<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended................................SEPTEMBER 30, 2001

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from...................to............................


Commission file number...................................................0-18046


                           FIRST FEDERAL CAPITAL CORP
             (Exact name of Registrant as specified in its charter)


WISCONSIN                                                             39-1651288
(State or other jurisdiction of                                    (IRS employer
incorporation or organization)                                   identification)


605 STATE STREET                                                           54601
LA CROSSE, WISCONSIN                                                  (Zip code)
(Address of principal executive office)


       Registrant's telephone number, including area code: (608) 784-8000


                                 NOT APPLICABLE
              (Former name, former address, and former fiscal year,
                          if changed since last report)


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


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class: COMMON STOCK--$.10 PAR VALUE.  Outstanding as of
November 13, 2001: 20,194,009.


<PAGE>


                           FORM 10-Q TABLE OF CONTENTS


PART I--FINANCIAL INFORMATION                                              Page

    Item 1--Financial Statements .............................................2

    Item 2--Management's Discussion and Analysis of Financial
            Condition and Results of Operations..............................13

    Item 3--Quantitative and Qualitative Disclosures about Market Risk.......25

PART II--OTHER INFORMATION

    Item 1--Legal Proceedings................................................26

    Item 2--Changes in Securities............................................26

    Item 3--Defaults Upon Senior Securities..................................26

    Item 4--Submission of Matters to Vote of Security Holders................26

    Item 5--Other Information................................................26

    Item 6--Exhibits and Reports on Form 8-K.................................26


SIGNATURES...................................................................27



                                       1

<PAGE>


                          PART I--FINANCIAL INFORMATION

ITEM 1--FINANCIAL STATEMENTS


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2001, and December 31, 2000

<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 30      DECEMBER 31
                                                                                     2001              2000
ASSETS                                                                            (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>               <C>
Cash and due from banks                                                              $49,921,420       $25,445,819
Interest-bearing deposits with banks                                                  64,769,563        13,054,493

Investment securities available for sale, at fair value                                -                   817,141
Mortgage-backed and related securities:
  Available for sale, at fair value                                                  293,780,592       331,236,909
  Held for investment, at cost (fair value of $135,075,230 and $76,456,829,
respectively)                                                                        133,716,640        77,298,853
Loans held for sale                                                                   68,897,813        22,973,887
Loans held for investment, net                                                     1,854,223,502     1,772,476,651
Federal Home Loan Bank stock                                                          26,838,800        25,568,100
Accrued interest receivable, net                                                      19,996,109        19,701,004
Office properties and equipment                                                       29,565,013        26,781,010
Mortgage servicing rights, net                                                        27,490,941        23,280,472
Intangible assets                                                                     10,725,031        11,490,392
Other assets                                                                          18,198,858         2,600,835
-------------------------------------------------------------------------------------------------------------------

  Total assets                                                                    $2,598,124,282    $2,352,725,566
===================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------

Deposit liabilities                                                               $1,989,119,085    $1,699,252,162

Federal funds purchased                                                                -                20,000,000

Securities sold under agreements to repurchase                                         -               100,000,000
Federal Home Loan Bank advances                                                      414,415,000       368,205,000
Other borrowings                                                                         273,611         2,641,370
Advance payments by borrowers for taxes and insurance                                 10,766,511         1,023,712
Accrued interest payable                                                               2,503,828         4,047,875
Other liabilities                                                                     22,596,796        11,005,952
-------------------------------------------------------------------------------------------------------------------
  Total liabilities                                                                2,439,674,831     2,206,176,071
-------------------------------------------------------------------------------------------------------------------
Preferred stock, $.10 par value, 5,000,000 shares authorized, none outstanding
                                                                                       -                -
Common stock, $.10 par value, 100,000,000 shares authorized, 19,941,630 shares
issued
  and outstanding, including 1,685,126 and 1,596,332 shares of treasury stock,
respectively                                                                           1,994,163         1,994,163
Additional paid-in capital                                                            34,540,064        34,540,064
Retained earnings                                                                    134,432,331       122,921,606
Treasury stock, at cost                                                             (16,518,776)      (15,127,142)
Unearned restricted stock                                                              (100,833)         (142,083)
Accumulated non-owner adjustments to equity, net                                       4,102,502         2,362,887
-------------------------------------------------------------------------------------------------------------------
  Total stockholders' equity                                                         158,449,451       146,549,495
-------------------------------------------------------------------------------------------------------------------

  Total liabilities and stockholders' equity                                      $2,598,124,282    $2,352,725,566
===================================================================================================================
</TABLE>

Refer to accompanying Notes to Consolidated Financial Statements.


                                       2

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED SEPTEMBER 30
                                                                             --------------------------------------
                                                                                    2001               2000
                                                                                 (UNAUDITED)       (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------

<S>                                                                                  <C>               <C>
Interest on loans                                                                    $36,473,756       $35,146,246
Interest on mortgage-backed and related securities                                     5,290,011         6,033,062
Interest and dividends on investments                                                    627,612           646,680
-------------------------------------------------------------------------------------------------------------------
  Total interest income                                                               42,391,379        41,825,988
-------------------------------------------------------------------------------------------------------------------
Interest on deposit liabilities                                                       20,910,626        19,686,202
Interest on FHLB advances and all other borrowings                                     5,698,593         7,132,929
-------------------------------------------------------------------------------------------------------------------
  Total interest expense                                                              26,609,219        26,819,131
-------------------------------------------------------------------------------------------------------------------
  Net interest income                                                                 15,782,160        15,006,857
Provision for loan losses                                                                354,973           302,487
-------------------------------------------------------------------------------------------------------------------
  Net interest income after provision for loan losses                                 15,427,187        14,704,370
-------------------------------------------------------------------------------------------------------------------
Retail banking fees and service charges                                                6,522,534         5,885,877
Premiums and commissions                                                                 882,742           675,846
Loan servicing fees, net                                                             (1,059,845)           949,955
Gain on sales of loans                                                                 3,996,677           811,577
Gain on sales of investments                                                              37,961                --
Other income                                                                             948,562           732,763
-------------------------------------------------------------------------------------------------------------------
  Total non-interest income                                                           11,328,631         9,056,018
-------------------------------------------------------------------------------------------------------------------
Compensation and employee benefits                                                     9,978,015         8,876,296
Occupancy and equipment                                                                1,985,681         2,011,015
Communications, postage, and office supplies                                           1,262,722         1,133,439
ATM and debit card transaction costs                                                     847,627           727,632
Advertising and marketing                                                                663,445           586,618
Amortization of intangibles                                                              255,120           256,815
Other expenses                                                                         1,446,735         1,172,802
-------------------------------------------------------------------------------------------------------------------
  Total non-interest expense                                                          16,439,345        14,764,617
-------------------------------------------------------------------------------------------------------------------
  Income before income taxes                                                          10,316,473         8,995,771
Income tax expense                                                                     3,592,615         3,205,360
-------------------------------------------------------------------------------------------------------------------

  Net income                                                                          $6,723,858        $5,790,411
===================================================================================================================

PER SHARE INFORMATION
-------------------------------------------------------------------------------------------------------------------
Diluted earnings per share                                                                 $0.36             $0.32
Basic earnings per share                                                                    0.36              0.32
Dividends paid per share                                                                    0.12              0.11
===================================================================================================================
</TABLE>


Refer to accompanying Notes to Consolidated Financial Statements.

                                       3
<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED SEPTEMBER 30
                                                                            ---------------------------------------
                                                                                   2001               2000
                                                                                (UNAUDITED)        (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                 <C>
Interest on loans                                                                  $108,095,217        $98,936,807
Interest on mortgage-backed and related securities                                   17,897,279         17,428,883
Interest and dividends on investments                                                 2,216,872          1,778,496
-------------------------------------------------------------------------------------------------------------------
  Total interest income                                                             128,209,368        118,144,186
-------------------------------------------------------------------------------------------------------------------
Interest on deposit liabilities                                                      63,497,676         52,655,193
Interest on FHLB advances and all other borrowings                                   18,791,128         20,744,754
-------------------------------------------------------------------------------------------------------------------
  Total interest expense                                                             82,288,804         73,399,947
-------------------------------------------------------------------------------------------------------------------
  Net interest income                                                                45,920,564         44,744,239
Provision for loan losses                                                             1,185,872            606,733
-------------------------------------------------------------------------------------------------------------------
  Net interest income after provision for loan losses                                44,734,692         44,137,506
-------------------------------------------------------------------------------------------------------------------
Retail banking fees and service charges                                              18,649,077         16,504,109
Premiums and commissions                                                              2,523,611          2,026,137
Loan servicing fees, net                                                            (2,442,763)          2,949,262
Gain on sales of loans                                                               12,266,457          1,607,162
Gain on sales of investments                                                             37,961                 --
Other income                                                                          2,466,830          1,981,314
-------------------------------------------------------------------------------------------------------------------
  Total non-interest income                                                          33,501,173         25,067,984
-------------------------------------------------------------------------------------------------------------------
Compensation and employee benefits                                                   29,219,947         26,228,940
Occupancy and equipment                                                               6,693,624          5,916,906
Communications, postage, and office supplies                                          3,835,463          3,176,721
ATM and debit card transaction costs                                                  2,428,369          2,157,340
Advertising and marketing                                                             1,790,143          1,698,783
Amortization of intangibles                                                             768,621            770,446
Other expenses                                                                        4,184,474          3,310,192
-------------------------------------------------------------------------------------------------------------------
  Total non-interest expense                                                         48,920,641         43,259,328
-------------------------------------------------------------------------------------------------------------------
  Income before income taxes                                                         29,315,224         25,946,162
Income tax expense                                                                   10,327,254          9,227,993
-------------------------------------------------------------------------------------------------------------------

  Net income                                                                        $18,987,970        $16,718,169
===================================================================================================================

PER SHARE INFORMATION
-------------------------------------------------------------------------------------------------------------------
Diluted earnings per share                                                                $1.02              $0.91
Basic earnings per share                                                                   1.03               0.91
Dividends paid per share                                                                   0.35               0.31
===================================================================================================================
</TABLE>

Refer to accompanying Notes to Consolidated Financial Statements.


                                       4

<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended September 30, 2001 and 2000

<TABLE>
<CAPTION>
                                      COMMON
                                     STOCK AND                                                 ACCUMULATED
                                    ADDITIONAL                                      UNEARNED     NON-OWNER
                                       PAID-IN        RETAINED        TREASURY    RESTRICTED   ADJUSTMENTS
UNAUDITED                              CAPITAL        EARNINGS           STOCK         STOCK     TO EQUITY         TOTAL
-------------------------------------------------------------------------------------------------------------------------

<S>                                <C>            <C>            <C>              <C>         <C>           <C>
Balance at June 30, 2000           $36,534,227    $114,176,246   ($15,662,698)    ($230,758)  ($1,736,324)  $133,080,693
                                                                                                           --------------
Net income                                           5,790,411                                                 5,790,411
Securities valuation
adjustment,
  net of income taxes                                                                            1,504,222     1,504,222
                                                                                                           --------------
                                                                                                           --------------
Net income and non-owner
  adjustments to equity                                                                                        7,294,633
                                                                                                           --------------
Dividends paid                                     (2,015,615)                                               (2,015,615)
Exercise of stock options                            (127,933)         130,712                                     2,779
Restricted stock award                                   4,687         160,313     (165,000)                          --
Amortization of restricted stock                       356,500                       101,631                     458,131
-------------------------------------------------------------------------------------------------------------------------

Balance at September 30, 2000      $36,534,227    $118,184,296   ($15,371,673)    ($294,127)    ($232,102)  $138,820,621
=========================================================================================================================


UNAUDITED
-------------------------------------------------------------------------------------------------------------------------

Balance at June 30, 2001           $36,534,227    $129,874,986   ($14,186,223)    ($114,583)    $3,414,156  $155,522,563
                                                                                                           --------------
Net income                                           6,723,858                                                 6,723,858
Securities valuation
adjustment,
  net of income taxes                                                                              688,346       688,346
                                                                                                           --------------
Net income and non-owner
  adjustments to equity                                                                                        7,412,204
                                                                                                           --------------
Dividends paid                                     (2,210,705)                                               (2,210,705)
Exercise of stock options                             (97,258)         221,448                                   124,190
Purchase of treasury stock                                         (2,554,001)                               (2,554,001)
Amortization of restricted                             141,450                        13,750                     155,200
stock
-------------------------------------------------------------------------------------------------------------------------

Balance at September 30, 2001      $36,534,227    $134,432,331   ($16,518,776)    ($100,833)    $4,102,502  $158,449,451
=========================================================================================================================
</TABLE>

Refer to accompanying Notes to Consolidated Financial Statements.



                                       5

<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 2001 and 2000

<TABLE>
<CAPTION>
                                      COMMON
                                     STOCK AND                                                 ACCUMULATED
                                    ADDITIONAL                                      UNEARNED     NON-OWNER
                                       PAID-IN        RETAINED        TREASURY    RESTRICTED   ADJUSTMENTS
UNAUDITED                              CAPITAL        EARNINGS           STOCK         STOCK     TO EQUITY         TOTAL
-------------------------------------------------------------------------------------------------------------------------

<S>                                <C>            <C>            <C>              <C>         <C>           <C>
Balance at December 31, 1999       $36,534,227    $106,929,097   ($14,388,670)    ($591,183)  ($1,208,245)  $127,275,226
                                                                                                           --------------
Net income                                          16,718,169                                                16,718,169
Securities valuation
  adjustment, net of income taxes                                                                  976,143       976,143
                                                                                                           =============
Net income and non-owner
  adjustments to equity                                                                                       17,694,312
                                                                                                           --------------
Dividends paid                                     (5,681,052)                                               (5,681,052)
Exercise of stock options                            (259,980)         565,347                                   305,367
Restricted stock award                                   4,687         160,313     (165,000)                          --
Purchase of treasury stock                                         (1,708,663)                               (1,708,663)
Amortization of restricted                             473,375                       462,056                     935,431
  stock
-------------------------------------------------------------------------------------------------------------------------

Balance at September 30, 2000      $36,534,227    $118,184,296   ($15,371,673)    ($294,127)    ($232,102)  $138,820,621
=========================================================================================================================


UNAUDITED
-------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 2000       $36,534,227    $122,921,606   ($15,127,142)    ($142,083)    $2,362,887  $146,549,495
                                                                                                           --------------
Net income                                          18,987,970                                                18,987,970
Securities valuation
  adjustment, net of income taxes                                                                1,739,615     1,739,615
                                                                                                           --------------
Net income and non-owner
  adjustments to equity                                                                                       20,727,585
                                                                                                           --------------
Dividends paid                                     (6,442,451)                                               (6,442,451)
Exercise of stock options                          (1,548,844)       1,821,742                                   272,898
Purchase of treasury stock                                         (3,213,376)                               (3,213,376)
Amortization of restricted                             514,050                        41,250                     555,300
  stock
-------------------------------------------------------------------------------------------------------------------------

Balance at September 30, 2001      $36,534,227    $134,432,331   ($16,518,776)    ($100,833)    $4,102,502  $158,449,451
=========================================================================================================================
</TABLE>


Refer to accompanying Notes to Consolidated Financial Statements.


                                       6


<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2001 and 2000


<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED SEPTEMBER 30
                                                                            ---------------------------------------
                                                                                   2001               2000
                                                                                (UNAUDITED)        (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                <C>
Cash flows from operating activities:
  Net income                                                                         $6,723,858         $5,790,411
  Adjustments to reconcile net income to net cash provided (used) by
operations:
    Provision for loan and real estate losses, net                                      435,043            316,430
    Net loan costs deferred                                                           (576,486)          (417,622)
    Amortization (including mortgage servicing rights)                                3,678,306          1,639,117
    Depreciation                                                                        593,500            657,986
    Gains on sales of loans and other investments                                   (4,034,638)          (811,577)
    Decrease (increase) in accrued interest receivable                                  104,714        (1,732,056)
    Increase in accrued interest payable                                                 47,753            359,075
    Increase in current and deferred income taxes                                     1,094,199            109,556
    Other accruals and prepaids, net                                                    205,883          (464,743)
-------------------------------------------------------------------------------------------------------------------
      Net cash provided by operations before loan originations and sales              8,272,132          5,446,577
  Loans originated for sale                                                       (266,742,400)       (37,107,904)
  Sales of loans originated for sale or transferred from held for investment        259,945,509         37,640,054
-------------------------------------------------------------------------------------------------------------------
      Net cash provided by operations                                                 1,475,241          5,978,727
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Increase in interest-bearing deposits with banks                                 (43,861,362)        (6,209,974)
  Purchases of mortgage-backed and related securities available for sale           (80,623,473)                  -
  Purchases of mortgage-backed and related securities held for investment          (80,517,523)                  -
  Principal repayments on mortgage-backed and related securities available
for sale                                                                             40,570,662         17,841,437
  Principal repayments on mortgage-backed and related securities held for
investment                                                                            9,390,111          6,937,071
  Sale of investment securities available for sale                                      737,961                  -
  Loans originated for investment                                                 (154,556,857)      (199,008,737)
  Loan principal repayments                                                         175,323,567         96,376,205
  Sales of education loans                                                                    -          4,996,708
  Sales of real estate                                                                  249,020            355,380
  Purchases of office properties and equipment                                      (1,559,089)        (1,725,277)
  Other, net                                                                        (6,292,002)            630,384
-------------------------------------------------------------------------------------------------------------------
    Net cash used by investing activities                                         (141,138,985)       (79,806,803)
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Increase in deposit liabilities                                                   181,119,286         63,793,379
  Long-term advances from Federal Home Loan Bank                                    112,500,000         75,000,000
  Repayment of long-term Federal Home Loan Bank advances                           (34,245,000)       (61,250,000)
  Decrease in short-term Federal Home Loan Bank borrowings                         (99,580,000)       (33,605,000)
  Increase in securities sold under agreements to repurchase                                  -         25,000,000
  Decrease in federal funds purchased                                              (20,000,000)                  -
  Increase (decrease) in other borrowings                                               238,086        (2,115,208)
  Increase in advance payments by borrowers for taxes and insurance                   2,525,974          1,786,120
  Purchase of treasury stock                                                        (2,554,001)                  -
  Dividends paid                                                                    (2,210,705)        (2,015,615)
  Other, net                                                                          3,644,367            206,822
-------------------------------------------------------------------------------------------------------------------
    Net cash provided by financing activities                                       141,438,007         66,800,498
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and due from banks                                    1,774,263        (7,027,578)
Cash and due from banks at beginning of period                                       48,147,157         54,405,783
-------------------------------------------------------------------------------------------------------------------
    Cash and due from banks at end of period                                        $49,921,420        $47,378,205
===================================================================================================================
Supplemental disclosures of cash flow information:
  Interest and dividends received on loans and investments                          $42,496,092        $40,093,931
  Interest paid on deposits and borrowings                                           26,561,465         26,460,056
  Income taxes paid                                                                   2,498,416          3,115,803
  Transfer of loans from held for investment to held for sale                        28,358,672          2,208,586
  Mortgage-backed security swaps                                                              -        132,280,050
===================================================================================================================
</TABLE>

Refer to accompanying Notes to Consolidated Financial Statements.


                                       7

<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED SEPTEMBER 30
                                                                            ---------------------------------------
                                                                                   2001               2000
                                                                                (UNAUDITED)        (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                 <C>
Cash flows from operating activities:
  Net income                                                                        $18,987,970        $16,718,169
  Adjustments to reconcile net income to net cash provided (used) by
operations:
    Provision for loan and real estate losses, net                                    1,246,551            660,022
    Net loan costs deferred                                                         (1,841,321)          (971,584)
    Amortization (including mortgage servicing rights)                                9,706,262          4,260,592
    Depreciation                                                                      1,864,003          1,917,550
    Gains on sales of loans and other investments                                  (12,304,418)        (1,607,162)
    Increase in accrued interest receivable                                           (295,105)        (4,140,388)
    Increase (decrease) in accrued interest payable                                 (1,544,047)            872,292
    Increase in current and deferred income taxes                                     2,711,812             80,242
    Other accruals and prepaids, net                                                  1,182,828          (501,912)
-------------------------------------------------------------------------------------------------------------------
      Net cash provided by operations before loan originations and sales             19,714,535         17,287,821
  Loans originated for sale                                                       (707,520,309)       (83,874,531)
  Sales of loans originated for sale or transferred from held for investment        778,013,460         87,072,039
-------------------------------------------------------------------------------------------------------------------
      Net cash provided by operations                                                90,207,686         20,485,329
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Decrease (increase) in interest-bearing deposits with banks                      (51,715,070)          6,411,226
  Maturities of investment securities                                                   100,000            100,000
  Purchases of mortgage-backed and related securities available for sale           (80,623,473)                  -
  Purchases of mortgage-backed and related securities held for investment          (80,517,523)                  -
  Principal repayments on mortgage-backed and related securities available
for sale                                                                            121,707,256         42,207,937
  Principal repayments on mortgage-backed and related securities held for
investment                                                                           24,065,650         21,285,427
  Sale of investment securities available for sale                                      737,961                  -
  Loans originated for investment                                                 (492,325,461)      (575,693,148)
  Loans purchased for investment                                                  (178,134,515)       (16,125,836)
  Loan principal repayments                                                         468,495,735        266,742,796
  Sales of education loans                                                            1,384,322          4,996,708
  Sales of real estate                                                                1,684,253          1,248,726
  Purchases of office properties and equipment                                      (5,151,624)        (3,917,302)
  Purchases of mortgage servicing rights                                            (1,100,197)        (1,865,307)
  Other, net                                                                       (14,842,792)        (1,220,305)
-------------------------------------------------------------------------------------------------------------------
    Net cash used by investing activities                                         (286,235,478)      (255,829,078)
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Increase in deposit liabilities                                                   289,866,923        213,240,931
  Long-term advances from Federal Home Loan Bank                                    112,500,000        175,000,000
  Repayment of long-term Federal Home Loan Bank advances                           (43,245,000)       (81,500,000)
  Decrease in short-term Federal Home Loan Bank borrowings                         (23,045,000)      (189,053,000)
  Increase (decrease) in securities sold under agreements to repurchase           (100,000,000)        100,000,000
  Decrease in federal funds purchased                                              (20,000,000)                  -
  Decrease in other borrowings                                                      (2,367,759)           (64,142)
  Increase in advance payments by borrowers for taxes and insurance                   9,742,799          5,279,262
  Purchase of treasury stock                                                        (3,213,376)        (1,708,663)
  Dividends paid                                                                    (6,442,451)        (5,681,052)
  Other, net                                                                          6,707,257          1,642,597
-------------------------------------------------------------------------------------------------------------------
    Net cash provided by financing activities                                       220,503,393        217,155,933
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and due from banks                                   24,475,601       (18,187,816)
Cash and due from banks at beginning of period                                       25,445,819         65,566,021
-------------------------------------------------------------------------------------------------------------------
    Cash and due from banks at end of period                                        $49,921,420        $47,378,205
===================================================================================================================
Supplemental disclosures of cash flow information:
  Interest and dividends received on loans and investments                         $127,914,262       $114,003,798
  Interest paid on deposits and borrowings                                           83,832,851         72,527,655
  Income taxes paid                                                                   7,615,441          9,147,751
  Transfer of loans from held for investment to held for sale                       114,363,902          4,995,174
  Mortgage-backed security swaps                                                              -        132,280,050
===================================================================================================================
</TABLE>

Refer to accompanying Notes to Consolidated Financial Statements.



                                       8

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1--PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts and balances
of First Federal Capital Corp (the "Corporation"), First Federal Savings Bank La
Crosse-Madison (the "Bank"), and the Bank's wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.


NOTE 2--BASIS OF PRESENTATION

         The accompanying interim consolidated financial statements are
unaudited and do not include information or footnotes necessary for a complete
presentation of financial condition, results of operations, or cash flows in
accordance with generally accepted accounting principles ("GAAP"). However, in
the opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the consolidated financial
statements have been included. Operating results for the three and nine month
periods ended September 30, 2001, may not necessarily be indicative of the
results that may be expected for the entire year ending December 31, 2001.

         Certain 2000 balances have been reclassified to conform to the 2001
presentation.

NOTE 3--EARNINGS PER SHARE

         Basic and diluted earnings per share data are based on the
weighted-average number of common shares outstanding during each period. Diluted
earnings per share is further adjusted for potential common shares that were
dilutive and outstanding during the period. Potential common shares generally
consist of stock options outstanding under the Corporation's stock incentive
plans. The dilutive effect of potential common shares is computed using the
treasury stock method. All stock options are assumed to be 100% vested for
purposes of the earnings per share computations. The computation of earnings per
share for the three and nine month periods ended September 30, 2001, and
September 30, 2000, is as follows:

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED SEPTEMBER 30
                                                      --------------------------------------------------------------
                                                                 2001                                2000
                                                      --------------------------------------------------------------
                                                          BASIC          DILUTED              BASIC         DILUTED
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>                <C>             <C>
Net income                                           $6,723,858       $6,723,858         $5,790,411      $5,790,411
====================================================================================================================
Average common shares issued, net
  of actual treasury shares                          18,417,242       18,417,242         18,313,544      18,313,544
Potential common shares issued under
  stock options (treasury stock method)                       -          200,060                  -         151,561
====================================================================================================================
Average common shares and
  potential common shares                            18,417,242       18,617,302         18,313,544      18,465,105
====================================================================================================================
Earnings per share                                        $0.36            $0.36              $0.32           $0.32
====================================================================================================================

<CAPTION>
                                                                     NINE MONTHS ENDED SEPTEMBER 30
                                                      --------------------------------------------------------------
                                                                  2001                                2000
                                                      --------------------------------------------------------------
                                                          BASIC          DILUTED              BASIC         DILUTED
--------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>                <C>             <C>
Net income                                          $18,987,970      $18,987,970        $16,718,169     $16,718,169
====================================================================================================================
Average common shares issued, net
  of actual treasury shares                          18,392,797       18,392,797         18,310,905      18,310,905
Potential common shares issued under
  stock options (treasury stock method)                       -          185,826                  -         161,544
====================================================================================================================
Average common shares and
  potential common shares                            18,392,797       18,578,623         18,310,905      18,472,449
====================================================================================================================
Earnings per share                                        $1.03            $1.02              $0.91           $0.91
====================================================================================================================
</TABLE>



                                       9

<PAGE>


NOTE 4--CONTINGENCIES

         The Corporation and its subsidiaries are engaged in various routine
legal proceedings occurring in the ordinary course of business, which considered
together are believed by management to be immaterial to the consolidated
financial condition of the Corporation.


NOTE 5--SEGMENT INFORMATION

         REPORTABLE SEGMENTS The Corporation tracks profitability in four major
areas: (i) residential lending, (ii) commercial real estate lending, (iii)
consumer lending, and (iv) investment and mortgage-related securities.
Residential lending is divided into two profit centers for segment reporting
purposes: (i) a mortgage banking profit center that is responsible for loan
origination, sales of loans in the secondary market, and servicing of
residential loans, and (ii) a residential loan portfolio that consists of loans
held by the Corporation for investment purposes (loans held for sale are
included in the mortgage banking profit center). This profit center also
includes mortgage-backed securities that are collateralized by loans that were
originated by the Corporation. Commercial real estate lending consists of the
Corporation's portfolio of multi-family and non-residential mortgage loans, as
well as functions related to the origination and servicing of such loans.
Consumer lending is divided into two profit centers for segment reporting
purposes: (i) a consumer lending portfolio, which consists of the Corporation's
second mortgage, automobile, and other consumer installment loans, as well as
functions related to the origination and servicing of such loans, and (ii) an
education loan portfolio, which also includes functions related to the
origination and servicing of the loans. Finally, the Corporation's investment
and mortgage-related securities portfolio is considered a profit center for
segment reporting purposes. As previously noted, however, mortgage-backed
securities collateralized by loans originated by the Corporation are included in
the residential loan profit center, rather than the investment and
mortgage-related securities portfolio.

         The Corporation's retail branch network, which delivers checking,
savings, certificates of deposit and other financial products and services to
customers, is considered a support department for segment reporting purposes, as
more fully described in a subsequent paragraph.

         MEASUREMENT OF SEGMENT PROFIT (LOSS) Management evaluates the after-tax
performance of the Corporation's profit centers as if each center were a
separate entity--each with its own earning assets, actual and/or allocated
non-earning assets, and allocated funding resources. Each profit center has its
own interest income, non-interest income, and non-interest expense as captured
by the Corporation's accounting systems. Interest expense is allocated to each
profit center according to its use of the Corporation's funding sources, which
consist primarily of deposit liabilities, wholesale borrowings, and equity. In
general, all funding sources are allocated proportionately to each profit
center. However, in certain instances specific liabilities may be matched
against specific assets of profit centers.

         The net cost of operating the Corporation's support departments is
allocated to the Corporation's profit centers and to the retail banking network
using a variety of methods deemed appropriate by management. In general, these
net costs are included in the non-interest expense of each profit center, to
include the retail banking network. In addition, certain allocations of revenues
and expenses are made between profit centers when they perform services for each
other. Such amounts, however, are not generally material in nature.

         The Corporation's retail branch network is considered a support
department center for segment reporting purposes. Retail banking fees and
revenues are deducted from the non-interest expense of operating the network (to
include an allocation of net costs from the Corporation's other support
departments) to arrive at net costs for the branch network. This net cost is
then allocated to each profit center based on its use of deposit liabilities to
fund its operations. This amount is reported as "net cost to acquire and
maintain deposit liabilities" and is included as an adjustment to the net
interest income of each profit center.


                                       10
<PAGE>


         For segment reporting purposes, management makes certain non-GAAP
adjustments and reclassifications to the results of operations and financial
condition of the Corporation that, in management's judgement, more fairly
reflect the performance and/or financial condition of certain of the
Corporation's profit centers.

         SEGMENT PROFIT (LOSS) STATEMENTS AND OTHER INFORMATION The following
table summarizes the profit (loss) and average assets of each of the
Corporation's reportable segments for the three and nine month periods ended
September 30, 2001 and 2000. In addition to the after-tax performance of profit
centers, management of the Corporation closely monitors the net cost to acquire
and maintain deposit liabilities, which consists principally of the net costs to
operate the Corporation's retail branch network, as previously described. The
net cost to acquire and maintain deposit liabilities was 1.09% and 1.14% of
average deposit liabilities outstanding during the three months ended September
30, 2001 and 2000, respectively. The net cost for the nine month periods ending
as of the same dates was 1.22% and 1.16%, respectively.

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED SEPTEMBER 30
                                                 ------------------------------------------------------------------
                                                               2001                             2000
                                                 ------------------------------------------------------------------
PROFIT CENTER                                     PROFIT (LOSS)    AVERAGE ASSETS  PROFIT (LOSS)    AVERAGE ASSETS
-------------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>               <C>            <C>
Mortgage banking                                     $1,046,118       $80,365,167       $910,029       $41,802,974
Residential loans                                     2,063,665       999,553,906      2,053,640       973,930,387
Commercial real estate lending                        1,384,226       529,441,862      1,085,300       467,143,657
Consumer lending                                      1,135,758       384,478,896      1,027,581       339,461,088
Education lending                                       603,046       210,922,171      1,089,000       206,506,087
Investment and mortgage-related securities              411,022       271,528,901        392,520       257,096,760
Other segments                                           59,705           635,380       (55,508)           274,952
Non-GAAP adjustments                                     20,318       (4,495,784)      (712,151)      (11,941,546)
-------------------------------------------------------------------------------------------------------------------
  Net income/total average assets                    $6,723,858    $2,472,430,499     $5,790,411    $2,274,274,359
-------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                                                  NINE MONTHS ENDED SEPTEMBER 30
                                                 ------------------------------------------------------------------
                                                               2001                             2000
                                                 ------------------------------------------------------------------
PROFIT CENTER                                     PROFIT (LOSS)    AVERAGE ASSETS  PROFIT (LOSS)    AVERAGE ASSETS
-------------------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>             <C>              <C>
Mortgage banking                                     $2,359,965       $81,225,125     $2,494,487       $41,440,837
Residential loans                                     5,572,809       971,217,548      6,351,849       911,413,442
Commercial real estate lending                        3,507,946       513,934,195      3,545,777       446,833,817
Consumer lending                                      2,906,286       376,492,709      2,786,286       315,826,495
Education lending                                     2,202,772       212,686,890      2,923,175       207,572,372
Investment and mortgage-related securities              815,526       255,434,841      1,495,683       271,064,997
Other segments                                        (132,305)           646,307      (393,511)           291,122
Non-GAAP adjustments                                  1,754,971       (5,123,866)    (2,485,577)      (12,140,831)
-------------------------------------------------------------------------------------------------------------------
  Net income/total average assets                   $18,987,970    $2,406,513,749    $16,718,169    $2,182,302,251
-------------------------------------------------------------------------------------------------------------------
</TABLE>


NOTE 6--RECENT ACCOUNTING STANDARDS

         In 2000 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS
140"). This standard established new rules for companies that engage in
securitization transactions. In particular, the standard establishes rules for
when a transfer qualifies as a sale. On April 1, 2001, the Corporation adopted
the requirements of SFAS 140 for various transfers of receivables and other
financial assets. The adoption did not have a material impact on the
Corporation's operations or financial condition.

         In June 2001 the FASB issued Statements of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS 141"), and No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with the new
statements. Other identifiable intangible assets will continue to be amortized
over their useful lives, which includes deposit-based intangibles. The new
standards are effective for fiscal years beginning after December 15, 2001. In
October 2001 the FASB released a proposed announcement that clarified the
accounting rules in situations where intangible assets acquired in previous
business combinations had not been recognized and accounted for separately from
goodwill. In these situations, the acquiring entity is not permitted to change
the amount of the purchase price that has been allocated to goodwill. If the
proposed announcement is adopted in its current form, the Corporation estimates
that its annual amortization of intangibles will decline by approximately
$875,000 in 2002, although there can be no assurances. If the announcement is
not



                                       11
<PAGE>

adopted, the Corporation has not completed the complex analysis necessary to
separate goodwill recorded in previous transactions from that which would be
characterized as a deposit-based intangible asset. Accordingly, the Corporation
is unable to determine the impact SFAS 141 and SFAS 142 will have on its
statements of financial condition or operations as of this time, although such
impact is not expected to be material.



                                       12
<PAGE>



ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


FORWARD-LOOKING STATEMENTS

         This report includes certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
include words and phrases such as "will likely result", "are expected to", "will
continue", "is anticipated", "is estimated", "is projected", "intends to", or
similar expressions. Forward-looking statements are based on management's
current expectations. Examples of factors which could cause future results to
differ from management's expectations include, but are not limited to, the
following: general economic and competitive conditions; legislative and
regulatory initiatives; monetary and fiscal policies of the federal government;
general market rates of interest; interest rates on competing investments;
interest rates on funding sources; consumer demand for deposit and loan products
and services; consumer demand for other financial services; changes in
accounting policies or guidelines; and changes in the quality or composition of
the Corporation's loan and investment portfolios. Readers are cautioned that
forward-looking statements are not guarantees of future performance and that
actual results may differ materially from management's current expectations.

         Management of the Corporation does not undertake and specifically
disclaims any obligation to update any forward-looking statements to reflect the
occurrence of anticipated or unanticipated events or circumstances after the
date of such statements.


RESULTS OF OPERATIONS

         QUARTER OVERVIEW The Corporation's net income for the three months
ended September 30, 2001, was $6.7 million or $0.36 per diluted share compared
to $5.8 million and $0.32 in the same period last year. These amounts
represented a return on average assets of 1.09% and 1.02%, respectively, and a
return on average equity of 16.55% and 16.85%, respectively.

         The increase in net income from 2000 to 2001 was primarily attributable
to a $3.2 million increase in gain on sales of loans, a $637,000 increase in
retail banking fees, and a $775,000 increase in net interest income. These
developments were partially offset by a $2.0 million decrease in loan servicing
fees and a $1.7 million increase in non-interest expense. Also contributing was
a $387,000 increase in income tax expense, due to higher pre-tax earnings.

         NINE MONTH OVERVIEW The Corporation's net income for the nine months
ended September 30, 2001, was $19.0 million or $1.02 per diluted share compared
to $16.7 million and $0.91 in the same period last year. These amounts
represented a return on average assets of 1.05% and 1.02%, respectively, and a
return on average equity of 16.15% and 16.67%, respectively.

         The increase in net income from 2000 to 2001 was primarily attributable
to a $10.7 million increase in gain on sales of loans, a $2.1 million increase
in retail banking fees, and a $1.2 million increase in net interest income.
These developments were offset in part by a $5.7 million increase in total
non-interest expense and a $5.4 million decrease in loan servicing fees. Also
contributing was a $1.1 million increase in income tax expense, due to higher
pre-tax earnings.

         The following paragraphs discuss the aforementioned changes in more
detail along with other changes in the components of net income during the three
and nine month periods ended September 30, 2001 and 2000.

         NET INTEREST INCOME Net interest income increased by $775,000 or 5.2%
and $1.2 million or 2.6% during the three and nine month periods ended September
30, 2001, respectively, as compared to the same periods in the previous year.
Net interest income was favorably impacted in both periods by an increase in the
amount of average interest-earning assets outstanding. Average interest-earning
assets increased by $163.7 million or 7.6% during the



                                       13
<PAGE>

three months ended September 30, 2001, and by $204.5 million or 9.9% during the
nine months ended September 30, 2001, as compared to the same periods in 2000.
The principal source of this growth occurred in the Corporation's single-family
residential loan, commercial real estate, and consumer loan portfolios. Asset
growth in both periods was largely funded by increases in deposit liabilities,
primarily certificates of deposit. Refer to "Financial Condition" for additional
discussion.

         Also contributing to the increase in net interest income during both
periods was an increase in average non-interest-bearing deposit liabilities,
which was the principal reason the Corporation's ratio of average
interest-earning assets to average interest-bearing liabilities improved. This
ratio improved from 110.50% during the three months ended September 30, 2000, to
111.96% during the same period in 2001, and from 110.08% during the nine months
ended September 30, 2000, to 111.65% during the same period in 2001. The
increase in non-interest-bearing deposit liabilities was due in part to an
increase in custodial deposit accounts. The Corporation maintains borrowers'
principal and interest payments in these accounts on a temporary basis pending
their remittance to the third-party owners of the loans. Balances in these
accounts increased significantly because of increased loan prepayment activity,
which was brought about by a lower interest rate environment.

         The Corporation's interest rate spread decreased during both the three
and nine month periods ended September 30, 2001, as compared to the same periods
in the previous year, which offset somewhat the increases in net interest income
caused by growth in average interest-earning assets and average
non-interest-bearing deposit liabilities. The Corporation's average interest
spread was 2.26% and 2.41% during the three and nine month periods ended
September 30, 2000, respectively. This compares to 2.18% and 2.14% during the
same periods in 2001, respectively. Beginning in 1999 and continuing into 2000,
market interest rates increased significantly, led generally by short-term
interest rates. The yield curve also flattened substantially, and was even
inverted at times during 2000. Although higher interest rates resulted in an
increase in the average yield on the Corporation's earning assets, the cost of
the Corporation's interest-bearing liabilities increased by a greater amount,
which has resulted in an overall decline in the Corporation's average interest
rate spread. In 2001, market interest rates reversed trend and declined
dramatically, particularly on the short end of the yield curve. However, the
Corporation has not experienced significant improvement in its interest rate
spread relative to prior periods because only a small portion of its funding
sources have repriced or matured during the first nine months of the year. In
general, recent declines in the Corporation's overall cost of interest-bearing
liabilities have been eclipsed by declining yields on its interest-earning
assets, particularly education loans, which declined in yield by 264 basis
points and 118 basis points during the three and nine month periods,
respectively. Management expects the Corporation's interest rate spread to
improve in the near term, although there can be no assurances. During the fourth
quarter of 2001, approximately 28% of the Corporation's certificates of deposit
will mature and 34% will mature in the first quarter of 2002. Management expects
to replace these deposits at interest rates that are 300 to 350 basis points
below their current cost. In addition, the Corporation will further benefit from
the reduced rates that are being paid on its interest-bearing checking accounts,
money market savings accounts, and regular saving accounts.

         The following tables set forth information regarding the average
balances of the Corporation's assets, liabilities, and equity, as well as the
interest earned or paid and the average yield or cost of each. The information
is based on daily average balances during the three and nine month periods ended
September 30, 2001 and 2000.



                                       14
<PAGE>



<TABLE>
<CAPTION>
Dollars in thousands                   THREE MONTHS ENDED SEPTEMBER 30, 2001  THREE MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------------------------
                                          AVERAGE                   YIELD/         AVERAGE                   YIELD/
                                          BALANCE    INTEREST         COST         BALANCE     INTEREST        COST
--------------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>        <C>             <C>           <C>
Interest-earning assets:
  Single-family mortgage loans           $870,334     $15,632        7.18%        $808,200      $15,052       7.45%
  Commercial real estate loans            502,193       9,989         7.96         443,651        8,873        8.00
  Consumer loans                          360,543       7,760         8.61         318,855        6,890        8.64
  Education loans                         200,527       3,093         6.17         196,592        4,331        8.81
--------------------------------------------------------------------------------------------------------------------
    Total loans                         1,933,597      36,474         7.55       1,767,296       35,146        7.95
Mortgage-backed and related                                           6.45                                     6.89
securities                                328,224       5,290                      350,268        6,033
Investment securities                          --          --           --             782           10        4.98
Interest-bearing deposits with                            242         3.41                          166        6.39
banks                                      28,336                                   10,365
Other earning assets                       26,865         386         5.75          24,574          471        7.67
--------------------------------------------------------------------------------------------------------------------
    Total interest-earning assets       2,317,022      42,391         7.32       2,153,285       41,826        7.77
Non-interest-earning assets:
  Office properties and equipment          29,082                                   25,882
  Other assets                            126,326                                   95,107
--------------------------------------------------------------------------------------------------------------------
    Total assets                       $2,472,430                               $2,274,274
====================================================================================================================
Interest-bearing liabilities:
  Regular savings accounts               $115,860        $348        1.20%        $109,570         $409       1.49%
  Checking accounts                        78,648         128         0.65          75,200          143        0.76
  Money market accounts                   183,689       1,380         3.00         155,099        1,682        4.34
  Certificates of deposit               1,258,493      19,055         6.06       1,130,629       17,451        6.17
--------------------------------------------------------------------------------------------------------------------
    Total interest-bearing deposits     1,636,690      20,911         5.11       1,470,499       19,685        5.35
FHLB advances                             410,580       5,555         5.41         361,737        5,318        5.88
Other borrowings                           22,230         143         2.57         116,459        1,815        6.23
--------------------------------------------------------------------------------------------------------------------
    Total interest-bearing
      liabilities                       2,069,500      26,609         5.14       1,948,695       26,818        5.51
Non-interest-bearing liabilities:
  Non-interest-bearing deposits           213,232                                  169,379
  Other liabilities                        27,172                                   18,766
--------------------------------------------------------------------------------------------------------------------
    Total liabilities                   2,309,904                                2,136,839
Stockholders' equity                      162,526                                  137,435
--------------------------------------------------------------------------------------------------------------------
    Total liabilities and
      stockholders' equity             $2,472,430                               $2,274,274
====================================================================================================================
Net interest income                                   $15,782                                   $15,007
====================================================================================================================
Interest rate spread                                                 2.18%                                    2.26%
====================================================================================================================
Net interest income as a percent of average
  earning assets                                                     2.72%                                    2.79%
====================================================================================================================
Average interest-earning assets to average
  interest-bearing liabilities                                     111.96%                                  110.50%
====================================================================================================================
</TABLE>



                                       15
<PAGE>

<TABLE>
<CAPTION>
Dollars in thousands                   NINE MONTHS ENDED SEPTEMBER 30, 2001      NINE MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------------------------
                                          AVERAGE                   YIELD/         AVERAGE                   YIELD/
                                          BALANCE    INTEREST         COST         BALANCE     INTEREST        COST
--------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>             <C>        <C>             <C>           <C>
Interest-earning assets:
  Single-family mortgage loans           $810,988     $44,653        7.34%         769,756       42,217       7.31%
  Commercial real estate loans            487,852      29,368         8.03         423,766       25,204        7.93
  Consumer loans                          353,409      22,866         8.63         296,136       18,826        8.48
  Education loans                         202,412      11,208         7.38         197,639       12,690        8.56
--------------------------------------------------------------------------------------------------------------------
    Total loans                         1,854,661     108,095         7.77       1,687,297       98,937        7.82
Mortgage-backed and related
securities                                357,460      17,897         6.68         341,267       17,429        6.81
Investment securities                         638          20         4.18             806           30        5.04
Interest-bearing deposits with
banks                                      29,500         951         4.30          10,227          430        5.61
Other earning assets                       25,996       1,246         6.39          24,127        1,318        7.28
--------------------------------------------------------------------------------------------------------------------
    Total interest-earning assets       2,268,255     128,209         7.54       2,063,725      118,144        7.63
Non-interest-earning assets:
  Office properties and equipment          28,058                                   25,275
  Other assets                            110,201                                   93,302
--------------------------------------------------------------------------------------------------------------------
    Total assets                       $2,406,514                               $2,182,302
====================================================================================================================
Interest-bearing liabilities:
  Regular savings accounts               $111,037      $1,150        1.38%        $110,099       $1,225       1.48%
  Checking accounts                        76,431         433         0.75          74,686          415        0.74
  Money market accounts                   168,071       4,527         3.59         163,229        4,928        4.03
  Certificates of deposit               1,228,512      57,388         6.23       1,052,315       46,087        5.84
--------------------------------------------------------------------------------------------------------------------
    Total interest-bearing deposits     1,584,051      63,498         5.34       1,400,329       52,655        5.01
FHLB advances                             382,837      16,106         5.61         384,394       16,608        5.76
Other borrowings                           64,627       2,685         5.54          89,973        4,137        6.13
--------------------------------------------------------------------------------------------------------------------
    Total interest-bearing              2,031,515      82,289         5.40       1,874,696       73,400        5.22
liabilities
Non-interest-bearing liabilities:
  Non-interest-bearing deposits           192,185                                  156,541
  Other liabilities                        26,036                                   17,327
--------------------------------------------------------------------------------------------------------------------
    Total liabilities                   2,249,736                                2,048,564
Stockholders' equity                      156,778                                  133,738
--------------------------------------------------------------------------------------------------------------------
    Total liabilities and              $2,406,514                               $2,182,302
stockholders' equity
====================================================================================================================
Net interest income                                   $45,921                                   $44,744
====================================================================================================================
Interest rate spread                                                 2.14%                                    2.41%
====================================================================================================================
Net interest income as a percent of
average
  earning assets                                                     2.70%                                    2.89%
====================================================================================================================
Average interest-earning assets to
average
  interest-bearing liabilities                                     111.65%                                  110.08%
====================================================================================================================
</TABLE>


         PROVISION FOR LOAN LOSSES Provision for loan losses was $355,000 and
$302,000 during the three months ended September 30, 2001 and 2000,
respectively. It was $1.2 million and $607,000 during the nine month periods
ended as of the same dates respectively. In general, provisions for loan losses
recorded during the first half of 2000 approximated the Corporation's actual net
charge-off activity during the period. However, beginning in the third quarter
of 2000, the Corporation recorded approximately $200,000 per quarter in
provision for loan losses over-and-above its actual net charge-off activity.
This additional provision was recorded to maintain the Corporation's allowance
for loan losses at a level deemed appropriate by management. This addition was
considered prudent in light of anticipated growth in the Corporation's loans
held for investment, an increased mix of higher-risk consumer and commercial
real estate loans, and modest increases in non-performing and classified assets.
On an annualized basis, net charge-offs were 0.04% and 0.05% of average loans
outstanding during the three and nine month periods in 2001, respectively. These
amounts compared to 0.03% during the same periods in 2000.

         As of September 30, 2001 and December 31, 2000, the Corporation's
allowance for loan losses was $8.6 million and $8.0 million, respectively, or
0.46% and 0.45% of loans held for investment, respectively. The allowance for
loan and real estate losses was 150% and 188% of non-performing assets as of the
same dates. Although management believes that the Corporation's present level of
allowance for loan losses is adequate, there can be no assurance that future
adjustments to the allowance will not be necessary, which could adversely affect
the



                                       16
<PAGE>

Corporation's results of operations. For additional discussion, refer to
"Financial Condition--Non-Performing Assets".

         NON-INTEREST INCOME Non-interest income for the three months ended
September 30, 2001 and 2000, was $11.3 million and $9.1 million, respectively.
The following paragraphs discuss the principal components of non-interest income
and the primary reasons for their changes from 2000 to 2001.

         Retail banking fees and service charges increased by $637,000 or 10.8%
during the three months ended September 30, 2001, as compared to the same period
in the previous year. Most of this improvement can be attributed to growth in
the number of checking accounts serviced by the Corporation since September 30,
2000. Also contributing to the growth in retail banking fees was a $225,000 or
30.9% increase and a $171,000 or 18.1% increase in fees from customers' use of
debit cards and ATMs, respectively.

         Premiums and commissions on annuity and insurance sales increased by
$207,000 or 30.6% during the three months ended September 30, 2001, as compared
to the same period in the previous year. The Corporation's principal sources of
premium and commission revenues are from sales of tax-deferred annuity
contracts, credit life and disability insurance policies, mortgage loan
insurance policies, and retail brokerage services. The increase was principally
the result of a $148,000 or 45.0% increase in commissions from the sales of
tax-deferred annuities and an $80,000 increase in premiums and commissions from
retail brokerage services. In the fourth quarter of 2000, the Corporation
expanded the services it offers customers by making available to them the
purchase of mutual funds, variable-annuities, and other equity and debt
securities.

         Loan servicing fees decreased by $2.0 million from $950,000 during the
three months ended September 30, 2000, to $(1.1) million during the same period
in 2001. As interest rates declined in 2001, actual loan prepayment activity was
much higher, as compared to the same period in the previous year. Because of
such increased prepayment activity, the Corporation recorded $2.3 million in
increased periodic amortization of mortgage servicing rights in the most recent
quarter.

         Excluding the effects of the aforementioned increase in amortization of
mortgage servicing rights, loan servicing fees increased by $249,000 or 13.3%
during the three months ended September 30, 2001, as compared to the same period
in the previous year. This increase can be attributed in part to a $348.1
million or 17.3% increase in the average outstanding balance of loans serviced
for others during such periods. Contributing to the growth in loans serviced for
others was an interest rate environment that caused borrowers to favor
fixed-rate loans, which the Corporation generally sells in the secondary market,
over adjustable-rate mortgage loans, which the Corporation generally retains in
portfolio. Also, in the second quarter of 2001, the Corporation purchased
mortgage servicing rights related to $89.4 million in fixed-rate residential
mortgage loans on properties located in the state of Iowa.

         Subsequent to September 30, 2001, interest rates have remained at low
levels, particularly on the short-end of the yield curve. If this interest rate
environment persists, or if interest rates decline further, the Corporation will
most likely record large losses on its mortgage servicing rights related to
faster than anticipated prepayment activity. Such losses, however, would most
likely continue to be offset by relatively high levels of gains on sales of
mortgage loans, as described in the following paragraph. It should be noted,
however, that further declines in interest rates or increases in market
expectations for future prepayments may also expose the Corporation to
unfavorable mark-to-market adjustments against its portfolio of mortgage
servicing rights. Although management believes that most of the Corporation's
loans that prepay are replaced by a new loan to the same customer or even a
different customer (thus preserving the future servicing cash flow), GAAP
requires mark-to-market losses resulting from increases in market expectations
for future prepayments to be recorded in the current period. However, the
offsetting gain on the sale of the new loan, if any, cannot be recorded until
the customer actually prepays the old loan and the new loan is sold in the
secondary market. Management will continue to closely monitor the carrying value
of its mortgage servicing rights and will record mark-to-market adjustments as
appropriate.

         Gains on sales of loans increased by $3.2 million from $812,000 during
the three months ended September 30, 2000, to $4.0 million during the same
period in 2001. This increase was primarily attributable to a $221 million or
over 590% increase in the Corporation's mortgage loan sales. This increase was
due in part to low



                                       17
<PAGE>

interest rates during the most recent quarter that resulted in increased
originations of fixed-rate mortgage loans, as well as increased conversions of
adjustable-rate loans into fixed-rate loans, both of which are generally sold in
the secondary market. Interest rates remain at relatively low levels. If this
environment continues, or if interest rates decline further, the Corporation is
likely to experience relatively high levels of refinance activity, as well as
conversions by borrowers of their adjustable-rate loans into fixed-rate loans.
Such activity is expected to result in high levels of gains on sales of mortgage
loans, although there can be no assurances.

         Other non-interest income increased by $216,000 or 29.5% during the
three months ended September 30, 2001, as compared to the same period in the
previous year. This increase was due in part to an increase in fees from
customers' conversions of adjustable-rate mortgage loans into fixed-rate
mortgage loans due to the low interest rate environment, as previously
described. Also contributing to the increase in other non-interest income was an
increase in the cash surrender value of the Corporation's bank owned life
insurance policies.

         Non-interest income for the nine months ended September 30, 2001 and
2000, was $33.5 million and $25.1 million, respectively. Most of the increase in
2001 was the result of a $10.7 million increase in gains on sales of loans from
$1.6 million in 2000 to $12.3 million in 2001. Also contributing was a $2.1
million or 13.0% increase in retail banking fees and a $497,000 or 24.6%
increase in premiums and commissions on annuity and insurance sales. These
developments were offset in part by a $5.4 million or over 180% decrease in loan
servicing fees. The explanations for these changes are substantially the same as
those given in previous paragraphs.

         NON-INTEREST EXPENSE Non-interest expense for the three months ended
September 30, 2001 and 2000, was $16.4 million and $14.8 million, respectively,
which was 2.66% and 2.60% of average assets during such periods, respectively.
The following paragraphs discuss the principal components of non-interest
expense and the primary reasons for their changes from 2000 to 2001.

         Compensation and employee benefits increased by $1.1 million or 12.4%
during the three months ended September 30, 2001, as compared to the same period
in the previous year. In general, this increase was due to normal annual merit
increases and to growth in the number of banking facilities operated by the
Corporation. Since September 30, 2000, the Corporation has opened eleven banking
facilities and closed one. During the remainder of 2001, the Corporation intends
to acquire two more banking facilities through the acquisition of American
Community Bank. (For further discussion, refer to "Other Matters".) In addition,
the Corporation intends to open two more supermarket banking facilities in the
next three to six months, although there can be no assurances. As of September
30, 2001, the Corporation had 988 full-time equivalent employees. This compares
to 897 and 871 as of December 31, 2000, and September 30, 2000, respectively.

         Also contributing to the increase in compensation and employee benefits
was an increase in commissions paid, due primarily to increased originations of
mortgage loans, as previously described.

         Communications, postage, and office supplies expense increased by
$129,000 or 11.4% during the three months ended September 30, 2001, as compared
to the same period in the previous year. This increase was primarily
attributable to general growth in the number of banking facilities operated by
the Corporation, as well as increases in the number of full-time equivalent
employees and in the number of customers served by the Corporation.

         ATM and debit card transaction costs increased by $120,000 or 16.5%
during the three months ended September 30, 2001, as compared to the same period
in the previous year. This increase can be attributed to increased use by the
Corporation's customers of ATM and debit card networks, as well as an increase
in the number of ATMs operated by the Corporation.

         Advertising and marketing costs increased by $77,000 or 13.1% during
the three months ended September 30, 2001, as compared to the same period in the
previous year. This increase can be attributed to growth in the number of
banking facilities operated by the Corporation, as previously described, as well
as an increase in the number of market areas serviced by the Corporation.



                                       18
<PAGE>

         Other non-interest expense increased by $274,000 or 23.4% during the
three months ended September 30, 2001, as compared to the same period in the
previous year. This increase was caused by a variety of factors, the most
significant of which were increased costs related to the operation and
disposition of foreclosed real estate, increased losses from forgery, fraud, and
other irregularities associated with customers' deposit accounts, and increased
costs related to servicing of loans for the Federal National Mortgage
Association (FNMA) and the Federal Home Loan Bank (FHLB). Under the terms of the
servicing agreements with these agencies, the Corporation is required to pay a
full month's interest when certain loans are repaid, regardless of the actual
date of the loan payoff. A declining interest rate environment and increased
prepayment activity in 2001 resulted in increased payment of loan pay-off
interest to FNMA and FHLB.

         Non-interest expense for the nine months ended September 30, 2001 and
2000, was $48.9 million and $43.3 million, respectively, which was 2.71% and
2.64% of average assets during such periods, respectively. This increase was
primarily the result of a $3.0 million or 11.4% increase in compensation and
employee benefits. Also contributing was an $874,000 or 26.4% increase in other
non-interest expense, a $777,000 or 13.1% increase in occupancy and equipment
expense, and a $659,000 or 20.7% increase in communications, postage, and office
supplies. Contributing to a lesser degree was a $271,000 or 12.6% increase in
ATM and debit card transaction costs and a $91,000 or 5.4% increase in
advertising and marketing. The explanations for these changes are substantially
the same as those given in previous paragraphs for the three month periods,
except as noted in the following paragraph.

         Contributing to the increase in occupancy and equipment expense was the
installation of new teller software and hardware in the retail branch network in
the second quarter of 2001. In addition, the Corporation closed a
limited-service facility and relocated two supermarket offices. These actions
resulted in a $278,000 charge-off of obsolete teller equipment and leasehold
improvements.

         INCOME TAX EXPENSE Income tax expense for the three months ended
September 30, 2001 and 2000, was $3.6 million and $3.2 million, respectively, or
34.8% and 35.6% of pretax income, respectively. Income tax expense for the nine
months ended September 30, 2001 and 2000, was $10.3 million and $9.2 million,
respectively, or 35.2% and 35.6% of pretax income, respectively. The decline in
the Corporation's effective income tax rate was due in part to the purchase of
bank owned life insurance policies.

         SEGMENT INFORMATION The following paragraphs contain a discussion of
the financial performance of each of the Corporation's reportable segments
(hereafter referred to as "profit centers") for the three and nine month periods
ended September 30, 2001 and 2000. Refer to the table in Note 5 of the
Corporation's Unaudited Consolidated Financial Statements, included herein under
Part I, Item I, "Financial Statements", for a summary of the after-tax profit
(loss) of each of the Corporation's profit centers.

                  MORTGAGE BANKING Profits from the Corporation's mortgage
banking activities during the most recent quarter were up $136,000 or 15.0%
compared to the same period in the previous year. On a year-to-date basis,
profits were down $135,000 or 5.4%. Loan origination volumes and mortgage
servicing fees are the principal drivers of performance in this profit center.
In the first nine months of 2001, the Corporation's mortgage banking operation
originated $907.1 million in single-family residential loans compared to $397.5
million during the same period in 2000. However, due to the low interest rate
environment in 2001, most of this increase was caused by an increase in
refinance activity, as described elsewhere in this report. In such an
environment, a substantial portion of the internal revenue allocated to the
mortgage banking profit center for loan originations is offset by an increase in
internal charges for lost servicing value. This methodology for measuring
results in the mortgage banking profit center recognizes that during periods of
high refinance activity the Corporation incurs significant costs related to the
preservation of existing mortgage customer relationships, rather than the
creation of new customer relationships. As a result, periods of high refinance
activity do not necessarily result in higher earnings in the mortgage banking
profit center, despite a substantial increase in loan origination volumes. Refer
to "Non-GAAP Adjustments", below, for additional discussion.

                  RESIDENTIAL LOANS Profits from the Corporation's residential
loan portfolio increased slightly during the three month period ended September
30, 2001, as compared to the same period in the previous year, but



                                       19
<PAGE>

declined by $779,000 or 12.3% during the nine month period. The slight increase
in this profit center's quarterly earnings and the larger decline in its
year-to-date earnings occurred despite 2.6% and 6.6% increases in the average
assets assigned to the profit center during three and nine month periods,
respectively. In 2001, the performance of this profit center has been impacted
by a significant increase in charge-offs of internally-capitalized origination
costs assigned to the loans in the portfolio. These charge-offs were $682,000
and $2.1 million during the three and nine month periods ended September 30,
2001, compared to only $306,000 and $506,000 during the same periods in the
previous year, respectively (refer to "Non-GAAP Adjustments", below, for
additional information). These increases resulted from increased conversions of
the profit center's adjustable-rate mortgage loans into fixed-rate loans, as
discussed elsewhere in this report.

                  The year-to-date performance of this profit center was also
impacted by a higher interest rate environment in the previous year, which
resulted in a larger increase in the cost of the profit center's funding sources
than it did in its yield on earning assets. This profit center is funded by a
mix of deposit liabilities and wholesale borrowings. The Corporation's average
cost of interest-bearing liabilities increased by 18 basis points between the
nine month period in 2000 and the same period in 2001. In contrast, the yield on
the profit center's single-family residential loans increased by only three
basis points between the periods. In addition, the yield on the mortgage-backed
securities ("MBSs") included in this profit center declined between the periods.
This decline occurred because the adjustable-rate mortgage loans the Corporation
swapped into MBSs in the third quarter of 2000 carried a lower rate of interest
than the securities that were already in the MBS portfolio.

                  The performance of this profit center during the most recent
quarter has benefited from a declining interest rate environment in 2001. On a
quarterly basis, the Corporation's average cost of interest-bearing liabilities
declined by 37 basis points. In contrast, the yield on the profit center's loans
declined by only 27 basis points between the periods.

                  COMMERCIAL REAL ESTATE LENDING Profits from commercial real
estate lending increased by $299,000 or 27.5% during the three months ended
September 30, 2001, but declined modestly during the nine month period in 2001
compared to the same period in 2000. The increase in the most recent quarter was
partly the result of a $62.3 million or 13.3% increase in the profit center's
average assets. Also contributing, however, was an improvement in the profit
center's interest rate spread in response to a declining interest rate
environment in 2001. This profit center is funded almost entirely by deposit
liabilities. The Corporation's average cost of interest-bearing deposits
declined by 24 basis points between the third quarter of 2000 and the same
period in 2001. The yield on commercial real estate loans, however, declined by
only four basis points between these periods.

                  The modest decline in the year-to-date earnings of this profit
center occurred despite a $67.1 million or 15.0% increase in the average assets
assigned to this profit center during the period, as compared to the same period
in the previous year. The year-to-date performance of this profit center was
adversely impacted by higher interest rates in 2000, which resulted in a larger
increase in the cost of the profit center's funding sources than it did in its
yield on earning assets. The Corporation's average cost of interest-bearing
deposits increased by 33 basis points between the nine month period in 2000 and
the same period in 2001. However, the yield on commercial real estate loans
increased by only ten basis points between the periods.

                  CONSUMER LENDING Profits from the Corporation's consumer
lending activities increased by $108,000 or 10.5% and $120,000 or 4.3% during
the three and nine month periods ended September 30, 2001, respectively, as
compared to the same periods in the previous year. These improvements were
principally the result of a $45.0 million or 13.3% increase and $60.7 million or
19.2% increase in the profit center's average assets during the most recent
three and nine month periods, respectively, as compared to the same periods in
2000. The improvement caused by increased volume was supplemented in the third
quarter by a wider interest rate spread in the profit center. This development
was caused by a declining interest rate environment in 2001, which resulted in a
larger decrease in the profit center's cost of funds than it did in the gross
yield on its assets. This profit center is funded almost entirely by deposit
liabilities. As previously noted, the Corporation's average cost of
interest-bearing deposits declined by 24 basis points between the third quarter
of 2000 and the same quarter in 2001. However, the yield on consumer loans
declined by only three basis points between the periods.



                                       20
<PAGE>

                  The year-to-date performance of this profit center was
negatively impacted by a higher interest rate environment in the previous year,
which resulted in a larger increase in the cost of the profit center's funding
sources than it did its yield on earning assets. The Corporation's average cost
of interest-bearing deposits increased by 33 basis points between the nine month
period in 2000 and the same period in 2001. In contrast, the yield on the profit
center's loans increased by only 15 basis points between the periods.

                  EDUCATION LENDING Profits from education lending decreased by
$486,000 or 44.6% and $720,000 or 24.6% during the three and nine month periods
ended September 30, 2001, respectively, as compared to the same periods in the
previous year. These decreases were principally the result of a sharp decline in
market rates of interest in 2001, which resulted in a 264 basis point and 118
basis point decline in the yield on education loans during the three and nine
month in 2001, respectively, as compared to the same periods in 2000. In
contrast, the cost of the Corporation's money market accounts, which are the
primary funding source for this profit center, declined by only 134 basis points
during the most recent quarter compared to the same quarter in 2000. On a
year-to-date basis, the cost of money market accounts declined by 44 basis
points in 2001 compared to the same period in the previous year.

                  INVESTMENT AND MORTGAGE-RELATED SECURITIES Profits from the
Corporation's investment securities portfolio increased by $19,000 or 4.7%
during the three months ended September 30, 2001, as compared to the same period
in the previous year. On a year-to-date basis, profits declined by $680,000 or
approximately 45% compared to the nine month period in 2000. The decrease in
year-to-date profits was due in part to a $15.6 million or 5.8% decline in
average assets assigned to this profit center, compared to the same period in
the previous year. Contributing to a greater degree, however, were higher
interest rates in 2000, which resulted in a significant increase in the
year-to-date cost of the profit center's funding sources. However, the yield on
the profit center's assets did not benefit from higher rates in 2000 because
such assets consisted primarily of fixed-rate securities.

                  The increase in this profit center's quarterly earnings was
principally due to a $14.4 million or 5.6% increase in average assets assigned
to this profit center, compared to the same quarter in the previous year. In the
near term, management of the Corporation expects the assets assigned to this
profit center to increase as a result of the temporary investment of proceeds
from mortgage loan sales, as well as cash flows from other earning assets.
Management expects that the reinvestment of such proceeds will be limited to
short-term investment securities. Such securities offer yields that are
currently lower than the cost of the profit center's funding sources.
Accordingly, such investments could have an adverse impact on the profit
center's earnings in future periods. Management believes that building a certain
amount of liquidity on the Corporation's balance sheet is a prudent strategy in
the near term. Such liquidity will position the Corporation to take advantage of
a rising interest rate environment in the future, although there can be no
assurances. Refer to "Financial Condition--Overnight Investments" for additional
discussion.

                  OTHER SEGMENTS This segment consists primarily of the parent
holding company, as well as some of the Bank's wholly-owned subsidiaries. The
improvement in the earnings (loss) from this segment was principally the result
of lower interest expense in the holding company. This change was caused by a
higher level of borrowings in 2000, the proceeds of which were largely used to
repurchase the Corporation's stock.

                  NON-GAAP ADJUSTMENTS Non-GAAP adjustments were $20,000 in the
third quarter of 2001 compared to $(712,000) in the third quarter of 2000.
Year-to-date, non-GAAP adjustments in 2001 were $1.8 million compared to $(2.5)
million in 2000. The changes between these periods were due primarily to the
fact that in 2001 a substantial portion of the efforts of the mortgage banking
profit center were devoted to the refinance of existing loans rather than the
origination of new loans. As such, the Corporation recorded significantly higher
levels of internal charge-offs related to its mortgage servicing operations. In
addition, the residential loan profit center experienced a substantially higher
level of charge-offs related to internally-capitalized origination costs.

                  NET COST TO ACQUIRE AND MAINTAIN DEPOSIT LIABILITIES In
addition to the after-tax performance of the aforementioned profit centers,
management of the Corporation closely monitors the net cost to acquire and
maintain deposit liabilities. The Corporation's profit centers are allocated a
share of the net cost to acquire and maintain deposit liabilities according to
their proportionate use of such deposits as a funding source. As such,



                                       21
<PAGE>

changes in the net cost to acquire and maintain deposit liabilities will impact
most of the Corporation's profit centers.

                  The net cost to acquire and maintain deposit liabilities was
1.09% and 1.14% of average deposit liabilities outstanding during the three
months ended September 30, 2001 and 2000, respectively. The net cost for the
nine month periods ending as of the same dates was 1.22% and 1.16%,
respectively. The decrease in cost between the three month periods was primarily
caused by a significant increase in deposit liabilities during the third quarter
of 2001. The increase in cost between the nine month periods was due principally
to the fact that the Corporation opened eleven new retail banking facilities
between September 30, 2000, and September 30, 2001.

FINANCIAL CONDITION

         OVERVIEW The Corporation's total assets increased by $245.4 million or
10.4% during the nine months ended September 30, 2001. This increase was
principally funded by a $289.9 million or 17.1% increase in deposit liabilities
and a $46.2 million or 12.6% increase in FHLB advances. The increase in the
Corporation's total assets was primarily the result of an $81.7 million or 4.6%
increase in loans held for investment, a $51.7 million or approximately 400%
increase in overnight investments, and a $45.9 million or approximately 200%
increase in loans held for sale. The increased funding from deposit liabilities
and FHLB advances was also used to reduce federal funds purchased and securities
sold under agreements to repurchase by $120.0 million or 100% in the aggregate.

         OVERNIGHT INVESTMENTS Interest-bearing deposits with banks, which
consist of overnight investments at the FHLB and short-term money market
accounts, increased by $51.7 million from $13.1 million at December 31, 2000, to
$64.8 million at September 30, 2001. The large amount of overnight investments
at September 30, 2001, was caused by the temporary investment of proceeds from
loan sales. These investments will be used to pay down funding sources as they
mature or will be reinvested in other interest-earning assets.

         In the near term, management of the Corporation expects any
reinvestment of proceeds from loans sales, as well as cash flows from other
earning assets, to be limited to short-term investment securities. Such
securities generally offer yields that are lower than the cost of the
Corporation's funding sources. Accordingly, such temporary investments could
have an adverse impact on the Corporation's net interest margin in future
periods. Management believes that building a certain amount of liquidity on the
Corporation's balance sheet is a prudent strategy in the near term. Such
liquidity will position the Corporation to take advantage of a rising interest
rate environment in the future, although there can be no assurances.

         LOANS HELD FOR SALE The Corporation's loans held for sale increased by
$45.9 million or approximately 200% during the nine months ended September 30,
2001. This increase was due to an interest rate environment that increased
consumer demand for fixed-rate mortgage loans and resulted in increased
conversions of adjustable-rate loans into fixed-rate loans, as previously
described. Both of these categories of loans are classified as "held for sale"
until the date of the sale, which typically occurs within 30 to 60 days of
origination and/or conversion.

         MORTGAGE-BACKED AND RELATED SECURITIES The Corporation's aggregate
investment in its mortgage-backed and related securities portfolios increased by
$19.0 million or 4.6% during the nine months ended September 30, 2001. This
increase was caused by the purchase of $161.1 million in short- and medium-term,
fixed-rate CMOs. Approximately 50% of these securities were classified as
"available for sale", and the remainder were classified as "held for
investment". These purchases were offset in part by $145.8 million in principal
repayments on the portfolio during the nine months ended September 30, 2001.

         LOANS HELD FOR INVESTMENT The Corporation's portfolio of loans held for
investment increased by $81.7 million or 4.6% during the nine months ended
September 30, 2001. This increase was caused by the Corporation's purchase of
$177.0 million in adjustable-rate residential mortgage loans originated by
third-party financial institutions. During this period, the interest rate
environment had a significant impact on the ability of the Corporation to
maintain its internally-originated portfolio of loans held for investment. This
situation developed because low interest rates tend to increase customer
preference for fixed-rate mortgage loans, as opposed to



                                       22
<PAGE>

adjustable-rate loans. In addition, a low interest rate environment encourages
borrowers to refinance their existing adjustable-rate residential loans into
fixed-rate loans to "lock-in" a lower long-term rate. Given the Corporation's
policy of selling these types of loans in the secondary market, its
internally-originated portfolio of adjustable-rate residential loans declined
significantly in the most recent period. Although the Corporation was able to
maintain internal growth in commercial real estate, consumer, and education
loans, the Corporation purchased adjustable-rate mortgage loans from three
third-party financial institutions in an effort to maintain growth in its level
of earning assets. These loans were subjected to substantially the same
underwriting process as the Corporation's own loans. These loans are located
throughout the U.S., with no single state making up a significant portion of the
overall principal. The loans have adjustable-rates that reset annually at an
average margin of approximately 200 to 250 basis points above the one-year U.S.
Treasury bill. Most of the loans have fixed interest rates for terms of three to
seven years before their first adjustment date. The loans were purchased by
First Capital Holdings, Inc., the Corporation's wholly-owned investment
subsidiary in Nevada.

         The Corporation will continue to explore alternatives to maintain
growth in its interest-earning assets in the near term. These alternatives
include, but are not limited to, the purchase of additional adjustable-rate
residential mortgage loans from third-party financial institutions, the purchase
of mortgage-backed and related securities, and the retention of certain
fixed-rate loans that are currently sold by the Corporation in the secondary
market. However, there are many considerations involved in such decisions and
there can be no assurances that the Corporation will elect to continue any of
these strategies to increase its interest-earning assets.

         DEPOSIT LIABILITIES The Corporation's deposit liabilities increased by
$289.9 million or 17.1% during the nine months ended September 30, 2001.
Management attributes this growth to recent volatility in other financial
markets, which has made traditional bank financial offerings more attractive to
consumers, as well as aggressive pricing of certificates of deposit by the
Corporation in its market areas. Although there can be no assurances, the
Corporation intends to be less aggressive in pricing its certificates of deposit
over the next two quarters in light of the significant amount of certificates it
expects will mature during such periods.

         The Corporation's deposit liabilities were also impacted by a $60.5
million or over 350% increase in custodial deposit accounts during the nine
months ended September 30, 2001. The Corporation maintains borrowers' principal
and interest payments in such accounts on a temporary basis pending their
remittance to the third-party owners of the loans. Balances in these accounts
were at a high level during the recent period due to significant increases in
loan prepayment activity.

         FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE The Corporation's federal funds purchased and securities sold under
agreement to repurchase declined by $120.0 million or 100% in the aggregate
during the nine months ended September 30, 2001. This decrease was primarily
funded by an increase in deposit liabilities, as previously described.

         FHLB ADVANCES The Corporation's FHLB advances increased by $46.2
million or 12.6% during the nine months ended September 30, 2001. Additional
FHLB advances were specifically drawn during the period to fund growth in the
Corporation's mortgage-backed and related securities.

         NON-PERFORMING ASSETS The Corporation's non-performing assets
(consisting of non-accrual loans, real estate acquired through foreclosure or
deed-in-lieu thereof, and real estate in judgement) amounted to $5.9 million or
0.23% of total assets at September 30, 2001, compared to $4.4 million or 0.19%
of total assets at December 31, 2000. At September 30, 2001, non-performing
assets included $1.0 million of real estate in judgement and real estate
acquired through foreclosure related to three independent builders that
experienced problems with a number of small single-family projects. Although
foreclosure on these loans has commenced, management does not expect to incur
significant losses. At December 31, 2000, this compared to $1.4 million in such
assets. The Corporation's allowance for loan and real estate losses was 150% and
188% of non-performing assets as of the same dates, respectively.



                                       23
<PAGE>

         In addition to non-performing assets, at September 30, 2001, management
was closely monitoring $3.0 million in assets which it had classified as
doubtful, substandard, or special mention, but which were performing in
accordance with their terms. This compares to $2.8 million in such assets at
December 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

         The Bank is required under applicable federal regulations to maintain
sufficient liquidity to ensure safe and sound operation. The Bank's objective is
to maintain liquid assets (generally defined as cash and due from banks,
interest-bearing deposits with banks, investment securities, and mortgage-backed
and related securities) equal to at least 4% of its liquidity base (generally
defined as short-term deposit liabilities and other borrowings). At September
30, 2001, the Bank's was in compliance with its management policies with respect
to liquidity.

         The Corporation's stockholders' equity ratio as of September 30, 2001,
was 6.10% of total assets. The Corporation's long-term objective is to increase
its stockholders' equity ratio to approximately 7.0%, which is consistent with
its long-term return on asset and return on equity goals of at least 1.2% and
15.0%, respectively.

         The Bank is also required to maintain specified amounts of capital
pursuant to regulations promulgated by the OTS and the FDIC. The Bank's
objective is to maintain its regulatory capital in an amount sufficient to be
classified in the highest regulatory capital category (i.e., as a "well
capitalized" institution). At September 30, 2001, the Bank's regulatory capital
exceeded all regulatory minimum requirements as well as the amount required to
be classified as a "well capitalized" institution.

         The Corporation paid cash dividends of $6.4 million and $5.7 million
during the nine months ended September 30, 2001 and 2000, respectively. These
amounts equated to dividend payout ratios of 33.9% and 34.0% of the net income
in such periods, respectively. It is the Corporation's objective to maintain its
dividend payout ratio in a range of 25% to 35% of net income. However, the
Corporation's dividend policy and/or dividend payout ratio will be impacted by
considerations such as the level of stockholders' equity in relation to the
Corporation's stated goal, as previously described, regulatory capital
requirements for the Bank, as previously described, and certain dividend
restrictions in effect for the Bank. Furthermore, unanticipated or non-recurring
fluctuations in earnings may impact the Corporation's ability to pay dividends
and/or maintain a given dividend payout ratio.

         On October 23, 2001, the Corporation's Board of Directors declared a
regular quarterly dividend of $0.12 per share payable on December 6, 2001, to
shareholders of record on November 15, 2001.

         During the nine months ended September 30, 2001, the Corporation
repurchased 228,800 shares of common stock at a cost of $3.2 million under its
1999 and 2000 stock repurchase plans (the "1999 Plan" and "2000 Plan",
respectively). As of September 30, 2001, no shares remain to be purchased under
the 1999 Plan, while 904,260 shares remain to be purchased under the 2000 stock
repurchase plan (the "2000 Plan"). On April 24, 2001, the Corporation's Board of
Directors extended the 1999 and 2000 Plans for another twelve months. The shares
may be repurchased from time to time in open-market transactions during the next
twelve months as, in the opinion of management, market conditions warrant. The
repurchased shares will be held as treasury stock and will be available for
general corporate purposes.

         During the nine months ended September 30, 2001, the Corporation
reissued 140,006 shares of common stock out of its inventory of treasury stock
with a cost basis of $1.8 million. In general, these shares were issued upon the
exercise of stock options by, or the issuance of restricted stock to, employees
and directors of the Corporation.

OTHER MATTERS

         On October 31, 2001, the Corporation completed the acquisition of
American Community Bankshares, Inc. ("ACB"), the parent company of American
Community Bank, headquartered in Wausau, Wisconsin. As a result of the
acquisition, ACB has been merged into the Corporation, with ACB shareholders
exchanging each share of ACB common stock for 4.5 shares of the Corporation's
common stock, or approximately 1.9 million shares. The



                                       24
<PAGE>

transaction was accounted for using the purchase method of accounting. The
amount of goodwill recorded in connection with this transaction will depend on
the estimated fair value that will be assigned to the identifiable tangible and
intangible assets and liabilities of ACB, including a deposit-based intangible
asset. Management has not completed a deposit portfolio valuation analysis as of
the date of this report or completed its estimate of the fair value of ACB's
tangible assets and liabilities. As such, management is not able to estimate the
value of the deposit-based intangible or goodwill at this time. The transaction
was tax-free to ACB shareholders receiving the Corporation's stock.


ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Corporation manages the exposure of its operations to changes in
interest rates ("interest rate risk" or "market risk") by monitoring its ratios
of interest-earning assets to interest-bearing liabilities within one- and
three-year maturities and/or repricing dates (i.e., its one- and three-year
"gaps"). Management has sought to control the Corporation's one- and three-year
gaps, thereby limiting the affects of changes in interest rates on its future
earnings, by selling substantially all of its long-term, fixed-rate,
single-family mortgage loan production, investing in adjustable-rate
single-family mortgage loans, investing in consumer and education loans, which
generally have shorter terms to maturity and/or floating rates of interest, and
investing in commercial real estate loans, which also tend to have shorter terms
to maturity and/or floating rates of interest. The Corporation also invests from
time-to-time in adjustable-rate and short- and medium-term fixed-rate CMOs and
MBSs. As a result of this strategy, the Corporation's exposure to interest rate
risk is significantly impacted by its funding of the aforementioned asset groups
with deposit liabilities, FHLB advances, and other borrowing sources that tend
to have average terms to maturity of less than one year or carry floating rates
of interest.

         In general, it is management's goal to maintain the Corporation's
one-year gap in a range between 0% and -30% and its three-year gap in a range
between 0% and -10%. Management believes this strategy takes advantage of the
fact that market yield curves tend to be upward sloping, which increases the
spread between the Corporation's earning assets and interest-bearing
liabilities. Furthermore, management of the Corporation does not believe that
this strategy exposes the Corporation to unacceptable levels of interest rate
risk as evidenced by the fact that the Corporation's three-year gap is generally
maintained in a narrow band around zero, which implies that the Corporation is
exposed to little interest rate risk over a three-year horizon.

         Although management believes that its asset/liability management
strategies reduce the potential effects of changes in interest rates on the
Corporation's operations, material and prolonged increases in interest rates may
adversely affect the Corporation's operations because the Corporation's
interest-bearing liabilities which mature or reprice within one year are greater
than the Corporation's interest-earning assets which mature or reprice within
the same period. Alternatively, material and prolonged decreases in interest
rates may benefit the Corporation's operations.

         The Bank is also required by the OTS to estimate the sensitivity of its
net portfolio value of equity ("NPV") to immediate and sustained changes in
interest rates and to measure such sensitivity on at least a quarterly basis.
NPV is defined as the estimated net present value of an institution's existing
assets, liabilities, and off-balance sheet instruments at a given level of
market interest rates. In general, it is management's goal to limit estimated
changes in the Bank's NPV under specified interest rate scenarios such that the
Bank will continue to be classified by the OTS as an institution with minimal
exposure to interest rate risk.

         As of September 30, 2001, the Corporation was in compliance with its
management polices with respect to exposure to interest rate risk. Furthermore,
there was no material change in its interest rate risk exposure since December
31, 2000.





                                       25
<PAGE>


PART II--OTHER INFORMATION

ITEM 1--LEGAL PROCEEDINGS

Refer to Note 4 of the Corporation's Consolidated Financial Statements.

ITEM 2--CHANGES IN SECURITIES

None.

ITEM 3--DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4--SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

ITEM 5--OTHER INFORMATION

None.

ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K

None.




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<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                                   FIRST FEDERAL CAPITAL CORP


/s/ Jack C. Rusch                                  November 13, 2001
Jack C. Rusch
President and Chief Executive Officer
(duly authorized officer)


/s/ Michael W. Dosland                             November 13, 2001
Michael W. Dosland
Senior Vice President and
Chief Financial Officer



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