, walk-in customers and
third-party sources. The Board of Directors of the Bank has authorized certain
officers to originate loans within specified underwriting limits. The President
has authority to make secured real estate loans up to $350,000 and secured
installment loans up to $40,000. Unsecured installment loans may be approved by
the President up to $15,000. The Consumer Loan Department Manager has authority
to make secured installment loans up to $40,000 and unsecured installment loans
up to $10,000. All loans in excess of these limitations must be approved by the
Board of Directors. The Bank has established a Loan Audit Committee which
reviews loans made or denied by officers of the Bank. The Loan Audit Committee
meets monthly and consists of the Chief Executive Officer and President as well
as three members of the Board of Directors.

         While the Bank originates both adjustable-rate and fixed-rate loans,
its ability to originate loans to a certain extent is dependent upon the
relative customer demand for loans in its market, which is affected by the
interest rate environment, among other factors. For the year ended June 30,
2001, the Bank originated $29.8 million in fixed-rate loans and $3.7 million in
adjustable-rate loans. For the fiscal year ended June 30, 2000, the Bank
originated $104.7 million in fixed-rate loans and $29.4 million in
adjustable-rate loans. For the fiscal year ended June 30, 1999 the Bank
originated $128.8 million in fixed-rate loans and $37.5 million in
adjustable-rate loans.

         In recent years, the Bank has not purchased loans. For the fiscal years
ended June 30, 2001, 2000 and 1999, the Bank purchased no loans. As currently
structured, longer term, fixed rate loans which don't meet the Bank's asset and
liability requirements are sold to investors on either a servicing released or
servicing retained basis. Such loans are preapproved by investors with interest
rates locked prior to loan funding. The Bank originates conforming,
non-conforming and subprime loans for sale to investors. For the year ended June
30, 2001, the Bank sold $30.3 million in conforming residential one- to
four-family loans (including $20.4 million of fixed rate loans and one pool of
ARM loans totaling $9.9 million), compared to $31.3 million and $57.9 million
for the years ended June 30, 2000 and 1999, respectively. Primarily all of the
residential loans sold by the Bank are fixed-rate residential loans with
maturities of 15 and 30 years, though the Bank sold some one- to four family ARM
loans, including a pool of $9.9 million of such loans for the year ended June
30, 2001.

                                       11

<PAGE>

         Set forth below is a table showing the Bank's loan originations, sales
and repayments for the periods indicated.

<TABLE>
<CAPTION>
                                                             Year Ended June 30,
                                                             -------------------
                                                      2001         2000         1999
                                                   ---------      ------      --------
Originations by type:                                         (In Thousands)
 Adjustable rate:
<S>                                               <C>         <C>             <C>
  Real estate -
   One- to four-family residential .............  $  2,893       $24,646      $33,341
   Multi-family ................................        --         1,661          443
   Commercial ..................................       192         2,534        1,222
   Land ........................................       604           368        1,914
  Consumer .....................................        --           179          546
                                                  --------       -------      -------
 Total adjustable rate .........................     3,689        29,388       37,466
                                                  --------       -------      -------

 Fixed rate:
  Real estate -
   One- to four-family residential .............    21,969        31,112       51,038
   Multifamily .................................        --           167          120
   Commercial ..................................       765         2,172        2,126
   Land ........................................        65           514        2,765
   Construction ................................     2,233        51,974       59,564
  Consumer .....................................     4,727        18,612       13,208
                                                  --------       -------      -------
 Commercial Business ...........................        --           156           --
 Total fixed rate ..............................    29,759       104,707      128,821
                                                  --------       -------      -------
 Total loans originated ........................    33,448       134,095      166,287
Sales and Repayments:
  Real Estate -
  One- to four-family residential ..............    30,324        17,088       57,949
                                                  --------       -------      -------
  Total loans sold .............................    30,324        17,088       57,949
 Principal repayments ..........................    72,636        80,143       97,631
                                                  --------       -------      -------
  Total sales and repayments ...................   102,960        97,231      155,580
Decrease (increase) in other items, net ........    16,870        (6,936)       8,895
                                                  --------       --------     -------
  Net (decrease) increase ......................  $(52,642)      $29,928      $19,602
                                                  ========       =======      =======
</TABLE>

Asset Quality

         The Bank's collection procedures provide that when a loan is past due,
a first notice is sent to the borrower requesting payment ten days (for consumer
loans) and 16 days (for real estate loans) after the due date. A second notice
is sent 16 days (for consumer loans) and 30 days (for real estate) after the due
date. At the time of the second notice, phone calls are made by the Bank with
personal letter backups. If the loan remains delinquent for 30 days, a second
telephone contact is made. If the loan becomes 60 days delinquent, a
right-to-cure letter generally is sent and the borrower is notified of the
availability of financial or counseling aid. If consumer loans are not resolved
by 90 days, the account is put on non-accrual status and repossession and/or
legal action is normally initiated. At June 30, 2001, 2000 and 1999, the
percentage of total loans delinquent 90 days or more to net loans receivable
were 6.74%, 3.07% and 0.41%, respectively. The majority of the increase was due
to increased delinquent construction loans.

         Delinquent Loans and Non-performing Assets. Loans are reviewed on a
regular basis and are placed on a non-accrual status when, in the opinion of
management, the collection of interest is doubtful. Mortgage and consumer loans
are placed on non-accrual status when principal or interest is 90 days or more
past due. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income. The loan will remain on
non-accrual status until the loan is brought current.

         Real estate acquired through foreclosure or by deed-in-lieu of
foreclosure is classified as real estate owned until such time as it is sold.
When real estate owned is acquired, it is recorded at the lower of the unpaid
principal balance of the related loan, or its fair value, less estimated selling
expenses. Any further write-down of real estate owned is charged against
earnings. At June 30, 2001, the Bank has $956,000 in real estate owned.

                                       12

<PAGE>

     The following table sets forth information with respect to the Bank's
delinquent loans at June 30, 2001.

<TABLE>
<CAPTION>
                                                 Loans Delinquent For
                              -----------------------------------------------------------

                                       60-89 Days                  90 Days and Over                    Total
                              ----------------------------   ----------------------------   ----------------------------
                                                  Percent                        Percent                        Percent
                                                  of Loan                        of Loan                        of Loan
                              Number    Amount    Category   Number    Amount    Category   Number  Amount      Category
                              ------    ------    --------   ------    ------    --------   ------  ------      --------

                                                                (Dollars in Thousands)
<S>                           <C>       <C>       <C>        <C>       <C>       <C>        <C>      <C>        <C>
Real Estate:
   One- to four-family.......     13    $  918       1.53%      15     $  964       1.61%      28   $ 1,882       3.14%
   Multi-family .............     --        --         --       --         --         --       --        --         --
   Commercial ...............     --        --         --       --         --         --       --        --         --
   Land .....................      1       150       2.59        6        598      10.31        7       748      12.90
   Consumer .................     23       145       1.31       34        311       2.82       57       456       4.13
   Construction or
      Development ...........      9       495       1.71       24      5,618      19.43       33     6,113      21.14
                               -----    ------    -------    -----     ------    -------    -----   -------     ------
      Total .................     46    $1,708       1.54%      79     $7,491       6.74%     125   $ 9,199       8.28%
                                        ======    =======              ======    =======            =======     ======
</TABLE>



     The following table sets forth information regarding non-performing loans
and real estate owned by the Bank at the dates indicated. As of the dates
indicated, the Bank had seven restructured loans within the meaning of SFAS No.
15, with an aggregate balance of $915,000. Non-accruing loans include loans with
principal or interest currently delinquent 90 days or more, plus loans
previously delinquent for 90 days or more which have not been brought current.

<TABLE>
<CAPTION>
                                                                         At June 30,
                                                         -------------------------------------------
                                                            2001              2000            1999
                                                         ---------         ---------       ---------
                                                                     (Dollars In Thousands)
<S>                                                       <C>              <C>            <C>
Non-accruing loans:
    One- to four-family..............................     $  2,331           $ 1,211       $     173
    Commercial ......................................          418                54              --
    Land ............................................          598               342              --
    Construction or development .....................        6,856             6,762             336
    Consumer ........................................          359               143              45
                                                          --------           -------       ---------

       Total ........................................     $ 10,562           $ 8,512             554
                                                                                           ---------

Accruing loans delinquent more than 90 days:
    One- to four-family .............................           --                --              --
    Consumer ........................................           --                --              --
                                                          --------           -------       ---------

       Total ........................................           --                --              --
                                                          --------           -------       ---------

Foreclosed assets:
    One- to four-family .............................          100               179              95
    Commercial real estate ..........................          225                58              58
    Construction or Development .....................          631                --              --
    Consumer ........................................           51                32               7
                                                          --------           -------       ---------

       Total ........................................        1,007               269             160
                                                          --------           -------       ---------

Total non-performing assets .........................     $ 11,569           $ 8,781       $     714
                                                          ========           =======       =========

Total loans delinquent 90 days or more
  to net loans receivable ...........................         6.74%             3.07%           0.41%
                                                          ========           =======       =========
</TABLE>


                                       13

<PAGE>

     For the fiscal year ended June 30, 2001, gross interest income which would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to $657,000. The amount that was included in
interest income on such loans was $435,000 for the fiscal year ended June 30,
2001.

     Classified Assets. Federal regulations provide for the classification of
loans and other assets, such as debt and equity securities, considered by the
OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard" with the added characteristic that
the weaknesses present make "collection or liquidation in full" on the basis of
currently existing facts, conditions and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.

     When an insured institution classifies problem assets as either substandard
or doubtful, it may establish general allowances for losses in an amount deemed
prudent by management. General allowances represent loss allowances which have
been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem assets. When an insured institution classifies problem assets
as "loss," it is required either to establish a specific allowance for losses
equal to 100% of that portion of the asset so classified or to charge-off such
amount. An institution's determination as to the classification of its assets
and the amount of its valuation allowances is subject to review by the
regulatory authorities, who may order the establishment of additional general or
specific loss allowances.

     In connection with the filing of its periodic reports with the OTS and in
accordance with its classification of assets policy, the Bank reviews loans in
its portfolio monthly to determine whether such assets require classification in
accordance with applicable regulations. On the basis of management's review of
its assets, at June 30, 2001, the Bank had classified a total of $15.8 million
of its assets as substandard. At June 30, 2001, the Bank had no assets
classified as doubtful and had $28,000 assets classified as loss. At June 30,
2001, total classified assets comprised $15.8 million, or 107.3% of the
Company's capital and 10.4% of the Company's total assets. At June 30, 2000,
total classified assets comprised $14.2 million, or 90.1% of the Company's
capital and 7.85% of the Company's total assets. The increase in classified
assets at June 30, 2001, reflects a deterioration of the credit quality in the
construction, commercial and consumer loan portfolios. Total classified assets
were $14.8 million at August 31, 2001.

     For a more detailed discussion of the Bank's classified assets, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of Operating Results for the Years Ended June 30, 2001,
and June 30, 2000--Provision for Loan Losses," in the Company's Annual Report to
Stockholders included as Exhibit 13 to this Form 10-KSB, which information is
incorporated herein by reference.

     Other Loans of Concern. In addition to the non-performing loans set forth
in the tables above, as of June 30, 2001, there were 78 loans, with an aggregate
balance of $12.0 million, classified by the Bank with respect to which known
information about the possible credit problems of the borrowers or the cash
flows of the security properties have caused management to have some doubts as
to the ability of the borrowers to comply with present loan repayment terms and
which may result in the future inclusion of such items in the non-performing
asset categories.

     Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity, including those loans which are being specifically monitored by
management. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters, the
loan classifications discussed above, the estimated fair value of the underlying
collateral, economic


                                       14

<PAGE>

conditions, historical loan loss experience, the amount of loans outstanding and
other factors that warrant recognition in providing for an adequate loan loss
allowance.

     Real estate properties acquired through foreclosure are recorded at the
lower of cost or fair value minus estimated cost to sell. If fair value at the
date of foreclosure is lower than the balance of the related loan, the
difference will be charged-off to the allowance for loan losses at the time of
transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on such property is established by a
charge to operations. At June 30, 2001, the Bank had $956,000 in properties
which were acquired through foreclosure.

     Although management believes that it uses the best information available to
determine the allowance, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Bank's allowance for loan losses will be
the result of periodic loan, property and collateral reviews and thus cannot be
predicted in advance. In addition, federal regulatory agencies, as an integral
part of the examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to increase the allowance based
upon their judgment of the information available to them at the time of their
examination. At June 30, 2001, the Bank had a total allowance for loan losses of
$3.5 million, representing 33.1% of total non-performing loans and 3.2% of the
Bank's loans receivable, net. The increase in the allowance at June 30, 2001 was
primarily attributable to an increase in the Bank's classified assets of $1.6
million to $15.8 million. The increase in classified assets was due to the
continued deterioration of the credit quality in the construction, commercial
and consumer loan portfolio conducted by the Bank. For additional information,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of Operating Results for the Years Ended June 30, 2001,
and June 30, 2000--Provision for Loan Losses," in the Company's Annual Report to
Stockholders included as Exhibit 13 to this Form 10-KSB, which information is
incorporated herein.

     The following table sets forth the allocation for loan losses by category
for the periods indicated.

<TABLE>
<CAPTION>
                                                                              At June 30,
                                --------------------------------------------------------------------------------------------------
                                               2001                                2000                            1999
                                -----------------------------------  -------------------------------  ----------------------------
                                                         Percent                          Percent                          Percent
                                                        of Loans                         of Loans                         of Loans
                                           Loan          in Each                Loan      in Each               Loan       in Each
                                Amount of  Amounts      Category  Amount of   Amounts    Category  Amount of  Amounts     Category
                                Loan Loss    by         to Total  Loan Loss     by       to Total  Loan Loss    by        to Total
                                Allowance  Category      Loans    Allowance   Category    Loans    Allowance  Category     Loans
                                ---------  --------    ---------  --------- ----------  ---------  ---------  --------   ---------
                                                               (Dollars in Thousands)

<S>                              <C>       <C>         <C>      <C>        <C>          <C>       <C>      <C>            <C>
One- to four-family..........    $    431   $ 59,982    51.17%   $    107   $ 84,645      45.33%   $   69   $     71,353     43.74%
Multi-family ................          10      1,986     1.69          14      2,832       1.52        10          1,951      1.20
Commercial real estate ......         101      9,490     8.09         188      7,388       3.96        31          5,496      3.37
Land ........................          96      5,798     4.95         108      7,183       3.85        42          6,485      3.98
Construction or development..       2,240     28,910    24.66       2,237     66,000      35.34       547         63,319     38.81
Consumer ....................         594     11,046     9.42         270     18,676      10.00       228         14,539      8.90
                                 --------   --------   ------    --------   --------    -------    ------   ------------   -------
     Total ..................       3,472    117,212   100.00%   $  2,924   $186,724     100.00%   $  927   $    163,143    100.00%
                                 ========   ========   ======    ========   ========    =======    ======   ============   =======
</TABLE>



                                       15

<PAGE>

     The following table sets forth information with respect to the Bank's
allowance for loan losses for the fiscal year indicated.

<TABLE>
<CAPTION>
                                                                       Years Ended June 30,
                                                                 -------------------------------
                                                                  2001        2000         1999
                                                                 ------      ------       ------
                                                                      (Dollars in thousands)
<S>                                                              <C>         <C>          <C>
Balance at beginning of year ................................    $2,924      $  927       $  669
                                                                 ------      ------       ------
Charge-offs:
  One- to four-family .......................................       122          --            8
  Construction ..............................................       834          --           --
  Consumer ..................................................       276         200           74
                                                                 ------      ------       ------
                                                                  1,232         200           82

Recoveries:
  Consumer ..................................................        41          45           42
                                                                 ------      ------       ------
                                                                     41          45           42
                                                                 ------      ------       ------

Net charge-offs .............................................     1,191         155           40
Provision for loan losses ...................................     1,739       2,152          298
                                                                 ------      ------       ------

Balance at end of year ......................................    $3,472      $2,924       $  927
                                                                 ======      ======       ======

Ratio of net charge-offs during the year
  to average loans outstanding during the year ..............      0.86%       0.10%        0.00%
                                                                 ======      ======       ======

Ratio of allowance for loan loss to ending
  loans receivable, net .....................................      3.12%       1.79%        0.69%
                                                                 ======      ======       ======

Ratio of allowance for loan loss to non-
  performing assets at end of year ..........................     30.01%      33.30%      129.83%
                                                                 ======      ======       ======
</TABLE>

                                       16

<PAGE>

Investment Activities

     General. Community Bank must maintain adequate levels of investments that
qualify as liquid assets under OTS regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Historically, the Bank has
generally maintained liquid assets at levels above the minimum requirements
previously imposed by the OTS regulations and at levels believed adequate to
meet the requirements of normal operations, including repayments of maturing
debt and potential deposit outflows. Cash flow projections are regularly
reviewed and updated to assure that adequate liquidity is maintained. At June
30, 2001, the Bank's liquidity ratio (liquid assets as a percentage of net
withdrawable savings deposits and current borrowings) was 21.61%. See
"Regulation - Liquidity."

     Federally chartered savings institutions have the authority to invest in
various types of liquid assets, including U.S. Treasury obligations, securities
of various federal agencies, certain certificates of deposit of insured banks
and savings institutions, certain bankers' acceptances, repurchase agreements
and federal funds. Subject to various restrictions, federally chartered savings
institutions may also invest their assets in commercial paper, investment grade
corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise
authorized to make directly.

     Generally, the investment policy of the Bank, as established by the Board
of Directors, is to invest funds among various categories of investments and
maturities based upon the Bank's liquidity needs, asset/liability management
policies, investment quality, marketability and performance objectives.

     Mortgage-backed Securities. The Bank purchases mortgage-backed securities
to supplement residential loan production and as part of its asset/liability
strategy. The type of securities purchased is based upon the Bank's
asset/liability management strategy and balance sheet objectives. The Bank has
invested primarily in federal agency securities, principally Freddie Mac and
Government National Mortgage Association ("GNMA") obligations. At June 30, 2001,
the Bank's investment in mortgage-backed securities totaled $8.0 million, or
5.3% of its total assets. At June 30, 2001, all but $25,000 of the Bank's
mortgage-backed securities were classified as available for sale. At June 30,
2000, all of the Bank's mortgage-backed securities were classified as held to
maturity.

     The Freddie Mac and GNMA certificates are modified pass-through
mortgage-backed securities that represent undivided interests in underlying
pools of fixed-rate, or certain types of adjustable-rate, single-family
residential mortgages issued by these government-sponsored entities. 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. Freddie Mac provides the certificate holder
a guarantee of timely payments of interest and ultimate collection of principal,
whether or not they have been collected. GNMA's guarantee to the holder of
timely payments of principal and interest is backed by the full faith and credit
of the U.S. Government.

     While mortgage-backed securities carry a reduced credit risk as compared to
whole loans, such securities remain subject to the risk that a fluctuating
interest rate environment, along with other factors such as the geographic
distribution of the underlying mortgage loans, may alter the prepayment rate of
such mortgage loans and so affect both the prepayment speed, and value, of such
securities.

                                       17

<PAGE>

     Set forth below is a table showing the Bank's purchases, sales and
repayments of mortgage-backed securities for the periods indicated.

<TABLE>
<CAPTION>
                                                                  Year Ended June 30,
                                                          -----------------------------------
                                                            2001         2000         1999
                                                          --------     ---------    ---------
                                                                    (In Thousands)
<S>                                                       <C>          <C>          <C>
Purchases ............................................    $ 8,005      $    --      $     --
Sales ................................................         --           --            --
Unrealized loss on mortgage-backed securities
  available for sale .................................        (34)          --            --
Repayments ...........................................        (14)         (18)          (18)
                                                          -------      -------      --------
Net increase (decrease) ..............................    $ 7,957      $   (18)     $    (18)
                                                          =======      =======      ========
</TABLE>

     Other Investments. At June 30, 2001, the Bank's investment securities other
than mortgage-backed securities consisted of U.S. Government agency securities,
municipal bonds, U.S. Treasury Bills, FHLB stock and other FHLB interest-earning
assets.

     OTS regulations restrict investments in corporate debt and equity
securities by the Bank. These restrictions include prohibitions against
investments in the debt securities of any one issuer in excess of 15% of the
Bank's unimpaired capital and unimpaired surplus as defined by federal
regulations, plus an additional 10% if the investments are fully secured by
readily marketable collateral. At June 30, 2001, the Bank was in compliance with
this regulation. See "Regulation - Federal Regulation of Savings Associations"
for a discussion of additional restrictions on the Bank's investment activities.

     The following table sets forth the composition of the Bank's investment
securities, net of premiums and discounts, at the dates indicated.

<TABLE>
<CAPTION>
                                                                                         June 30,
                                                         ---------------------------------------------------------------------------
                                                                   2001                    2000                        1999
                                                         ----------------------    -------------------       -----------------------
                                                         Carrying        % of      Carrying     % of         Carrying         % of
                                                          Value          Total      Value       Total         Value          Total
                                                         -------        -------    -------     -------       -------         -------
                                                                                 (Dollars in Thousands)
<S>                                                      <C>            <C>        <C>         <C>           <C>             <C>
Investment securities available-for-sale:
  Federal agency obligations .........................   $ 3,996          16.94    $    --          --       $    --             --%
                                                         -------        -------    -------     -------       -------         ------
Subtotal .............................................     3,996          16.94         --          --            --             --

Investment securities held-to-maturity ...............       379           1.61        187        2.17%      $    93           1.08%
                                                         -------        -------    -------     -------       -------         ------
Subtotal .............................................       379           1.61        187        2.17            93           1.08%

FHLB stock ...........................................     2,323           9.85      2,323       27.01         2,173          25.22
                                                         -------        -------    -------     -------       -------         ------
Total investment securities and
    FHLB stock .......................................     6,698          28.40      2,510       29.18         2,266          26.30
                                                         -------        -------    -------     -------       -------         ------

Other interest-earning assets:
FHLB CD's ............................................     8,000          33.92      3,000       34.89            --             --
FHLB checking ........................................     2,888          12.25      1,964       22.85         3,351          38.89
FHLB Daily Time ......................................     5,997          25.43      1,125       13.08         3,000          34.81
                                                         -------        -------    -------     -------       -------         ------
   Total other interest-earnings assets ..............    16,885          71.60    $ 6,089       70.82         6,351          73.70
                                                         -------        -------    -------     -------       -------         ------

Total investment portfolio ...........................   $23,583         100.00%   $ 8,599      100.00%      $ 8,617         100.00%
                                                         =======        =======    =======     =======       =======         ======
</TABLE>

                                       18

<PAGE>

     Investment Portfolio Maturities. The following table sets forth the
scheduled maturities, carrying values, market values and average yields for the
Bank's investment securities excluding FHLB stock at June 30, 2001.

<TABLE>
<CAPTION>
                                                                         June 30, 2000
                                            -------------------------------------------------------------------------
                                             Less than     1 to 5     5 to 10     Over
                                              1 Year       Years       Years     10 Years   Total Investment Securities
                                            ----------  ----------  ----------  ----------  ---------------------------
                                             Carrying    Carrying    Carrying    Carrying     Carrying        Fair
                                              Value       Value       Value       Value        Value          Value
                                            ----------  ----------  ----------  ----------  -----------    -----------
                                                                     (Dollars in Thousands)
<S>                                        <C>          <C>         <C>         <C>          <C>           <C>
Investment Securities .....................  $    301     $    14     $    23     $    41      $   379       $   379
                                             --------     -------     -------     -------      -------       -------
Federal agency obligations ................  $     --     $ 3,996     $    --     $    --      $ 3,996       $ 3,996
                                             --------     -------     -------     -------      -------       -------
Total investment securities ...............  $    301     $ 4,010     $    23     $    41      $ 4,375       $ 4,375
                                             ========     =======     =======     =======      =======       =======
Weighted average yield ....................      4.63%       5.96%       6.50%       6.50%        5.88%
</TABLE>

Sources of Funds

     General. The Bank's primary sources of funds are deposits, receipt of
principal and interest on loans and securities, sale or maturity of investments,
FHLB advances, and other funds provided from operations.

     FHLB advances are used to support lending activities and to assist in the
Bank's asset/liability management strategy. Typically, the Bank does not use
other forms of borrowings. At June 30, 2001, the Bank had $10.2 million in FHLB
advances.

     Deposits. Community Bank offers a variety of deposit accounts having a wide
range of interest rates and terms. The Bank's deposits consist of passbook,
demand, NOW, money market deposit and certificate accounts. The certificate
accounts currently range in terms from 91 days to seven years.

     The Bank relies primarily on advertising, competitive pricing policies and
customer service to attract and retain these deposits. Historically, Community
Bank has solicited deposits from its primary market area. However, in fiscal
2000, the Bank also solicited brokered deposits as a source of funds for its
loan originations. During fiscal 2001, substantially all of the brokered
deposits matured and rolled off. The Bank is no longer soliciting brokered
deposits. The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition.

     The Bank has become more susceptible to short-term fluctuations in deposit
flows as customers have become more interest-rate conscious. The Bank endeavors
to manage the pricing of its deposits in keeping with its profitability
objectives giving consideration to its asset/liability management.
Notwithstanding the foregoing, a significant percentage of the Bank's deposits
are for terms of less than one year. At June 30, 2001, $77.3 million, or 76.5%
of the Bank's certificates of deposit were in certificates of deposit scheduled
to mature in 12 months or less. The Bank believes that upon maturity, a majority
of these deposits will remain at the Bank. The ability of the Bank to attract
and maintain savings accounts and certificates of deposit, and the rates paid on
these deposits, has been and will continue to be significantly affected by
market conditions.

     The Bank's total deposits decreased from $135.6 million at June 30, 2000,
to $124.6 million at June 30, 2001. This decrease resulted primarily from the
maturity and roll off of brokered deposits of $14.7 million.

                                       19

<PAGE>

Savings Portfolio

     The following table sets forth the dollar amount of savings deposits with
various types of deposit programs offered by the Bank at the periods indicated.

<TABLE>
<CAPTION>
                                                                           At June 30,
                                                ----------------------------------------------------------------
                                                       2001                   2000                 1999
                                                -------------------   --------------------  --------------------
                                                 Balance   Percent     Balance    Percent    Balance   Percent
                                                --------- ---------   ---------  ---------  --------- ----------
                                                                    (Dollars  in  Thousands)
<S>                                            <C>       <C>        <C>        <C>        <C>       <C>
Transactions and Savings
 Deposits:
  Passbook savings ...........................   $  3,655      2.93%   $  3,928       2.90%  $  4,079      4.02%
  NOW accounts ...............................      9,468      7.60       9,811       7.23      8,988      8.86
  Money market accounts ......................      6,092      4.89       5,403       3.98      5,776      5.69
  Noninterest-bearing demand accounts ........      4,269      3.43       4,021       2.97      3,953      3.90
                                                 --------  --------    --------   --------   --------  --------
    Total non-certificates                         23,484     18.85      23,163      17.08     22,796     22.48
                                                 --------  --------    --------   --------   --------  --------

Certificates:
  2.00 - 3.99% ...............................      2,674      2.14          --         --          1        --
  4.00 - 5.99% ...............................     34,702     27.85      41,653      30.71     60,954     60.10
  6.00 - 7.99% ...............................     63,749     51.16      70,815      52.21     17,673     17.42
                                                 --------  --------    --------   --------   --------  --------
   Total certificates                             101,125     81.15%    112,468      82.92%    78,628     77.52%
                                                 --------  --------    --------   --------   --------  --------
         Total                                   $124,609    100.00%   $135,631     100.00%  $101,424    100.00%
                                                 --------  --------    --------   --------   --------  --------
</TABLE>

Deposit Activity

     The following table sets forth the deposit activities of the Bank for the
periods indicated:

<TABLE>
<CAPTION>
                                                           Years Ended June 30,
                                                  ------------------------------------
                                                    2001         2000           1999
                                                  --------     --------      ---------
                                                          (Dollars in Thousands)
<S>                                             <C>          <C>           <C>
Opening balance ...............................   $135,631     $101,424      $  85,777
Deposits(1) ...................................    279,372      299,198        250,886
Withdrawals ...................................    296,158      269,531        238,780
Interest credited .............................      5,764        4,540          3,541
                                                  --------     --------      ---------

Ending balance ................................   $124,609     $135,631      $ 101,424
                                                  ========     ========      =========
Net (decrease) increase .......................   $(11,022)    $ 34,207      $  15,647
                                                  ========     ========      =========

Percent (decrease) increase ...................      (8.13)%      33.73%         18.24%
                                                  ========     ========      =========
</TABLE>

------------------
(1) Does not reflect the rollover of certificates of deposit.


                                       20

<PAGE>

Time Deposit Maturity Schedule

     The following table shows weighted average rate and maturity information
for the Bank's certificates of deposit as of June 30, 2000.

                                                       Weighted
Certificate accounts maturing in            Total       Average     Percent of
--------------------------------
quarter ending:                            Balance       Rate         Total
--------------                            ---------   ----------    ---------

                                                (Dollars in Thousands)

September 30, 2001 .....................    $21,189         6.49%        20.96%
December 31, 2001 ......................     17,277         6.03         17.08
March 31, 2002 .........................     18,552         5.99         18.35
June 30, 2002 ..........................     20,320         5.74         20.09
September 30, 2002 .....................      6,759         5.51          6.68
December 31, 2002 ......................      2,453         5.44          2.43
March 31, 2003 .........................      2,077         5.89          2.05
June 30, 2003 ..........................        992         5.59          0.98
September 30, 2003 .....................        365         5.73          0.36
December 31, 2003 ......................        759         4.88          0.75
March 31, 2004 .........................      2,261         6.45          2.24
June 30, 2004 ..........................      1,451         6.65          1.43
Thereafter .............................      6,670         6.35          6.60
                                           --------                   --------
    Total                                  $101,125                     100.00%

     The following table indicates the amount of the Bank's certificates of
deposit and other deposits by time remaining until maturity as of June 30, 2001.

<TABLE>
<CAPTION>
                                                                 Maturity
                                         ----------------------------------------------------------
                                           3 Months     Over 3 to 6    Over 6 to 12       Over
                                           or Less         Months         Months        12 Months       Total
                                         -----------    ------------   ------------   -------------   ---------
                                                                (Dollars in Thousands)
<S>                                      <C>            <C>            <C>            <C>            <C>
Certificates of deposit less
 than $100,000 ......................... $   17,553      $   15,262     $  28,168      $   20,242    $   81,225
Certificates of deposit of
 $100,000 or more ......................      3,636           2,015        10,704           3,545        19,900
                                         ----------      ----------     ---------      ----------    ----------
  Total certificates of deposit ........ $   21,189      $   17,277     $  38,872      $   23,787    $  101,125
                                         ==========      ==========     =========      ==========    ==========
</TABLE>

                                       21

<PAGE>

     Borrowings. Community Bank's borrowings historically have consisted of
advances from the FHLB of Des Moines. Such advances may be made pursuant to
different credit programs, each of which has its own interest rate and range of
maturities. Federal law limits an institution's borrowings from the FHLB to 20
times the amount paid for capital stock in the FHLB, subject to regulatory
collateral requirements. At June 30, 2001, the Bank had $10.2 million in
advances from the FHLB. The Bank has the ability to purchase additional capital
stock from the FHLB. For additional information regarding the term to maturity
on FHLB advances, see Note 6 of the Notes to Consolidated Financial Statements.

     The following tables set forth the maximum month-end balance and average
balance of FHLB advances for the periods indicated, as well as the amount of
such advances and the weighted average interest rate at the dates indicated.

                                                      Years Ended June 30,
                                                 ----------------------------
                                                   2001      2000      1999
                                                 --------  --------  --------
                                                        (In Thousands)

Maximum Balance:
---------------
  FHLB advances .............................    $ 26,750  $ 45,450  $ 43,450

Average Balance:
---------------
  FHLB advances .............................    $ 17,027  $ 33,288  $ 33,837



                                                          At June 30,
                                                 ----------------------------
                                                   2001      2000      1999
                                                 --------  --------  --------
                                                        (In Thousands)

  FHLB advances .............................    $ 10,150  $ 26,750  $ 29,450
                                                 ========  ========  ========

  Weighted average interest rate ............        5.60%     6.16%     5.43%

Service Corporation Activities

     As a federally chartered savings association, Community Bank is permitted
by OTS regulations to invest up to 2% of its assets, or approximately $3.0
million at June 30, 2001, in the stock of, or loans to, service corporation
subsidiaries. Community may invest an additional 1% of its assets in service
corporations where such additional funds are used for inner-city or community
development purposes and up to 50% of its total capital in conforming loans to
service corporations in which it owns more than 10% of the capital stock. In
addition to investments in service corporations, federal associations are
permitted to invest an unlimited amount in operating subsidiaries engaged solely
in activities in which a federal association may engage. At June 30, 2001,
Community Bank had one subsidiary, CBES Service Corporation ("CBES"). CBES was
established in March 1993 for the purpose of offering credit life, health and
accident insurance to its customers. At June 30, 2001, the Bank's investment in
CBES was $1,000. Also, for the fiscal year ended June 30, 2001, CBES had no
pre-tax income.

                                       22

<PAGE>

                                   REGULATION

General

     Community Bank is a federally chartered savings bank, the deposits of which
are federally insured and backed by the full faith and credit of the U.S.
Government. Accordingly, the Bank is subject to broad federal regulation and
oversight extending to all its operations. The Bank is a member of the FHLB of
Des Moines and is subject to certain limited regulation by the Federal Reserve
Board. As the savings and loan holding company of the Bank, the Company also is
subject to federal regulation and oversight. The purpose of the regulation of
the Company and other holding companies is to protect subsidiary savings and
loan associations. The Bank is a member of the SAIF. The deposits of the Bank
are insured by the SAIF of the FDIC. As a result, the FDIC has certain
regulatory and examination authority over the Bank.

     Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.

Federal Regulation of Savings Associations

     The OTS has extensive authority over the operations of savings and loan
associations. As part of this authority, the Bank is required to file periodic
reports with the OTS and is subject to periodic examinations by the OTS and the
FDIC. The last regular OTS and FDIC examinations of the Bank were as of June
2001 and April 1991, respectively. The prior OTS examination resulted in the
Bank entering into the Supervisory Agreement. See "Description of
Business--Supervisory Agreement" herein. When these examinations are conducted
by the OTS and the FDIC, the examiners may require the Bank to provide for
higher general or specific loan loss reserves, as occurred with the prior OTS
examination.

     The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Bank and the Holding
Company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.

     In addition, the investment, lending and branching authority of the Bank is
prescribed by federal laws, and regulations, and it is prohibited from engaging
in any activities not permitted by such laws and regulations. For example, no
savings institution may invest in non-investment grade corporate debt
securities. In addition, the permissible level of investment by federal
associations in loans secured by non-residential real property may not exceed
400% of total capital, except with approval of the OTS. Federal savings and loan
associations are also generally authorized to branch nationwide. The Bank is in
compliance with the noted restrictions.

     OTS regulations limit a thrift institution's loans to one borrower to the
greater of $500,000 or 15% of unimpaired capital and surplus (except for loans
fully secured by certain readily marketable collateral, in which case this limit
is increased to 25% of unimpaired capital and surplus). At June 30, 2001, the
Bank's lending limit under this restriction was approximately $2.5 million. See
"Description of Business--Supervisory Agreement" herein.

     The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure and compensation and other employee benefits. Any institution
which fails to comply with these standards must submit a capital compliance
plan. A failure to submit a plan or to comply with an approved plan will subject
the institution to further enforcement action. The OTS and the other federal
banking agencies have also adopted additional guidelines on asset quality and
earnings standards, which are designed to enhance early identification and
resolution of problems and problem assets.

                                       23

<PAGE>

Insurance of Deposit Accounts

     The FDIC has adopted a risk-based deposit insurance assessment system. The
FDIC assigns an institution to one of three capital categories based on the
institution's financial information, as of the reporting period ending seven
months before the assessment period, and one of three supervisory subcategories
within each capital group. The three capital categories are well capitalized,
adequately capitalized and undercapitalized. The supervisory subgroup to which
an institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and information which the
FDIC determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds. An institution's assessment rate
depends on the capital category and supervisory category to which it is
assigned. The FDIC is authorized to raise the assessment rates. The FDIC has
exercised this authority several times in the past and may raise insurance
premiums in the future. If this type of action is taken by the FDIC, it could
have an adverse effect on the earnings of the Bank.

     The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC.

Capital Requirements.

     OTS capital regulations require savings institutions to meet three minimum
capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for
institutions receiving the highest rating on the CAMELS rating system) and an 8%
risk-based capital ratio. In addition, the prompt corrective action standards
discussed below also establish, in effect, a minimum 2% tangible capital
standard, a 4% leverage ratio (3% for institutions receiving the highest rating
on the CAMELS financial institution rating system), and, together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. OTS
regulations also require that, in meeting the tangible, leverage and risk-based
capital standards, institutions must generally deduct investments in and loans
to subsidiaries engaged in activities as principal that are not permissible for
a national bank.

     The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the OTS capital regulation based on the risks
believed inherent in the type of asset. Core capital is defined as common
stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus and minority interests in equity
accounts of consolidated subsidiaries less intangibles other than certain
mortgage servicing rights and credit card relationships. The components of
supplementary capital currently include cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock, the allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted assets and up to 45% of
unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.

     The capital regulations also incorporate an interest rate risk component.
Savings institutions with "above normal" interest rate risk exposure are subject
to a deduction from total capital for purposes of calculating their risk-based
capital requirements. For the present time, the OTS has deferred implementation
of the interest rate risk capital charge.

     At June 30, 2001, the Bank had tangible capital of $13.0 million, or 8.57%
of adjusted total assets, which is approximately $10.7 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date. At June 30,
2001, the Bank had core capital equal to $13.0 million, or 8.57% of adjusted
total assets, which is $6.9

                                       24

<PAGE>

million above the minimum leverage ratio requirement of 4% as in effect on that
date. At that date, the Bank had total risk based capital of $14.3 million
(including approximately $13.0 million in core capital and $1.3 million in
qualifying supplementary capital) and risk-weighted assets of $107.7 million
(with no converted off-balance sheet assets); or total capital of 13.31% of
risk-weighted assets. This amount was $5.7 million above the 8% requirement in
effect on that date.

Prompt Corrective Regulatory Action

     Under the OTS Prompt Corrective Action regulations, the OTS is required to
take supervisory actions against undercapitalized institutions, the severity of
which depends upon the institution's level of capital. Generally, a savings
institution that has total risk-based capital of less than 8.0% or a leverage
ratio or a Tier 1 core capital ratio that is less than 4.0% is considered to be
undercapitalized. A savings institution that has total risk-based capital less
than 6.0%, a Tier 1 core risk-based capital ratio of less than 3.0% or a
leverage ratio that is less than 3.0% is considered to be "significantly
undercapitalized" and a savings institution that has a tangible capital to
assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." Generally, the banking regulator is required to appoint a
receiver or conservator for an institution that is "critically
undercapitalized." The regulation also provides that a capital restoration plan
must be filed with the OTS within 45 days of the date an institution receives
notice that it is "undercapitalized," "significantly undercapitalized" or
"critically undercapitalized." In addition, numerous mandatory supervisory
actions become immediately applicable to the institution, including, but not
limited to, restrictions on growth, investment activities, capital
distributions, and affiliate transactions. The OTS could also take any one of a
number of discretionary supervisory actions against undercapitalized
institutions, including the issuance of a capital directive and the replacement
of senior executive officers and directors.

     At June 30, 2001, the Bank was categorized as "well capitalized"under the
prompt corrective action regulations.

Standards for Safety and Soundness

     Federal law requires each federal banking agency to prescribe for all
insured depository institutions standards relating to, among other things,
internal controls, information systems and audit systems, loan documentation,
credit underwriting, interest rate risk exposure, asset growth, compensation,
and other operational and managerial standards as the agency deems appropriate.
The federal banking agencies adopted Interagency Guidelines Prescribing
Standards for Safety and Soundness to implement the safety and soundness
standards required under the Federal law. The guidelines set forth the safety
and soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. The guidelines address internal controls and information systems;
internal audit systems; credit underwriting; loan documentation; interest rate
risk exposure; asset growth; and compensation, fees and benefits. If the
appropriate federal banking agency determines that an institution fails to meet
any standard prescribed by the guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve compliance
with the standard. If an institution fails to meet these standards, the
appropriate federal banking agency may require the institution to submit a
compliance plan.

Capital Distributions

     OTS regulations govern capital distributions by savings institutions, which
include cash dividends, stock repurchases and other transactions charged to the
capital account of a savings institution to make capital distributions. A
savings institution must file an application for OTS approval of the capital
distribution if either (1) the total capital distributions for the applicable
calendar year exceed the sum of the institution's net income for that year to
date plus the institution's retained net income for the preceding two years, (2)
the institution would not be at least adequately capitalized following the
distribution, (3) the distribution would violate any applicable statute,
regulation, agreement or OTS-imposed condition, or (4) the institution is not
eligible for expedited treatment of its filings. If an application is not
required to be filed, savings institutions which are a subsidiary of a holding
company, as well as certain other institutions, must still file a notice with
the OTS at least 30 days before the board of directors declares a dividend or
approves a capital distribution.

                                       25

<PAGE>

Liquidity.

         The Bank is required to maintain liquid assets in an amount that would
ensure its safe and sound operation. The Bank's liquidity ratio at June 30, 2001
was 21.61%.

Qualified Thrift Lender Test

         As a federal savings institution, the Bank is required to satisfy a
qualified thrift lender test whereby it must maintain at least 65% of its
"portfolio assets" in "qualified thrift investments" consisting primarily of
residential mortgages and related investments, including mortgage-backed and
related securities. "Portfolio assets" generally means total assets less
specified liquid assets up to 20% of total assets, goodwill and other intangible
assets, and the value of property used to conduct business. A savings
association that fails the qualified thrift lender test must either convert to a
bank charter or operate under specified restrictions. As of June 30, 2001, the
Bank met the qualified thrift lender test.

Community Reinvestment Act

         Savings associations are required to follow the provisions of the
Community Reinvestment Act of 1977, which requires the appropriate federal bank
regulatory agency, in connection with its regular examination of a savings
association, to assess the savings association's record in meeting the credit
needs of the community serviced by the savings associations, including low and
moderate income neighborhoods. The regulatory agency's assessment of the savings
association's record is made available to the public. Further, an assessment is
required of any savings associations which has applied, among other things, to
establish a new branch office that will accept deposits, relocate an existing
office or merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. The Bank received
an "outstanding" rating as a result of its most recent examination.

Activities of Associations and Their Subsidiaries

         A savings association may establish operating subsidiaries to engage in
any activity that the savings association may conduct directly and may establish
service corporation subsidiaries to engage in certain pre-approved activities
or, with approval of the OTS, other activities reasonably related to the
activities of financial institutions. When a savings association establishes or
acquires a subsidiary or elects to conduct any new activity through a subsidiary
that the association controls, the savings association must notify the FDIC and
the OTS 30 days in advance and provide the information each agency may, by
regulation, require. Savings associations also must conduct the activities of
subsidiaries in accordance with existing regulations and orders.

         The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices. Based upon that determination, the
FDIC or the OTS has the authority to order the savings association to divest
itself of control of the subsidiary. The FDIC also may determine by regulation
or order that any specific activity poses a serious threat to the Savings
Association Insurance Fund. If so, it may require that no Savings Association
Insurance Fund member engage in that activity directly.

Transactions with Affiliates

         Savings associations must comply with Sections 23A and 23B of the
Federal Reserve Act relative to transactions with affiliates in the same manner
and to the same extent as if the savings association were a Federal Reserve
member bank. A savings and loan holding company, its subsidiaries and any other
company under common control are considered affiliates of the subsidiary savings
association under the Home Owners Loan Act. Generally, Sections 23A and 23B
limit the extent to which the insured association or its subsidiaries may engage
in certain covered transactions with an affiliate to an amount equal to 10% of
the institution's capital and surplus and place an aggregate limit on all
transactions with affiliates to an amount equal to 20% of capital and surplus,
and require that

                                       26

<PAGE>

all transactions be on terms substantially the same, or at least as favorable to
the institution or subsidiary, as those provided to a non-affiliate. The
term"covered transaction" includes the making of loans, the purchase of assets,
the issuance of a guarantee and similar types of transactions.

         Any loan or extension of credit by the Bank to an affiliate must be
secured by collateral in accordance with Section 23A.

         Three additional rules apply to savings associations. First, a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies. Second, a savings association may not purchase or invest insecurities
issued by an affiliate, other than securities of a subsidiary. Third, the OTS
may, for reasons of safety and soundness, impose more stringent restrictions on
savings associations but may not exempt transactions from or otherwise abridge
Section 23A or 23B. Exemptions from Section 23A or 23B may be granted only by
the Federal Reserve, as is currently the case with respect to all FDIC-insured
banks.

         The Bank's authority to extend credit to executive officers, directors
and 10% shareholders, as well as entities controlled by those persons, is
currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder. Among other things, these regulations require that
loans be made on terms and conditions substantially the same as those offered to
unaffiliated individuals and not involve more than the normal risk of repayment.
Regulation O also places individual and aggregate limits on the amount of loans
the Bank may make to those persons based, in part, on the Bank's capital
position, and requires certain board approval procedures to be followed. The OTS
regulations, with certain minor variances, apply Regulation O to savings
institutions.

Holding Company Regulation

         Federal law and regulation generally prohibit a savings and loan
holding company, without prior OTS approval, from acquiring more than 5% of the
voting stock of any other savings association or savings and loan holding
company or controlling the assets thereof. They also prohibit, among other
things, any director or officer of a savings and loan holding company, or any
individual who owns or controls more than 25% of the voting shares of the
Company, from acquiring control of any savings association not a subsidiary of a
savings and loan holding company, unless the acquisition is approved by the OTS.

         The Company is a unitary savings and loan holding company under federal
law because The Bank is its only insured subsidiary. Formerly, a unitary savings
and loan holding company was not restricted as to the types of business
activities in which it could engage, provided that its subsidiary savings
association continued to be a qualified thrift lender. Recent legislation,
however, restricts unitary saving and loan holding companies not existing or
applied for before May 4, 1999 to activities permissible for a financial holding
company as defined under the legislation, including insurance and securities
activities, and those permitted for a multiple savings and loan holding company
as described below. In view of the holding company's size and business plan, the
Board of Directors of the Company does not believe that the recent legislation
will have a material impact on the holding company. Upon any non-supervisory
acquisition by the Company of another savings association as a separate
subsidiary, the Company would become a multiple savings and loan holding company
and would have extensive limitations on the types of business activities in
which it could engage. The Home Owner's Loan Act limits the activities of a
multiple savings and loan holding company and its non-insured institution
subsidiaries primarily to activities permissible for the bank holding companies
under Section 4(c)(8) of the Bank Holding Company Act, provided the prior
approval of the Office of Thrift Supervision is obtained, and to other
activities authorized by Office of Thrift Supervision regulation. Multiple
savings and loan holding companies are generally prohibited from acquiring or
retaining more than 5% of a non-subsidiary company engaged in activities other
than those permitted by the Home Owners Loan Act.

         The activities authorized by the Federal Reserve Board as permissible
for bank holding companies also must be approved by the OTS prior to being
engaged in by a multiple savings and loan holding company.

                                       27

<PAGE>

         Qualified Thrift Lender Test. Federal law provides that any savings and
loan holding company that controls a savings association that fails the
qualified thrift lender test, as explained above, must, within one year after
the date on which the association ceases to be a qualified thrift lender,
register as and be deemed a bank holding company under all applicable laws and
regulations.

Federal Securities Law

         The stock of the Company is registered with the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company is subject to the information, proxy solicitation,
insider trading restrictions and other requirements of the SEC under the
Exchange Act.

         Company 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.

Federal Reserve System

         The Federal Reserve Board requires all depository institutions to
maintain noninterest-bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At June 30, 2001, the Bank was in compliance with these reserve requirements.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements that may be imposed
by the OTS. See "- Liquidity."

         Savings and loan associations are authorized to borrow from the Federal
Reserve Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System

         The Bank is a member of the Federal Home Loan Bank System, which
consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank
System provides a central credit facility primarily for member institutions. The
Bank, as a member of the Federal Home Loan Bank of Des Moines, is required to
acquire and hold shares of capital stock in that Federal Home Loan Bank in an
amount at least equal to 1% of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of each
year, or 1/20 of its borrowings from the Federal Home Loan Bank, whichever is
greater. As of June 30, 2001, the Bank was in compliance with this requirement.
The Federal Home Loan Banks are required to provide funds for the resolution of
insolvent thrifts and to contribute funds for affordable housing programs. These
requirements could reduce the amount of dividends that the Federal Home Loan
Banks pay to their members and could also result in the Federal Home Loan Banks
imposing a higher rate of interest on advances to their members.

Federal and State Taxation

         For federal income tax purposes, the Company and the Bank file a
consolidated federal income tax return on a fiscal year basis using the accrual
method of accounting.

         As a result of federal legislation enacted in 1996, all savings banks
and savings associations may convert to a commercial bank charter, diversify
their lending, or be merged into a commercial bank without having to recapture
any of their pre-1988 tax bad debt reserve accumulations. However, transactions
which would require recapture of the pre-1988 tax bad debt reserve include
redemption of the Bank's stock, payment of dividends or distributions in excess
of earnings and profits, or failure by the institution to qualify as a bank for
federal income tax purposes. At June 30, 2001, the Bank had a balance of
approximately $1.7 million of pre-1988 bad debt reserves. A deferred tax
liability has

                                       28

<PAGE>

not been provided on this amount as management does not intend to make
distributions, redeem stock or fail certain bank tests that would result in
recapture of the reserve.

         Deferred income taxes arise from the recognition of items of income and
expense for tax purposes in years different from those in which they are
recognized in the consolidated financial statements. The Company accounts for
deferred income taxes by the asset and liability method, applying the enacted
statutory rates in effect at the balance sheet date to differences between the
book basis and the tax basis of assets and liabilities. The resulting deferred
tax liabilities and assets will be adjusted to reflect changes in the tax laws.

         The Company will be subject to the corporate alternative minimum tax to
the extent it exceeds the Company's regular income tax for the year. The
alternative minimum tax will be imposed at the rate of 20% of a specially
computed tax base. Included in this base are a number of preference items,
including interest on certain tax-exempt bonds issued after August 7, 1986, and
an "adjusted current earnings" computation which is similar to a tax earnings
and profits computation. In addition, for purposes of the alternative minimum
tax, the amount of alternative minimum taxable income that may be offset by net
operating losses is limited to 90% of alternative minimum taxable income.

         The Company's recent income tax returns have not been audited by the
Internal Revenue Service.

         State Taxation. The Missouri Corporation Income Tax Act provides for an
exemption from the Missouri Corporation Income Tax for mutual savings banks and
for banking corporations, which includes stock associations (e.g., the Bank).
However, this exemption does not extend to non-banking entities such as the
Company. The non-banking subsidiaries of the Bank (as well as the Company) are
subject to the Missouri Corporate Income Tax based on their Missouri taxable
income, as well as franchise taxes. The Missouri Corporation Income Tax applies
at graduated rates from 4% upon the first $25,000 of Missouri taxable income to
8% on all Missouri taxable income in excess of $200,000.For these purposes,
"Missouri taxable income" means net income which is earned within or derived
from sources within the State of Missouri, after adjustments permitted under
Missouri law including a federal income tax deduction and an allowance for net
operating losses, if any. In addition, the Bank became subject to the Missouri
Shares Tax after the Conversion, which will be imposed on the assessed value of
the Bank's stock. The formula for deriving the assessed value is to calculate
15% of the sum of (i) 20% of a corporation's capitalized earnings, plus (ii) 80%
of a corporation's taxable stockholders' equity, and to subtract from that
amount 50% of a corporation's real and personal property assessment. Other
various items may also be subtracted in calculating a corporation's capitalized
earnings.

         Delaware Taxation. As a Delaware holding company, the Company is
exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Company is also
subject to an annual franchise tax imposed by the State of Delaware.

Employees
---------

         At June 30, 2001, the Bank had a total of 60 full-time and 10 part-time
employees. The Bank's employees are not represented by any collective bargaining
group. Management considers its employee relations to be excellent.

Executive Officers of the Bank and the Company Who Are Not Directors
--------------------------------------------------------------------

         Margaret E. Teegarden. Ms. Teegarden, age 52, is the Manager of the
Bank's Savings Department, responsible for managing the Bank's savings
department. Ms. Teegarden joined the Bank in 1978.


         James V. Alderson. Mr. Alderson, age 55, has served as the Manager of
the Consumer Loan Department since June 1994, responsible for supervision of the
Bank's consumer lending operations. Mr. Alderson has been with the Bank since
1990 and served as a loan officer until June 1994.

                                       29

<PAGE>


         Keith E. Folkerts. Mr. Folkerts, age 52, is the Senior Vice-President
of Non-Residential Lending, responsible for managing the Bank's construction and
commercial lending. Prior to joining the Bank in 2001, Mr. Folkerts was Senior
Commercial Loan Officer with People's Bank in Overland Park, Kansas.

         Brenda K. Barnes. Ms. Barnes, age 39, is Senior Vice-President of
Residential Lending, responsible for the Bank's residential lending operations.
Prior to joining the Bank in 2001, Ms. Barnes was the Managing Underwriter with
Corinthian Mortgage Corporation in Mission, Kansas.

         Ronald W. Hill. Mr. Hill, age 52, has served as the Chief Financial
Officer and Manager of the Bank's Accounting Department since July 16, 2001. He
is responsible for the supervision of the Accounting Department and reporting to
regulatory authorities. He is also responsible for overseeing the Bank's
asset/liability management program.

Item 2.  Description of Property
--------------------------------

         The Bank conducts its business through its main office, located in
Excelsior Springs, Missouri and two branch offices, one located in Kearney,
Missouri and the other in Liberty, Missouri. On August 13, 2001, the Bank
announced the sale of the Kearney Branch to Kearney Trust Company, subject to
regulatory approval. The Bank's Liberty branch office is leased. The following
table sets forth information relating to the Bank's offices as of June 30, 2001.
The total net book value of the Bank's premises and equipment (including land,
buildings and leasehold improvements and furniture, fixtures and equipment) at
June 30, 2001 was approximately $2.1 million.

<TABLE>
<CAPTION>
                                                              Total
                                                           Approximate
                                                Date          Square      Net Book Value at
           Location                           Acquired       Footage       June 30, 2001
------------------------------------          --------     -----------    ---------------
                                                                           (In thousands)
<S>                                        <C>             <C>            <C>
Main Office:                                    1983          10,000         $       962
1001 North Jesse James Road
Excelsior Springs, Missouri  64024

Branch Offices:                                 1998           2,725                 850
601 N. Country
Kearney, Missouri  64020

913 Liberty Drive                              Leased         10,500                 267
Liberty, Missouri 64020                    (Expires March
                                                2003)
</TABLE>


         Community Bank believes that its current facilities are adequate to
meet the present and foreseeable needs of the Bank and the Holding Company. The
Bank intends to reduce the amount of space leased for the Liberty office.

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

         The Company is involved, from time to time, as plaintiff or defendant
in various legal actions arising in the normal course of their businesses. While
the ultimate outcome of these proceedings cannot be predicted with certainty, it
is the opinion of management, after consultation with counsel representing the
Company in the proceedings, that the resolution of these proceedings should not
have a material effect on the Company's financial position or results of
operations on a consolidated basis. For a discussion of the Supervisory
Agreement entered into by the Bank, see "Item 1. Description of
Business--Supervisory Agreement" herein.

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

                                       30

<PAGE>

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 2001.

                                     PART II
                                     -------

Item 5.  Market for the Registrant's Common Stock and Related Security Holder
------------------------------------------------------------------------------
Matters
-------

         Page 43 of the attached 2001 Annual Report to Shareholders is herein
incorporated by reference.

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------

         Pages 5 to 15 of the attached 2001 Annual Report to Shareholders are
herein incorporated by reference.

Item 7.  Financial Statements
-----------------------------

         Pages 16 to 42 of the attached 2001 Annual Report to Shareholders are
herein incorporated by reference.

Item 8.  Changes in and Disagreements With Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
--------------------

         There has been no Current Report on Form 8-K filed within 24 months
prior to the date of the most recent financial statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.

                                    PART III
                                    --------

Item 9.  Directors and Executive Officers of the Registrant
-----------------------------------------------------------

         Information concerning Directors of the Registrant is incorporated
herein by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Shareholders scheduled to be held on October 25, 2001.

Item 10. Executive Compensation
--------------------------------

         Information concerning executive compensation is incorporated herein by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Shareholders scheduled to be held on October 25, 2001.

Item 11. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

         Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on
October 25, 2001.

Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------

         Information concerning certain relationships and transactions is
incorporated herein by reference from the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders scheduled to be held on October 25, 2001.

Item 13. Exhibits List and Reports on Form 8-K
----------------------------------------------

         (a) (1)  Financial Statements:
         -----------------------------

                                       31

<PAGE>

         The following information appearing in the Registrant's Annual Report
to Shareholders for the year ended June 30, 2001, is incorporated by reference
in this Form 10-KSB Annual Report as Exhibit 13.

<TABLE>
<CAPTION>
                                                                                                      Page in
                                                                                                       Annual
            Annual Report Section                                                                      Report
            ---------------------                                                                      ------

<S>                                                                                                   <C>
Report of Independent Auditors ......................................................................    16

Consolidated Balance Sheets at June 30, 2001 and 2000 ...............................................    17

Consolidated Statements of Operations for the Years ended June 30, 2001, 2000 and 1999 ..............    18

Consolidated Statements of Stockholders' Equity and Comprehensive Income for the Years ended
   June 30, 2001, 2000 and 1999 ....................................................................     19

Consolidated Statements of Cash Flows for the Years ended June 30, 2001, 2000 and 1999 .............     20

Notes to Consolidated Financial Statements .........................................................     22
</TABLE>

         (a)(2) Financial Statement Schedules - All financial statement
                -----------------------------
schedules have been omitted as the information is either inapplicable or not
required under the related instructions.

         (a)(3) Exhibits - The following exhibits are either filed or attached
                --------
as part of this report or are incorporated herein by reference.


<TABLE>
<CAPTION>
                                                                                         Reference to
             Regulation                                                                 Prior Filing or
            S-B Exhibit                                                                 Exhibit Number
               Number                     Document                                      Attached Hereto
               ------                     --------                                      ---------------
            <S>                                                                         <C>
                2             Plan of acquisition, reorganization,                           None
                              arrangement, liquidation or succession

                3.1           Certificate of Incorporation                                     *

                3.2           Bylaws                                                           *

                 4            Instruments defining the rights of                               *
                              security holders, including indentures

                 9            Voting trust agreement                                         None

                10.1          Proposed Stock Option and Incentive Plan                         *

                10.2          Proposed Recognition and Retention Plan                          *

                10.3          Employment Agreement with Larry E. Hermreck, Daryl               *
                              R. Goettling, Margaret E. Teegarden and Dennis D.
                              Hartman.
</TABLE>

                                       32

<PAGE>

<TABLE>
<CAPTION>
                                                                                         Reference to
             Regulation                                                                 Prior Filing or
            S-B Exhibit                                                                 Exhibit Number
               Number                     Document                                      Attached Hereto
               ------         --------------------------------                          ---------------
            <S>               <C>                                                       <C>
                10.4          Employee Stock Ownership Plan                                    *

                10.5          Director Emeritus Agreements                                     *

                10.6          Salary Continuation Agreement                                    *

                10.7          Severance Agreements with Larry Hermreck, Deryl R.              **
                              Goettling, Margaret E. Teegarden and Dennis D.
                              Hartman

                 11           Statement re: computation of per share earnings                None

                 12           Statement re: computation or ratios                        Not required

                 13           Annual Report to Security Holders                               13

                 16           Letter re: change in certifying accountant                     None

                 18           Letter re: change in accounting principles                     None

                 21           Subsidiaries of Registrant                                      21

                 22           Published report regarding matters                             None
                              submitted to vote of security holders

                 23           Consent of experts and counsel                                  23

                 24           Power of Attorney                                          Not Required

                 28           Information from reports furnished to                          None
                              State insurance regulatory authorities

                 99           Additional exhibits                                            None
</TABLE>

___________________

         *Filed on June 21, 1996, as exhibits to the Registrant's Form SB-2
registration statement (Registration No. 333-6649), pursuant to the Securities
Act of 1933. All of such previously filed documents are hereby incorporated
herein by reference in accordance with Item 601 of Regulation S-B.

         **Filed on September 28, 1999 as exhibits to the Registrants' Annual
Report on Form 10-KSB for the year ended June 30, 1999. All of such previously
filed documents are hereby incorporated herein by reference in accordance with
Item 601 of Regulation S-B.

         (b) Reports on Form 8-K - No Form 8-K was filed during the last quarter
             -------------------
of the year covered by this Form 10-KSB.

                                       33

<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.

                                CBES BANCORP, INC.

Date: September 27, 2001        By:   /s/ Paul L. Thomas
                                  ----------------------------------------------
                                   Paul L. Thomas, Chief Executive Officer and
                                   Chairman of the Board

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


By:  /s/ Paul L. Thomas            By:  /s/ Cecil E. Lamb
    ---------------------------        -----------------------------------------
     Paul L. Thomas, Chief               Cecil E. Lamb, Director
      Executive Officer and
      Chairman of the Board
     (Principal Executive Officer)

Date: September 27, 2001           Date: September 27, 2001


By:  /s/ Ronald W. Hill            By: /s/ Dennis D. Hartman
     -------------------------         -----------------------------------------
     Ronald W. Hill, Chief               Dennis D. Hartman, President and
      Financial Officer                    Director
     (Principal Accounting and
       Financial Officer)

Date: September 27, 2001           Date: September 27, 2001


By:  /s/ Richard Cox               By: /s/ Robert McCrorey
     -------------------------         -----------------------------------------
     Richard Cox, Director               Robert McCrorey, Director

Date: September 27, 2001           Date: September 27, 2001


By:  /s/ Robert L. Lalumondier     By: /s/ Rodney Rounkles
     --------------------------        -----------------------------------------
     Robert L. Lalumondier,              Rodney Rounkles, Director
      Director

Date: September 27, 2001           Date: September 27, 2001

                                       34

<PAGE>

                                Index to Exhibits

Exhibit 13                 2001 Annual Report to Stockholders
Exhibit 21                 Subsidiaries of the Registrant
Exhibit 23                 Consent of Experts and Counsel



                                       35