<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, 2002
                                                     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
 incorporation or organization)                          Identification No.)

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, 2002 were
$9.3 million.

         As of September 6, 2002, 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 6, 2002, was $13.4 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

    None.





<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 office in 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. In November 2001, the Bank sold its branch office in Kearney,
Missouri, to Kearney Trust Company. At June 30, 2002, CBES Bancorp had total
assets of $112.9 million, deposits of $87.8 million and stockholders' equity of
$14.2 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, commercial
real estate loans, 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, 2002, the
Bank's total loan portfolio was $72.4 million, of which 60.3% were one-to
four-family residential mortgage loans, 13.8% were construction and land loans
(the vast majority of which related to single-family residential properties),
and 7.3% were consumer loans. During the fiscal year ended June 30, 2002, the
Bank originated $24.7 million of fixed-rate one- to four-family residential
mortgage loans, of which $18.9 million, or 76.5%, 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.

Recent Developments

         On September 5, 2002, CBES Bancorp, Inc., NASB Financial, Inc., a
Missouri corporation, and NASB Acquisition Subsidiary, Inc., a Missouri
corporation and wholly-owned subsidiary of NASB Financial, entered into a merger
agreement. The merger agreement provides, among other things, for the merger of
NASB Acquisition Subsidiary into CBES Bancorp, with CBES Bancorp thereafter
being a wholly-owned subsidiary of NASB Financial.

         Pursuant to the merger agreement, each share of common stock of CBES
Bancorp that is issued and outstanding at the effective time of the merger will
be converted into the right to receive $17.50 in cash, subject to adjustment if
the adjusted stockholders' equity of CBES Bancorp as of the close of business on
the last business day immediately prior to the effective date of the merger is
less than $13,900,000. If the adjusted stockholders' equity of CBES Bancorp is
less than $13,900,000, the per share cash consideration distributable by NASB
Financial will be reduced to $17.05 per share. If the adjusted stockholders'
equity of CBES Bancorp is less than $13,500,000, NASB Financial has the option
of consummating the transaction and paying each shareholder $17.05 per share of
CBES Bancorp common stock or terminating the merger agreement.

<PAGE>

     The merger agreement can be terminated for various reasons, including,
among others, by the mutual written consent of the parties, by either party if
the other party has materially breached its covenants, agreements,
representations or warranties, which breach cannot be cured within 30 days after
notice thereof, or by either party upon the occurrence or nonoccurrence of
certain other conditions or actions as set forth in the merger agreement,
including the failure of the shareholders of CBES Bancorp to approve the merger
agreement and the failure to consummate the merger by January 31, 2003. NASB
Financial also may terminate the merger agreement if the adjusted stockholders'
equity of CBES Bancorp is less than $13,500,000 as measured at the close of
business on the last day prior to the effective date of the merger.

     Consummation of the merger is subject to the satisfaction of certain
conditions, including approval of the shareholders of CBES Bancorp and approval
of appropriate regulatory agencies.

     The special meeting of shareholders of CBES Bancorp to consider and vote on
the merger agreement is expected to be held in December 2002. Applications to
obtain the required regulatory approvals are being prepared but have not yet
been filed as of the date of this Form 10-KSB.

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 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 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.

     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 office in Liberty. As noted above, the Bank also maintained a branch
office in Kearney, Missouri, until its sale in November 2001. Excelsior Springs
and Liberty are located in Clay County, which is part of the Kansas City
Metropolitan Statistical Area. Excelsior Springs and Liberty are small towns.
Clay County has a population estimated at 184,000 as of 2000. The northern
portion of Clay County is a combination of suburban and rural areas containing a
number of small towns, including Excelsior Springs. 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.

                                       2

<PAGE>

     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 Company, Precise Technology Incorporated, Magna Interior Systems 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 June 2002,
the unemployment rate in Clay County was 4.0% and the unemployment rate in Ray
County was 4.9%.

     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 two years, 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 originates 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 Associations." At June
30, 2002, the maximum amount which the Bank could have lent under this limit to
any one borrower and the borrower's related entities was approximately $2.1
million. At June 30, 2002, 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, 2002 was approximately $2.09 million in loans to real
estate investors on a commercial real estate construction loan of $1.8 million,
a land loan of $147,000, an equity line of credit of $99,000 and a consumer auto
loan of $17,000 and was secured by real estate located in Clay County and
Buchanan County, Missouri. At June 30, 2002, this commercial real estate
construction loan was in non-accrual status; the rest of these loans were
performing in accordance with their terms.

                                       3

<PAGE>

     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,
                                                              -------------------------------------------  --------------------
                                                                      2002                 2001                  2000
                                                              --------------------  ---------------------  --------------------
                                                               Amount      Percent     Amount     Percent    Amount    Percent
                                                              --------    --------  ---------   ---------  --------   ---------
                                                                                     (Dollars in Thousands)
<S>                                                           <C>         <C>       <C>         <C>        <C>        <C>
Real estate loans:
  One- to four-family residential .........................   $ 43,659       60.30%  $ 59,982       51.18% $ 84,645       45.33%
  Multi-family ............................................      2,025        2.80      1,986        1.69     2,832        1.51
  Commercial ..............................................     11,443       15.80      9,490        8.10     7,388        3.96
  Land ....................................................      3,450        4.77      5,798        4.95     7,183        3.85
  Construction ............................................      6,570        9.07     28,910       24.66    66,000       35.35
                                                              --------    --------   --------   ---------  --------    --------
 Total real estate loans ..................................     67,147       92.74    106,166       90.58   168,048       90.00
                                                              --------    --------   --------   ---------  --------    --------
Consumer loans:
  Direct automobile loans .................................      2,780        3.84      5,539        4.72     9,421        5.04
  Indirect automobile loans ...............................      1,290        1.78      2,833        2.42     4,117        2.20
  Deposit accounts ........................................        286        0.40        480        0.41       739        0.40
  Home improvement ........................................         22        0.03         25        0.02        30        0.02
 Commercial loans .........................................        122        0.17        510        0.43     1,372        0.73
  Other ...................................................        754        1.04      1,659        1.41     2,997        1.61
                                                              --------    --------   --------   ---------   -------   ---------
     Total consumer loans .................................      5,254        7.26     11,046        9.42    18,676       10.00
                                                              --------    --------   --------   ---------   -------   ---------

     Total loan portfolio .................................   $ 72,401      100.00%  $117,212      100.00%  186,724      100.00%
                                                                          ========              =========             =========
Less:
  Loans in process ........................................      1,272                  2,333                19,355
  Deferred loan origination fees and ......................
    discounts on loans, net ...............................        208                    250                   646
  Allowance for loan losses ...............................      1,501                  3,472                 2,924
                                                              --------               --------              --------
    Total loans receivable, net ...........................   $ 69,420               $111,157              $163,799
                                                              ========               ========              ========
</TABLE>

                                       4

<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,
                                          -----------------------------------------------------------------
                                                    2002                  2001                 2000
                                          --------------------    -------------------  --------------------
                                           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 ...............    $  15,826       21.86%   $  7,342      14.80%  $ 25,611     13.71%
  Multi-family ......................           --          --         165       0.14        167      0.09
  Commercial ........................        2,518        3.48       3,711       3.17      3,104      1.66
  Land ..............................          581        0.80       1,678       1.43      2,645      1.42
  Construction ......................        6,570        9.07      26,952      22.99     66,000     35.35
                                         ---------    --------    --------   --------   --------  --------
 Total real estate loans ............       25,495       35.21      49,848      42.53     97,527     52.23
                                         ---------    --------    --------   --------   --------  --------

Consumer loans ......................        5,254        7.26      11,046       9.42     18,278      9.79
                                         ---------    --------    --------   --------   --------  --------

     Total fixed-rate loans .........       30,749       42.47      60,894      51.95    115,805     62.02
                                         ---------    --------    --------   --------   --------  --------

Adjustable Rate Loans:
 Real estate: .......................
  One- to four-family ...............       27,833       38.44      42,640      36.38     59,034     31.62
  Multi-family ......................        2,025        2.80       1,821       1.55      2,665      1.43
  Commercial ........................        8,925       12.33       5,779       4.93      4,284      2.29
  Land ..............................        2,869        3.96       4,120       3.52      4,538      2.43
  Construction ......................           --          --       1,958       1.67         --        --
                                         ---------    --------    --------   --------   --------  --------
 Total real estate loans ............       41,652       57.53      56,318      48.05     70,521     37.77
                                         ---------    --------    --------   --------   --------  --------

Consumer loans ......................           --          --          --         --        398      0.21
                                                                                        --------  --------

     Total adjustable-rate loans ....       41,652       57.53      56,318      48.05     70,919     37.98
                                         ---------    --------    --------   --------   --------  --------

     Total loan portfolio ...........       72,401      100.00%    117,212     100.00%   186,724    100.00%
                                                      ========               ========             ========
Less:
  Loans in process ..................        1,272                   2,333                19,355
  Deferred fees and discounts .......          208                     250                   646
  Allowance for losses ..............    $   1,501                $  3,472                 2,924
                                         ---------                --------              --------
    Total loans receivable, net .....    $  69,420                $111,157              $163,799
                                         =========                ========              ========
</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, 2002, the
Bank had $43.7 million, or 60.3% of its total 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, 2002, $15.8 million, or 21.9% of the Bank's total
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

                                       5

<PAGE>

Bank retains servicing rights on a portion of such loans, depending upon
customer preferences and competitive conditions. For the fiscal year ended June
30, 2002, of the $24.7 million in fixed-rate residential one- to four-family
loans originated by the Bank, $18.9 million of such loans, or 76.5%, 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 $27.8 million, or 38.4% of the Bank's total loan
portfolio at June 30, 2002. 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
risk 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, 2002, the Bank
originated $24.7 million in fixed-rate residential mortgage loans and $1.8
million of ARM loans. Normally, the Bank's policy is to originate ARM loans for
portfolio.

         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,
2002, the Bank's second mortgage/home equity loans totaled $1.2 million, or 1.7%
of the Bank's loan portfolio.

                                       6

<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, 2002, the
Bank's lines of credit secured by first or second mortgages totaled $1.0
million, or 1.4% 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. Since June 30,
2000, 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, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                         At June 30, 2002             At June 30, 2001              At June 30, 2000
                                 -------------------------------   ------------------------------   --------------------------------
                                    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>
Speculative - 1-4 family .......   $    2,907           29.0%        $   20,104           57.9%       $  50,353            68.8%
Speculative - Multifamily ......           --           --                  901            2.6            2,925             4.0
Contract .......................          362            3.6              2,090            6.0              377             0.5
Construction - commercial ......        1,839           18.4              2,246            6.5            2,612             3.6
Construction - 1-4 family ......          912            9.1              2,101            6.1            4,018             5.5
                                   ----------         ------         ----------        -------        ---------          ------
 Total construction ............        6,020           60.1             27,442           79.1           60,285            82.4
Land development and acquisition          550            5.5              1,468            4.2            5,715             7.8
Land ...........................        3,450           34.4              5,798           16.7            7,183             9.8
                                   ----------         ------         ----------        -------        ---------          ------
 Total construction and land ...   $   10,020          100.0%        $   34,708          100.0%       $  73,183           100.0%
                                   ==========         ======         ==========        =======        =========          ======
</TABLE>

_________________
/(1/)Includes loans in process.

         At June 30, 2002, the Bank's $6.0 million of construction loans and
$4.0 million of land and land development loans represented 8.3% and 5.5%,
respectively, of total loans receivable. At the same time, the Bank's $2.9
million of speculative construction loans represented 4.0% of total loans
receivable. Speculative 1-4 family loans decreased $17.2 million from $20.1
million at June 30, 2001 to $2.9 million at June 30, 2002.

                                       7

<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, 2002, the Bank had speculative construction loans secured by properties
in 20 subdivisions of which one represented an exposure to a single subdivision
of more than $1.0 million. At June 30, 2002, the Bank had no 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 six to twelve
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.
None were originated in fiscal 2002. At June 30, 2002, the Bank had no
speculative construction loans secured by multi-family properties and one $1.8
million speculative construction loan on commercial real estate which was in
non-accrual status. The Bank plans on originating commercial or multi-family
construction loans, subject to compliance with the Supervisory Agreement.

          Land Loans. At June 30, 2002, the Bank had total land loans of $3.5
million and land development loans of $0.6 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 twelve months that is typical of construction
loans. The Bank plans on originating land development loans, subject to
compliance with the Supervisory Agreement.

                                       8

<PAGE>

          Multi-Family and Commercial Real Estate Lending. The Bank also
originates loans secured by multi-family and commercial real estate. At June 30,
2002, $13.5 million, or 18.6% 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, 2002, the Bank's consumer loan portfolio totaled $5.3 million, or
7.3% 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, 2002, the Bank's indirect automobile loans totaled
$1.3 million, or 1.8% of the Bank's loan portfolio and direct automobile loans
totaled $2.8 million, or 3.8% 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.

                                       9

<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, 2002, $69,000, or 1.3% 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.

                                       10

<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, 2002.
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, 2003 that
have predetermined interest rates is $21.8 million, and that have floating or
adjustable rates is $41.4 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)
Due During Years Ending June 30,
--------------------------------

                                <C>       <C>        <C>       <C>        <C>       <C>       <C>      <C>
2003 ...........................   $   614      8.90%   $ 1,105      8.77%   $  281       8.09%  $ 6,570     8.06%
2004 ...........................       577      7.41        668      7.42       260       8.49         -        -
2005 ...........................       808      7.13        152      7.97        27       7.26         -        -
2006 and 2007 ..................       482      8.08        428      7.47        31       8.53         -        -
2008 to 2012 ...................     1,329      7.84        369      9.69       288       7.63         -        -
2013 to 2027 ...................    13,613      7.01      3,931      8.16       905       7.59         -        -
2028 and following .............    26,236      7.34      6,815      7.99     1,658       7.68         -        -
                                   -------   -------    -------   --------   ------    -------   -------  -------
                                   $43,659      7.28%   $13,468      8.11%   $3,450       7.75%  $ 6,570     8.06%
                                   =======              =======              ======              =======
</TABLE>

                                       Consumer             Total
                                   ----------------   -----------------
                                           Weighted            Weighted
                                            Average             Average
                                   Amount    Rate     Amount     Rate
                                   ------    ----     ------     ----

Due During Years Ending June 30,
--------------------------------
2003 ...........................   $  727     8.78%   $ 9,297     8.26%
2004 ...........................    1,017    10.12      2,522     8.62
2005 ...........................    2,395     9.82      3,382     9.07
2006 and 2007 ..................    1,093     9.43      2,034     8.68
2008 to 2012 ...................       12     8.50      1,998     8.16
2013 to 2027 ...................       10    12.99     18,459     7.29
2028 and following .............        -        -     34,709     7.48
                                   ------  -------    -------  -------
                                   $5,254     9.66%   $72,401     7.70%
                                   ======             =======

                                       11

<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
and Chief Executive Officer of the Bank have authority to make secured real
estate loans up to $500,000 and secured installment loans up to $50,000.
Unsecured installment loans may be approved by the President and Chief Executive
Officer of the Bank up to $15,000. The Consumer Loan Department Manager of the
Bank has authority to make secured installment loans up to $30,000 and unsecured
installment loans up to $3,000. All loans in excess of these limitations must be
approved by the Board of Directors of the Bank. 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 of the Bank.

         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,
2002, the Bank originated $30.6 million in fixed-rate loans and $6.4 million in
adjustable-rate loans. For the fiscal 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.

         In recent years, the Bank has not purchased loans. For the fiscal years
ended June 30, 2002, 2001 and 2000, 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, 2002 the Bank sold $18.9 million in conforming residential one- to
four-family loans (including $18.9 million of fixed rate loans), compared to
$30.3 million and $30.7 million for the years ended June 30, 2001 and 2000,
respectively. Primarily all of the residential loans sold by the Bank are
fixed-rate residential loans with maturities of 15 and 30 years.

         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,
                                                 ------------------------------
                                                     2002     2001        2000
                                                 --------   --------   --------
<S>                                              <C>        <C>        <C>
Originations by type:                                     (In Thousands)
 Adjustable rate:
  Real estate -
   One- to four-family residential ..........    $  1,825   $  2,893   $ 24,646
   Multi-family .............................          --         --      1,661
   Commercial ...............................       4,546        192      2,534
   Land .....................................          --        604        368
  Consumer ..................................          --         --        179
                                                 --------   --------   --------
 Total adjustable rate ......................       6,371      3,689     29,388
                                                 --------   --------   --------

 Fixed rate:
  Real estate -
   One- to four-family residential ..........      24,676     21,969     31,112
   Multifamily ..............................          --         --        167
   Commercial ...............................       1,726        765      2,172
   Land .....................................         265         65        514
   Construction .............................       2,545      2,233     51,974
  Consumer                                          1,373      4,727     18,612
                                                 --------   --------   --------
 Commercial Business ........................          --         --        156
 Total fixed rate ...........................      30,585     29,759    104,707
                                                 --------   --------   --------
 Total loans originated .....................      36,956     33,448    134,095
Sales and Repayments:
  Real Estate -
  One- to four-family residential ...........      18,886     30,324     30,726
                                                 --------   --------   --------
  Total loans sold ..........................      18,886     30,324     30,726
 Principal repayments .......................      62,875     72,636     66,505
                                                 --------   --------   --------
  Total sales and repayments ................      81,761    102,960     97,231
Decrease (increase) in other items, net .....       3,068     16,870     (6,936)
                                                 --------   --------   --------
  Net (decrease) increase ...................    $(41,737)  $(52,642)  $ 29,928
                                                 ========   ========   ========
</TABLE>

                                       12

<PAGE>

Asset Quality

     The Bank's collection procedures provide that when a loan is past due, a
written notice is sent to the borrower between ten and sixteen days after the
due date requesting payment, followed by phone calls and personal contact. If
payment arrangements have not been made within 30 days or payment arrangements
have been broken, a right-to-cure letter is sent, and foreclosure or
repossession proceedings are started upon failure to cure. If a loan remains
delinquent for 90 days or more, the account is put on non-accrual status. At
June 30, 2002, 2001 and 2000, the percentages of total loans delinquent 90 days
or more to net loans receivable were 4.62%, 6.74% and 3.07% respectively. The
majority of the decrease was due to decreased 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, 2002, the Bank has $2.9 million in real estate owned.

The following table sets forth information with respect to the Bank's delinquent
                            loans at June 30, 2002.

<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 ....         6  $    524       1.20%        14  $    976      2.24%         20  $  1,500       3.44%
 Multi-family ...........        --        --         --          1       259     12.79           1       259      12.79
 Commercial .............        --        --         --          1        69      0.60           1        69       0.60
 Land ...................        --        --         --         --        --        --          --        --         --
 Consumer ...............        18       137       2.61          9        65      1.24          27       202       3.84
 Construction or
    Development .........         1        98       1.49          1     1,839     27.99           2     1,937      29.48
                           --------  --------  ----------  --------  --------   -------    --------  --------  ----------
    Total ...............        25  $    759       1.09%        26  $  3,208      4.62%         51  $  3,967       5.71%
                                     ========  ==========            ========   =======              ========  ==========
</TABLE>

                                       13

<PAGE>

     The following table sets forth information regarding non-performing loans
and real estate owned by the Bank at the dates indicated. At June 30, 2002, the
Bank had five restructured loans within the meaning of SFAS No. 15, with an
aggregate balance of $769,000. 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,
                                                            ------------------------------------------
                                                                2002           2001           2000
                                                            -------------   -----------   ------------
                                                                       (Dollars In Thousands)
<S>                                                         <C>             <C>           <C>
Non-accruing loans:
    One- to four-family ..................................    $     976       $ 2,331       $  1,211
    Multi-family .........................................          259            --             --
    Commercial ...........................................           69           418             54
    Land .................................................           --           598            342
    Construction or development ..........................        1,839         6,856          6,762
    Consumer .............................................           69           359            143
                                                              ---------       -------       --------

       Total .............................................       $3,212       $10,562       $  8,512

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

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

Foreclosed assets:
    One- to four-family ..................................          597           100            179
    Multi-family .........................................        1,857           225             --
    Commercial real estate ...............................           --            --             58
    Construction or Development ..........................          494           631             --
    Consumer .............................................           --            51             32
                                                              ---------       -------       --------

       Total .............................................        2,948         1,007            269
                                                              ---------       -------       --------

Total non-performing assets ..............................    $   6,160       $11,569       $  8,781
                                                              =========       =======       ========

Total loans delinquent 90 days or more
  to net loans receivable ................................         4.62%         6.74%          3.07%
                                                              =========       =======       ========
</TABLE>

          For the fiscal year ended June 30, 2002, gross interest income which
   would have been recorded had the non-accruing loans been current in
   accordance with their original terms amounted to $337,000. The amount that
   was included in interest income on such loans was $229,000 for the fiscal
   year ended June 30, 2002.

          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

                                       14

<PAGE>

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, 2002, the Bank had classified a total of $5.5 million
of its assets, including real estate owned of $2.9 million, as substandard. At
June 30, 2002, the Bank had no assets classified as doubtful and had $21,000
assets classified as loss. At June 30, 2002, total classified assets comprised
$5.5 million, or 38.7% of the Company's capital and 4.9% of the Company's total
assets. 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. The
decrease in classified assets at June 30, 2002, reflects improved collection
efforts and resolution of problem loans.

          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, 2002,
and June 30, 2001--Provision for Loan Losses," included elsewhere in this Form
10-KSB.

          Other Loans of Concern. In addition to the non-performing loans set
forth in the tables above, as of June 30, 2002, there were 93 loans, with an
aggregate balance of $7.2 million, classified by the Bank with respect to which
known information about the possible credit problems of the borrowers or the
cash flows or physical condition of the security properties have caused
management to have some concerns 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 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, 2002, the Bank had $2.9 million 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, 2002, the Bank had a total allowance for loan losses of
$1.5 million, representing 46.7% of total non-performing loans and 2.2% of the
Bank's loans receivable, net. The decrease in the allowance at June 30, 2002 was
primarily attributable to a decrease in the Bank's classified assets of $10.3
million to $5.5 million, due to loan payoffs and loan charge-offs. The decrease
in classified assets was due to improved collection efforts and the resolution
of previous problem assets. 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, 2002,
and June 30, 2001--Provision for Loan Losses," included elsewhere in this Form
10-KSB.

                                       15

<PAGE>

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

<TABLE>
<CAPTION>
                                                                           At June 30,
                                 -----------------------------------------------------------------------------------------------
                                               2002                            2001                           2000
                                 -------------------------------  ------------------------------  ------------------------------
                                                        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 ...........    $   318   $ 43,659     60.30%   $   431   $ 59,982    51.17%    $   107   $ 84,645     45.33%
Multi-family ..................        125      2,025      2.80         10      1,986     1.69          14      2,832      1.52
Commercial real estate ........        106     11,443     15.80        101      9,490     8.09         188      7,388      3.96
Land ..........................         44      3,450      4.77         96      5,798     4.95         108      7,183      3.85
Construction or development ...        188      6,570      9.07      2,240     28,910    24.66       2,237     66,000     35.34
Consumer ......................        720      5,254      7.26        594     11,046     9.42         270     18,676     10.00
                                   -------   --------  --------    -------   --------  -------     -------   --------  --------
     Total ....................      1,501     72,401    100.00%     3,472    117,212   100.00%    $ 2,924   $186,724    100.00%
                                   =======   ========  ========    =======   ========  =======     =======   ========  ========
</TABLE>

          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,
                                                        ---------------------------------------
                                                          2002           2001            2000
                                                        --------       --------        --------
                                                                 (Dollars in thousands)
<S>                                                     <C>           <C>              <C>
Balance at beginning of year .......................    $  3,472      $   2,924        $    927
                                                        --------      ---------        --------
Charge-offs:
  One- to four-family ..............................         367            122              --
  Multi-family .....................................         645             --              --
  Commercial real estate ...........................          29             --              --
  Construction .....................................       1,545            834              --
  Consumer .........................................         544            276             200
                                                        --------      ---------        --------
                                                           3,130          1,232             200

Recoveries:
  Consumer .........................................          67             41              45
                                                        --------      ---------        --------
                                                              67             41              45
                                                        --------      ---------        --------

Net charge-offs ....................................       3,063          1,191             155
Provision for loan losses ..........................       1,092          1,739           2,152
                                                        --------      ---------        --------

Balance at end of year .............................    $  1,501      $   3,472        $  2,924
                                                        ========      =========        ========

Ratio of net charge-offs during the year
  to average loans outstanding during the year .....        3.42%          0.86%           0.10%
                                                        ========      =========        ========

Ratio of allowance for loan loss to ending
  loans receivable, net ............................        2.16%          3.12%           1.79%
                                                        ========      =========        ========

Ratio of allowance for loan loss to non-
  performing assets at end of year .................       24.37%         30.01%          33.30%
                                                        ========      =========        =========
</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, 2002, the Bank's liquidity ratio (liquid assets as a percentage of net
withdrawable savings deposits and current borrowings) was 29.5%. 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, 2002, the Bank's investment in mortgage-backed securities totaled $6.6
million, or 5.9% of its total assets. At June 30, 2002, all but $13,000 of the
Bank's mortgage-backed securities were classified as available for sale.

          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,
                                                        ----------------------------------
                                                          2002         2001         2000
                                                        --------     --------     --------
                                                                       (In Thousands)
<S>                                                     <C>          <C>          <C>
Purchases ........................................      $    --      $ 8,005      $    --
Sales ............................................           --           --           --
Unrealized gain (loss) on mortgage-backed
  securities available for sale ..................          221          (34)          --
Repayments .......................................        1,560          (14)         (18)
                                                        -------      -------      -------
Net (decrease) increase ..........................      $(1,339)     $ 7,957      $   (18)
                                                        =======      =======      =======
</TABLE>

          Other Investments. At June 30, 2002, 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, 2002, 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>
                                                                                            At June 30,
                                                    ------------------------------------------------------------------------------
                                                             2002                         2001                      2000
                                                    -----------------------    ------------------------    -----------------------
                                                      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 .....................   $ 3,558          12.82     $ 3,996        16.94        $    --           --
                                                     -------         ------     -------       ------        -------       ------
Subtotal .........................................     3,558          12.82       3,996        16.94             --           --

Investment securities held-to-maturity ...........        75           0.27         379         1.61            187         2.17
                                                     -------         ------     -------       ------        -------       ------
Subtotal .........................................        75           0.27         379         1.61            187         2.17

FHLB stock .......................................     2,323           8.37       2,323         9.85          2,323        27.01
                                                     -------         ------     -------       ------        -------       ------
Total investment securities and
    FHLB stock ...................................     5,956          21.46       6,698        28.40          2,510        29.18
                                                     -------         ------     -------       ------        -------       ------

Other interest-earning assets:
FHLB and other CD's ..............................     1,684           6.07       8,000        33.92          3,000        34.89
FHLB checking ....................................    10,109          36.43       2,888        12.25          1,964        22.85
FHLB Daily Time ..................................    10,000          36.04       5,997        25.43          1,125        13.08
                                                     -------         ------     -------       ------        -------       ------
   Total other interest-earnings assets ..........    21,793          78.54      16,885        71.60        $ 6,089        70.82
                                                     -------         ------     -------       ------        -------       ------

Total investment portfolio .......................   $27,749         100.00%    $23,583       100.00%       $ 8,599       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, 2002.

<TABLE>
<CAPTION>
                                                                           June 30, 2002
                                             -------------------------------------------------  -----------------------------
                                                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 .................      $      3     $     15     $     25      $      32     $    75          $    75
                                             --------     --------     --------      ---------     -------          -------
Federal agency obligations ............      $  3,046     $    512     $     --      $      --     $ 3,558          $ 3,558
                                             --------     --------     --------      ---------     -------          -------
Total investment securities ...........      $  3,049     $    527     $     25      $      32     $ 3,633          $ 3,633
                                             ========     ========     ========      =========     =======          =======
Weighted average yield ................          2.20%        5.61%        6.50%          6.50%       2.77%
</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, 2002, the Bank had $9.0 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 and 2002, 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, 2002, $43.9 million, or 68.0%
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 $124.6 million at June 30,
2001, to $87.8 million at June 30, 2002. The decrease included the sale of $9.4
million in deposits to Kearney Trust Company in November 2001. Because of
decreased loan demand and increased loan repayments, the Bank was not as
aggressive in retaining deposits as in prior years.

                                       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,
                                                 ------------------------------------------------------------------------
                                                          2002                      2001                    2000
                                                 ----------------------    ----------------------   ---------------------
                                                  Balance      Percent      Balance      Percent     Balance     Percent
                                                 ---------    ---------    ---------    ---------   ---------   ---------
                                                                          (Dollars  in  Thousands)
<S>                                              <C>          <C>          <C>          <C>         <C>         <C>
Transactions and Savings
 Deposits:
  Passbook savings .........................     $  3,621         4.12%    $  3,655          2.93%   $  3,928       2.90%
  NOW accounts .............................        9,762        11.12        9,468          7.60       9,811       7.23
  Money market accounts ....................        7,073         8.05        6,092          4.89       5,403       3.98
  Noninterest-bearing demand accounts ......        2,827         3.22        4,269          3.43       4,021       2.97
                                                 --------      -------     --------       -------    --------    -------
    Total non-certificates .................       23,283        26.51       23,484         18.85      23,163      17.08
                                                 --------      -------     --------       -------    --------    -------

Certificates:
  1.00 - 3.99% .............................       34,790        39.61        2,674          2.14          --         --
  4.00 - 5.99% .............................       17,711        20.17       34,702         27.85      41,653      30.71
  6.00 - 7.99% .............................       12,038        13.71       63,749         51.16      70,815      52.21
                                                 --------      -------     --------       -------    --------    -------
   Total certificates ......................       64,539        73.49      101,125         81.15%    112,468      82.92%
                                                 --------      -------     --------       -------    --------    -------
         Total .............................     $ 87,822       100.00%    $124,609        100.00%   $135,631     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,
                                                   --------------------------------
                                                     2002        2001        2000
                                                   --------    --------    --------
                                                         (Dollars in Thousands)
<S>                                                <C>         <C>         <C>
Opening balance ............................       $124,609    $135,631    $ 101,424
Deposits(1) ................................        222,714     279,372      299,198
Withdrawals ................................        253,767     296,158      269,531
Interest credited ..........................          3,701       5,764        4,540
Deposits sold ..............................          9,435          --           --
                                                   --------    --------    ---------

Ending balance .............................       $ 87,822    $124,609    $ 135,631
                                                   ========    ========    =========
Net (decrease) increase ....................       $(36,787)   $(11,022)   $  34,207
                                                   ========    ========    =========

Percent (decrease) increase ................         (29.52)%     (8.13)%      33.73%
                                                   ========    ========    =========
</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, 2002.

<TABLE>
<CAPTION>
                                                          Weighted
Certificate accounts maturing in               Total       Average    Percent of
--------------------------------
quarter ending:                               Balance       Rate        Total
--------------                              -----------  ----------  -----------
                                                  (Dollars in Thousands)
<S>                                         <C>          <C>         <C>
September 30, 2002 ......................    $ 16,707        3.72%       25.89%
December 31, 2002 .......................      12,586        3.32        19.50
March 31, 2003 ..........................       8,356        3.42        12.95
June 30, 2003 ...........................       6,209        3.21         9.62
September 30, 2003 ......................       2,832        3.21         4.39
December 31, 2003 .......................       1,062        4.26         1.64
March 31, 2004 ..........................       2,666        5.87         4.13
June 30, 2004 ...........................       1,801        5.87         2.79
September 30, 2004 ......................         483        5.42         0.75
December 31, 2004 .......................         675        5.92         1.05
March 31, 2005 ..........................       2,146        6.69         3.32
June 30, 2005 ...........................       1,458        6.37         2.26
Thereafter ..............................       7,558        4.95        11.71
                                          -----------    --------      --------
    Total ...............................      64,539                   100.00%
                                          ===========                  ========
</TABLE>

          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, 2002.

<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 .....................     $   14,751    $   10,986      $  13,174     $   16,154      $   55,065
Certificates of deposit of
 $100,000 or more ..................          1,956         1,600          1,391          4,527           9,474
                                         ----------    ----------      ---------     ----------      ----------
  Total certificates of deposit ....     $   16,707    $   12,586      $  14,565     $   20,681      $   64,539
                                         ==========    ==========      =========     ==========      ==========
</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, 2002, the Bank had $9.0 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,
                                            ------------------------------------
                                              2002       2001         2000
                                              ----       ----         ----
                                                     (In Thousands)

Maximum Balance:
---------------
  FHLB advances ........................    $10,150     $ 26,750     $ 45,450

Average Balance:
---------------
  FHLB advances ........................    $ 9,531     $ 17,027     $ 33,288


                                                       At June 30,
                                            ------------------------------------
                                              2002       2001          2000
                                              ----       ----          ----
                                                     (In Thousands)

  FHLB advances ........................    $ 9,000     $ 10,150     $ 26,750
                                            =======     ========     ========

  Weighted average interest rate .......       5.64%        5.60%        6.16%

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 $2.2
million at June 30, 2002, in the stock of, or loans to, service corporation
subsidiaries. The Bank 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 savings associations
are permitted to invest an unlimited amount in operating subsidiaries engaged
solely in activities in which a federal savings association may engage. At June
30, 2002, 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, 2002, the Bank's
investment in CBES was $1,000. Also, for the fiscal year ended June 30, 2002,
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, 2002, the
Bank's lending limit under this restriction was approximately $2.1 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

                                       23

<PAGE>

adopted additional guidelines on asset quality and earnings standards, which are
designed to enhance early identification and resolution of problems and problem
assets.

                                       24

<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.

                                       25

<PAGE>

     At June 30, 2002, the Bank had tangible capital of $12.5 million, or 11.2%
of adjusted total assets, which is approximately $10.9 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date. At June 30,
2002, the Bank had core capital equal to $12.5 million, or 11.2% of adjusted
total assets, which is $8.1 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 $13.4 million (including approximately $12.5 million in core capital
and $0.9 million in qualifying supplementary capital) and risk-weighted assets
of $69.2 million (with no converted off-balance sheet assets); or total capital
of 19.4% of risk-weighted assets. This amount was $7.9 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, 2002, 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

                                       26

<PAGE>

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.

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, 2002
was 29.5%.

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, 2002, 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.

                                       27

<PAGE>

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 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

                                       28

<PAGE>

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 OTS is obtained, and to
other activities authorized by OTS 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.

     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,
2002, 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, 2002, 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.

The USA PATRIOT Act

                                       29

<PAGE>

     In response to the events of September 11/th/, the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, was signed into law on
October 26, 2001. The USA PATRIOT Act gives the federal government new powers to
address terrorist threats through enhanced domestic security measures, expanded
surveillance powers, increased information sharing, and broadened anti-money
laundering requirements. By way of amendments to the Bank Secrecy Act, Title III
of the USA PATRIOT Act takes measures intended to encourage information sharing
among bank regulatory agencies and law enforcement bodies. Further, certain
provisions of Title III impose affirmative obligations on a broad range of
financial institutions, including banks, thrifts, brokers, dealers, credit
unions, money transfer agents and parties registered under the Commodity
Exchange Act.

     Among other requirements, Title III of the USA PATRIOT Act imposes the
following requirements with respect to financial institutions:

          .    Pursuant to Section 352, all financial institutions must
               establish anti-money laundering programs that include, at
               minimum: (i) internal policies, procedures, and controls; (ii)
               specific designation of an anti-money laundering compliance
               officer; (iii) ongoing employee training programs; and (iv) an
               independent audit function to test the anti-money laundering
               program.

          .    Section 326 of the Act authorizes the Secretary of the Department
               of Treasury, in conjunction with other bank regulators, to issue
               regulations by October 26, 2002 that provide for minimum
               standards with respect to customer identification at the time new
               accounts are opened.

          .    Section 312 of the Act requires financial institutions that
               establish, maintain, administer, or manage private banking
               accounts or correspondence accounts in the United States for
               non-United States persons or their representatives (including
               foreign individuals visiting the United States) to establish
               appropriate, specific, and, where necessary, enhanced due
               diligence policies, procedures, and controls designed to detect
               and report money laundering.

          .    Effective December 25, 2001, financial institutions are
               prohibited from establishing, maintaining, administering or
               managing correspondent accounts for foreign shell banks (foreign
               banks that do not have a physical presence in any country), and
               will be subject to certain record keeping obligations with
               respect to correspondent accounts of foreign banks.

          .    Bank regulators are directed to consider a holding company's
               effectiveness in combating money laundering when ruling on
               Federal Reserve Act and Bank Merger Act applications.

     The federal banking agencies have begun to propose and implement
regulations pursuant to the USA PATRIOT Act. These proposed and interim
regulations would require financial institutions to adopt the policies and
procedures contemplated by the USA PATRIOT Act.

Sarbanes-Oxley Act of 2002

     On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act represents a
comprehensive revision of laws affecting corporate governance, accounting
obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all
companies with equity or debt securities registered under the Securities
Exchange Act of 1934. In particular, the Sarbanes-Oxley Act establishes: (i) new
requirements for audit committees, including independence, expertise, and
responsibilities; (ii) additional responsibilities regarding financial
statements for the Chief Executive Officer and Chief Financial Officer of the
reporting company; (iii) new standards for auditors and regulation of audits;
(iv) increased disclosure and reporting obligations for the reporting company
and their directors and executive officers; and (v) new and increased civil and
criminal penalties for violation of the securities laws. Many of the provisions
became effective immediately while other provisions become effective over a
period of 30 to 270 days and are subject to rulemaking by the Securities

                                       30

<PAGE>

and Exchange Commission. Although the Company anticipates that it will incur
additional expense in complying with the provisions of the Sarbanes-Oxley Act
and the resulting regulations, management does not expect that such compliance
will have a material impact on the Company's results of operations or financial
condition.

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, 2002, the Bank had a balance of approximately
$1.7 million of pre-1988 bad debt reserves. A deferred tax liability has 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.

                                       31

<PAGE>

Employees

     At June 30, 2002, the Bank had a total of 45 full-time and 5 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 53, 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 56, is a mortgage loan officer. He
served as the manager of the Consumer Loan Department from 1994 to 2002. Mr.
Alderson has been with the Bank since 1990.

     Ronald W. Hill. Mr. Hill, age 53, 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 one branch offices, located in Liberty,
Missouri. In November 2001, the Bank sold its branch office in Kearney,
Missouri, to Kearney Trust Company. The following table sets forth information
relating to the Bank's offices as of June 30, 2002. 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, 2002 was
approximately $1.0 million.

<TABLE>
<CAPTION>
                                                                Total
                                                              Approximate
                                                  Date           Square       Net Book Value at
          Location                              Acquired        Footage        June 30, 2002
------------------------------------            --------        -------        -------------
                                                                              (In thousands)
<S>                                             <C>           <C>             <C>
Main Office:                                      1983           10000            $ 817
1001 North Jesse James Road
Excelsior Springs, Missouri 64024

Branch Office:                                   Leased          10500            $ 211
913 Liberty Drive                               (Expires
Liberty, Missouri 64020                      December 2002)
</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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 2002.

                                       32

<PAGE>

                                     PART II

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

         The Company's common stock is traded on the National Association of
Securities Dealers, Inc. Small Cap Market under the Symbol "CBES."

         The per share price range of the common stock and the dividends
declared or paid for each quarter during the past two fiscal years is set forth
below. These quotations reflect inter-dealer prices, without retail mark-up,
markdown, or commissions, and may not necessarily represent actual transactions:


                         Fiscal  2002      High       Low       Dividends
                      ----------------  ---------  ---------   ------------
                      First Quarter     $ 14.750     12.500           0.08
                      Second Quarter      14.800     13.180           0.08
                      Third Quarter       13.800     12.000           0.08
                      Fourth Quarter      15.000     13.070           0.08
                                        =========  =========   ============
                         Fiscal  2001      High       Low       Dividends
                      ----------------  ---------  ---------   ------------
                      First Quarter     $ 12.750      9.000           0.08
                      Second Quarter      10.875      9.000           0.08
                      Third Quarter       12.438      8.750           0.08
                      Fourth Quarter      13.000     11.750           0.08
                                        =========  =========   ============

          At June 30, 2002, there were 1,031,851 shares issued and 875,805
shares outstanding of the Company's common stock (including unallocated ESOP
shares) and there were approximately 200 registered holders of record.

                                       33

<PAGE>

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

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

Set forth below are selected consolidated financial and other data of the
Company. The financial data is derived from, and should be read in conjunction
with, the consolidated financial statements and notes thereto presented
elsewhere in this annual report.

<TABLE>
<CAPTION>
                                                               At or for the years ended June 30,
                                              -------------------------------------------------------------------
                                                 2002          2001            2000          1999         1998
                                                 ----          ----            ----          ----         ----
                                                            (Dollars in thousands, except share data)
<S>                                           <C>           <C>             <C>           <C>          <C>
Selected financial condition data:
   Total assets                               $ 112,916     $ 151,712         180,840       150,406      123,856
   Loans receivable, net                         69,420       111,157         163,799       134,459      114,822
   Mortgage-backed securities                     6,647         7,996              39            57           81
   Investment securities                          3,633         4,375             187            93           98
   FHLB stock                                     2,323         2,323           2,323         2,173        1,025
   Other interest-bearing assets                 21,793        16,885           6,089         6,673        2,424
   Deposits                                      87,822       124,609         135,631       101,424       85,777
   FHLB advances                                  9,000        10,150          26,750        29,450       19,500
   Total stockholders' equity                    14,172        14,745          15,753        16,947       16,857
                                              =========     =========       =========     =========     ========
Selected operations data:
   Total interest income                      $   8,483     $  12,698          13,448        11,918        9,266
   Total interest expense                         5,053         8,161           7,606         6,485        4,520
                                              ---------     ---------       ---------     ---------     --------

        Net interest income                       3,430         4,537           5,842         5,433        4,746

Provision for loan losses                         1,092         1,739           2,152           298          266
                                              ---------     ---------       ---------     ---------     --------

        Net interest income after
            provision for loan losses             2,338         2,798           3,690         5,135        4,480
                                              ---------     ---------       ---------     ---------     --------

Loan fees and service charges                       243           315             379           237          279
Gain on sale of loans                               324           398             590         1,178          460
Other noninterest income                            206           177             180           158          128
                                              ---------     ---------       ---------     ---------     --------

        Total noninterest income                    773           890           1,149         1,573          867
                                              ---------     ---------       ---------     ---------     --------

Total noninterest expense                         4,030         5,206           5,198         4,948        3,749
                                              ---------     ---------       ---------     ---------     --------

        (Loss) earnings before income
              taxes                                (919)       (1,518)           (359)        1,760        1,598

Income tax (benefit) expense                       (321)         (564)           (142)          650          544
                                              ---------     ---------       ---------     ---------     --------

        Net (loss) earnings                   $    (598)    $    (954)           (217)        1,110        1,054
                                              =========     =========       =========     =========     ========
(Loss) earnings per share:
        Basic                                 $   (0.70)    $   (1.14)          (0.26)         1.26         1.12
                                              =========     =========       =========     =========     ========
        Diluted                               $   (0.70)    $   (1.14)          (0.26)         1.26         1.11
                                              =========     =========       =========     =========     ========

Average common shares outstanding               852,653       838,454         851,060       883,976      940,742
                                              =========     =========       =========     =========     ========
</TABLE>

                                       34

<PAGE>

<TABLE>
<CAPTION>
                                                                     At or for the years ended June 30,
                                                     -----------------------------------------------------------------------
                                                       2002            2001           2000           1999            1998
                                                       ----            ----           ----           ----            ----
<S>                                                  <C>             <C>            <C>            <C>             <C>
Selected financial ratios and other data:
   Performance ratios:
     Return on assets (ratio of net
        earnings (loss) to average total assets)        (0.45)%         (0.58)          (0.13)          0.74            0.95
     Return on equity (ratio of net
        earnings (loss) to average equity)              (4.08)          (6.29)          (1.30)          6.60            6.04
     Interest rate spread:
        Average during period                            2.54            2.38            3.17           3.38            3.80
        End of period                                    2.44            2.14            2.74           2.92            6.04
   Net interest margin                                   2.80            2.93            3.65           3.84            4.46
   Dividend payout ratio                               (45.71)         (28.07)        (261.54)         47.62           37.50
   Ratio of noninterest expense to
        average total assets                             3.05            3.17            3.10           3.34            3.37
   Ratio of average interest earning
        assets to average interest-
        bearing liabilities                            106.25          110.43          110.26         110.31          115.56

Quality ratios:
   Nonperforming assets to total
      assets at end of period.                           5.46            7.62            4.86           0.47            0.59
   Allowance for loan losses to
      nonperforming loans                               46.73           30.31           33.30         129.83           91.39
   Allowance for loan losses to
      loans receivable, net                              2.16            3.12            1.79           0.69            0.58

Capital ratios:
   Equity to total assets at end
      of year                                           12.55            9.72            8.71          11.27           13.61
   Average equity to average assets                     11.09            9.24            9.94          11.38           15.66

Number of full service offices                              2               3               3              3               3
                                                     ========        ========        ========       ========        ========
</TABLE>


                                       35

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The Company's results of operations depend primarily on its level of net
interest income, which is the difference between interest earned on
interest-earning assets, consisting primarily of mortgage and consumer loans and
other investments, and the interest paid on interest-bearing liabilities,
consisting of deposits and Federal Home Loan Bank of Des Moines ("FHLB")
advances. Net interest income is a function of the Company's "interest rate
spread," which is the difference between the average yield earned on
interest-earning assets and the average rate paid on interest-bearing
liabilities, as well as a function of the average balance of interest-earning
assets as compared to interest-bearing liabilities. The interest rate spread is
affected by regulatory, economic, and competitive factors that influence
interest rates, loan demand, and deposit flows. The Company, like other
financial institutions, is subject to interest rate risk to the degree that its
interest-earning assets mature or reprice at different times, or on different
bases, than its interest-bearing liabilities. Net interest income is reduced by
all loans with principal or interest that is currently delinquent ninety days or
more, plus loans previously delinquent ninety days or more, which have not been
brought current. The Company's operating results are also affected by the amount
of its noninterest income, including gains on the sales of loans, service
charges, loan service income, and other income. Noninterest expense consists
principally of employee compensation and benefits, occupancy expense, data
processing, federal insurance premiums, advertising, real estate owned
operations, and other operating expenses. The Company's operating results are
significantly affected by general economic and competitive conditions, in
particular, the changes in market interest rates, government policies, and
actions by regulatory authorities.

Financial Condition

Total Assets. Total assets decreased $38.8 million, or 25.6%, to $112.9 million
at June 30, 2002 from $151.7 million at June 30, 2001. This was primarily due to
a decrease in loans receivable, net offset by increases in loans held for sale,
interest bearing deposits and real estate owned.

Loans Receivable. Loans receivable, net (including loans held for sale),
decreased by $41.8 million, or 37.6%, to $69.4 million at June 30, 2002 from
$111.2 million at June 30, 2001. The decrease was primarily due to decreases in
construction loans, net of loans in process, of $21.3 million, one-to-four
family loans of $21.6 million, consumer loans of $5.8 million and land loans of
$2.3 million, partially offset by increases in loans held for sale of $5.3
million and commercial real estate loans of $2.0 million. For the fiscal years
ended June 30, 2002 and 2001, the Bank originated loans in the amount of $37.0
million and $33.4 million, respectively. Funds received from the repayment of
loans were used to purchase time deposits in other financial institutions and
U.S. government agency securities, and to fund the decrease in deposits and to
pay down maturing FHLB advances.

Mortgage-backed Securities. Mortgage-backed securities decreased by $1.4 million
to $6.6 million at June 30, 2002 from $8.0 million at June 30, 2001. The
decrease was primarily due to repayments of approximately $1.6 million and an
increase of market value of $221,000. These securities potentially will remain
in the available for sale portfolio until such time that lending levels increase
to levels exceeding loan repayments and net deposit inflows.


                                       36

<PAGE>

Investment Securities. Investment securities were $3.6 million at June 30, 2002
compared to $4.4 million at June 30, 2001.

Deposits. Deposits decreased $36.8 million, or 29.5%, to $87.8 million at June
30, 2002 from $124.6 million at June 30, 2001. The decrease included $9.4
million due to the sale of the Kearney branch office to Kearney Trust Company on
November 30, 2001. Due to decreased loan demand, the Bank was not as aggressive
retaining deposits as in prior years. Funds received from the repayment of loans
were used to fund the roll-off in deposits.

Federal Home Loan Bank Advances. FHLB advances decreased $1.2 million, or 11.3%,
to $9.0 million at June 30, 2002 from $10.2 million at June 30, 2001. Decreases
in the loan portfolio provided funds for the payoff of advances.

Equity. Total stockholders' equity decreased by $573,000 to $14.2 million at
June 30, 2002 from $14.7 million at June 30, 2001. The decrease was primarily
due to the Company's net loss of $598,000 for the fiscal year and dividends
declared of $272,000 offsetting the increased gain on securities available for
sale of $153,000 and amortization of unearned employee benefits.

Net Interest Income Analysis

The schedule on the following page presents, for the periods indicated, the
total dollar amount of interest income from average interest-earning assets and
the resultant yields, as well as the total dollar amount of interest expense on
average interest-bearing liabilities and resultant rates. All average balances
are monthly average balances. Management does not believe that the use of
monthly balances instead of daily balances has caused a material difference in
the information presented. Nonaccruing loans have been included as loans
carrying a zero yield.


                                       37

<PAGE>

<TABLE>
<CAPTION>
                                                                            Year ended June 30,
                                                 -------------------------------------------------------------------
                                                                                               2002
                                                                            ----------------------------------------
                                                     At June 30, 2002           Average      Interest
                                                 ------------------------
                                                  Outstanding     Yield/      outstanding     earned/       Yield/
                                                    balance        rate         balance         paid         rate
                                                 -------------   --------   --------------   ---------     ---------
                                                                                       (Dollars in Thousands)
<S>                                              <C>             <C>        <C>              <C>           <C>
Interest-earning assets:
   Loans receivable                              $  69,420         7.70%    $  89,615         7,406         8.26%
   Mortgage-backed securities                        6,647         6.23         7,375           444         6.02
   Investment securities                             3,633         2.77         5,599           292         5.22
   FHLB stock                                        2,323         3.00         2,323            80         3.44
   Other interest-bearing deposits                  21,793         1.14        17,749           261         1.47
                                                 ---------                  ---------       -------
       Total interest-earning
             assets (1)                          $ 103,816         5.95%    $ 122,661       $ 8,483         6.92%
                                                 =========        =====     =========       =======      =======

 Interest-bearing liabilities:
   Passbook accounts                                 3,621         1.50%        3,524            61         1.73%
   Demand and NOW accounts                          19,662         1.19        19,439           250         1.29
   Certificate accounts                             64,539         4.03        82,947         4,198         5.06
   FHLB advances                                     9,000         5.64         9,531           545         5.72
                                                 ---------                  ---------       -------
      Total interest-bearing

           liabilities                           $  96,822         3.51%    $ 115,441       $ 5,054         4.38%
                                                 =========        =====     =========       =======      =======
Net interest income                                                                         $ 3,429
                                                                                            =======
Net interest rate spread (2)                                       2.44%                                    2.54%
                                                                  =====                                  =======
Net interest-earning assets                      $   6,994                  $   7,220
                                                 =========                  =========
Net interest margin (3)                                                                                     2.80%
                                                                                                         =======
Average interest-earning assets to
   average interest-bearing liabilities                                                                   106.25%
                                                                                                         =======

<CAPTION>
                                                 ----------------------------------------------------------------------------------
                                                                    2001                                      2000
                                                 ----------------------------------------  ----------------------------------------
                                                     Average      Interest                     Average      Interest

                                                   outstanding     earned/       Yield/      outstanding     earned/       Yield/
                                                     balance         paid         rate         balance         paid         rate
                                                 --------------   ---------     ---------  --------------   ---------     ---------
<S>                                              <C>              <C>           <C>        <C>              <C>           <C>
Interest-earning assets:
   Loans receivable                                $  138,668        11,930         8.60%     $ 149,912       12,894         8.60%
   Mortgage-backed securities                             317            20         6.31             48            4         8.33
   Investment securities                                  505            27         5.35            166           10         6.02
   FHLB stock                                           2,323           138         5.94          2,255          148         6.56
   Other interest-bearing deposits                     13,177           583         4.42          7,516          393         5.23
                                                   ----------      --------                   ---------     --------
       Total interest-earning
             assets (1)                            $  154,990      $ 12,698         8.19%     $ 159,897     $ 13,449         8.41%
                                                   ==========      ========     ========      =========     ========      =======

 Interest-bearing liabilities:
   Passbook accounts                                    3,686            90         2.44%         3,652           90         2.46%
   Demand and NOW accounts                             14,711           339         2.30         13,959          339         2.43
   Certificate accounts                               104,772         6,737         6.43         94,118        5,254         5.58
   FHLB advances                                       17,187           994         5.78         33,288        1,923         5.78
                                                   ----------      --------                   ---------     --------
      Total interest-bearing
           liabilities                             $  140,356      $  8,160         5.81%     $ 145,017     $  7,606         5.24%
                                                   ==========      ========     ========      =========     ========      =======
Net interest income                                                $  4,538                                 $  5,843
                                                                   ========                                 ========
Net interest rate spread (2)                                                        2.38%                                    3.17%
                                                                                ========                                  =======
Net interest-earning assets                        $   14,634                                 $  14,880
                                                   ==========                                 =========
Net interest margin (3)                                                             2.93%                                    3.65%
                                                                                ========                                  =======
Average interest-earning assets to
   average interest-bearing liabilities                                           110.43%                                  110.26%
                                                                                ========                                  =======
</TABLE>

__________
(1) Calculated net of deferred loan fees and discounts, loans in process and
    loss reserves.
(2) Net interest rate spread represents the difference between the average yield
    on interest-earning assets and the average rate on interest-bearing
    liabilities.
(3) Net interest margin represents net interest income divided by average
    interest-earning assets.


                                       38

<PAGE>

Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes due to
changes in outstanding balances and those due to changes in interest rates. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by prior interest rate), and (ii) changes in rates
(i.e., changes in rate multiplied by prior volume). For purposes of this table,
changes attributable to both rate and volume, which cannot be segregated, have
been allocated proportionately to the changes due to volume and the changes due
to rate.

<TABLE>
<CAPTION>
                                                                     Year ended June 30,
                                      ------------------------------------------------------------------------------
                                                  2002 vs 2001                                  2001 vs 2000
                                      -----------------------------------       ------------------------------------
                                              Increase                                Increase
                                             (decrease)            Total             (decrease)             Total
                                               due to            increase              due to              increase
                                      ---------------------                     ----------------------
                                       Volume          Rate     (decrease)       Volume          Rate     (decrease)
                                      -------          ----     ----------      -------          ----     ----------
                                                                   (Dollars in Thousands)
<S>                                   <C>            <C>        <C>             <C>              <C>      <C>
Interest-earning assets:
   Loans receivable                   $ (4,070)        (454)      (4,524)          (964)           -         (964)
   Mortgage-backed securities              425           (1)         424             17           (1)          16
   Investment securities                   266           (1)         265             18           (1)          17
   FHLB stock                                -          (58)         (58)             4          (14)         (10)
   Other interest-earning assets           157         (479)        (322)           239          (49)         190
                                      --------       ------       ------           ----         ----       ------
          Total interest-earning
                 assets                 (3,222)        (993)      (4,215)          (686)         (65)        (751)
                                      --------       ------       ------           ----         ----       ------

Interest-bearing liabilities
   Passbook accounts                        (4)         (25)         (29)             1           (1)           -
   Demand and NOW accounts                 219         (308)         (89)            18          (18)           -
   Certificate accounts                 (1,256)      (1,283)      (2,539)           632          851        1,483
   FHLB advances                          (439)         (10)        (449)          (929)           -         (929)
                                      --------       ------       ------           ----         ----       ------

        Total interest-bearing
              liabilities               (1,480)      (1,626)      (3,106)          (278)         832          554
                                      --------       ------       ------           ----         ----       ------
        Net interest income           $ (1,742)         633       (1,109)          (408)        (897)      (1,305)
                                      ========       ======       ======           ====         ====       ======
</TABLE>



                                       39

<PAGE>

Comparison of Operating Results for the Year Ended June 30, 2002 and June 30
2001

Performance Summary. Net loss on operations for the year ended June 30, 2002 was
$598,000, an improvement of $356,000 from the net loss on operations of $954,000
for the year ended June 30, 2001, an improvement of 37.3%. The improvement in
the net loss was primarily due to a decrease in the provision for loan loss of
$648,000 and a decrease in noninterest expense of $1.2 million offsetting a
decrease in net interest income of $1.1 million, a decrease in noninterest
income of $117,000 and a decrease in net tax benefit of $243,000.

The return on average assets for the years ended June 30, 2002 and 2001 were
(0.45)% and (0.58)%, respectively. The return on average equity for the years
ended June 30, 2002 and 2001 were (4.08)% and (6.29)%, respectively.

Net Interest Income. Net interest income was $3.4 million for the year ended
June 30, 2002, a decrease of $1.1 million from the $4.5 million for the year
ended June 30, 2001. The decrease was primarily due to a decrease in interest
income of $4.2 million being offset by a decrease of $3.1 million in interest
expense.

The average yield on interest-earning assets for the years ended June 30, 2002
and 2001 were 6.92% and 8.19%, respectively. The average rate paid on
interest-bearing liabilities for the years ended June 30, 2002 and 2001 were
4.38% and 5.81%, respectively. The net interest rate spreads for the years ended
June 30, 2002 and 2001 were 2.54% and 2.38%. The net interest margins for the
years ended June 30, 2002 and 2001 were 2.80% and 2.93%, respectively.

Total interest Income. Total interest income decreased by $4.2 million in the
year ended June 30, 2002 to $8.5 million from $12.7 million for the year ended
June 30, 2001. Interest on loans receivable decreased $4.5 million to $7.4
million for the year ended June 30, 2002 from $11.9 million for the prior year.
The decrease was primarily due to decreased average balances outstanding and
lower average yields on those balances. Average loans outstanding were $89.6
million and $138.7 million for the years ended June 30, 2002 and 2001,
respectively. The average yield on those balances decreased to 8.26% for fiscal
2002 from 8.60% for fiscal 2001. Interest on investment and mortgage-backed
securities increased $694,000 to $737,000 for the year ended June 30, 2002 from
$43,000 for the year ended June 30, 2001. The increase was due to increased
average balances outstanding. The average outstanding balances were $13.0
million and $822,000 for the years ended June 30, 2002 and 2001, respectively.
Other interest income decreased $385,000 to $341,000 for the year ended June 30,
2002 from $726,000 for the year ended June 30, 2001. The decrease was due to
lower yields on the balances outstanding.

Total Interest Expense. Total interest expense decreased $3.1 million in the
year ended June 30, 2002 to $5.1 million from $8.2 million for the year ended
June 30, 2001. The decrease was primarily due to lower average balances
outstanding and lower average rates paid during the year ended June 30, 2002,
especially on certificates of deposits. The average balances of outstanding
certificate accounts were $82.9 million for fiscal 2002 and $104.8 million for
fiscal 2001. The average balances outstanding of all interest-bearing
liabilities were $115.4 million and $140.4 million for the years ended June 30,
2002 and 2001, respectively. The average rates paid on interest bearing
liabilities were 4.38% and 5.81% for the years ended June 30, 2002 and 2001,
respectively. For certificate accounts, the average rates for the years ended
June 30, 2002 and 2001 were 5.06% and 6.43%, respectively.

Provision for Loan Losses. The provision for loan losses decreased $648,000 in
the year ended June 30, 2002 to $1.1 million from $1.7 million for the year
ended June 30, 2001. The decrease was primarily due to a reduction in classified
assets due to loan payoffs and loan charge-offs in the year ended June 30, 2002.
Assets classified as Substandard at June 30, 2002 and 2001 were $5.5 million and
$15.8 million,


                                       40

<PAGE>

respectively. Although considerable success was had in fiscal 2002 in reducing
the level of classified assets, non-accruing loans and real estate owned
continue at a high level.

The Bank's methodology for determining the general allowance for loan losses
focuses primarily on the application of specific reserve percentages to the
various categories of loans. These percentages are based upon management's
estimate of the exposure to loss in the various categories. The reserve factors
are subject to change from time to time based on management's assessment of the
relative credit risk within the portfolio. Percentages generally range from
0.05% for single-family residential loans to 6.00% for some consumer loans;
higher percentages are generally applied to problem loans. Management continues
to review specifically identified problem or potential problem loans. On a
case-by-case basis, where considered necessary, reserves are increased. For this
purpose, problem loans include non-accruing loans and accruing loans delinquent
more than ninety days and classified assets. In addition, pursuant to the Bank's
methodology, the reserve is replenished for net charge-offs, which are charged
against the reserve. Net charge-offs were $2.6 million for mortgage loans and
$477,000 for consumer loans for the year ended June 30, 2002, compared to net
charge-offs of $956,000 for mortgage loans and $235,000 for consumer loans in
the year ended June 30, 2001. Pursuant to the Supervisory Agreement, the Bank
may not reduce the allowance for loan losses without prior notice of no
objection from the OTS.

As a result of the provision for loan losses during the year ended June 30,
2002, the Bank had a general allowance for loan losses of $1.48 million and a
specific allowance of $21,000 for a total allowance for loan losses of $1.5
million. This represents 46.7% of non-performing loans and 2.2% of the Bank's
loans receivable, net. The Bank had a total allowance for loan losses of $3.5
million, or 32.9% of total non-performing loans and 3.2% of the Bank's loans
receivable, net at June 30, 2001.

Management will continue to monitor its allowance for loan losses and make
additions to the allowance through the provision for loan losses as economic
conditions dictate. Although the Company maintains its allowance for loan losses
at a level considered to be adequate, there can be no assurances that future
losses will not exceed estimated amounts or that additional provisions for loan
losses will not be required in the future.

Noninterest Income. Noninterest income decreased $117,000 to $773,000 for the
year ended June 30, 2002 from $890,000 for the year ended June 30, 2001. Gain on
the sale of loans decreased $75,000 to $323,000 for the year ended June 30, 2002
from $398,000 for the year ended June 30, 2001. The decrease was primarily due
to reduced levels of loan sales in the current year. The proceeds from the sale
of loans held for sale were $19.2 million and $30.7 million for the years ended
June 30, 2002 and 2001, respectively. Customer service charges on deposit
accounts decreased $47,000 to $243,000 for the year ended June 30, 2002 from
$290,000 for the year ended June 30, 2001. The decrease was primarily due to
fewer accounts with monthly service charges and fewer returned check fees. Loan
servicing fees decreased $18,000 to $7,000 for the year ended June 30, 2002. The
decrease was primarily due to fewer loan accounts serviced for others. Other
noninterest income increased $23,000 to $200,000 for the year ended June 30,
2002 from $177,000 for the year ended June 30, 2001. The increase was primarily
due to increased late charges.

Noninterest Expense. Noninterest expense decreased $1.2 million to $4.0 million
for the year ended June 30, 2002 from $5.2 million for the year ended June 30,
2001. Compensation and benefits expense decreased $297,000 to $2.2 million for
the year ended June 30, 2002. Cash compensation decreased $166,000 due to fewer
employees. Payroll tax expense decreased $16,000 due to reduced compensation.
Expenses for the RRP plan decreased $115,000. Final awards vested in January
2002. ESOP expense increased $14,000 due to a higher average stock price for the
Company's common stock during the year. Due to higher loan originations in the
current fiscal year, more loan origination expenses were deferred in accordance
with FAS No. 91. This resulted in decreased compensation expense of $22,000 for
the


                                       41

<PAGE>

current fiscal year. Office property and equipment expense decreased $264,000 to
$527,000 for the year ended June 30, 2002. Depreciation expenses for office
buildings, furniture and computer equipment decreased $165,000 in the current
year. The decrease was primarily due to equipment being fully depreciated and
the sale of the Kearney office. Expenses for taxes and utilities decreased
$19,000 and repair and maintenance expense decreased $30,000. Data processing
expenses decreased $13,000 to $214,000 for the year ended June 30, 2002. The
decrease was primarily due to fewer accounts serviced in the current year and
data processing conversion expenses in the prior year. Expenses for federal
insurance premiums increased $10,000 to $58,000 for the year ended June 30,
2002. Although deposit balances decreased during the year, the Bank was
subjected to higher assessment rates which increased the amount of premiums due.
Real estate owned and repossessed asset expense decreased $76,000 in fiscal 2002
to $187,000. The decrease was primarily due to increased gains on the sale of
real estate owned. Advertising expenses increased $5,000 to $62,000 for the year
ended June 30, 2002 due to increased levels of advertising in the current year.
Other expense decreased $543,000 to $745,000 for the year ended June 30, 2002.
Expenses included in the prior year were a $324,000 write off for customer bad
check losses and a provision for loss of $144,000 for the sale of the Kearney
branch office. Professional fees deceased $32,000 during the current fiscal year
due to reduced legal and accounting expenses. During the fiscal year ended June
30, 2002 postage expense decreased $27,000, office supply expense decreased
$18,000, telephone expense decreased $17,000, other loan related expenses
decreased $15,000 and dues and subscription expenses decreased $8,000.

Income taxes. Income tax benefits decreased $243,000 to $321,000 for the year
ended June 30, 2002. The decrease was due to the decrease in the pretax loss.
The Company's effective tax rates for the years ended June 30, 2002 and 2001
were 34.9% and 37.1%, respectively.

Comparison of Operating Results for the Years Ended June 30, 2001 and June 30,
2000

Performance Summary. Net loss on operations for the year ended June 30, 2001
increased by $737,000 to a loss of $954,000 from a loss of $217,000 for the year
ended June 30, 2000. The increase was due a decrease of $1.3 million in net
interest income, a decrease of $258,000 in noninterest income and an increase of
$8,000 in noninterest expense offset by a $412,000 decrease in the provision for
loan losses and an increase in income tax benefit of $421,000.

For the years ending June 30, 2001 and 2000, the returns on average assets were
(0.58)% and (0.13)%, respectively, while the returns on average equity were
(6.29)% and (1.30)%, respectively.

Net Interest Income. Net interest income decreased from $5.8 million for the
fiscal year ended June 30, 2000 to $4.5 million for the current fiscal year, a
decrease of $1.3 million. The decrease was caused by a decrease in total
interest income of $750,000 and an increase in total interest expense of
$555,000.

The average yields on interest-earning assets for the years ended June 30, 2001
and 2000 were 8.19% and 8.41%, respectively. The average rates paid on
interest-bearing liabilities for the years ended June 30, 2001 and 2000 were
5.81% and 5.24%, respectively. The average rate paid in 2001 increased because
of the large increase in higher rate certificates of deposit. The net interest
rate spreads for the years ended June 30, 2001 and 2000 were 2.38% and 3.17%,
respectively. The net interest margins for the years ended June 30, 2001 and
2000 were 2.93% and 3.65%, respectively.

Total Interest Income. Total interest income decreased by $750,000, or 5.58% in
the year ended June 30, 2001 to $12.7 million from $13.4 million for the year
ended June 30, 2000. Interest on loans receivable decreased $963,000, or 7.47%,
to $11.9 million for the year ended June 30, 2001 from $12.9 million for the
year ended June 30, 2000. Interest on investments, mortgage-backed securities
and other interest bearing deposits increased $213,000, or 38.45%, to $768,000
for the year ended June 30, 2001 from


                                       42

<PAGE>

$555,000 for the year ended June 30, 2000. The decrease on loans receivable
reflected both a decrease in the average balance of loans outstanding and an
increase in non-accrual loans. The average balance of loans outstanding
decreased to $138.7 million for fiscal year 2001 compared to $149.9 million for
fiscal year 2000. The decrease in average balances of loans outstanding in
fiscal 2001 was primarily due to reduced lending levels after the Supervisory
Agreement was signed in August 2000. Non-accrual 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.
Non-accrual loans increased $2.5 million, or 30.9%, to $10.6 million at June 30,
2001 from $8.1 million at June 30, 2000. For the fiscal year ended June 30,
2001, gross interest income which would have been recorded had the non-accrual
loans been current in accordance with their original terms amounted to $356,000.
The reduction in delinquent loans is a major priority of the Bank. Interest
income on investments, mortgage-backed securities and other interest bearing
deposits increased primarily due to increased average balances in those assets.

Total Interest Expense. Total interest expense increased by $555,000, or 7.29%,
in the year ended June 30, 2001 to $8.2 million from $7.6 million for the year
ended June 30, 2000. Interest on deposits increased $1.5 million, or 26.10%, to
$7.2 million for the year ended June 30, 2001 from $5.7 million for the year
ended June 30, 2000. In the year ended June 30, 2000, the Bank raised $33.8
million in new short-term certificates of deposit, including $12.8 million in
brokered deposits. Rates at the top of the market were offered on these deposits
to fund the increase in construction and consumer loans made that year. Funds
received from loan repayments were used to fund a roll-off of deposits. During
fiscal 2001, rates were lowered considerably on certificates of deposits and
significant amounts of certificates, and all brokered deposits, were allowed to
mature and roll off. Although substantially all of the brokered deposits and
other higher rate certificates offered in fiscal 2000 had matured by June 30,
2001, they were outstanding for a majority of the year. Average balances in
certificate accounts were $104.8 million for fiscal 2001 compared to $94.1
million for fiscal 2000. Interest expense on FHLB advances decreased $929,000,
or 48.29%, to $994,000 for the year ended June 30, 2001, compared to $1.9
million for the year ended June 30, 2000. FHLB advances decreased $16.6 million
to $10.2 million at June 30, 2001. Repayments from the loan portfolio provided
the funds to repay maturing advances.

Provision for Loan Losses. The provision for loan losses decreased by $412,000,
or 19.16%, to $1.7 million for the year ended June 30, 2001 from $2.2 million
for the year ended June 30, 2000. Assets classified as substandard totaled $15.8
million at June 30, 2001, compared to $14.1 million at June 30, 2000. Classified
assets were $18.7 million at March 31, 2001 and $22.4 million at December 31,
2000. At June 30, 2000 thirteen loan relationships classified as substandard had
aggregate balances of $13.0 million. At June 30, 2001, the unpaid balances of
loans remaining as substandard from that group were $5.0 million. A total of
$1.5 million of those loans were classified as "watch" at September 30, 2001.
Although a good deal of success was had during the last half of fiscal 2001 in
reducing the level of classified assets, non-accruing and impaired loans
continue at a high level. Deterioration in the construction loan portfolio due
to a slowing economy during fiscal 2001 was the primary reason for the high
level of provision for loan losses. At June 30, 2001, speculative construction
loans classified as substandard totaled $10.6 million.

As a result of the provision for loan losses during the year ended June 30,
2001, the Bank had a general allowance for loan losses of $2.0 million and a
specific allowance for loan losses of $1.5 million for a total allowance for
loan losses of $3.5 million. This represents 32.9% of total non-performing loans
and 3.2% of the Bank's loans receivable, net. The Bank had a total allowance for
loan losses of $2.9 million, or 34.3% of total non-performing loans and 1.79% of
loans receivable, net at June 30, 2000.

Noninterest Income. Noninterest income decreased $258,000, or 22.5%, to $890,000
for the year ended June 30, 2001 from $1.1 million for the year ended June 30,
2000. Gains on the sale of loans decreased


                                       43

<PAGE>

$191,000 to $398,000 for the year ended June 30, 2001 from $590,000 for the
prior fiscal year. Customer service charges on deposit accounts decreased
$32,000 to $290,000 for the year ended June 30, 2001. The decrease was due to
fewer accounts with regular monthly service charges and a decrease in the number
of non-sufficient check charges. Loan servicing fees decreased $32,000 to
$25,000 for the year ended June 30, 2001 from $57,000 for the year ended June
30, 2000.

Noninterest Expense. Noninterest expense increased $8,000 to $5,206,000 for the
year ended June 30, 2001 from $5,198,000 for the year ended June 30, 2000.
Compensation and benefits expense decreased $261,000, or 9.35%, to $2.5 million
for the year ended June 30, 2001 from $2.8 million for the prior fiscal year.
Cash compensation decreased $263,000 for fiscal 2001 due to fewer employees.
ESOP expense decreased $65,000 for fiscal 2001 due to a lower average stock
price for the Company's common stock during the year. Payroll taxes decreased
$32,000 during fiscal 2001 due to reduced compensation. Board fees for directors
decreased $13,000 during fiscal 2001 due to reduced fees. Expenses for salary
continuation plans decreased $34,000 due to the reversal of accrued expenses
after a former officer left. Due to fewer loan originations in fiscal 2001,
fewer loan origination expenses were deferred in accordance with FAS No. 91.
This resulted in increased compensation expenses of $128,000 for fiscal 2001.
Office property and equipment expense decreased $95,000 to $790,000 for the year
ended June 30, 2001 from $886,000 for the year ended June 30, 2000. The decrease
was primarily due to equipment expenses related to the data processing
conversion in fiscal 2000. Data processing expenses increased $11,000 in the
year ended June 30, 2001. The increase was primarily due to data conversion
expenses. Federal insurance premiums increased $6,000 to $47,000 in the year
ended June 30, 2001. The increase was due to increased deposits during fiscal
2000 and parts of fiscal 2001. Advertising expenses decreased $96,000, or 62.8%,
to $57,000 for the year ended June 30, 2001 from $153,000 in the year ended June
30, 2000. The decrease was due to reduced levels of advertising and promotions.
Real estate owned expense increased $205,000 to $262,000 for the year ended June
30, 2001. The increase was due to increased losses on the sale of real estate
owned in fiscal 2001. Other operating expenses increased $240,000 to $1.3
million for the year ended June 30, 2001 from $1.0 million for the year ended
June 30, 2000. Included in that amount was a write off of $320,000 on one
depositor in possible bad check losses. The Bank is trying to recover all or
part of that amount, but because of uncertainty over the likelihood of recovery,
has expensed the entire amount. Also, part of the increase in other expense was
due to the provision for loss on the sale of the Kearney branch of $144,000.
Professional fees increased $49,000 during fiscal 2001 due to increased legal
and accounting expenses. Reduced loan originations resulted in a reduction of
loan expenses of $148,000 for the year ended June 30, 2001. During the fiscal
year ended June 30, 2001 office supply expense decreased $67,000, travel
expenses decreased $21,000, postage expenses decreased $15,000, and both
charitable contributions and automobile expenses decreased $5,000.

Income taxes. Income tax benefits increased $421,000 to $564,000 for the year
ended June 30, 2001. The increase was due to the increase in the pretax loss.
The Company's effective tax rate was 37.1 % for fiscal 2001 and 39.6% for fiscal
2000.

Asset/Liability Management

Savings institutions, such as the Company, are subject to interest rate risk to
the extent their interest-bearing liabilities (consisting primarily of deposit
accounts, FHLB advances and other borrowings) mature or reprice more rapidly, or
on a different basis, than their interest-earning assets (consisting
predominantly of intermediate and long-term real estate loans, consumer loans
and investments held for investment and liquidity purposes). Having
interest-bearing liabilities that mature or reprice more frequently on average
than assets may be beneficial in times of declining rates, although such an
asset-liability structure may result in declining net interest earnings during
periods of rising interest rates. Conversely, having interest-earning assets
that mature or reprice more frequently on average than

                                       44

<PAGE>

liabilities may be beneficial in times of rising interest rates, although this
asset-liability structure may result in declining net interest earnings during
periods of falling interest rates.

The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 2002, which are expected to
reprice or mature in each of the future time periods shown, assuming a 22%
annual prepayment rate for fixed-rate real estate loans, a 22% annual prepayment
rate for mortgage-backed securities, an 8% annual prepayment for adjustable-rate
real estate loans, and an 8% annual prepayment rate for consumer loans. Except
for deposits, which are classified as repricing in the "within 1 year" category,
the amounts of assets and liabilities shown which reprice or mature during a
particular period were determined in accordance with the earlier of term to
repricing or the contractual terms of the asset/liability.

<TABLE>
<CAPTION>
                                                               Maturing or repricing
                                      ------------------------------------------------------------------------
                                       Within                                             Over
                                       1 year   1-3 years   3-5 years     5-10 years     10 years        Total
                                      -------   ---------   ---------     ----------     --------        -----
                                                            (Dollars in Thousands)
<S>                                   <C>       <C>         <C>           <C>            <C>            <C>
Interest-earning assets:
  Loans receivable, net (1)           $46,986    15,408       4,698         2,011          317          69,420
  Mortgage-backed securities            1,732     2,454       1,563           898            -           6,647
  Investment securities                 3,049         7         520            25           32           3,633
  Interest-bearing deposits
   in other financial institutions     21,793         -           -             -            -          21,793
  FHLB stock                            2,323         -           -             -            -           2,323
                                      -------    ------      ------        ------       ------         -------
     Total interest-earning
        assets                         75,883    17,869       6,781         2,934          349         103,816
                                      -------    ------      ------        ------       ------         -------

Interest-bearing liabilities:
  Savings deposits                      3,621         -           -             -            -           3,621
  Demand and NOW deposits              19,662         -           -             -            -          19,662
  Certificate accounts                 44,108    12,873       4,834         2,724            -          64,539
  FHLB advances                             -     1,000           -         8,000            -           9,000
                                      -------    ------      ------        ------       ------         -------
      Total interest-bearing
        liabilities                    67,391    13,873       4,834        10,724            -          96,822
                                      -------    ------      ------        ------       ------         -------
Interest sensitivity gap              $ 8,492     3,996       1,947        (7,790)         349           6,994
                                      =======    ======      ======        ======       ======         =======
Cumlative interest sensitivity gap    $ 8,492    12,488      14,435         6,645        6,994           6,994
                                      =======    ======      ======        ======       ======         =======
Ratio of interest-earning assets to
  interest bearing liabilities         112.60 %  128.80 %    140.28 %       27.36 %          - %         107.22 %
                                      =======    ======      ======        ======       ======         =======
Ratio of cumlative gap to total
   assets                                7.59 %   11.06 %     12.78 %        5.88 %       6.19 %          6.19 %
                                      =======    ======      ======        ======       ======         =======
</TABLE>

(1) Calculated net of deferred loan fees, loans in process and loan loss
reserves.

                                       45

<PAGE>

Net Portfolio Value

In order to encourage institutions to reduce their interest rate risk, the
Office of Thrift Supervision ("OTS") adopted a rule incorporating an interest
rate risk ("IRR") component into the risk-based capital rules. The IRR component
is a dollar amount that will be deducted from total capital for the purpose of
calculating an institution's risk-based capital requirement and is measured in
terms of the sensitivity if its net portfolio value ("NPV") to changes in
interest rates. NPV is the difference between incoming and outgoing discounted
cash flows from assets, liabilities and off-balance sheet contracts. An
institution's IRR is measured as the change to its NPV as a result of a
hypothetical 200 basis point ("bp") increase in market interest rates or a 100
basis point decrease in market interest rates. A resulting change in NPV of more
than 2% of the estimated market value of its assets will require the institution
to deduct from its capital 50% of that excess change. The rule provides that the
OTS will calculate the IRR component quarterly for each institution. The Bank,
based on asset size and risk-based capital, has been informed by the OTS that it
is exempt from this rule. Nevertheless, the following table presents the Bank's
NPV at June 30, 2002, as calculated by the OTS, based on information provided to
the OTS by the Bank.

             Interest Rate Sensitivity of Net Portfolio Value (NPV)

                                                               NPV as percent
                Net portfolio value                             of PV assets
        ----------------------------------------------      --------------------
        Change in     Dollar        Dollar     Percent       NPV          Change
        rates (bp)    amount        change      change      ratio          (bp)
        ----------    ------        ------      ------      -----          ----
                                  (Dollars in Thousands)

           300       $14,796        (172)         (1)%       13.12 %         20
           200        15,045          78           1         13.21           29
           100        15,101         134           1         13.14           22
             -        14,967           -           -         12.92            -
          (100)       14,426        (541)         (4)        12.39          (54)
          ====       =======        ====          ==         =====          ===

Certain shortcomings are inherent in the method of analysis presented in both
the computation of NPV and in the analysis presented in prior tables setting
forth the maturing and repricing of interest-earning assets and interest-bearing
liabilities. Although certain assets and liabilities may have similar maturities
or periods in which they will reprice, they may react differently to changes in
market interest rates. The interest on certain types of assets and liabilities
may fluctuate in advance of changes in market interest rates, while interest
rates on other types may lag behind changes in market rates. Occasionally,
adjustable-rate mortgages have features which restrict changes in interest rates
on a short-term basis and over the life of the asset. The proportion of
adjustable-rate loans could be reduced in future periods if market interest
rates would decrease and remain at lower levels for a sustained period, due to
increased refinance activity. Further, in the event of a change in interest
rates, prepayment and early withdrawal levels would likely deviate significantly
from those assumed in the table. Finally, the ability of many borrowers to
service their adjustable-rate debt may decrease in the event of a sustained
interest rate increase.

                                       46

<PAGE>

Contractual Obligations and Commercial Commitments

The following table presents the Company's contractual cash obligations, defined
as operating lease obligations, principal payments due on non-deposit
obligations and guarantees with maturities in excess of one year, as of June 30,
2002 for the periods indicated.

<TABLE>
<CAPTION>
                                                          Payments Due by Period
                                       --------------------------------------------------------------
                                                      One to        Four
                                        One Year       Three       to Five    More than
Contractual Cash Obligations            and Less       Years        Years     Five Years      Total
-----------------------------------    ----------   ----------   ----------   ----------   ----------
                                                          (dollars in thousands)
<S>                                    <C>          <C>          <C>          <C>          <C>
Operating leases                       $       54   $        -   $        -   $        -   $       54
FHLB advances                                   -        1,000            -        8,000        9,000
                                       ----------   ----------   ----------   ----------   ----------

   Total contractual obligations       $       54   $    1,000   $        -   $    8,000   $    9,054
                                       ==========   ==========   ==========   ==========   ==========
</TABLE>

Liquidity and Capital Resources

The Company's primary sources of funds are deposits, FHLB advances, repayments
and prepayments of loans and mortgage-backed securities, the maturity or sale of
investment securities and interest income. Although maturity and scheduled
amortization of loans are relatively predictable sources of funds, deposit flows
and prepayments on loans are influenced significantly by general interest rates,
economic conditions and competition.

The primary investing activity of the Company is originating residential
mortgage loans, construction loans and consumer loans. For the fiscal years
ended June 30, 2002 and 2001, the Bank originated loans in the amount of $37.0
million and $33.4 million, respectively.

The Bank is required to maintain adequate levels of liquid assets under the OTS
regulations. Savings institutions were previously required to maintain an
average daily balance of liquid assets (including cash, certain time deposits,
and specified U. S. government, state, or federal agency obligations) of not
less than 4.0% of its average daily balance of net withdrawable accounts plus
short-term borrowings.

It is the Bank's policy to maintain its liquidity portfolio in excess of
regulatory requirements. The Bank's eligible liquidity ratios were 29.51% and
21.61%, respectively, at June 30, 2002 and 2001. The increase in the Bank's
liquidity was primarily due to reduced loan originations during the current
fiscal year.

The Company's most liquid assets are cash and cash equivalents, which include
short-term investments. At June 30, 2002 and 2001, cash and cash equivalents
were $22.7 million and $18.1 million, respectively.

Liquidity management for the Company is both an ongoing and long-term component
of the Company's asset liability management strategy. Excess funds generally are
invested in overnight deposits at the FHLB and held for sale mortgage-backed and
U.S. government agency securities. Should the Company require funds beyond its
ability to generate them internally, additional sources of funds are available
through advances from the FHLB. The Company would pledge its FHLB stock or
certain other assets as collateral for such advances.


                                       47

<PAGE>

At June 30, 2002, the Bank had outstanding loan commitments of $83,000 and
undisbursed loans in process of $1.3 million.

Certificates of deposit, which are scheduled to mature in one year or less at
June 30, 2002, were $43.9 million. Management believes that a significant
portion of such deposits will remain with the Bank, although depending upon the
Bank's needs for funds, the Bank may be less aggressive in seeking to retain
certain deposits.

At June 30, 2002, the Bank had tangible capital of $12.5 million, or 11.22% of
total adjusted assets, which is approximately $10.9 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date. On that
date, the Bank had core capital of $12.5 million, or 11.22% of adjusted total
assets, which is $8.1 million above the minimum leverage ratio requirement of 4%
as in effect on that date. On that date, the Bank had total risk based capital
of $13.4 million and total risk-weighted assets of $69.2 million, or total
capital of 19.37% of risk-weighted assets. This was $7.9 million above the 8%
requirement in effect on that date.

Supervisory Agreement

On August 4, 2000 the Bank entered into a Supervisory Agreement with the OTS. By
signing the Supervisory Agreement, the Bank agreed to take certain actions in
response to concerns raised by the OTS. The Supervisory Agreement provided that
the Bank shall take the 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 provided that the Bank take certain corrective steps to improve its
internal asset review program. The Supervisory Agreement required the Bank to
establish adequate allowance for loan losses and not reduce the balance of the
allowance for loan losses without prior notice of no objection from the OTS. The
Supervisory Agreement also provided that the Bank refrain from making any new
loan commitments with new builders or subdivision developments without prior OTS
approval. The Bank was also prohibited from increasing the number of loans to
current builders or subdivision developments without prior OTS approval.

In addition, the Supervisory Agreement provided that the Board of Directors of
the Bank 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 provided that the Bank
revise its internal audit procedures, update its contingency disaster recovery
plan, establish and implement certain budgetary procedures and revise its bonus
program. The Supervisory Agreement also provided that the Bank refrain from
making capital distributions without OTS approval. The Company relies, in part,
upon dividends from the Bank to satisfy its cash needs.

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 has completed the necessary steps to comply with
the Supervisory Agreement and remains in compliance with the Supervisory
Agreement. The Supervisory Agreement will remain in effect until terminated by
the OTS.

Critical Accounting Policies

The Securities and Exchange Commission ("SEC") recently issued guidance for the
disclosure of "critical accounting policies." The SEC defines "critical
accounting policies" as those that are most important to the presentation of a
company's financial condition and results, and require management's most
difficult,


                                       48

<PAGE>

subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain.

The Company follows financial accounting and reporting policies that are in
accordance with generally accepted accounting principles. The more significant
of these policies are summarized in Note 1 to the consolidated financial
statements. Not all these significant accounting policies require management to
make difficult, subjective, or complex judgments. However, the policies noted
below could be deemed to meet the SEC's definition of critical accounting
policies.

Management considers the policies related to the allowance for loan losses as
the most critical to the financial statement presentation. The total allowance
for loan losses includes activity related to allowances calculated in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting
by Creditors for Impairment of a Loan" and SFAS No. 5, "Accounting for
Contingencies." The allowance for loan losses is established through a provision
for loan losses charged to current earnings. The amount maintained in the
allowance reflects management's continuing evaluation of the loan losses
inherent in the loan portfolio. The allowance for loan losses is comprised of
specific reserves assigned to certain classified loans and general reserves.
Factors contributing to the determination of specific reserves include the
credit-worthiness of the borrower, and more specifically, changes in the
expected future receipt of principal and interest payments and/or in the value
of pledged collateral. A reserve is recorded when the carrying amount of the
loan exceeds the discounted estimated cash flows using the loan's initial
effective interest rate or the fair value of the collateral for certain
collateral dependent loans. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Provision for Loan Losses" for
further discussion of the risk factors considered by management in establishing
the allowance for loan losses.

The Company makes various assumptions and judgments about the collectibility of
its loan portfolio and provides an allowance for losses based on a number of
factors. If the Company's assumptions are wrong, its allowance for loan losses
may not be sufficient to cover loan losses. The Company may have to increase the
allowance in the future. Material additions to the Company's allowance for loan
losses would have a material adverse effect on its net earnings.

New Accounting Standards

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Statement 141 requires that the purchase
method of accounting be used for all business combinations completed after June
30, 2001. Statement 141 also includes guidance on the initial recognition and
measurement of goodwill and other intangible assets arising from business
combinations completed after June 30, 2001. Statement 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
Statement 142 requires that these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to be amortized over
their estimated useful lives. Additionally, Statement 142 requires that goodwill
included in the carrying value of equity method investments no longer be
amortized. The adoption of these new Statements did not have an effect on
earnings or the financial position of the Company.

SFAS No. 144 "Accounting for the Impairment of Disposal of Long-Lived Assets"
was adopted by the Company on January 1, 2002. The Statement established a
single accounting model for all long-lived assets to be disposed of by sale,
which is to measure a long-lived asset classified as held for sale at the lower
of its carrying amount or fair value less cost to sell and to cease
depreciation. The Statement also


                                       49

<PAGE>

establishes criteria to determine when a long-lived asset is held for sale and
provides additional guidance on accounting for such specific circumstances. The
adoption of the new Statement did not have a significant effect on earnings or
the financial position of the Company.

Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto presented herein have
been prepared in accordance with generally accepted accounting principles, which
generally requires the measurement of financial position and operating results
in terms of historical dollars without considering the change in relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Nearly all the
assets and liabilities of the Company are financial, unlike most industrial
companies. As a result, the Company's performance is directly impacted by
changes in interest rates, which are indirectly influenced by inflationary
expectations. The Company's ability to match the interest sensitivity of its
financial assets to the interest sensitivity of its financial liabilities in its
asset\liability management may tend to minimize the effect of change in interest
rates on the Company's performance. Changes in interest rates do not necessarily
move to the same extent as changes in the price of goods and services. In an
increasing interest rate environment, liquidity and the maturity structure of
the Company's assets and liabilities are critical to the maintenance of
acceptable performance levels.

Forward-looking Statements

In addition to historical information, this Annual Report contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements.
Important factors that might cause such a difference include, but are not
limited to, those discussed in the section entitled Management's Discussion and
Analysis of Financial Conditions and Results of Operations. Readers should not
place undue reliance in these forward-looking statements, as they reflect
management's analysis of the date of this report. The Company has no obligation
to update or revise these forward-looking statements to reflect events or
circumstances that occur after the date of this report. Readers should carefully
review the risk factors described in other documents the Company files from time
to time with the Securities and Exchange Commission, including Quarterly 10-Q
reports and reports filed on Form 8-K.


                                       50

<PAGE>

Item 7. Financial Statements



                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                 Consolidated Financial Statements and Schedules

                          June 30, 2002, 2001, and 2000

                   (With Independent Auditors' Report Thereon)


                                       51

<PAGE>

                         Independent Auditors' Report

The Board of Directors
CBES Bancorp, Inc.:

We have audited the accompanying consolidated balance sheets of CBES Bancorp,
Inc. and subsidiary as of June 30, 2002 and 2001, and the related consolidated
statements of operations, stockholders' equity, and comprehensive income
(loss), and cash flows for each of the years in the three-year period ended
June 30, 2002. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CBES Bancorp, Inc.
and subsidiary as of June 30, 2002 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 2002, in conformity with accounting principles generally
accepted in the United States of America.

                                /s/ KPMG LLP



Kansas City, Missouri,
August 2, 2002, except
Note 18 which is as
of September 5, 2002


                                       52

<PAGE>

                       CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                           Consolidated Balance Sheets

                             June 30, 2002 and 2001

<TABLE>
<CAPTION>
                                 Assets                                                 2002              2001
                                                                                    -------------    -------------
<S>                                                                                 <C>                  <C>
Cash                                                                                $     925,456        1,222,857
Interest-bearing deposits in other financial institutions                              21,792,880       16,885,248
                                                                                    -------------    -------------
          Total cash and cash equivalents                                              22,718,336       18,108,105

Investment and mortgage-backed securities available-for-sale (note 3)                  10,191,487       11,966,804
Investment and mortgage-backed securities - held-to-maturity (fair
  value of $89,120 and $403,560, respectively) (note 3)                                    88,462          404,177
Loans held for sale, net                                                                6,697,547        1,440,429
Loans receivable net, (note 4)                                                         62,722,383      109,717,025
Accrued interest receivable:
  Loans receivable                                                                        391,991          746,108
  Investment and mortgage-backed securities and interest-bearing
       deposits                                                                           106,950           60,477
Real estate owned (note 5)                                                              2,947,558          956,165
Stock in Federal Home Loan Bank (FHLB), at cost                                         2,322,500        2,322,500
Office property and equipment, net (note 6)                                             1,028,120        1,229,014
Office property and equipment held for sale (note 7)                                           --          850,000
Deferred income tax asset (note 10)                                                       623,000        1,324,000
Current income taxes receivable                                                           930,985          244,598
Cash surrender value of life insurance                                                  1,867,786        1,788,035
Other assets                                                                              278,554          555,306
                                                                                    -------------    -------------
          Total  assets                                                             $ 112,915,659      151,712,743
                                                                                    =============    =============
             Liabilities and Stockholders'  Equity

Liabilities:
  Deposits (note 8)                                                                 $  87,821,636      124,608,965
  FHLB advance (note 9)                                                                 9,000,000       10,150,000
  Accrued expenses and other liabilities                                                  805,082          801,211
  Accrued interest payable on deposits                                                     89,978          189,222
  Advance payments by borrowers for property taxes and insurance                        1,027,252        1,218,622
                                                                                    -------------    -------------
          Total liabilities                                                            98,743,948      136,968,020
                                                                                    -------------    -------------

Stockholders' equity:
  Common stock, $0.01 par value. Authorized 3,500,000 shares;
     issued 1,031,851 shares                                                               10,319           10,319
  Additional paid-in capital                                                           10,062,199       10,030,411
  Retained earnings, substantial restricted (notes 11, 12, and 14)                      7,152,296        8,022,702
  Unearned employee benefits (note 11)                                                   (191,890)        (304,066)
  Accumulated other comprehensive income (loss)                                           126,298          (27,132)
  Treasury stock, 156,046 shares, at cost                                              (2,987,511)     (2,9871511)
                                                                                    -------------    -------------
          Total stockholders' equity                                                   14,171,711       14,744,723

Commitments (note 4)
                                                                                    -------------    -------------
          Total liabilities and stockholders' equity                                $ 112,915,659      151,712,743
                                                                                    =============    =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       53

<PAGE>

                       CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                      Consolidated Statements of Operations

                    Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                            2002            2001            2000
                                                        -----------     -----------     -----------
<S>                                                     <C>             <C>             <C>
Interest income:
   Loans receivable                                    $  7,405,507      11,930,215      12,893,702
   Investment and mortgage-backed securities                736,547          42,510          13,757
   Interest-bearing deposits and other                      340,882         725,619         541,051
                                                       ------------     -----------     -----------
        Total interest income                             8,482,936      12,698,344      13,448,510
                                                       ------------     -----------     -----------

Interest expense:
   Deposits (note 8)                                      4,508,502       7,166,164       5,682,722
   FHLB advances                                            544,685         994,347       1,923,109
                                                       ------------     -----------     -----------
        Total interest expense                            5,053,187       8,160,511       7,605,831
                                                       ------------     -----------     -----------
        Net interest income                               3,429,749       4,537,833       5,842,679

Provision for loan losses (note 4)                        1,091,764       1,739,357       2,151,697
                                                       ------------     -----------     -----------
        Net interest income after provision
             for loan losses                              2,337,985       2,798,476       3,690,982
                                                       ------------     -----------     -----------
Noninterest income:
   Gain on sales of loans, net                              323,297         398,204         589,528
   Customer service charges                                 243,186         289,998         321,781
   Loan servicing fees                                        6,519          24,648          56,515
   Other                                                    199,576         176,934         179,927
        Total noninterest income                       ------------     -----------     -----------
                                                            772,578         889,784       1,147,751
                                                       ------------     -----------     -----------
Noninterest expense:
   Compensation, payroll taxes, and fringe
     benefits (note 11)                                   2,236,754       2,533,383       2,794,722
   Office property and equipment                            526,662         790,340         885,879
   Data processing                                          214,424         227,112         216,052
   Federal insurance premiums (note 8)                       57,550          47,205          41,525
   Advertising                                               62,108          57,073         153,411
   Real estate owned and repossessed assets                 186,695         262,253          57,447
   Other                                                    745,462       1,288,763       1,049,204
                                                       ------------     -----------     -----------
        Total noninterest expense                         4,029,655       5,206,129       5,198,240
                                                       ------------     -----------     -----------
        Loss before income taxes                           (919,092)     (1,517,869)       (359,507)

Income tax benefit (note 10)                               (320,810)       (564,000)       (142,469)
                                                       ------------     -----------     -----------
        Net loss                                       $   (598,282)       (953,869)       (217,038)
                                                       ============     ===========     ===========
Loss per share:
   Basic and diluted                                   $      (0.70)          (1.14)          (0.26)
                                                       ============     ===========     ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       54

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                          EXCELSIOR SPRINGS, MISSOURI
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)
                    Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                                                               Accumulated
                                                        Additional                Unearned       other
                                              Common     paid-in      Retained    employee    comprehensive   Treasury
                                               stock     capital      earnings    benefits       loss           stock       Tota1
                                           ----------  -----------  ------------ ----------- -------------- -----------  ----------
<S>                                        <C>         <C>          <C>          <C>         <C>            <C>          <C>
Balance, June 30, 1999                     $  10,319    9,989,075    10,033,284   (817,876)            -    (2,267,740)  16,947,062
Comprehensive income (loss):
   Net loss                                        -            -      (217,038)         -             -            -      (217,038)
   Other comprehensive income-
     unrealized holding losses on
     debt securities available-for-sale,
     net of tax                                    -            -             -                        -            -             -
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
            Total comprehensive income
              (loss)                               -            -      (217,038)         -             -            -      (217,038)
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
Allocation of ESOP shares                          -       46,477             -    125,450             -            -       171,927
Purchase of 46,056 shares of treasury stock        -            -             -          -             -     (707,797)     (707,797)
Amortization of RRP                                -            -                  131,366             -            -       131,366
Dividends declared ($0.68 per share)               -            -      (572,038)         -             -            -      (572,038)
Award of RRP shares                                -      (15,012)            -    (58,911)            -       73,923             -
Forfeiture of RRP shares                           -            -             -   (107,561)            -     (107,561)            -
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
Balance, June 30, 2000                        10,319   10,020,540     9,244,208   (512,410)            -   (3,009,175)   15,753,482

Comprehensive income (loss):
   Net loss                                        -            -      (953,869)         -             -            -      (953,869)
   Other comprehensive income-
     unrealized holding losses on
     debt and equity securities
     available-for-sale, net of tax                -            -             -                  (27,132)           -       (27,132)
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
            Total comprehensive income
              (loss)                               -            -      (953,869)         -       (27,132)           -      (981,001)
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
Allocation of ESOP shares                          -        9,871             -     91,860             -            -       101,731
Amortization of RRP                                -            -             -     61,867             -            -        61,687
Dividends declared ($0.32 per share)               -            -      (267,637)         -             -            -      (267,637)
Award of 5,941 RRP shares                          -            -             -          -             -       76,461        76,461
Forfeiture of 3,198 RRP shares                     -            -             -     54,797             -      (54,797)            -
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
Balance, June 30, 2001                        10,319   10,030,411     8,022,702   (304,066)      (27,132)  (2,987,511)   14,744,723

Comprehensive income (loss):
   Net loss                                       -            -      (598,282)         -             -            -      (598,282)
   Other comprehensive income-
     unrealized holding losses on
     debt securities available-for-sale,
     net of tax                                    -            -             -                  153,430            -       153,430
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
              Total comprehensive income
              (loss)                               -            -      (598,282)         -       153,430            -       (44,852)
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------

Allocation of ESOP shares                          -       31,788             -     89,090             -            -       120,878
Amortization of RRP                                -            -             -     23,086             -            -        23,086
Dividends declared ($0.32 per share)               -            -      (272,124)         -             -            -      (272,124)
                                            --------   ----------    ----------  ---------  ------------   ----------   -----------
Balance, June 30, 2002                      $ 10,319   10,062,199     7,152,296   (191,890)      126,298   (2,987,511)   14,171,711
                                            ========   ==========    ==========  =========  ============   ==========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       55

<PAGE>

                       CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                      Consolidated Statements of Cash Flows

                     Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                                             2002               2001             2000
                                                                         -------------     -------------    ------------
<S>                                                                      <C>               <C>              <C>
Cash flows from operating activities:
     Net loss                                                            $   (598,282)        (953,869)        (217,038)
     Adjustments to reconcile net loss to net cash
          provided by (used in) operating activities:
             Provision for loan losses                                      1,091,764        1,739,357        2,151,697
             Depreciation                                                     214,779          379,668          415,679
             Amortization of RRP and allocation of ESOP shares                143,964          239,879          303,293
             Write-down of office property and equipment held
               for sale                                                             -          144,156                -
             (Gain) loss on disposition of real estate owned, net            (137,754)         127,365          (19,779)
             Proceeds from sale of loans held for sale                     19,209,416       30,721,769       31,315,667
             Origination of loans held for sale                           (24,143,286)     (21,596,304)     (45,195,899)
             Gain on sale of loans held for sale, net                        (323,297)        (398,204)        (589,528)
             Amortization and accretion of discounts
               and deferred loan fees, net                                   (105,205)        (389,380)        (780,351)
             Provision for deferred income taxes                              605,000         (473,000)        (701,000)
             Changes in assets and liabilities:
               Accrued interest receivable                                    307,644          391,782         (142,297)
               Current income taxes receivable                               (686,387)        (360,844)          67,542
               Other assets                                                   197,001           54,128         (176,642)
               Accrued expenses and other liabilities                           3,871          (38,603)        (553,702)
               Accrued interest payable on deposits                           (99,244)         (66,749)         117,567
                                                                         -------------   -------------     ------------
                  Net cash (used in) provided by operating
                   activities                                              (4,320,016)       9,521,151      (14,004,791)
                                                                         -------------   -------------     ------------

Cash flows from investing activities:
   Net decrease (increase) in loans receivable                             40,335,556       41,288,284      (16,539,030)
   Purchase of FHLB stock                                                           -                -         (150,000)
   Purchase of investment securities held-to-maturity                        (237,418)        (293,213)        (195,115)
   Purchase of investment securities available-for-sale                    (4,069,766)     (12,011,250)               -
   Maturity of investment securities held-to-maturity                         546,000          107,000          105,000
   Maturity of investment securities available-for-sale                     4,500,000                -                -
   Principal repayments on mortgage-backed securities
        held-to-maturity                                                       11,707           13,827           18,182
   Principal repayments on mortgage-backed securities
        available-for-sale                                                  1,551,671                -                -
   Purchase of office property and equipment                                  (13,885)         (19,708)        (400,366)
   Proceeds from sale of office property and equipment                        850,000                -                -
   Proceeds from sale of real estate owned                                  3,857,205          424,117          229,356
                                                                         ------------    -------------     ------------
                  Net cash provided by (used in) investing
                   activities                                              47,331,070       29,509,057      (16,931,973)
                                                                         ------------    -------------     ------------
</TABLE>

                                  56                                 (Continued)

<PAGE>

                       CBES BANCORP, INC. AND SUBSIDIARY
                          EXCELSIOR SPRINGS, MISSOURI

                     Consolidated Statements of Cash Flows

                   Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                                                 2002            2001            2000
                                                                            --------------  -------------   -------------
<S>                                                                         <C>             <C>             <C>
Cash flows from financing activities:
  (Decrease) increase in deposits                                           $ (36,787,329)   (11,021,798)     34,207,165
  Proceeds from FHLB advances                                                          --     64,300,000      75,600,000
  Repayments of FHLB advances                                                  (1,150,000    (80,900,000)    (78,300,000)
  (Decrease) increase in advance payments by borrowers
    for property taxes and insurance                                             (191,370)      (225,664)        528,071
  Purchase of treasury stock                                                           --             --        (707,797)
  Dividends paid                                                                 (272,124)      (316,686)       (611,408)
                                                                            -------------   ------------    ------------
            Net cash (used in) provided by financing activities               (38,400,823)   (28,164,148)     30,716,031
                                                                            -------------   ------------    ------------
            Net increase (decrease) in cash and cash equivalents                4,610,231     10,866,060        (220,733)
Cash and cash equivalents at the beginning of the year                      $  18,108,105      7,242,045       7,462,778
                                                                            -------------   ------------    ------------
Cash and cash equivalents at the end of the year                            $  22,718,336     18,108,105       7,242,045
                                                                            =============   ============    ============

Supplemental disclosure of cash flow information:
  Cash paid (received) during the year for income taxes                     $    (239,375)       269,844         109,151
  Cash paid during the year for interest                                        5,152,431      8,227,260       7,488,264

Supplemental schedule of noncash investing and financing activities:
    Conversion of loans to real estate owned                                $   6,618,900      1,270,586         293,779
    Loans made to finance sales of real estate owned                              908,056        150,000          73,750
    Dividends declared and payable                                                 73,501         73,501         122,550
</TABLE>

See accompanying notes to consolidated financial statements.

                                      57                             (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(1)  Conversion and Acquisition of the Association by the Company

     CBES Bancorp, Inc. (the Company) was incorporated in September 1996 for the
     purpose of becoming the savings and loan holding company of Community Bank
     of Excelsior Springs, a Savings Bank (the Bank), in connection with the
     Bank's conversion from a federally chartered mutual savings and loan to a
     federally chartered stock savings and loan. Pursuant to its Plan of
     Conversion, on September 19, 1996, the Company issued and sold 1,024,958
     shares of its common stock in a subscription and community offering to the
     Bank's depositors and borrowers, the Company's employee stock ownership
     plan (ESOP), and the general public.

(2)  Summary of Significant Accounting Policies

     (a)  Principles of Consolidation and Basis of Presentation

          The accompanying consolidated financial statements include the
          accounts of the Company and the Bank and its wholly owned subsidiary,
          CBES Service Corporation. Significant intercompany balances and
          transactions have been eliminated in consolidation.

     (b)  Cash and Cash Equivalents

          For purposes of the consolidated statements of cash flows, all
          investments with a maturity of three months or less at date of
          purchase are considered cash equivalents.

     (c)  Investment and Mortgage-Backed Securities

          The Company classifies its investment and mortgage-backed securities
          portfolios as held-to-maturity, which are recorded at amortized cost,
          or available-for-sale, which are recorded at fair value. The Company
          classifies its investment and mortgage-backed securities as
          held-to-maturity if it has the positive intent and ability to hold the
          securities to maturity. Unrealized holding gains and losses, net of
          the related tax effect, on available-for-sale securities are excluded
          from earnings and are reported as a separate component of other
          comprehensive income (loss) until realized. Transfers of securities
          from available-for-sale to held-to-maturity are recorded at fair value
          at the date of transfer, and unrealized holding gains or losses are
          amortized over the remaining life of the security.

          A decline in the fair value of any security below cost that is deemed
          other than temporary is charged to income, resulting in the
          establishment of a new cost basis for the security.

          Premiums and discounts on mortgage-backed and investment securities
          are amortized using the interest method over the estimated life of the
          securities. Realized gains and losses on sales are included in income
          using the specific identification method for determining cost of the
          securities sold.

     (d)  Loans

          The Company determines at the time of origination whether mortgage
          loans will be held for the Company's portfolio or sold in the
          secondary market. Loans originated and intended for sale in the
          secondary market are recorded at the lower of aggregate cost or
          estimated fair value. Fees received on such loans are deferred and
          recognized in income as part of the gain or loss on sale.

                                        58                           (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

     Interest on loans is accrued based on the principal amount outstanding. The
     Company defers all loan origination, commitment and related fees, and
     certain direct origination costs related to loans generated for the Bank's
     portfolio. The Bank amortizes the net fees over the expected life of the
     individual loans using the interest method.

 (e) Allowance for Loan Losses

     The allowance for loan losses is established through provisions for loan
     losses charged against income. Loans deemed to be uncollectible are charged
     against the allowance for loan losses, and subsequent recoveries, if any,
     are credited to the allowance.

     A valuation allowance for losses on loans is established by management
     based on its estimate of the amount required to maintain an adequate
     allowance for loan losses reflective of the risks in the loan portfolio.
     This estimate is based on reviews of the loan portfolio, including
     assessment of the estimated net realizable value of the related underlying
     collateral of and consideration of past loan loss experience, current
     economic conditions, and such other factors which, in the opinion of
     management, deserve current recognition. Loans are also subject to periodic
     examination by regulatory agencies. Such agencies may require charge-off or
     additions to the allowance based upon their judgments about information
     available at the time of their examination. The Company allocates a portion
     of the allowance to certain impaired loans as required by Statement of
     Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
     Impairment of a Loan.

     Impaired loans include all non-accrual loans 90 days or more delinquent and
     all loans upon which accrual of interest has been suspended.

 (f) Mortgage Banking Activities

     The Company capitalizes the value of retained mortgage servicing rights
     related to loans originated and sold after January 1, 1996 as an asset,
     thereby increasing the gain on sale of the loan by the amount of the asset.
     Such mortgage servicing rights are amortized in proportion to and over the
     period of the estimated net servicing income. Any remaining unamortized
     amount is charged to expense if the related loan is repaid prior to
     maturity. Management monitors the capitalized mortgage servicing rights for
     impairment based on the fair value of those rights. Any impairment is
     recognized through a valuation allowance.

     Included in gains on sales of loans are capitalized mortgage servicing
     rights aggregating $3,000, $10,000, and $127,000 in 2002, 2001, and 2000,
     respectively. Amortization expense related to the capitalized servicing
     rights, included as a reduction of loan servicing fees in the accompanying
     consolidated statements of operations, aggregated $103,000, $127,000, and
     $91,000 during 2002, 2001, and 2000, respectively. Mortgage servicing
     rights capitalized by the Company and included in other assets was $161,000
     and $261,000 at June 30, 2002 and 2001, respectively.

     At June 30, 2002 and 2001, the Bank was servicing loans for others
     amounting to $25,618,000 and $39,119,000, respectively. Loan servicing fees
     include servicing fees from investors and certain charges collected from
     borrowers, such as late payment fees, which are recorded when received. The
     amount of escrow balances held for borrowers at June 30, 2002 and 2001
     amounted to $290,000 and $404,000, respectively.

                                       59                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(g)  Real Estate Owned

     Real estate properties acquired through foreclosure are initially recorded
     at the lower of cost or the fair value, less estimated costs to sell, of
     the underlying collateral at the time of foreclosure. Subsequent to
     foreclosure, further declines in the fair value of such properties are
     recorded as a reduction to the carrying value of those assets through the
     establishment of an allowance for losses.

(h)  Stuck in Federal Home Loan Bank (FHLB) of Des Moines

     The Bank is a member of the FHLB system. As a member, the Bank is required
     to purchase and hold stock in the FHLB of Des Moines in an amount equal to
     the greater of (a) 1% of unpaid residential loans, (b) 5% of outstanding
     FHLB advances, or (c) 0.3% of total assets. FHLB stock is carried at cost
     in the accompanying consolidated balance sheets.

(i)  Office Property and Equipment

     Premises and equipment are generally stated at cost less accumulated
     depreciation. Depreciation is provided using the straight-line method over
     the estimated useful lives of the assets, which range from three to thirty
     years. Major replacements and betterments are capitalized while normal
     maintenance and repairs are charged to expense when incurred. Gains or
     losses on dispositions are reflected in current operations. Premises and
     equipment held for sale are recorded at the lower of cost or estimated net
     realizable value.

(j)  Income Taxes

     The Company records deferred tax assets and liabilities for the future tax
     consequences attributable to differences between the consolidated financial
     statement carrying amounts of existing assets and liabilities and their
     respective income tax bases. The effect on deferred tax assets and
     liabilities of a change in tax rate is recognized in income in the period
     that includes the enactment date.

(k)  Use of Estimates

     Management of the Company has made a number of estimates and assumptions
     relating to the reporting of assets and liabilities and the disclosure of
     contingent assets and liabilities to prepare these consolidated financial
     statements in conformity with accounting principles generally accepted in
     the United States of America. Actual results could differ from those
     estimates.

(l)  Earnings (Loss) Per Share

     Basic earnings (loss) per share is based upon the weighted average number
     of common shares outstanding during the periods presented. Diluted earnings
     (loss) per share include the effects of all dilutive potential common
     shares outstanding during each period. Unallocated ESOP shares are excluded
     from outstanding shares.

                                       60                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

     The shares used in the calculation of basic and diluted earnings per share
     are shown below:

                                                          June 30
                                             -----------------------------------
                                              2002          2001          2000
                                             -------       -------       -------
     Weighted average common
        shares outstanding                   852,653       838,454       851,060
     Stock options                               992            --            --
                                             -------       -------       -------
                                             853,645       838,454       851,060
                                             =======       =======       =======

(m)  Recently Issued Accounting Pronouncements

     In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
     No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that
     the purchase method of accounting be used for all business combinations
     completed after June 30, 2001. SFAS No. 141 also specifies criteria
     intangible assets acquired in a purchase method business combination must
     meet to be recognized and reported apart from goodwill. SFAS No. 142
     requires that goodwill and intangible assets with indefinite useful lives
     no longer be amortized, but instead be tested for impairment at least
     annually in accordance with the provisions of SFAS No. 142. SFAS No. 142
     also requires intangible assets with definite useful lives be amortized
     over their respective estimated useful lives to their estimated residual
     values, and reviewed for impairment in accordance with SFAS No. 121,
     Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to Be Disposed of. The adoption of these standards will not have an
     impact on the consolidated financial statements of the Company.

(3)  Investments in Debt Securities

     The amortized cost and approximate fair value of available-for-sale and
     held-to-maturity securities at June 30, 2002 are as follows:

<TABLE>
<CAPTION>
                                                       Gross        Gross
                                      Amortized      unrealized   unrealized     Fair
           Available-for-sale            cost          gains        losses       value
           ------------------            ----          -----        ------       -----
<S>                                   <C>            <C>          <C>         <C>
U.S. treasury and agency securities   $3,539,236       18,368           --     3,557,604
Mortgage-backed securities             6,446,889      186,994           --     6,633,883
                                      ----------      -------       ------    ----------
                                      $9,986,125      205,362           --    10,191,487
                                      ==========      =======       ======    ==========
           Held-to-maturity
           ----------------

U.S. treasury and agency securities   $   75,000           --           --        75,000
Mortgage-backed securities                13,462          658           --        14,120
                                      ----------      -------      -------    ----------
                                      $   88,462          658           --        89,120
                                      ==========      =======      =======    ==========
</TABLE>

                                       61                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

The amortized cost and approximate fair values of available-for-sale
held-to-maturity securities at June 30, 2001 are as follows:

<TABLE>
<CAPTION>
                                                            Gross             Gross
                                         Amortized        unrealized        unrealized         Fair
         Available-for-sale                 cost            gains             losses           value
-------------------------------------  -------------    --------------   ---------------  -------------
<S>                                    <C>                <C>              <C>              <C>
U. S. treasury and agency securities   $  4,016,356             --            (10,401)       4,005,955
Mortgage-backed securities                7,994,566             --            (33,717)       7,960,849
                                       ------------        -------          ---------       ----------
                                       $ 12,010,922             --            (44,118)      11,966,804
                                       ============        =======          =========       ==========
         Held-to-maturity
-------------------------------------

U. S. treasury and agency securities   $    379,008             334                --          379,342
Mortgage-backed securities                   25,169              --               (951)         24,218
                                       ------------        --------         ----------      ----------
                                       $    404,177             334               (951)        403,560
                                       ============        ========         ==========      ==========
</TABLE>

Maturities of investment securities and mortgage-backed securities classified as
available-for-sale and held-to-maturity are listed as follows:

                                                  Amortized             Fair
                                                     cost               value
                                               ---------------     -------------

Due in one year or less                        $   3,042,897          3,048,600
Due after one year through five years                514,639            527,004
Due after five years through ten years                25,000             25,000
Due after ten years                                   32,000             32,000
Mortgage-backed securities                         6,460,051          6,648,003
                                               -------------         ----------
                                               $  10,074,587         10,280,607
                                               =============         ==========

                                       62                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                           June 30, 2002, 2001 and 2000

(4)  Loans Receivable

     Loans receivable consisted of the following at June 30, 2002 and 2001:

                                                       2002               2001
                                                       ----               ----
Real estate:
   One-to-four family residential                 $ 36,961,763        58,541,188
   Construction                                      6,570,271        28,910,269
   Land                                              3,450,234         5,797,735
   Commercial                                       11,443,048         9,490,091
   Multifamily                                       2,025,353         l,986,218
Consumer loans                                       5,253,284        1l,045,956
                                                  ------------       -----------
                                                    65,703,953       115,771,457
Less:
   Loans in process                                  1,272,080         2,332,701
   Deferred loan origination fees
     and discounts on loans, net                       208,452           249,731
   Allowance for loan losses                         1,501,038         3,472,000
                                                  ------------       -----------
                                                  $ 62,722,383       109,717,025
                                                  ============       ===========

The Company had loans to directors and officers at June 30, 2002 and 2001 which
carry terms similar to those for other loans. A summary of such loans is as
follows:

                                                  2002                2001
                                                  ----                ----

Balance at beginning of year                    $ 745,000          1,871,000
New loans                                          69,000            131,000
Payments                                         (280,000)        (1,257,000)
                                                ---------         ----------
Balance at end of year                          $ 534,000            745,000
                                                =========         ==========

A summary of activity in the allowance for loan losses for the years ended June
30, 2002, 2001, and 2000 is as follows:

                                      2002            2001           2000
                                      ----            ----           ----

Balance at beginning of year       $ 3,472,000      2,924,000        926,546
Provision for loan losses            1,091,764      1,739,357      2,151,697
Charge-offs                         (3,130,042)    (1,232,267)      (199,747)
Recoveries                              67,316         40,910         45,504
                                   -----------     ----------      ---------
Balance at end of year             $ 1,501,038      3,472,000      2,924,000
                                   ===========     ==========      =========

                                       63                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000



     The following table shows the recorded investment in impaired loans, the
     amount of that recorded investment for which there is a related allowance
     for credit losses and the amount of that allowance, and the amount of that
     recorded investment for which there is no related allowance for credit
     losses as of June 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                       2002          2001
                                                                   ------------   -----------
     <S>                                                           <C>            <C>
     Impaired loans for which an allowance has been
        established                                                $    26,000      3,923,000
     Impaired loans for which no allowance has been
        established                                                  3,186,000      6,639,000
                                                                   -----------    -----------
                 Total recorded investment in impaired loans       $ 3,212,000     10,562,000
                                                                   ===========    ===========
     Allowance for loan losses allocated to impaired loans         $   171,000      1,474,000
</TABLE>

     The average balance of impaired loans for 2002 and 2001 was $7,342,000 and
     $11,667,000, respectively, based on month-end balances. The net amount of
     interest recorded on such loans during their impairment period aggregated
     $229,000 and $435,000 in 2002 and 2001, respectively.

     The Bank evaluates each customer's creditworthiness on a case-by-case
     basis. Residential loans with a loan-to-value ratio exceeding 80% are
     required to have private mortgage insurance. The Bank's principal lending
     areas are the economically diverse communities northeast of Kansas City,
     Missouri.

(5)  Assets Acquired Through Foreclosure

     Assets acquired through foreclosure categorized by type of property are as
     follows at June 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                 2002            2001
                                                             ------------     ---------
     <S>                                                     <C>              <C>
     One-to-four family and multifamily real estate          $ 2,321,386       733,415
     Commercial real estate                                      556,172       222,750
     Other                                                        70,000            --
                                                             -----------      --------
                                                               2,947,558       956,165

     Less allowance for losses                                        --            --
                                                             -----------      --------
                  Total                                      $ 2,947,558       956,165
                                                             ===========      ========
</TABLE>

                                         64                          (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000



The components of income and expense on assets acquired through foreclosure for
the years ended June 30, 2002 and 2001 are as follows:

                                       2002             2001         2000
                                       ----             ----         ----
Provision for loan losses          $        -               -            -
Operating income                       31,975           1,723            -
Gain on sales                         137,754        (127,365)      19,779
Operating expenses                   (356,424)       (136,611)     (77,226)
                                   ----------        --------      -------
                                   $ (186,695)       (262,253)     (57,447)
                                   ==========        ========      =======


(6)  Office Property and Equipment

     Office property and equipment consist of the following at June 30, 2002 and
2001:

                                             2002                 2001
                                             ----                 ----
Land and land improvements              $    171,130             171,130
Office buildings                           1,485,931           1,475,533
Furniture and equipment                    1,883,639           l,880,152
                                        ------------          ----------
                                           3,540,700           3,526,815
Less accumulated depreciation              2,512,580           2,297,801
                                        ------------          ----------
                                        $  1,028,120           1,229,014
                                        ============          ==========

(7)  Premises and Equipment Held for Sale

     During June 2001, the Company designated the property and equipment located
     at the Kearney, Missouri branch location (Kearney branch) as held for sale.
     Subsequent to June 30, 2001, the Company entered into an agreement to sell
     the property and equipment and deposits at the Kearney branch to Kearney
     Trust Company. In connection with such designation and pending sale, the
     Company recorded a loss of $144,156, which is included in other expenses in
     2001. The Kearney Branch was sold on November 30, 2001 for $850,000,
     following the receipt of regulatory approval. The sale of deposits and
     property was funded by the Company by liquidating interest-bearing deposits
     in other financial institutions.

                                       65                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(8)  Deposits

     Deposit balances at June 30, 2002 and 2001 are summarized as follows:

                                                       2002              2001
                                                  -------------     ------------

Noninterest bearing demand accounts               $   2,827,416       4,269,001
NOW accounts                                          9,761,549       9,467,897
Money market                                          7,072,723       6,092,665
Passbook accounts                                     3,620,572       3,654,695
                                                  -------------     -----------
                                                     23,282,260      23,484,258
Certificates of deposit                              64,539,376     101,124,707
                                                  -------------     -----------
                                                  $  87,821,636     124,608,965
                                                  =============     ===========
Weighted average interest rate on deposits
   at period-end                                           3.29%           5.16%

Contractual maturity of certificate accounts:
   Under 12 months                                $  43,857,646      77,338,987
   12 to 24 months                                    8,361,175      12,281,369
   24 to 36 months                                    4,762,388       4,834,130
   36 to 48 months                                    1,383,536       4,861,904
   48 to 60 months                                    3,450,841         936,015
   Over 60 months                                     2,723,790         872,302
                                                  -------------     -----------
                                                  $  64,539,376     101,124,707
                                                  =============     ===========

At June 30, 2002 and 2001, time deposits of $100,000 or more totaled $9,475,000
and $23,684,000, respectively.

The components of interest expense on deposits for the years ended June 30,
2002, 2001, and 2000 are as follows:

                                        2002             2001            2000
                                    -----------       ---------        ---------

NOW, money market demand,
   and passbook accounts            $   310,357         448,946          402,462
Certificates of deposit               4,198,145       6,717,218        5,280,260
                                    -----------       ---------        ---------
                                    $ 4,508,502       7,166,164        5,682,722
                                    ===========       =========        =========

                                       66                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                           June 30, 2002, 2001 and 2000

(9) FHLB Advances

    The Company had the following advances outstanding from the FHLB of Des
    Moines at June 30,2002 and 2001:

<TABLE>
<CAPTION>
                                                                       2002            2001
                                                                    -----------    ------------
    <S>                                                             <C>            <C>
    $1,150,000 advance, interest at 5.33%, due December 2001                  -       1,150,000
    $l,000,000 advance, interest at 6.04%, due December 2004       $  1,000,000       1,000,000
    $3,000,000 advance, interest at 4.99%, due September 2008         3,000,000       3,000,000
    $2,000,000 advance, interest at 5.84%, due December 2009          2,000,000       2,000,000
    $3,000,000 advance, interest at 6.02%, due March 2010             3,000,000       3,000,000
                                                                    -----------    ------------
                                                                   $  9,000,000      10,150,000
                                                                    ===========    ============
</TABLE>

    The advances with the FHLB are collateralized by first mortgage loans.

    Scheduled maturities of FHLB advances at June 30, 2002 are as follows:

                                                                      Amount
                                                                    -----------
                            Year ending June 30:
                              2003                                 $          -
                              2004                                    1,000,000
                              2005                                            -
                              2006                                            -
                              2007

                              Thereafter                              8,000,000
                                                                    -----------
                                                                   $  9,000,000
                                                                    ===========

                                       67                            (Continued)

<PAGE>

                        CBES BANCORP INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                           June 30, 2002, 2001, and 2000

(10)   Income Taxes

       Components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
                                                        Federal        State        Total
                                                    --------------  -----------  -----------
<S>                                                <C>              <C>          <C>
Year ended June 30, 2002:
   Current                                         $     (925,810)          --     (925,810)
   Deferred                                               605,000           --      605,000
                                                    --------------  -----------  -----------
                                                   $     (320,810)          --     (320,810)
                                                    ==============  ===========  ===========

Year ended June 30, 200l:
   Current                                         $      (91,000)          --      (91,000)
   Deferred                                              (473,000)          --     (473,000)
                                                    --------------  -----------  -----------
                                                   $     (564,000)          --     (564,000)
                                                    ==============  ===========  ===========

Year ended June 30, 2000:
   Current                                         $      500,667       57,864      558,531
   Deferred                                              (626,000)     (75,000)    (701,000)
                                                    --------------  -----------  -----------
                                                   $     (125,333)     (17,136)    (142,469)
                                                    ==============  ===========  ===========
</TABLE>

Income tax expense (benefit) has been provided at effective rates of (34.9)%,
(37.1)%, and (39.6)% (applied to loss before income taxes) for the years ended
June 30, 2002, 2001, and 2000, respectively. The reasons for the differences
between the effective tax rates and the corporate Federal income tax rate of 34%
are as follows:

<TABLE>
<CAPTION>
                                                        2002            2001           2000
                                                    ------------   ------------   -------------
<S>                                                 <C>            <C>            <C>
Federal income tax rate                                 (34.0) %       (34.0) %        (34.0) %
Items affecting federal income tax rate:
   ESOP                                                   1.8            0.9            10.3
   Increase in cash surrender value of
     life insurance policies, net of
     nondeductible premiums                              (3.0)          (1.7)          (19.8)
   State income tax, net of Federal benefit                --             --            (4.6)
   Other                                                  0.3           (2.3)            8.5
                                                    ------------   ------------   -------------
        Effective income tax rate                       (34.9) %       (37.1) %        (39.6) %
                                                    ============   ============   =============
</TABLE>

                                 68                                  (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                           June 30, 2002, 2001, and 2000

Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Temporary differences which give rise to
deferred tax assets and liabilities at June 30, 2002 and 2001 are as follows:

                                                           2002           2001
                                                        -----------   ----------
Accrued compensation                                    $  149,000      157,000
Allowance for loan losses                                  499,000    1,164,000
Office property and equipment                                   --       35,000
Real estate owned                                          117,000       79,000
Reserve for check loss                                          --      109,000
Unrealized losses on AFS securities                             --       17,000
Unrealized gains on loans held for sale                     43,000           --
                                                        ----------    ---------
     Deferred income tax asset                             808,000    1,561,000
                                                        ----------    ---------
Loan origination fees                                      (37,000)    (129,000)
Originated servicing rights                                (55,000)     (89,000)
Unrealized gains on AFS Securities                         (79,000)          --
Other                                                      (14,000)     (19,000)
                                                        ----------    ---------
     Deferred income tax liability                        (185,000)    (237,000)
                                                        ----------    ---------
     Net deferred income tax asset                      $  623,000    1,324,00O
                                                        ==========    =========


The Company did not record a valuation allowance for deferred tax assets at
June 30, 2002 and 2001. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Taxable income (loss) for the years ended June 30,
2002, 2001, and 2000, was $(2,727,000), $(159,000), and $1,554,000
respectively. Based upon the projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not the Company will realize the benefits of these deductible
differences. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable
income during the net operating loss carry forward period are reduced.

For the years ended June 30, 2002 and 2001, the Company was able to carry back
the respective year's net operating losses to prior periods and recover actual
taxes paid for those periods. At June 30, 2002, the Company has exhausted its
net operating loss carry back potential and the recoverability of any future
net operating losses is subject to the Company generating future taxable income
over the carry forward period.

Prior to 1996, savings institutions that met certain definitional tests and
other conditions prescribed by the Internal Revenue Code were allowed to deduct,
within limitations, a bad debt deduction under either of two alternative
methods:(i) a deduction based on a percentage of taxable income (most recently
8%), or (ii) a deduction based upon actual loan loss experience (the Experience
Method). The Small Business Job Protection Act (the Act) repealed the bad debt
deduction based on a percentage of taxable income effective

                                       69                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

     for taxable years beginning after December 31, 1995. The Company,
     therefore, is now limited to the use of the bad debt deduction computed
     under the Experience Method. The Company's base year tax bad debt reserve
     balance of approximately $1.7 million will, in future years, be subject to
     recapture in whole or in part upon the occurrence of certain events, such
     as a distribution to stockholders in excess of the Company's current and
     accumulated earnings and profits, a redemption of shares, or upon a partial
     or complete liquidation of the Company. The Company does not intend to make
     distributions to stockholders that would result in recapture of any portion
     of its base year bad debt reserve. Since management intends to use the
     reserve only for the purpose for which it was intended, a deferred tax
     liability of approximately $578,000 has not been recorded.

(11) Benefit Plans

          Deferred Compensation Plan

          Effective March 1995, the Bank entered into deferred compensation
          agreements with members of the board of directors and certain
          officers. The agreements provide for monthly payments to the
          individuals or their beneficiaries for between ten and fifteen years
          following retirement. The agreements are accounted for on an
          individual basis with the cost accrued over the individual's period of
          service. Expense under the agreements for the years ended June 30,
          2002, 2001, and 2000 was approximately $24,000, $7,000, and $40,000,
          respectively. The directors/officers and their beneficiaries are
          general unsecured creditors of the Bank for all amounts due under
          these agreements.

          Employee Stock Ownership Plan

          Qualified employees of the Company and Bank participate in an ESOP. In
          connection with the conversion described in note 1, the ESOP borrowed
          $819,960 from the Company, the proceeds of which were used to acquire
          81,996 shares of the Company's common stock. Contributions from the
          Company and the Bank, along with dividends on unallocated shares of
          common stock, are used by the ESOP to make payments of principal and
          interest on the loan. Under the terms of the ESOP, contributions are
          allocated to participants using a formula based upon compensation
          Participants are fully vested after five years. Because the Company
          has provided the ESOP's borrowing, the unearned compensation is
          presented as a reduction of stockholders' equity in the accompanying
          consolidated balance sheets. As of June 30, 2002, 2001, and 2000,
          54,228, 45,319, and 39,014, shares, respectively, had been allocated
          to participants. Compensation and benefits expense in 2002, 2001, and
          2000, representing the fair value of allocated shares, was $121,000,
          $102,000, and $172,000, respectively. The fair value of the remaining
          23,110 unallocated shares at June 30, 2002 aggregated approximately
          $334,000.

          Recognition and Retention Plan (RRP)

          During 1998, the Company adopted a RRP. In 1998, 2000, and 2001,
          common stock aggregating 36,893, 3,895, and 5,941 shares,
          respectively, was awarded to certain officers and directors of the
          Company and the Bank. The awards do not require any payment by the
          recipients. The 1998 and 2000 shares vest 20% upon award with the
          remaining shares vesting equally over four years. The 2001 award
          vested immediately on June 30, 2001, the date of the award. The fair
          value of the 1998 and 2000 shares at the date of award, aggregating
          $710,190 and $3l,006, respectively, was included

                                       70                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

          in unearned compensation in the accompanying consolidated balance
          sheets and is being amortized to expense over the vesting period. The
          fair value of the 2001 shares at the date of award was $76,461 and was
          recorded as expense on the award date. The Company recognized RRP
          expense of $23,086, $138,148, and $131,366 in 2002, 2001, and 2000,
          respectively.

          401(k) Plan

          During June 1996, the Company established a defined contribution
          401(k) plan covering substantially all employees. The plan provides
          for discretionary employer contributions. Employer contributions were
          $4,000, $4,000, and $5,000 in 2002, 2001, and 2000, respectively.

(12) Stock Options

     During 1998, the Company adopted a stock option plan. Under the plan,
     options to acquire 102,495 shares of the Company's common stock may be
     granted to certain officers, directors, and employees of the Company or the
     Bank. The options enable the recipient to purchase stock at an exercise
     price equal to the fair value of the stock at the date of the grant. The
     options, issued prior to June 30, 2000, vest over five years and are
     exercisable for up to ten years. On June 21, 2001, the Company granted
     options to acquire 19,300 shares for $12.87 per share, with 9,650 vesting
     on October 1, 200l and the remaining 9,650 vesting on October 1, 2002.

     At June 30, 2002, 33,484 shares remain available for option grants under
     this program. The following tables summarize option activity over the last
     three years and current options outstanding:

<TABLE>
<CAPTION>
                               2002                    2001                      2000
                       ---------------------   ---------------------     ---------------------
                                   Weighted                Weighted                  Weighted
                                   average                 average                   average
                                    option                  option                    option
                        Shares      price       Shares      price         Shares      price
                       --------   ----------   --------   ----------     --------   ----------
Outstanding at
  beginning o f year    69,011     $17.47       96,859     $  18.84       96,859     $ 18.84
Granted                     --         --       19,300        12.87           --          --
Canceled                    --         --      (47,148)       18.40           --          --
                       --------                --------                  --------
Outstanding at
  end of year           69,011      17.47       69,011        17.47       96,859       18.84
                       ========                ========                  ========

                                 Options outstanding              Options exercisable
                       --------------------------------------  -------------------------
                                        Weighted
                           Number       average     Weighted      Number       Weighted
                        outstanding    remaining    average     outstanding    average
     Range of             at June     contractual   exercise    at June 30,    exercise
 exercise prices           2002           life       price         2002          price
-----------------      -------------  -----------  ----------  -------------  ----------
<S>                    <C>            <C>          <C>         <C>            <C>
 $12.87 - $19.25          69.01l          6.3       $  17.47      69,011       $  17.47
</TABLE>

                                       71                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000



     SFAS No. 123, Accounting for Stock-Based Compensation, permits entities to
     recognize, as expense over the vesting period, the fair value of
     stock-based awards. Alternately, SFAS No. 123 allows entities to disclose
     pro forma net income and income per share as if the fair value-based method
     defined in SFAS No. 123 had been applied, while continuing to apply the
     provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting
     for Stock Issued to Employees, under which compensation expense is recorded
     on the date of grant only if the current fair value of the underlying stock
     exceeds the exercise price.

     The Company has elected to apply the recognition provisions of APB Opinion
     No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. If
     compensation expense for the stock options had been determined based upon
     the fair value at the grant date consistent with the methodology prescribed
     under SFAS No. 123, the Company's net loss and diluted loss per share would
     have been increased by approximately $33,000, or $.04 per diluted share in
     2002; $115,000 or $0.14 per diluted share in 2001; and $136,000, or $0.16
     per diluted share in 2000.

     Following is a summary of the assumptions used to estimate the value of the
     options issued in 2001 and 1999:

                                                    2001 Award      1999 Award
                                                  --------------  --------------
     Dividend yield                                       2.29 %          2.06 %
     Volatility                                          40.04 %         39.57 %
     Risk-free interest rate                              6.00 %          5.60 %
     Expected life                                    10 years        10 years

(13) Financial Instruments With Off-Balance Sheet Risk and Concentrations of
     Credit Risk

     The Bank is a party to financial instruments with off-balance sheet risk in
     the normal course of business to meet customer financing needs. These
     financial instruments consist principally of commitments to extend credit.
     The Bank uses the same credit policies in making commitments and
     conditional obligations as it does for on-balance sheet instruments. The
     Bank's exposure to credit loss in the event of nonperformance by the other
     party is represented by the contractual amount of those instruments. The
     Bank does not generally require collateral or other security on unfunded
     loan commitments until such time that loans are funded.

     In addition to financial instruments with off-balance sheet risk, the Bank
     is exposed to varying risks associated with concentrations of credit
     relating primarily to lending activities in specific geographic areas. The
     Bank's principal lending area consists of the agricultural-based rural
     communities northeast of Kansas City, Missouri, and the Bank's loans are
     primarily to residents of or secured by properties located in its principal
     lending area. Accordingly, the ultimate collectibility of the Bank's loan
     portfolio is dependent upon market conditions in that area. This geographic
     concentration is considered in management's establishment of the allowance
     for loan losses.

                                       72                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(14) Regulatory Capital Requirements

     The Bank is subject to various regulatory capital requirements administered
     by the federal banking agencies. Failure to meet minimum capital
     requirements can initiate certain mandatory, and possibly additional
     discretionary, actions by regulators that, if undertaken, could have a
     direct material effect on the Bank's consolidated financial statements.
     Under capital adequacy guidelines and the regulatory framework for prompt
     corrective action, the Bank must meet specific capital guidelines that
     involve quantitative measures of the Bank's assets, liabilities, and
     certain off-balance sheet items as calculated under regulatory accounting
     practices. The Bank's capital amounts and classification are also subject
     to qualitative judgments by the regulators about components, risk
     weighting, and other factors.

     Quantitative measures established by regulation to ensure capital adequacy
     require the Bank to maintain minimum amounts and ratios (set forth in the
     table below) of risk-based capital, as defined in the regulations, to
     risk-weighted assets, as defined, and of tangible and core capital, as
     defined, to total assets, as defined. Management believes, as of June 30,
     2002, that the Bank meets all capital adequacy requirements to which it is
     subject. To be categorized as well-capitalized under the regulatory
     framework for prompt corrective action, the Bank must maintain minimum
     total risk-based, leverage risk-based, tangible, and core capital ratios as
     set forth in the table.

                                       73                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                           June 30,2002,2001, and 2000

 The Bank met all regulatory capital requirements at June 30, 2002 and 2001. The
Bank's actual and required capital amounts and ratios as of June 30,2002 and
2001 were as follows:

<TABLE>
<CAPTION>
                                                                              To be well-
                                                       For capital          capitalized under
                                                        adequacy            prompt corrective
                                 Actual                 purposes            action provisions
                          ---------------------   ---------------------    ---------------------
       2002                  Amount      Ratio       Amount      Ratio       Amount      Ratio
----------------------    ------------  -------   -----------    ------    -----------   -------
<S>                       <C>           <C>       <C>            <C>       <C>           <C>
Tangible capital
  (to tangible assets)    $ 12,526,000  11.22 %   $ 1,677,000    1.50 %    $        --      -- %
Tier 1 leverage (core)
  capital (to adjusted
  tangible assets)          12,526,000  11.22       4,464,000    4.00        5,580,000    5.00
Risk-based capital
  (to risk-weighted
  assets)                   13,394,000  19.37       5,533,000    8.00        6,916,000   10.00
Tier 1 leverage risk-
  based capital (to
  risk-weighted assets)     12,526,000  18.11              --      --        4,149,000    6.00

<CAPTION>
                                                                              To be well-
                                                       For capital          capitalized under
                                                        adequacy            prompt corrective
                                 Actual                 purposes            action provisions
                          --------------------    ---------------------    ---------------------
        2001                 Amount      Ratio         Amount     Ratio      Amount      Ratio
----------------------    ------------  ------    -----------     -----    -----------   -------
<S>                       <C>           <C>       <C>            <C>       <C>           <C>
Tangible capital
  (to tangible assets)    $ 12,986,000   8.57 %   $ 2,273,000    1.50 %    $        --      -- %
Tier 1 leverage (core)
  capital (to adjusted
  tangible assets)          12,986,000   8.57       6,063,000    4.00        7,579,000    5.00
Risk-based capital
  (to risk-weighted
  assets)                   14,336,000  13.31       8,619,000    8.00       10,774,000   10.00
Tier 1 leverage risk-
  based capital (to
  risk-weighted assets)     12,986,000  12.05              --      --        6,464,000    6.00
</TABLE>

                                       74                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000


(15) Fair Value of Financial Instruments

     Fair value estimates of the Company's financial instruments as of June 30,
     2002 and 2001, including methods and assumptions utilized, are set forth
     below:

<TABLE>
<CAPTION>
                                                              2002                           2001
                                               -------------------------------   ----------------------------
                                                    Carrying        Estimated      Carrying       Estimated
                                                     amount         fair value      amount        fair value
                                               -------------       -----------   -----------     ------------
<S>                                            <C>                 <C>           <C>             <C>
     Cash and cash equivalents                 $  22,718,336        22,718,000    18,108,105       18,108,000

     Investment securities:
        Available-for-sale                        10,191,000        10,19l,000    11,967,000       11y967,000
        Held-to-maturity                              88,462            89,000       404,177          404,000
     Loans, net of loans in process               69,419,930        70,808,000   111,157,454      112,951,000
     Accrued interest receivable                     498,941           499,000       806,585          807,000

     Noninterest bearing demand deposits           2,827,416         2,827,000     4,269,001        4,269,000
     Money market and NOW deposits                16,834,272        16,834,000    15,560,562       15,561,000
     Passbook accounts                             3,620,572         3,621,000     3,654,695        3,655,000
     Certificate accounts                         64,539,376        65,594,000   101,124,707      102,743,000
                                                ------------      ------------  ------------    -------------
          Total deposits                       $  87,821,636        88,876,000   124,608,965      126,228,000
                                                ============      ============  ============    =============
     Accrued interest payable                  $      89,978            90,000       189,222          189,000
     FHLB advances                                 9,000,000         9,743,000    10,150,000       10,339,000
</TABLE>

          Methods and Assumptions Utilized

          The carrying amount of cash and cash equivalents and accrued interest
          receivable and payable are considered to be approximate fair value
          based on the short-term nature of these items.

          The estimated fair value of mortgage-backed and investment securities
          is based on bid prices published in financial newspapers or bid
          quotations received from securities dealers.

          The estimated fair value of the Company's loan portfolio is based on
          the segregation of loans by collateral type, interest terms, and
          maturities. In estimating the fair value of each category of loans,
          the carrying amount of the loan is reduced by an allocation of the
          allowance for loan losses. Such allocation is based on management's
          loan classification system which is designed to measure the credit
          risk inherent in each classification category. The estimated fair
          value of performing variable rate loans is the carrying value of such
          loans, reduced by an allocation of the allowance for loan losses. The
          estimated fair value of performing fixed rate loans is calculated by
          discounting scheduled cash flows through the estimated maturity using
          estimated market discount rates that reflect the interest rate risk
          inherent in the loan, reduced by an allocation of the allowance for
          loan losses. The estimate of maturity is based on the Company's
          historical experience with repayments for each loan classification,
          modified, as required, by an estimate of the effect of current
          economic and lending conditions. The fair value for significant
          nonperforming loans is the estimated fair value of the underlying
          collateral based on recent external appraisals or other available
          information, which generally approximates carrying value.

                                      75                             (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000



The estimated fair value of deposits with no stated maturity, such as
noninterest bearing deposits, savings, money market accounts, passbook accounts,
and NOW accounts, is equal to the amount payable on demand. The fair value of
interest-bearing time deposits is based on the discounted value of contractual
cash flows of such deposits. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.

The estimated fair value of advances from the FHLB is determined by discounting
the future cash flows of existing advances using rates currently available on
advances from the FHLB with similar characteristics.

Limitations

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in assumptions could
significantly affect the estimates. Fair value estimates are based on existing
balance sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are not
considered financial instruments.

                                       76                            (Continued)

<PAGE>

                       CBES BANCORP, INC. AND SUBSIDIARY
                          EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                         June 30, 2002, 2001, and 2000

(16)  Parent Company Condensed Financial Statements

      Presented below are condensed financial statements of the Company (parent
      only) as of June 30, 2002 and 2001 and for the years ended June 30, 2002,
      2001, and 2000:

                            Condensed Balance Sheets
                             June 30, 2002 and 2001

<TABLE>
<CAPTION>
                                                                        2002           2001
                                                                    ------------   ------------
<S>                                                                 <C>            <C>
      Cash and cash equivalents                                     $    812,729      1,514,991
      Investment securities available-for-sale                           512,004             --
      Investment in subsidiary                                        12,644,517     12,889,461
      ESOP loan receivable                                               218,644        309,542
      Loan receivable from subsidiary                                         --         76,461
      Accrued interest receivable-investment securities
         available-for-sale                                               12,867             --
      Current income taxes receivable                                     94,782         58,495
                                                                    ------------   ------------
                 Total assets                                       $ 14,295,543     14,848,950
                                                                    ============   ============
      Dividends payable                                             $     73,501         73,501
      Other liabilities                                                   50,331         30,726
                                                                    ------------   ------------
                 Total liabilities                                       123,832        104,227

      Stockholders' equity                                            14,171,711     14,744,723
                                                                    ------------   ------------
                 Total liabilities and stockholders' equity         $ 14,295,543     14,848,950
                                                                    ============   ============
</TABLE>

                       Condensed Statements of Operations
                    Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                             2002         2001        2000
                                                          ----------   ----------   ----------
<S>                                                       <C>          <C>          <C>
      Interest income                                     $   58,553       60,000      148,146
      Other expense, net                                    (122,102)    (123,673)    (162,905)
                                                          ----------   ----------   ----------
                 Loss before equity in distributed
                    losses of subsidiary                     (63,549)     (63,613)     (14,759)

      Equity in losses of subsidiary                        (554,733)    (890,256)    (202,279)
                                                          ----------   ----------   ----------
                 Net loss                                 $ (598,282)    (953,869)    (217,038)
                                                          ==========   ==========   ==========
</TABLE>

                                       77                            (Continued)

<PAGE>

                       CBES BANCORP, INC. AND SUBSIDIARY
                          EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000


                       Condensed Statements of Cash Flows
                    Years ended June 30, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                         2002           2001           2000
                                                    ------------     ----------    ----------
<S>                                                 <C>              <C>           <C>
Cash provided by operating activities:
   Net loss                                          $  (598,282)      (953,869)     (217,038)
   RRP amortization                                       23,086         76,461       131,366
   Premium amortization of investment
     securities                                            6,227             --            --
   Change in other assets                                (49,154)       (58,495)           --
   Change in other liabilities                             4,124        (55,535)     (108,644)
   Undistributed losses of subsidiary                    534,733        890,256       202,279
                                                    ------------     ----------    ----------
               Cash (used in) provided by
                 operating activities                    (79,266)      (101,182)        7,963
                                                    ------------     ----------    ----------

   Cash provided by investing activities:
     Purchase of investment securities
     available-for-sale                                 (518,231)            --            --
   Net decrease in loans receivable                      167,359      1,700,327       437,613
                                                    ------------     ----------    ----------
               Cash (used in) provided by
                 investing activities                   (350,872)     1,700,327       437,613
                                                    ------------     ----------    ----------

Cash provided by financing activities:
   Dividends paid                                       (272,124)      (316,686)     (611,408)
   Purchase of treasury stock                                 --             --      (707,797)
                                                    ------------     ----------    ----------
               Cash used in financing activities        (272,124)      (316,686)   (1,319,205)
                                                    ------------     ----------    ----------

               Net (decrease) increase in cash
                 and cash equivalents                   (702,262)     1,282,459      (873,629)

Cash and cash equivalents at beginning of year         1,514,991        232,532     1,106,161
                                                    ------------     ----------    ----------
Cash and cash equivalents at end of year             $   812,729      1,514,991       232,532
                                                    ============     ==========    ==========

Noncash investing and financing activities:
   Dividends declared and payable                    $    73,501         73,501       122,550
                                                    ============     ==========    ==========
</TABLE>

                                       78                            (Continued)

<PAGE>

                        CBES BANCORP, INC. AND SUBSIDIARY
                           EXCELSIOR SPRINGS, MISSOURI

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(17)  Supervisory Agreement

      On August 10, 2000, the Bank entered into a Supervisory Agreement with the
      Office of Thrift Supervision (the OTS). The Supervisory Agreement provided
      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. Among other things, the Supervisory Agreement required the
      Bank to establish adequate allowances for loan losses, consistent with
      accounting principles generally accepted in the United States of America,
      and not to reduce the balance of the allowance for loan losses without
      prior notice of no objection from the OTS. The Supervisory Agreement also
      provided that the Bank shall cease making any commercial real estate loans
      and refrain from making any new loan commitments with new builders or
      subdivision developments without prior OTS approval. Finally, the
      Supervisory Agreement provided that the Bank shall be subject to certain
      growth restrictions and shall refrain from making capital distributions
      without OTS approval.

      Failure to comply with the Supervisory Agreement can lead to further
      enforcement actions by the OTS. The Bank believes that it can comply with
      the Supervisory Agreement and is currently taking the necessary steps to
      do so. Compliance with the Supervisory Agreement has not had a materially
      adverse impact on the operations or the financial condition of the Bank or
      the Company. However, the restrictions imposed on the Bank's construction
      and commercial real estate lending activities has caused a significant
      decrease in the Bank's activities in these areas. The Supervisory
      Agreement will remain in effect until terminated by the OTS.

(18)  Subsequent Event

     On September 5, 2002, the Company announced that they had signed a
     definitive agreement providing for the acquisition of CBES by way of a
     merger with a subsidiary of NASB Financial, Inc. NASB Financial owns and
     operates North American Savings Bank, F.S.B. Under the terms of the
     agreement, stockholders of the Company would receive $17.50 in cash,
     subject to adjustment, for each share of the common stock owned by them.
     The merger is expected to close in the fourth quarter of 2002. The proposed
     merger is subject to the approval of the stockholders of the Company and
     the Office of Thrift Supervision. Consummation of the proposed merger is
     subject to other customary conditions.

                                       79

<PAGE>

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

         The Company's Board of Directors is presently composed of seven
members, each of whom is also a director of the Bank. The Directors are divided
into three classes. Directors of the Company are generally elected to serve for
a three-year term which is staggered to provide for the election of
approximately one-third of the directors each year. The following table sets
forth certain information regarding the Company's Board of Directors, including
their terms of office.

<TABLE>
<CAPTION>
                                                                                                Shares of Common
                            Age at                                             Term            Stock Beneficially          Percent
                           June 30,                              Director       to                  Owned at                  of
         Name                2002        Position(s) Held       Since/(1)/     Expire          September 14, 2002/(2)/      Class
------------------------  ----------   -----------------------  -----------  ----------   ------------------------------  ----------
<S>                        <C>         <C>                      <C>            <C>             <C>                         <C>
Robert L. Lalumondier         62       Director                    1992         2004                  7,355/(3)/             0.78%

Cecil E. Lamb                 73       Director                    1985         2004                 13,674/(3)/             1.45%

Paul L. Thomas                34       Chairman of the Board       2001         2004                 30,651/(5)/             3.24%
                                       and Chief Executive
                                       Officer

Dennis D. Hartman             48       Director and President      2000         2003                 20,152/(4)/             2.13%

Rodney G. Rounkles            64       Director                    1984         2003                 14,420/(3)/             1.53%

Richard N. Cox                56       Director                    1992         2002                 21,960/(3)/             2.32%

Robert E. McCrorey            61       Director                    1973         2002                 32,563/(3)/             3.45%
</TABLE>

-------------------------------

(1) Includes service as a director of the Bank.
(2) Includes shares held directly, as well as shares held in retirement
    accounts, held by certain members of the named individuals' families, or
    held by trusts of which the named individual is a trustee or substantial
    beneficiary, with respect to which shares the named individuals may be
    deemed to have sole or shared voting and/or investment power. Does not
    include options to purchase shares of Common Stock granted under the
    Company's 1997 Stock Option and Incentive Plan (the "Stock Option Plan")
    which have not yet vested.
(3) Includes 5,125 stock options for Director Lalumondier, Rounkles, Lamb, Cox,
    and McCrorey.
(4) Includes 9,737 stock options stock for Mr. Hartman.
(5) Includes 19,300 stock options stock for Mr. Thomas.

       The business experience of each director and director nominee is set
forth below. All directors have held their present positions for at least the
past five years, except as otherwise indicated.

       Robert L. Lalumondier. Mr. Lalumondier is the retired former owner of
Lalumondier Insurance Agency, located in Kearney, Missouri.

       Cecil E. Lamb. Mr. Lamb is a retired postmaster.

       Paul L. Thomas. Mr. Thomas has served as Chief Executive Officer of the
Company and the Bank since

                                       80

<PAGE>

May 2001. As Chief Executive Officer, Mr. Thomas is responsible for overseeing
the day-to-day operations of the Company and the Bank. Mr. Thomas joined the
Bank in October 2000 as Chief Operating Officer and Chief Lending Officer. Prior
to that time, Mr. Thomas was a Vice President of North America Savings Bank and
NASB Financial, Inc., located in Grandview, Missouri.

     Dennis D. Hartman. Mr. Hartman has served as President of the Company and
the Bank since June 2000. In that capacity, he is responsible for the Company's
and the Bank's operations. Mr. Hartman also served as the Chief Executive
Officer of the Company and the Bank from July 1999 until May 2001. Prior to that
time, Mr. Hartman served as the Chief Financial Officer and Manager of the
Bank's Accounting Department. In that capacity, he was responsible for the
supervision of the Accounting Department and reporting to the regulatory
authorities. He was also responsible for overseeing the Bank's asset/liability
management program. Mr. Hartman joined the Bank in 1978.

     Rodney G. Rounkles. Mr. Rounkles was the plant manager of a molding
products plant in Excelsior Springs, Missouri until his retirement in 1995.

     Richard N. Cox. Mr. Cox is the owner and operator of Cox Tool Co., Inc., a
designer/builder of plastic molds, located in Excelsior Springs, Missouri.

     Robert E. McCrorey. Mr. McCrorey served as a loan originator for the Bank
from 1993 until June 19, 2000. Prior to 1993, he served as a branch manager for
a beer distributor. Mr. McCrorey also served as Chairman of the Board and
President of the Company and the Bank until June 19, 2000.

     For information on executive officers who are not also directors, please
see "Item 1. Business" in this Form 10-KSB.

Ownership Reports by Officers and Directors

     The Common Stock of the Company is registered pursuant to Section 12(g) of
the 1934 Act. The officers and directors of the Company and beneficial owners of
greater than 10% of the Company's Common Stock ("10% beneficial owners") are
required to file reports on Forms 3, 4, or 5 with the SEC disclosing changes in
beneficial ownership of the Common Stock. SEC rules require disclosure in the
Company's Proxy Statement and Annual Report on Form 10-K of the failure of an
officer, director or 10% beneficial owner of the Company's Common Stock to file
a Form 3, 4, or 5 on a timely basis. Based on the Company's review of such
ownership reports, no officer, director or 10% beneficial owner of the Company
failed to file ownership reports on a timely basis for the fiscal year ended
June 30, 2002.

Item 10.  Executive Compensation

     Director Compensation

     During fiscal 2001, the Company paid directors a fee of $200 per annum.
Additionally, during fiscal 2002 each director of the Bank received a total of
$9,000 in board fees, except for directors Hartman and Thomas who received
$6,000 in board fees. Each director also receives life insurance coverage, and
each director except for Messrs. Lalumondier and Lamb also receives group
hospitalization, dental and prescription coverage. Messrs. Lalumondier and Lamb
each received $3,172 in lieu of such coverages during fiscal 2002.

     Stock Benefit Plans. Following approval by the Company's stockholders at
the Annual Meeting of Stockholders held on October 28, 1997, each director of
the Company who was not a full-time employee (5 persons) received an option to
purchase 5,125 shares of Common Stock under the Company's 1997 Stock Option and
Incentive Plan and an award of 2,049 shares of restricted stock under the
Company's Recognition and Retention Plan. In addition, Mr. McCrorey received
options to purchase 10,249 shares under the Stock Option Plan, and 4,099 shares
of restricted stock under the Recognition and Retention Plan. As a result of his
termination of service as an employee of the Company and the Bank in June 2000,
certain awards to Mr. McCrorey in his capacity as an employee were terminated.
Mr. McCrorey currently has 5,125 options to purchase shares under the Stock
Option Plan, and 3,648 shares of restricted stock under the Recognition and
Retention Plan. On June 21, 2001, Mr. Thomas received options

                                       81

<PAGE>

to purchase 19,300 shares under the Stock Option Plan and 5,941 shares of
restricted stock under the Recognition and Retention Plan.

     Director Emeritus Agreement. In order to encourage directors to remain
members of the Bank's board, in February 1995 the Bank entered into Director
Emeritus Agreements (the "Emeritus Agreements") with each of the directors of
the Bank at that time. Pursuant to the Emeritus Agreements, upon reaching age
75, directors Lamb, Lalumondier, McCrorey, Rounkles and Cox will receive a
benefit of $525, $642, $1,225, $817, and $846, respectively, per month paid
monthly for ten years following retirement. Upon termination of service for
disability or retirement prior to age 75, the director will receive a reduced
amount pursuant to a schedule as set forth in the Emeritus Agreements, paid
monthly for ten years following termination, or if earlier, until the director's
recovery from disability. Upon termination following a change in control of the
Bank, each director would be entitled to a lump sum payment of a reduced amount
pursuant to a schedule as set forth in the Emeritus Agreement. Upon the death or
termination for cause of a director, no benefits will be paid to such director.
The Bank purchased life insurance to finance the benefits that would be payable
to five of the six directors. The Bank accrued expenses during fiscal 2002 in
the aggregate amount of $14,343 for the Emeritus Agreements.

Executive Compensation

     The Company has not paid any compensation to its executive officers since
its formation. However, the Company does reimburse the Bank for services
performed on behalf of the Company by its officers. The Company does not
presently anticipate paying any compensation to such persons until it becomes
actively involved in the operation or acquisition of businesses other than the
Bank.

     The following table sets forth the compensation paid or accrued by the Bank
for services rendered by Paul L. Thomas, who served as Chief Executive Officer
since May 2001, and Dennis D. Hartman, who served as Chief Executive Officer and
President during fiscal 2001. No other executive officer earned in excess of
$100,000 during fiscal 2002 or 2001.

<TABLE>
<CAPTION>
===============================================================================================================================
                                                   SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------------------
                                                                                Long-Term Compensation
                                            Annual Compensation                         Awards
                                    -------------------------------------------------------------------------
                                                                Other
                                                                Annual       Restricted Stock     Options/        All Other
    Name and Principal      Fiscal     Salary      Bonus     Compensation        Award(s)           SARs        Compensation
         Position            Year        ($)        ($)         ($)(1)             ($)              (#)              ($)
-------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================================
<S>                         <C>       <C>         <C>        <C>             <C>                 <C>            <C>
Paul L. Thomas               2002     $126,462    $25,000       $   --              --               --          $ 6,200/(7)/
  Chief Executive Officer    2001     $ 90,050    $40,000       $   --         $76,461/(5)/      19,300/(6)/     $    --

Dennis D. Hartman,           2002     $ 89,674    $    --       $   --         $10,267/(2)/          --/(3)/     $19,484/(4)/
  President                  2001     $ 80,435    $    --       $   --         $ 7,011/(2)/          --/(3)/     $15,315/(4)/
                             2000     $ 67,304    $ 5,548       $   --         $11,782/(2)/          --/(3)/     $ 7,683/(4)/
===============================================================================================================================
</TABLE>

--------------------
(1)  Neither Mr. Hartman nor Mr. Thomas received any additional benefits or
     perquisites which in the aggregate exceeded 10% of his salary and bonus or
     $50,000.
(2)  Based upon approximately 779 shares of restricted stock which vested in
     each of fiscal 2002, fiscal 2001 and fiscal 2000 at an assumed price of
     $13.18, $9.00 and $15.13 per share, respectively. On October 28, 1997,
     pursuant to the Company's Recognition and Retention Plan, Mr. Hartman was
     awarded 3,895 shares of restricted stock. The market value per share of the
     Common Stock was $19.25 on the date of the grant, and the aggregate value
     of 3,895 shares at $19.25 per share totals $74,979. Such awards vest in
     equal installments at a rate of 20% per year beginning on October 28, 1997,
     the date of grant, unless otherwise determined by the Board. Awards will be
     100% vested upon termination of employment due to death or disability, or
     following a change of control. The aggregate value of the 3,895 shares of
     restricted stock awarded to Mr. Hartman, including both vested and unvested
     shares, as of June 30, 2002 was $56,283, based upon a closing price of
     $14.45 per share on June 30, 2002.

                                       82

<PAGE>

(3)  On October 28, 1997, pursuant to the Company's Stock Option Plan, Mr.
     Hartman was awarded options to purchase 9,737 shares of Common Stock. Such
     options vest in equal installments at a rate of 20% per year commencing on
     the date of grant. The exercise price of such options is $19.25, the fair
     market value of the underlying shares on October 28, 1997, the date of
     grant.
(4)  Includes $6,000 in Bank board fees and $200 in Company board fees, $13,284
     contributed under the ESOP for the benefit of Mr. Hartman and $398
     contributed under the Bank's 401K Plan for the benefit of Mr. Hartman in
     fiscal 2002. Includes $7,500 in Bank board fees and $200 in Company board
     fees, $7,222 contributed under the ESOP for the benefit of Mr. Hartman, and
     $393 contributed under the Bank's 401K Plan for the benefit of Mr. Hartman
     in fiscal 2001; includes $7,378 contributed under the ESOP for the benefit
     of Mr. Hartman, and $305 contributed under the Bank's 401K Plan for the
     benefit of Mr. Hartman in fiscal 2000.
(5)  Based upon 5,941 shares of restricted stock which vested in fiscal 2001 at
     an assumed price of $12.87. On June 21, 2001, pursuant to the Company's
     Recognition and Retention Plan, Mr. Thomas was awarded 5,941 shares of
     restricted stock. The market value per share of the common stock was $12.87
     on the date of the grant, and the aggregate value of 5,941 shares at $12.87
     per share totals $76,461. Such award vested without restriction on June 30,
     2001. The aggregate value of 5,941 shares of restricted stock awarded to
     Mr. Thomas as of June 30, 2001 was $85,847, based upon a closing price of
     $14.45 per share on June 30, 2002.
(6)  On June 21, 2001, pursuant to the Company's Stock Option Plan, Mr. Thomas
     was awarded options to purchase 19,300 shares of common stock. Such options
     vest at a rate of 50% per year commencing on October 1, 2001. The exercise
     price of such options is $12.87, the fair market value of the underlying
     shares on June 21, 2001, the date of the grant.
(7)  Includes $6,000 in Bank board fees and $200 in Company board fees.

Stock Options

     The Board of Directors of the Company has adopted the Stock Option Plan,
which has been approved by the stockholders. Certain directors, officers and
employees of the Bank and the Company are eligible to participate in the Stock
Option Plan. The Stock Option Plan is administered by a committee of outside
directors (the "Committee"). The Stock Option Plan authorizes the grant of stock
options equal to 102,495 shares of Common Stock. The Stock Option Plan provides,
among other things, for the grant of options to purchase Common Stock intended
to qualify as incentive stock options under Section 422 of the Internal Revenue
Code, and options that do not so qualify ("nonstatutory options"). For
information regarding options granted to directors under the Stock Option Plan,
see "Director Compensation--Stock Benefit Plans," herein. Options must be
exercised within 10 years from the date of grant. The exercise price of the
options must be at least 100% of the fair market value of the underlying Common
Stock at the time of the grant.

     No options were granted under the Stock Option Plan to the named executive
officers during the year ended June 30, 2002.

     Set forth below is certain additional information concerning options
outstanding to the named executive officers at June 30, 2002. No options were
exercised during fiscal 2002.

<TABLE>
<CAPTION>
==================================================================================================================
                                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                                           FISCAL YEAR-END OPTION VALUES
==================================================================================================================

                                                           Number of Unexercised        Value of Unexercised In-
                                                                 Options at               The-Money Options at
                                                              Fiscal Year-End                 Year-End (1)
                                                        ----------------------------------------------------------
                        Shares Acquired       Value      Exercisable/Unexercisable     Exercisable/Unexercisable
           Name          Upon Exercise      Realized                (#)                           ($)
------------------------------------------------------------------------------------------------------------------
<S>                     <C>                 <C>         <C>                            <C>
Paul L. Thomas                 --             $ --              9,650/9,650                  15,247/15,247

Dennis D. Hartman              --             $ --                9,737/0                         0/0
==================================================================================================================
</TABLE>

-----------------------------
(1)  Equals the difference between the aggregate exercise price of such options
     and the aggregate fair market value of the shares of Common Stock that
     would be received upon exercise, assuming such exercise occurred on June
     30, 2002, at which date the most recent sales price of the Common Stock as
     reported on the Nasdaq SmallCap Market was $14.45.


                                       83

<PAGE>

Severance Agreements

     The Bank entered into an employment agreement effective upon consummation
of the conversion with Dennis D. Hartman providing for a term of two years. Mr.
Hartman currently serves as the Bank's President, and previously served as the
Bank's Chief Financial Officer following the conversion until June 1999 and as
the Bank's Chief Executive Officer from July 1999 until Mr. Thomas recently
assumed that position. The contract provided for payment to the employee for the
remaining term of the contract unless the employee is terminated "for cause."
The employment agreement's term expired in September 1999.

     On March 24, 1998, the Bank entered into a severance agreement with Dennis
D. Hartman, effective upon termination of the employment agreement ( September
1999) previously entered into upon the conversion of the Bank from mutual to
stock form. The severance agreement provides for a term of three years. The
agreement provides for the payment of benefits in the event of a change in
control of the Bank or the Company during the term of the contract unless the
executive is "terminated for cause." The severance agreement provides for annual
extensions for one additional year, but only upon express authorization by the
Board of Directors at the end of each year.

     In the event there is a change in control of the Bank or Company, as
defined in the agreement, and if employment terminates involuntarily, as defined
in the agreement, in connection with such change in control or within 12 months
thereafter, the severance agreement provides for a payment equal to 1.5 times
Mr. Hartman's salary during the preceding calendar year including bonuses and
any other cash compensation paid. In addition to the severance payment, Mr.
Hartman would be entitled to receive health benefits for the remaining term of
the agreement. Notwithstanding any provision to the contrary in the severance
agreement, payments under the severance agreement are limited so that they will
not constitute an excess parachute payment under Section 280G of the Code.
Assuming a change in control were to take place as of June 30, 2001, the
aggregate amounts payable to Mr. Hartman pursuant to this change in control
provision would be approximately $132,000.

     In March 1998, the Bank entered into a severance agreement with Ms.
Teegarden. This agreement provides for a term of two years and a change of
control payment on involuntary termination equal to 150% of the executive's
salary during the preceding calendar year including bonuses and any other cash
compensation paid. This agreement is otherwise similar to the severance
agreement with Mr. Hartman.

Salary Continuation Agreements

     In order to encourage the Bank's President to remain an employee of the
Bank, the Bank entered into a Salary Continuation Agreement (the "Agreement") in
February 1995 with Mr. Hartman. Pursuant to the Agreement, upon retirement on or
after reaching age 65, Mr. Hartman would receive a monthly benefit of $1,897
paid monthly for 15 years following retirement. Upon termination of service for
disability or retirement prior to age 65, Mr. Hartman would receive a reduced
amount pursuant to a schedule set forth in the Agreement, paid monthly for 15
years following termination or, if earlier, until Mr. Hartman's recovery from
disability. Upon termination following a change in control of the Bank, Mr.
Hartman would be entitled to a lump sum payment of a reduced amount pursuant to
a schedule set forth in the Agreement. The Agreement provides for a death
benefit if Mr. Hartman dies while in active service of the Bank equal to the
amount that would be paid to Mr. Hartman upon serving until age 65. If Mr.
Hartman dies after benefit payments commence but before receiving all payments,
the Bank will pay the remaining benefits at the same time and in the same
amounts they would have been paid had Mr. Hartman survived. The Bank purchased
life insurance on Mr. Hartman whereby the Bank is the beneficiary in order to
offset the expected payments to Mr. Hartman. The Bank accrued expenses during
fiscal 2002 in the amount of $2,390 for the Agreement. The Bank has also entered
into Salary Continuation Agreements with Mr. Alderson and Ms. Teegarden. These
agreements are similar to the Agreement with Mr. Hartman, although providing for
lower payments.

Equity Compensation

     The Company does not have any equity compensation program that was not
approved by stockholders, other than its employee stock ownership plan.

     Set forth below is certain information as of June 30, 2002 regarding equity
compensation to directors and executive officers of the Company that has been
approved by stockholders.

                                       84

<PAGE>

<TABLE>
<CAPTION>
============================= =============================== ============================  ============================
                               Number of securities to be                                    Number of securities
  Equity compensation plans    issued upon exercise of         Weighted average              remaining available for
  approved by stockholders     outstanding options and rights  exercise price                issuance under plan
----------------------------- ------------------------------- ----------------------------  ---------------------------
<S>                           <C>                             <C>                           <C>
    Stock Option Plan                    69,011                       $17.47                           33,484

----------------------------- ------------------------------  ----------------------------  ---------------------------

    Recognition and Retention
      Plan                             - 0 - (1)                   Not Applicable                       3,371

----------------------------- ------------------------------  ----------------------------  ---------------------------

         Total                           69,011                       $17.47                           36,855

============================= ==============================  ============================  ===========================
</TABLE>

_____________________
(1)  Represents shares that have been granted but have not yet vested.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         Persons and groups who beneficially own in excess of 5% of the Common
Stock are required to file certain reports with the Company and with the
Securities and Exchange Commission (the "SEC") regarding such ownership pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act").

                                       85

<PAGE>

     The following table sets forth information regarding share ownership of
those persons or entities known by management to beneficially own more than five
percent of the Common Stock on September 6, 2002 and all directors and executive
officers of the Company and the Bank as a group.

<TABLE>
<CAPTION>
                                                                               Shares
                                                                            Beneficially     Percent
                                 Beneficial Owner                               Owned       of Class
-----------------------------------------------------------------------  ----------------   --------
<S>                                                                      <C>                <C>
CBES Bancorp, Inc. Employee Stock Ownership Plan/(1)/                          65,649          7.50%
1001 North Jesse James Road
Excelsior Springs, Missouri 64024

David H. Hancock                                                               82,100/(6)/     9.37%
12498 South 71 Highway
Grandview, Missouri 64030

First Financial Fund, Inc.                                                     86,600/(3)/     9.89%
Gateway Center Three
100 Mulberry Street, 9/th/ Floor
Newark, New Jersey 07102-7503

Keith E.  Doss                                                                 45,242/(4)/     5.17%
PO Box 137
Kearney, Missouri 64060

Investors of America Limited Partnership                                       55,900/(5)/     6.38%
135 North Meramac
Clayton, Missouri 63017

Directors and executive officers of the Company                               166,014/(2)/    17.57%
 and the Bank, as a group (10 persons)
</TABLE>
__________________________
/(1)/ The amount reported represents shares held by the Employee Stock Ownership
      Plan ("ESOP"), 42,539 shares of which have been allocated to accounts of
      participants. First Bankers Trust of Quincy, Illinois, the trustee of the
      ESOP, may be deemed to beneficially own the shares held by the ESOP which
      have not been allocated to accounts of participants. Participants in the
      ESOP are entitled to instruct the trustee as to the voting of shares
      allocated to their accounts under the ESOP. Unallocated shares held in the
      ESOP's suspense account are voted by the trustee in the same proportion as
      allocated shares voted by participants.
/(2)/ Amount includes shares held directly, as well as shares held jointly with
      family members, shares held in retirement accounts, shares held in a
      fiduciary capacity or by certain family members, with respect to which
      shares the group members may be deemed to have sole or shared voting
      and/or investment power. The amount above includes 69,011 options to
      purchase shares of Common Stock granted under the Company's 1997 Stock
      Option and Incentive Plan to directors and executive officers of the
      Company. The amount above excludes options which do not vest within 60
      days of September 14, 2002.
/(3)/ According to a Schedule 13G filed by Wellington Management Company, LLP
      ("Wellington"), Wellington beneficially owns 86,600 shares of the
      Company's Common Stock. The Schedule 13G indicates that the shares are
      owned by Wellington in its capacity as an investment advisor and are owned
      of record by clients of Wellington. The Schedule 13G discloses that First
      Financial Fund, Inc., a client of Wellington, is the owner of more than
      five percent of the Company's shares.
/(4)/ According to a Schedule 13D filed by Mr. Doss, Mr. Doss has sole voting
      and dispositive power over 45,242 shares of the Company's Common Stock.
/(5)/ According to a Schedule 13G filed by Investors of America Limited
      Partnership ("Investors"), Investors has sole voting and dispositive power
      over 55,900 shares of the Company's Common Stock.
/(6)/ According to a Schedule 13D filled by Mr. Hancock. Mr. Hancock has sole
      voting and dispositive power over 82,100 shares of the Company's Common
      Stock.

                                       86

<PAGE>

Item 12. Certain Relationships and Related Transactions

         The Bank has followed a policy of granting consumer loans and loans
secured by one- to four-family real estate to officers, directors and employees.
Loans to directors and executive officers are made in the ordinary course of
business and on substantially the same terms and conditions as those of
comparable transactions with other persons prevailing at the time, in accordance
with the Bank's underwriting guidelines, and do not involve more than the normal
risk of collectibility or present other unfavorable features.

         All loans by the Bank to its directors and executive officers are
subject to OTS regulations restricting loan and other transactions with
affiliated persons of the Bank. Federal law generally requires that all loans to
directors and executive officers be made on terms and conditions comparable to
those for similar transactions with non-affiliates, subject to limited
exceptions. However, recent regulations now permit executive officers and
directors to receive the same terms on loans through plans that are widely
available to other employees, as long as the director or executive officer is
not given preferential treatment compared to the other participating employees.
Loans to all directors, executive officers, and their associates totaled
$245,000 at June 30, 2002, which was 1.73% of the Company's stockholders' equity
at that date. All loans to directors and officers were performing in accordance
with their terms at June 30, 2002.

         On November 30, 2001, the Bank sold its Kearney, Missouri branch office
to Kearney Trust Company for a sales price of $850,000. The Bank transferred to
Kearney Trust the branch office and fixtures, as well as approximately $9.4
million of deposits. Mr. Keith Doss, a 5% beneficial owner of the Bank, is a
major stockholder and an executive officer of Kearney Trust. Kearney Trust was
selected as the purchaser based upon a competitive bidding process.

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

         (a) (1)  Financial Statements:

         The following financial information appears in Part II, Item 7 of this
Form 10-KSB Annual Report.

Report of Independent Auditors

Consolidated Balance Sheets at June 30, 2002 and 2001

Consolidated Statements of Operations for the Years ended June 30, 2002, 2001
 and 2000

Consolidated Statements of Stockholders' Equity and Comprehensive Income for the
 Years ended June 30, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the Years ended June 30, 2002, 2001
 and 2000

Notes to Consolidated Financial Statements

         (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.

                                       87

<PAGE>


         (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>                                                        <C>
2                      Plan of acquisition, reorganization,                              2
                       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.

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                                None

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
</TABLE>

                                       88

<PAGE>

<TABLE>
<CAPTION>
                                                                                   Reference to
Regulation                                                                       Prior Filing or
S-B Exhibit                                                                      Exhibit Number
 Number                           Document                                       Attached Hereto
-----------            --------------------------------                          ---------------
<S>                    <C>                                                       <C>
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                     Certification of Chief Executive Officer and                      99
                       Chief Financial Officer pursuant to Section 906
                       of the Sarbanes-Oxley Act of 2002
</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.

                                       89

<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, 2002                   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 Executive           Cecil E. Lamb, Director
        Officer and Chairman of the Board
     (Principal Executive Officer)

Date: September 27, 2002                   Date: September 27, 2002

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

Date: September 27, 2002                   Date: September 27, 2002

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

Date: September 27, 2002                   Date: September 27, 2002

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

Date: September 27, 2002                   Date: September 27, 2002

                                       90

<PAGE>

                      Certification pursuant to Rule 13a-14
               Of the Securities Exchange Act of 1934, as amended,
                             As adopted pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002


I, Ronald W. Hill, Chief Financial Officer of CBES Bancorp, Inc., certify that:

1.     I have reviewed this annual report on Form 10-KSB of CBES Bancorp, Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
       statement of a material fact or omit to state a material fact necessary
       to make the statements made, in light of the circumstances under which
       such statements were made, not misleading with respect to the period
       covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and cash
       flows of the registrant as of, and for, the period presented in this
       annual report;



September 27, 2002                              /s/ Ronald W. Hill
---------------------------                     --------------------------------
Date                                            Ronald W. Hill
                                                Chief Financial Officer


                                       91

<PAGE>

                      Certification pursuant to Rule 13a-14
               Of the Securities Exchange Act of 1934, as Amended,
                             As adopted pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002


I, Paul L. Thomas, Chief Executive Officer of CBES Bancorp, Inc., certify that:

1.     I have reviewed this annual report on Form 10-KSB of CBES Bancorp, Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
       statement of a material fact or omit to state a material fact necessary
       to make the statements made, in light of the circumstances under which
       such statements were made, not misleading with respect to the period
       covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and cash
       flows of the registrant as of, and for, the period presented in this
       annual report;



September 27, 2002                                 /s/ Paul L. Thomas
---------------------------                        -----------------------------
Date                                               Paul L. Thomas
                                                   Chief Executive Officer


                                       92

<PAGE>

                                Index to Exhibits

Exhibit 2      Merger Agreement
Exhibit 21     Subsidiaries of the Registrant
Exhibit 23     Consent of Experts and Counsel
Exhibit 99     Certification of Chief Executive Officer and Chief Financial
               Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002