UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-KSB
(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934.
     For the Fiscal Year Ended June 30, 2003.

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934.

For the transition period from __________to __________

                         Commission File Number: 0-23409
                                                 -------

                           HIGH COUNTRY BANCORP, INC.
                  --------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

          COLORADO                                               84-1438612
-------------------------------                                ----------------
(State or Other Jurisdiction of                                (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

7360 WEST US HIGHWAY 50, SALIDA, COLORADO                            81201
 ----------------------------------------                          ----------
 (Address of Principal Executive Offices)                          (Zip Code)

         Issuer's Telephone Number, Including Area Code: (719) 539-2516
                                                          -------------

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

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                     --------------------------------------
                                (Title of Class)

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State registrant's revenues for its most recent fiscal year: $14,832,150

     The aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the last sale of which the registrant was aware ($31.15) per
share on September 15, 2003), was approximately $16,545,914. Solely for purposes
of this calculation,  the term "affiliate" refers to all directors and executive
officers of the registrant and all  stockholders  beneficially  owning more than
10% of the registrant's common stock.

     As of September 15, 2003, there were issued and outstanding  901,704 shares
of the registrant's common stock.

     Transitional Small Business Disclosure Format (check one): YES    NO X
                                                                   ---   ---

                       DOCUMENTS INCORPORATED BY REFERENCE

     1. Portions of Annual Report to Stockholders for the Fiscal Year Ended June
30, 2003 (Parts II and III).

     2. Portions of Proxy  Statement for the 2003 Annual Meeting of Stockholders
(Part III)
<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

     HIGH COUNTRY BANCORP,  INC. High Country Bancorp,  Inc. (the "Company") was
incorporated  under the laws of the  State of  Colorado  in August  1997 for the
purpose of becoming a savings and loan holding  company for Salida  Building and
Loan  Association  which  changed its name to High  Country Bank (the "Bank") in
February 2000. On December 9, 1997,  the Bank  consummated  its conversion  from
mutual to stock form (the  "Conversion")  and the Company  completed its initial
public offering of common stock. The Company engages in no significant  activity
other than  investing  the  proceeds of the  offering  of Common  Stock which it
retained,  holding the stock of the Bank and operating the business of a savings
and loan association through the Bank. Accordingly, the information set forth in
this report,  including financial statements and related data, relates primarily
to the Bank and its subsidiaries.

     The  Company's  executive  offices  are located at 7360 West US Highway 50,
Salida, Colorado. Its telephone number is (719) 539-2516.

     HIGH  COUNTRY  BANK.  The  Bank  is a  federal  stock  savings  association
operating  through  offices  located  in the towns of  Salida,  Buena  Vista and
Leadville,  Colorado and serving  Chaffee,  Lake,  Western  Fremont and Saguache
Counties in Colorado.  The Bank also maintains a loan production office in Canon
City,  Colorado.  The Bank was  chartered  in 1886 as the first  state-chartered
building and loan association in Colorado.  The Bank received federal  insurance
of its  deposit  accounts  and  became a member  of the  Federal  Home Loan Bank
("FHLB") of Topeka in 1937. The Bank became a federally chartered association on
August  16,  1993  under  the name of  Salida  Building  and  Loan  Association.
Effective   December  9,  1997,  the  Bank  became  a  stock  savings  and  loan
association.  The Company's  subsidiary,  High Country Title and Escrow Company,
offers title  insurance  and escrow  closing  services  within the Bank's market
area.  At June 30,  2003,  the Bank had total  assets of $187.4  million,  loans
receivable  (net) of  $152.6  million,  total  deposits  of $129.2  million  and
stockholders' equity of $17.7 million.

     Historically, the Bank has operated as a traditional savings institution by
emphasizing the origination of loans secured by one- to four-family  residences.
Since fiscal 1996,  the Bank has  significantly  increased  its  origination  of
consumer,  commercial business and commercial real estate loans, including loans
for the  purchase  and  development  of raw land,  most of which loans have been
originated in its market area.

     The Bank is subject to  examination  and  comprehensive  regulation  by the
Office of Thrift  Supervision  ("OTS"),  and the  Bank's  savings  deposits  are
insured  up to  applicable  limits by the  Savings  Association  Insurance  Fund
("SAIF"),  which is administered by the Federal  Deposit  Insurance  Corporation
("FDIC").  The Bank is a member of and owns capital stock in the FHLB of Topeka,
which  is one of 12  regional  banks  in the FHLB  System.  The Bank is  further
subject to regulations  of the Board of Governors of the Federal  Reserve System
(the "Federal  Reserve Board")  governing  reserves to be maintained and certain
other matters.  Regulations significantly affect the operations of the Bank. See
"-- Regulation of the Bank."

     The Bank's  executive  offices  are  located  at 7360 West US  Highway  50,
Salida, Colorado 81201-0309 and its main telephone number is (719) 539-2516.

     LENDING ACTIVITIES

     GENERAL. The Bank's loan portfolio, net, totaled $152.6 million at June 30,
2003, representing 81.46% of total assets at that date.  Substantially all loans
are originated in the market area. At June 30, 2003, $64.9 million,  or 42.55%of
the Bank's gross loan portfolio  consisted of one- to  four-family,  residential
mortgage  loans.  Construction  loans of residential  real estate and commercial
real estate were $12.7 million or 8.30% of the banks gross loan portfolio. Other
loans secured by real estate include commercial real estate loans which amounted
to $37  million  or  24.30%  of the  gross  loan  portfolio  and  land  and land
development  loans,  which  amounted to $9.0  million or 5.89% of the gross loan
portfolio at June 30, 2003. The Bank also originates  commercial  business loans
and  consumer

                                       2
<PAGE>

loans,  most of which are  automobile  loans.  At June 30, 2003,  consumer loans
totaled $11.2  million,  or 7.34% of the gross loan  portfolio,  and  commercial
business loans totaled $22.0 million or 14.39% of the gross loan portfolio.

     LOAN  PORTFOLIO  COMPOSITION.  Set forth below is selected data relating to
the  composition  of the  Bank's  loan  portfolio  by type of loan at the  dates
indicated.  At June 30, 2003, the Bank had no  concentrations of loans exceeding
10% of total loans other than as disclosed below.

                                                  At June 30,
                                 --------------------------------------------
                                          2003                    2002
                                 --------------------    --------------------
                                  Amount          %       Amount          %
                                 --------       -----    --------       -----
                                               (Dollars in thousands)
Mortgage Loans:
  One- to four-family ........   $ 64,955       42.55%   $ 59,809       41.58%
  Commercial .................     37,127       24.32      35,549       24.71
  Construction ...............     12,671        8.30       9,412        6.54
  Land and land development ..      8,994        5.89      11,244        7.82
                                 --------      ------    --------      ------
     Total mortgage loans ....    123,747       81.06     116,014       80.65
                                 --------      ------    --------      ------
Consumer loans ...............     11,205        7.34      13,677        9.51
Loans on savings accounts ....        799        0.52         767        0.53
Commercial loans .............     21,961       14.39      18,611       12.94
Other loans ..................        403        0.26          59        0.04
                                 --------      ------    --------      ------
     Total loans .............    158,115      103.58     149,128      103.67
                                 --------      ------    --------      ------

Less:
  Undisbursed loans in process      3,249        2.13       3,195        2.22
  Deferred fees and discounts         703        0.46         611        0.42
  Allowance for losses .......      1,508        0.99       1,485        1.03
                                 --------       -----    --------       -----
Loan portfolio, net ..........   $152,655      100.00%   $143,837      100.00%
                                 ========      ======    ========      ======

                                       3
<PAGE>

     LOAN MATURITY SCHEDULE.  The following table sets forth certain information
at June 30, 2003  regarding the dollar amount of mortgage  loans maturing in the
Bank's portfolio based on their contractual terms to maturity.

                                            Due after
                            Due during      1 through       Due after
                          the year ending  5 years after  5 years after
                           June 30, 2003  June 30, 2003  June 30, 2003   Total
                           -------------  -------------  -------------   -----
                                                  (In thousands)

Mortgage loans:
  One-to-four-family .........   $ 3,655      $ 5,927       55,373      $64,955
  Commercial .................     7,841        5,901       23,385       37,127
  Construction ...............    12,671            0            0       12,671
  Land and land development...     2,305        3,819        2,870        8,994
                                 -------      -------      -------     --------
    Total ....................   $26,472      $15,647      $81,628     $123,747
                                 =======      =======      =======     ========


     The next  table  sets  forth at June 30,  2003,  the  dollar  amount of all
mortgage  loans which have  predetermined  interest  rates and have  floating or
adjustable interest rates.

                               Predetermined      Floating or
                                  Rates         Adjustable Rates
                              --------------    ----------------
                                       (In thousands)

Mortgage loans:
  One-to four-family ..........  $ 48,790         $ 16,165
  Commercial ..................  $ 35,019         $  2,108
  Construction ................  $ 12,671         $      0
  Land and land development....  $  6,890         $  2,104
                                 --------         --------
    Total .....................  $103,370         $ 20,377
                                 ========         ========

     Scheduled  contractual  principal  repayments  of loans do not  reflect the
actual life of such assets. The average life of loans is substantially less than
their contractual terms because of prepayments. In addition, due-on-sale clauses
on loans generally give the Bank the right to declare a loan immediately due and
payable in the event,  among  other  things,  that the  borrower  sells the real
property  subject to the mortgage.  The average life of mortgage  loans tends to
increase when current mortgage loan market rates are  substantially  higher than
rates on existing mortgage loans and, conversely, decrease when current mortgage
loan market rates are substantially lower than rates on existing mortgage loans.

     LOAN FEES AND  SERVICING.  The Bank receives  fees in connection  with loan
applications, late payments and for miscellaneous services related to its loans.
The Bank also charges a fee on loan originations generally 1.00% to 2.00% of the
principal balance.  As of June 30, 2003, the Bank serviced $2.9 million in loans
for the Federal Home Loan Mortgage Corporation ("FHLMC").

     ONE- TO FOUR-FAMILY  REAL ESTATE LOANS. The Bank's primary lending activity
consists  of the  origination  of  loans  secured  by  owner-occupied,  one-  to
four-family residential properties where the majority are located in its primary
market area.  At June 30, 2003,  $65.0  million,  or 42.55%,  of the Bank's loan
portfolio  consisted  of  loans  secured  by  one-  to  four-family  residential
properties,  of which $16.2  million,  or 24.96%,  carried  adjustable  interest
rates.  The Bank  estimates that the average size of the  residential  mortgages
that it currently originates is $150,000.

     The Bank  originates  both  fixed-rate  mortgage loans and  adjustable-rate
mortgage  loans  ("ARMs").  For the year ended June 30, 2003, the Bank increased
ARM originations  significantly  through  competitive pricing in comparison with
fixed-rate  mortgage  loans.  The  one- to  four-family  residential  ARM  loans
increased from $14.0 million at June 30, 2002 to $16.2 million at June 30, 2003.
Most fixed-rate  mortgage loans are originated for terms of 15 or 30 years. ARMs
are originated for terms of up to 30 years.  The Bank's ARMs have interest rates
that adjust every year, with a maximum  adjustment of two percentage  points for
any adjustment period and up to six percentage points over the life of the loan.
These  loans are  indexed  to the rate on  one-year  U.S.  Treasury  securities,

                                       4
<PAGE>

adjusted  to a  constant  maturity.  The  current  margin  is two  and  one-half
percentage  points.  Historically,  all loans  originated  by the Bank have been
retained in the Bank's loan  portfolio.  The Bank began selling new loans to the
FHLMC in April 1999.  For the years ended June 30, 2003 and 2002,  the Bank sold
fixed-rate loans of $65.7 million and $50.9 million, respectively, to the FHLMC.

     The Bank's lending policies generally limit the maximum loan-to-value ratio
on residential mortgage loans to a maximum of 80% of the lesser of the appraised
value of the  underlying  property or its  purchase  price.  For those few loans
where the loan-to-value  ratio exceeds 80%, the Bank generally  requires private
mortgage insurance.

     The  retention  of ARMs in portfolio  helps  reduce the Bank's  exposure to
increases in interest rates.  There are,  however,  unquantifiable  credit risks
resulting from potential  increased  costs to the borrower as a result of upward
repricing of ARMs. It is possible that during periods of rising  interest rates,
the risk of  default  on ARMs  may  increase  due to the  upward  adjustment  of
interest  costs to the  borrower.  The Bank does not  originate  ARM loans which
provide for negative amortization.  Although ARMs allow the Bank to increase the
sensitivity of its asset base to changes in interest  rates,  the extent of this
interest  sensitivity  is limited by the  periodic and  lifetime  interest  rate
ceilings contained in ARM contracts.  In addition,  since ARM interest rates can
be  adjusted  no more  frequently  than  annually,  the yield on the  Bank's ARM
portfolio  does not  adjust as rapidly as market  interest  rates.  Accordingly,
there  can  be  no  assurance  that  yields  on  the  Bank's  ARMs  will  adjust
sufficiently to compensate for increases in its cost of funds.

     The Bank also  originates  second  mortgage  loans and home equity lines of
credit primarily for its existing one- to four-family first mortgage  customers.
At June 30,  2003,  $9.8  million  or 6.19% of the Bank's  gross loan  portfolio
consisted  of second  mortgage  loans and home  equity  lines of credit.  Second
mortgage loans are generally underwritten on a fixed-rate basis with terms of up
to 15 years and are  usually  fully  amortized  over the term of the loan.  Home
equity loans are  underwritten  with terms of 20 years with an  adjustable  rate
based on prime.  Second mortgages and home equity loans are generally subject to
an 80%  combined  loan-to-value  limitation,  including  all  other  outstanding
mortgages or liens.

     CONSTRUCTION  LOANS.  The Bank offers  construction  financing to qualified
borrowers for construction primarily of single-family residential properties and
to qualified  borrowers  for  construction  of commercial  properties.  The Bank
provides  financing  to one  builder for the  construction  of no more than four
homes  at a  time.  Construction  loans  are  generally  limited  to  a  maximum
loan-to-value  ratio  of 75% of  the  appraised  value  of  the  property  on an
"as-completed"   basis.   The  Bank  attempts  to  structure   its   residential
construction  loans so that they convert to a permanent  loan.  Loans to finance
the construction of residential property on a speculative basis are offered. The
Bank limits the  origination of  construction  loans to borrowers and developers
with whom the Bank has had substantial  prior  experience due to the significant
time and other risks  associated with  originating  and monitoring  construction
loans.

     Loan proceeds are disbursed during the construction  phase (a maximum of 12
months)  according  to a  draw  schedule  based  on  the  stage  of  completion.
Construction  loans are  underwritten on the basis of the estimated value of the
property as completed and loan-to-value  ratios must conform to the requirements
for the permanent loan. At June 30, 2003, $12.7 million, or 8.30%, of the Bank's
gross loan portfolio consisted of construction loans to fund the construction of
one- to four-family properties and commercial  properties.  Approximately 80% of
all construction  loans originated by the Bank convert into permanent loans upon
completion of the construction phase.

     Construction  financing  generally is considered to involve a higher degree
of risk of loss than long-term financing on improved, occupied real estate. Risk
of loss on a  construction  loan is  dependent  largely upon the accuracy of the
initial  estimate of the  property's  value at  completion  of  construction  or
development and the estimated cost (including interest) of construction.  During
the  construction  phase,  a number of factors  could  result in delays and cost
overruns. If the estimate of construction cost proves to be inaccurate, the Bank
may be required  to advance  funds  beyond the amount  originally  committed  to
permit completion of the development.  If the estimate of the value proves to be
inaccurate, the Bank may be confronted, at or prior to the maturity of the loan,
with a project having a value which is  insufficient  to assure full  repayment.
The ability of a developer to sell  developed  lots or completed  dwelling units
will depend on, among other things, demand, pricing,  availability of comparable
properties and economic conditions. The Bank has sought to minimize this risk by
limiting  construction lending to

                                       5
<PAGE>

qualified  borrowers in the Bank's market area, limiting the aggregate amount of
outstanding   construction  loans  and  imposing  a  lower  loan-to-value  ratio
requirement than required for one- to four-family mortgage loans.

     LAND AND LAND  DEVELOPMENT  LOANS.  The Bank originates land loans to local
developers for the purpose of developing the land (i.e., roads, sewer and water)
for sale for building  sites.  Such loans are secured by a lien on the property,
are generally  limited to 70% of the developed value of the secured property and
are typically  made for a period of one-year,  renewable  based on  negotiations
with the Bank.  Most land  development  loans are  expected to be fully paid off
five years after the  original  date of the loan.  The Bank  generally  requires
semi-annual  interest  payments  during the term of the land loan. The amount of
funds  available  under the Bank's land  development  loans  usually  include an
amount from which the  borrower can pay the stated  interest  due thereon  until
completion  of the loan term.  The  principal of the loan is reduced as lots are
sold and liens released.  The majority of the Bank's land development  loans are
secured by property  located in its primary  market area. In addition,  the Bank
obtains  personal  guarantees  from its borrowers and  originates  such loans to
developers  with whom it has  established  relationships.  At June 30, 2003, the
Bank had $9.0 million of land development  loans, which constituted 5.69% of the
gross loan portfolio at such date. This total includes one loan of $1.9 million,
which is the Bank's largest  outstanding  loan. The Bank originated $4.0 million
and $5.1 million in land  development  loans during fiscal 2003 and fiscal 2002,
respectively.  The 2003 fiscal year originations included land development loans
of $1.4 million and $1.2 million.  Land  development  loans generally  involve a
higher degree of risk than residential  mortgage lending in that there are large
loan  balances to single  borrowers,  and the initial  estimate of the  property
value  at  completion  may  be  inaccurate  due to  market  variations  and  the
difficulty  in  selling  lots  for  home  building.  The  success  of such  land
development  projects is sensitive to changes in supply and demand conditions in
the local housing market, as well as regional and economic conditions generally.
The Bank also grants loans secured by raw land such as cattle  ranching  acreage
and  acreage  or  lots  for   residential   construction   loans.   The  maximum
loan-to-value is generally 65%.

     COMMERCIAL REAL ESTATE LOANS. At June 30, 2003, loans secured by commercial
real estate  properties  totaled $37.1 million,  and  represented  24.32% of the
Bank's  gross  loan  portfolio.  Commercial  real  estate  loans are  secured by
ranches, motels, small office buildings,  retail stores and other nonresidential
property.  Some of the Bank's  commercial  real  estate  loans are made to local
businesses  connected  to  the  tourism  and  recreational   industries,   which
predominate  in the Bank's  primary  market area.  At June 30, 2003,  the Bank's
three largest  commercial real estate loans over one million dollars were a $1.4
million  loan  secured by two full  service gas  stations,  a $1.3  million loan
secured by a motel in  Gunnison,  Colorado  and a $1.1 million loan secured by a
motel in Salida,  Colorado.  Most of the Bank's commercial real estate loans are
secured by property  located  within the Bank's market area and were current and
performing at June 30, 2003.

     Commercial  real  estate  loans  are  underwritten  on  either  a fixed  or
adjustable-rate  basis.  Commercial  real estate loans  generally have a maximum
20-year  amortization,  with a three  to  five  year  maturity.  Adjustable-rate
commercial and  multi-family  mortgages are indexed to the prime rate and adjust
on an annual  basis.  Loan-to-value  ratios  usually  do not  exceed  75% of the
appraised  value of the underlying  property.  It is the Bank's policy to obtain
personal guarantees from all principals  obtaining commercial real estate loans.
In assessing  the value of such  guarantees,  the Bank reviews the  individuals'
personal financial  statements,  credit reports, tax returns and other financial
information.

     Commercial  real  estate  lending  entails  significant   additional  risks
compared to residential  property  lending.  These loans typically involve large
loan balances to single  borrowers or groups of related  borrowers.  The payment
experience on such loans  typically is dependent on the successful  operation of
the real estate project or business.  These risks can be significantly  affected
by business  conditions and by supply and demand conditions in the market,  and,
as such, may be subject to a greater extent to adverse conditions in the economy
generally.  To minimize  these  risks,  the Bank  generally  limits this type of
lending  to its  market  area and to  borrowers  with  which it has  substantial
experience or who are otherwise well known to management.

     With certain limited exceptions,  the maximum amount that the Bank may lend
to any borrower  (including certain related entities of the borrower) at any one
time  may  not  exceed  15%  of  the  unimpaired  capital  and  surplus  of  the
institution,  plus an additional 10% of unimpaired capital and surplus for loans
fully secured by readily  marketable  collateral.  At June 30, 2003, the maximum
amount that the Bank could have  loaned to any one  borrower  without  prior OTS
approval was approximately $2.9 million. At June 30, 2003, the largest aggregate
amount of

                                       6
<PAGE>

loans  that the Bank had  outstanding  to any one  borrower  and  their  related
interests was $2.5 million and consisted of two loans,  including a $1.9 million
land development loan and a $605 thousand single family  construction  loan. The
largest  single  loan  outstanding  was a $1.9  million  loan  secured by a land
development property, which is discussed above.

     COMMERCIAL  BUSINESS LOANS. At June 30, 2003, the Bank had $22.0 million in
commercial  business  loans which  represented  14.39% of the Bank's  gross loan
portfolio. The Bank is permitted to invest up to 20% of its assets in commercial
loans. The Bank's  commercial  business lending  activities are directed towards
small  businesses  located in its market area,  including those connected to the
tourism industry, such as recreational vehicle ("RV") dealers, rafting companies
and other tourist-related businesses.  Generally, the Bank's commercial business
loans are secured by assets such as inventory, equipment or other assets and are
guaranteed by the  principals of the business.  From time to time,  the Bank has
engaged in dealer  floor-plan  lending with a limited number of dealerships with
which the Bank has had substantial experience. At June 30, 2003, the Bank had an
auto dealer  floor-plan  loan of $1.8 million and an equipment loan of $1.7 to a
heavy equipment  contracting company.  Commercial business loans usually carry a
fixed-rate and generally have a term for a maximum of five years.

     The Bank  underwrites  its  commercial  business  loans on the basis of the
borrower's  cash flow and ability to service the debt from earnings  rather than
on the basis of the  underlying  collateral  value,  and seeks to structure such
loans to have more than one source of  repayment.  The  borrower  is required to
provide  the Bank  with  sufficient  information  to allow  the Bank to make its
lending determination.  In most instances, this information consists of at least
three years of  financial  statements,  a  statement  of  projected  cash flows,
current financial information on any guarantor and any additional information on
the collateral.

     CONSUMER LOANS.  The Bank's consumer loans,  which totaled $12.4 million or
8.12% of the gross loan  portfolio at June 30, 2003,  includes  primarily  loans
secured by deposit  accounts,  automobile loans and other personal loans,  which
represented  52%,  7.34%and .26% of its total loan portfolio,  respectively,  at
June 30, 2003. The Bank also makes RV and boat loans,  equipment  loans and home
improvement loans pursuant to its consumer lending authority.

     The Bank makes deposit account loans up to 95% of the  depositor's  account
balance.  The interest  rate is normally 2.0% above the rate paid on the account
and the  account  must be pledged  as  collateral  to secure  the loan.  Savings
account  loans are  secured by demand  notes and  interest is due on a quarterly
basis. The Bank's  automobile  loans are generally  underwritten in amount up to
the purchase  price of the automobile or 80% of the retail value as published by
the National Automobile Dealers  Association.  The terms of such loans generally
do not exceed 60 months and vary  depending  on the age of the vehicle  securing
the loan. The Bank usually  requires the borrower to insure the automobile under
a policy listing the Bank as loss payee. The Bank also makes unsecured  personal
loans.

     The Bank intends to continue to emphasize  the  origination  of  commercial
business loans and consumer loans.  Commercial business loans and consumer loans
entail greater risk than do residential mortgage loans, particularly in the case
of consumer loans or commercial business loans which are unsecured or secured by
rapidly depreciable assets such as automobiles and inventory. In such cases, any
repossessed collateral for a defaulted consumer loan or commercial business loan
may not provide an adequate source of repayment of the outstanding  loan balance
as a result of the  greater  likelihood  of damage,  loss or  depreciation.  The
remaining  deficiency  often does not  warrant  further  substantial  collection
efforts  against the  borrower.  In addition,  collections  are dependent on the
borrower's  continuing  financial  stability,  and thus are  more  likely  to be
adversely  affected by job loss,  divorce,  illness or personal  bankruptcy  for
consumer  loans,  and  economic   conditions  for  commercial   business  loans.
Furthermore,  the  application  of various  federal  and state  laws,  including
federal and state bankruptcy and insolvency laws, may limit the amount which can
be recovered on such loans. Such loans may also give rise to claims and defenses
by a borrower against an assignee of such loans such as the Bank, and a borrower
may be able to assert  against such  assignee  claims and defenses  which it has
against the seller of the underlying  collateral.  These  additional risks could
result  in the Bank  experiencing  increased  delinquencies,  thereby  incurring
additional losses from its consumer and commercial  business lending activities.
The Bank tightens its  underwriting  standards  accordingly  with  deteriorating
economic conditions.

     LOAN SOLICITATION AND PROCESSING.  The Bank's mortgage loans have generally
been  originated by its loan  officers,  branch  managers and senior  management
officials.  Loan  originations are obtained from a number of

                                       7
<PAGE>

sources,  including existing and past customers,  members of the local community
and  established  builders and  realtors  within the Bank's  market  area.  Upon
receipt of a loan application from a prospective borrower,  the Bank reviews the
information  provided and makes an initial  determination  as to whether certain
basic  underwriting  standards  regarding  the type of property,  debt-to-income
ratios and other credit  concerns are  satisfied.  A credit  report,  employment
history and other  evidence is obtained to verify certain  specific  information
relating to the loan applicant's  employment,  income and credit  standing.  For
real estate loans,  an appraisal of the property  intended to secure the loan is
undertaken by an  independent  appraiser  approved by the Bank. It is the Bank's
policy to obtain  appropriate  insurance  protection  on all real  estate  first
mortgage loans and to obtain a title  insurance  which insures that the property
is free of  prior  encumbrances.  The  borrower  must  also  obtain  paid  flood
insurance  when the  property is located in a flood plain as  designated  by the
Federal Government.  It is the Bank's policy to record a lien on the real estate
securing the loan. Borrowers generally are required to advance funds for certain
items such as real estate taxes, flood insurance and private mortgage insurance,
when applicable.

     Residential  mortgage loans in amounts of up to $322,700 may be approved by
two members of the Bank's Loan  Committee.  Residential  mortgage  loans between
$322,700  and  $500,000  may be  approved  by three  members of the Bank's  Loan
Committee.  Residential  mortgage  loans over $500,000 must be approved by three
members of the Bank's Loan Committee and the majority of the Board of Directors.

     Consumer  loans up to $30,000 may be approved by the Consumer Loan Manager.
Branch  Managers  may  approve  loans up to  $10,000.  Two  members  of the Loan
Committee may approve loans  between  $30,000 and $100,000.  Four members of the
Loan Committee may approve consumer loans over $100,000.

     Commercial real estate and non-mortgage commercial loans up to $500,000 may
be approved by three members of the Loan Committee.  Loans in excess of $500,000
must be approved by the majority of the Board of Directors.  The Bank's approval
process  also  contains  conditions  of  approval  for loans over  $100,000  and
$500,000 in the aggregate.

     The Bank's  Loan  Committee  consists  of the  various  department  lending
officers, senior management, as well as the Board of Directors.

     Loan applicants are promptly notified in writing of the Bank's decision. If
the loan is approved,  the notification  will provide that the Bank's commitment
will generally terminate within 30 days of the approval.  It has been the Bank's
experience that substantially all approved loans are funded.

     LOAN ORIGINATIONS, PURCHASES AND SALES. Historically, most loans originated
by the Bank have been held in the Bank's portfolio until maturity. On an ongoing
basis,  the Bank sells new  fixed-rate  single-family  residential  loans to the
FHLMC.  The sales to the FHLMC were done to increase fee income,  lower interest
rate risk and compete with mortgage bankers.

                                       8
<PAGE>

     The  following  table sets forth  certain  information  with respect to the
Bank's loan origination  activity for the periods indicated.  The Bank purchased
one loan in the 2003 fiscal year.

                                                For the year ended June 30,
                                                ---------------------------
                                                  2003             2002
                                                ---------        ---------
                                                      (In thousands)

Net loans, beginning of period ...............  $ 143,837        $ 136,834


Origination by type:
--------------------

Mortgage loans:
  One- to four-family ........................    115,128           90,401
  Commercial .................................      7,706           11,837
  Land development ...........................      4,041            5,089
Consumer loans ...............................      7,115            9,251
Loans on savings accounts ....................        622              822
Commercial loans .............................     12,422            9,140
    Total loans originated ...................    147,034          126,540
Loans purchased ..............................        325               50
Loans sold ...................................    (66,980)         (50,882)
                                                ---------        ---------
Repayments ...................................    (71,162)         (68,414)
                                                ---------        ---------
Decrease (increase) in other items, net ......       (399)            (291)
                                                ---------        ---------
    Net increase in loans receivable, net.....      8,818            7,003
                                                ---------        ---------
Net loans, end of period .....................  $ 152,655        $ 143,837
                                                =========        =========


     NONPERFORMING  LOANS AND OTHER PROBLEM ASSETS. It is management's policy to
continually  monitor its loan portfolio to anticipate and address  potential and
actual  delinquencies.  When a borrower  fails to make a payment on a loan,  the
Bank takes immediate  steps to have the delinquency  cured and the loan restored
to current status. Mortgage loans which are delinquent fifteen days incur a late
fee of 5.0% of principal and interest  due.  Consumer and Auto loans incur a $30
late fee for payments which are ten days past due. Commercial non-mortgage loans
that  are ten  days  delinquent  incur  a late  fee of 5% of the  principal  and
interest  due. As a matter of policy,  the Bank will contact the borrower  after
the loan has been delinquent 30 days. If payment is not promptly  received,  the
borrower is contacted  again,  and efforts are made to formulate an  affirmative
plan to cure the delinquency. Generally, after any loan is delinquent 90 days or
more,  formal legal proceedings are commenced to collect amounts owed. Loans are
placed  on  nonaccrual  status  if the loan  becomes  past due more than 90 days
unless such loans are well-secured  and in the process of collection.  Loans are
charged off when management concludes that they are uncollectible. See Note 1 of
Notes to Financial  Statements  included in the Company's  2003 Annual Report to
Stockholders.

     Real estate  acquired by the Bank as a result of  foreclosure is classified
as real estate acquired through  foreclosure until such time as it is sold. When
such property is acquired,  it is initially recorded at estimated fair value and
subsequently  at the lower of book value or fair value,  less estimated costs to
sell.  Costs relating to holding such real estate are charged  against income in
the current  period,  while costs  relating  to  improving  such real estate are
capitalized until a saleable  condition is reached.  Any required  write-down of
the loan to its fair value less  estimated  selling  costs upon  foreclosure  is
charged against the allowance for loan losses.

                                       9
<PAGE>


     The  following  table sets  forth  information  with  respect to the Bank's
nonperforming assets at the dates indicated.  Further, no loans were recorded as
restructured loans within the meaning of SFAS No. 15 at the dates indicated.

                                                At June 30,
                                             ---------------
                                              2003     2002
                                             ------   ------
                                              (In thousands)
Loans accounted for on a nonaccrual basis:
 Real estate:
    One- to four-family ..................   $   --   $   --
    Commercial ...........................       --       --
    Land development .....................       --       --
 Consumer ................................       --       63
 Commercial ..............................       --      257
 Other ...................................       --       --
                                             ------   ------
        Total ............................        0      320
                                             ------   ------

Accruing loans delinquent 90 days or more:
 Real estate:
    One- to four-family ..................   $  545   $  360
    Commercial ...........................    1,688      729
    Land development .....................       61      218
    Consumer .............................      134       --
    Commercial ...........................      524       --
    Other ................................        0       --
                                             ------   ------
        Total ............................    2,952    1,307
                                             ------   ------
            Total nonperforming loans ....    2,952    1,627
                                             ------   ------
Repossessed assets .......................      171       69
                                             ------   ------
Total nonperforming assets ...............   $3,123   $1,696
                                             ======   ======
Total nonperforming loans as a
  percentage of total net loans...........     2.05%    1.18%
                                             ------   ------
Total nonperforming assets as a
  percentage of total assets..............     1.67%    0.96%
                                             ======   ======

     At June 30, 2003, the Bank had $3.1 million in loans  outstanding that were
classified as nonperforming, of which $61 thousand were land loans, $1.7 million
were commercial real estate loans,  $524 thousand were  commercial  loans,  $545
thousand  were by one- to  four-family  loans and $88 thousand  were  automobile
loans. The largest nonperforming loan is a $735 thousand commercial purpose loan
secured by a single-family residence and vacant land.

     For the year ended June 2003,  the banks primary  lending area continued to
be affected by the severe drought and forest fires which negatively impacted the
2002 summer  season for the local tourist  economy.  Local  businesses  affected
included motels, rafting companies, recreational businesses, and retailers. Many
of these businesses experienced  significantly reduced sales in 2002. Due to the
poor tourist season in 2002, a number of these loans are currently classified as
non-performing.

     The Small Business  Administration declared this area eligible for disaster
relief loans and has helped many of the local businesses with low interest rate,
long term loans, as well as some grants. The Bank has been responsive to several
of the Bank's  borrowers  who were  affected by the  drought to  continue  their
business operations.

     Although  the 2003  tourist  season was much  improved,  it will take these
borrowers several years of normal business operations to improve. The Bank feels
that by working  with these  borrowers,  that  there is an  opportunity  for the
borrowers to repay the loans.

     Federal regulations  require savings  institutions to classify their assets
on the  basis  of  quality  on a  regular  basis.  An asset  meeting  one of the
classification  definitions  set forth  below may be  classified  and still be a

                                       10
<PAGE>

performing loan. An asset is classified as substandard if it is determined to be
inadequately  protected by the current retained  earnings and paying capacity of
the obligor or of the  collateral  pledged,  if any. An asset is  classified  as
doubtful if full collection is highly  questionable  or improbable.  An asset is
classified as loss if it is considered uncollectible, even if a partial recovery
could be expected  in the future.  The  regulations  also  provide for a special
mention designation, described as assets which do not currently expose a savings
institution  to a  sufficient  degree of risk to warrant  classification  but do
possess credit deficiencies or potential weaknesses deserving management's close
attention.  Such assets designated as special mention may include  nonperforming
loans consistent with the above definition.  Assets classified as substandard or
doubtful require a savings  institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings institution
must either establish a specific allowance for loss in the amount of the portion
of the asset classified loss, or charge off such amount.  Federal  examiners may
disagree with a savings institution's classifications.  If a savings institution
does not agree with an examiner's classification of an asset, it may appeal this
determination  to the OTS  Regional  Director.  The Bank  regularly  reviews its
assets   to   determine   whether   any   assets   require   classification   or
reclassification.  At June  30,  2003,  the  Bank had  $5.1  million  in  assets
classified as special mention, $7.0 million in assets classified as substandard,
$87 thousand in assets  classified as doubtful and no assets classified as loss.
The special mention  classification  is primarily used by management as a "watch
list" to monitor loans that exhibit any potential  deviation in performance from
the contractual terms of the loan.

     ALLOWANCE FOR LOAN LOSSES.  In originating  loans, the Bank recognizes that
credit  losses  will be  experienced  and that the risk of loss will vary  with,
among other things,  the type of loan being made,  the  creditworthiness  of the
borrower over the term of the loan, general economic conditions and, in the case
of a secured loan, the quality of the security for the loan. It is  management's
policy to maintain an adequate  allowance  for loan losses based on, among other
things,  the  Bank's  and  the  industry's   historical  loan  loss  experience,
evaluation of economic  conditions,  regular reviews of  delinquencies  and loan
portfolio quality and evolving standards imposed by federal bank examiners.  The
Bank  increases its allowance  for loan losses by charging  provisions  for loan
losses  against  the  Bank's  income.  During  the year  ended June 30, the Bank
established  a provision  for loan losses of $577  thousand in order to maintain
the level of the allowance for loan losses at approximately  $1.5 million as the
Bank had $554 thousand of net charge-offs during the year.

     Management  will continue to actively  monitor the Bank's asset quality and
allowance  for loan  losses.  Management  will  charge off loans and  properties
acquired in settlement of loans against the  allowances for losses on such loans
and such properties when  appropriate and will provide  specific loss allowances
when  necessary.  Although  management  believes  it uses the  best  information
available to make  determinations  with respect to the allowances for losses and
believes such  allowances are adequate,  future  adjustments may be necessary if
economic  conditions differ  substantially  from the economic  conditions in the
assumptions used in making the initial determinations.

     The Bank's methodology for establishing the allowance for loan losses takes
into consideration  probable losses that have been identified in connection with
specific  assets as well as  losses  that  have not been  identified  but can be
expected to occur.  Management conducts regular reviews of the Bank's assets and
evaluates  the  need to  establish  allowances  on the  basis  of  this  review.
Allowances are  established by the Board of Directors on a quarterly basis based
on an  assessment of risk in the Bank's  assets  taking into  consideration  the
composition and quality of the portfolio, delinquency trends, current charge-off
and loss experience,  loan concentrations,  the state of the real estate market,
regulatory reviews conducted in the regulatory  examination process and economic
conditions generally.  Specific reserves will be provided for individual assets,
or portions of assets,  when ultimate  collection  is  considered  improbable by
management  based on the current payment status of the assets and the fair value
of the security.  At the date of  foreclosure  or other  repossession,  the Bank
would  transfer  the  property to real estate  acquired in  settlement  of loans
initially at the lower of cost or estimated fair value and  subsequently  at the
lower of book value or fair value less estimated  selling costs.  Any portion of
the  outstanding  loan  balance in excess of fair value less  estimated  selling
costs  would be charged  off against the  allowance  for loan  losses.  If, upon
ultimate disposition of the property, net sales proceeds exceed the net carrying
value of the property, a gain on sale of real estate would be recorded.

     The Bank's policy includes an analysis of individual  commercial loans. The
loans analyzed  include all commercial  loans of $100,000 or greater  secured by
business  assets other than real  estate;  all  commercial  real estate loans of
$500,000 or greater;  all land development loans of $500,000 or greater; and all
unsecured  loans and loans

                                       11
<PAGE>

secured by vehicles $100,000 or greater. Once the loans to be analyzed have been
identified,  an impairment  test on each  individual loan is conducted using the
fair value of collateral less costs to sell method. High Country Bank utilizes a
comprehensive  worksheet  for  each  loan  being  reviewed  which  includes  the
description of why the loan was selected for individual  review, the measurement
calculation,  a comparison to the current loan balance and the rationale for the
impairment  measurement  technique used.  Such method  includes  determining the
value of the collateral by use of appraisals,  valuation assumptions,  financial
statements, and tax returns.  Furthermore, the bank will consider the supporting
rational  for  adjustments  for  quality,  expertise  and  independence  to  the
appraisal valuations, financial statements and current economic conditions.

     The following table sets forth an analysis of the Bank's allowance for loan
losses for the periods indicated.

                                     Year Ended June 30,
                                     ------------------
                                      2003       2002
                                     -------    -------
                                    (Dollars in thousands)

Balance at beginning of period ...   $ 1,485    $ 1,348
                                     -------    -------
Charge-offs:
  Real estate:
    One- to four-family ..........       (22)        --
    Multi-family .................                   --
    Non-residential ..............      (226)        --
    Construction .................                   --
  Consumer .......................      (142)       (78)
  Commercial .....................      (175)       (27)
                                     -------    -------
                                        (565)      (105)
                                     -------    -------
Recoveries .......................        11          6
                                     -------    -------
Net recoveries (charge-offs) .....      (554)       (99)
                                     -------    -------
Additions charged to operations ..       577        236
                                     -------    -------
Balance at end of period .........   $ 1,508    $ 1,485
                                     =======    =======
Allowance for loan losses
  to total nonperforming loans at
  end of period...................     51.08%     91.27%
                                     =======    =======
Allowance for loan losses to
  net loans at end of period......      1.02%      1.03%
                                     =======    =======

                                       12
<PAGE>

     The  following  table  allocates  the  allowance  for loan  losses  by loan
category  at the  dates  indicated.  The  allocation  of the  allowance  to each
category is not  necessarily  indicative  of future losses and does not restrict
the use of the allowance to absorb losses in any category.

                                                    June 30,
                                   -------------------------------------------
                                          2003                   2002
                                   --------------------   --------------------
                                            Percent of           Percent of
                                             Loans in             Loans in
                                            Category to          Category to
                                   Amount   Total Loans   Amount  Total Loans
                                   ------   -----------   ------  -----------
                                            (Dollars in thousands)

Mortgage loans:
    One-to-four-family .........   $   60      42.55%    $   61      41.58%
    Commercial .................      445      24.32        164      24.71
    Construction ...............        0       8.30          0       6.54
    Land and land development...       33       5.89          8       7.82
Consumer loans .................      241       7.34        275       9.51
Loans on Savings Accounts ......        0        .52          0        .53
Commercial loans ...............      729      14.39        977      12.94
Other Loans ....................        0        .26          0        .04
                                   ------                ------
                                   $1,508                $1,485
                                   ======                ======

INVESTMENT ACTIVITIES

     GENERAL.   The  Bank  is  permitted  under  federal  law  to  make  certain
investments,  including  investments  in  securities  issued by various  federal
agencies and state and  municipal  governments,  deposits at the FHLB of Topeka,
certificates  of deposit in federally  insured  institutions,  certain  bankers'
acceptances  and  federal  funds.  It  may  also  invest,   subject  to  certain
limitations,  in  commercial  paper rated in one of the two  highest  investment
rating categories of a nationally  recognized credit rating agency,  and certain
other types of corporate debt securities and mutual funds.

     The Bank makes  investments  in order to manage  cash flow,  diversify  its
assets,  obtain yield, for  asset/liability  management  purposes and to satisfy
certain requirements for favorable tax treatment.  The investment  activities of
the Bank consist  primarily of  investments  in  mortgage-backed  securities and
other investment securities,  consisting primarily of interest-bearing  deposits
and  securities  issued  by  the  U.S.  Treasury.  Typical  investments  include
federally sponsored agency mortgage  pass-through and federally sponsored agency
and mortgage-related securities. Investment and aggregate investment limitations
and credit quality  parameters of each class of investment are prescribed in the
Bank's  investment  policy.  The  Bank  performs  analyses  on  mortgage-related
securities  prior to purchase  to  determine  the impact on earnings  and market
value under various  interest rate and prepayment  conditions.  Under the Bank's
current investment policy,  securities  purchases must be approved by the Bank's
Investment Committee. The Board of Directors reviews all securities transactions
on a monthly basis.

     Pursuant  to SFAS  No.  115,  the  Bank  had no  securities  classified  as
"available for sale" at June 30, 2003 and 2002.  Securities  designated as "held
to maturity"  are those assets which the Bank has the ability and intent to hold
to  maturity.  Upon  acquisition,  securities  are  classified  as to the Bank's
intent,  and a sale  would  only be  affected  due to  deteriorating  investment
quality.  The held to maturity investment  portfolio is not used for speculative
purposes  and is  carried  at  amortized  cost.  In the  event  the  Bank  sells
securities  from this  portfolio  for other than  credit  quality  reasons,  all
securities within the investment portfolio with matching  characteristics may be
reclassified as assets available for sale.  Securities  designated as "available
for sale" are those  assets which the Bank may not hold to maturity and thus are
carried at market  value with  unrealized  gains or losses,  net of tax  effect,
recognized in retained earnings.

     INTEREST BEARING DEPOSITS.  Interest bearing deposits represent deposits at
the FHLB of Topeka.  At June 30, 2003, the Bank's deposits included $5.8 million
in overnight  deposits and $1.7 million in an  interest-earning

                                       13
<PAGE>

demand deposit account. In the upcoming months, these funds may be used for FHLB
advance  repayment,  seasonal  deposit  withdrawals,  loan demand and investment
purchases.

     MORTGAGE-BACKED   AND  RELATED   SECURITIES.   Mortgage-backed   securities
represent a participation  interest in a pool of  single-family  or multi-family
mortgages,  the  principal  and  interest  payments on which are passed from the
mortgage  originators  through   intermediaries  that  pool  and  repackage  the
participation  interest in the form of securities to investors such as the Bank.
Such intermediaries include quasi-governmental agencies such as the Federal Home
Loan Mortgage Corporation  ("FHLMC"),  the Federal National Mortgage Association
("FNMA")  and  the  Government  National  Mortgage  Association  ("GNMA")  which
guarantee  the payment of principal  and  interest to investors  and from all of
whom  the  Bank  has  purchased  mortgage-backed   securities.   Mortgage-backed
securities  generally increase the quality of the Bank's assets by virtue of the
guarantees  that back them, are more liquid than  individual  mortgage loans and
may be used to collateralize borrowings or other obligations of the Bank.

     Mortgage-related  securities  typically  are issued with  stated  principal
amounts and the securities are backed by pools of mortgages that have loans with
interest  rates  that  are  within  a range  and have  similar  maturities.  The
underlying   pool  of  mortgages  can  be  composed  of  either   fixed-rate  or
adjustable-rate  mortgage  loans.   Mortgage-backed   securities  generally  are
referred to as mortgage participation certificates or pass-through certificates.
As a result,  the interest rate risk  characteristics  of the underlying pool of
mortgages, i.e., fixed-rate or adjustable-rate,  as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed  pass-through
security is equal to the life of the underlying mortgages.

     The actual maturity of a mortgage-backed security varies, depending on when
the  mortgagors  prepay or repay the  underlying  mortgages.  Prepayments of the
underlying  mortgages may shorten the life of the investment,  thereby adversely
affecting   its  yield  to  maturity  and  the  related   market  value  of  the
mortgage-backed  security.  The yield is based upon the interest  income and the
amortization  of the  premium  or  accretion  of  the  discount  related  to the
mortgage-backed security.  Premiums and discounts on mortgage-backed  securities
are amortized or accredited  over the estimated term of the  securities  using a
level  yield  method.   The  prepayment   assumptions   used  to  determine  the
amortization  period for premiums and  discounts  can  significantly  affect the
yield of the  mortgage-backed  security,  and  these  assumptions  are  reviewed
periodically  to reflect the actual  prepayment.  The actual  prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the
coupon  rate,  the  age of  the  mortgages,  the  geographical  location  of the
underlying  real estate  collateralizing  the  mortgages  and general  levels of
market  interest  rates.  The  difference  between  the  interest  rates  on the
underlying  mortgages and the prevailing mortgage interest rates is an important
determinant  in the rate of  prepayments.  During  periods of  falling  mortgage
interest rates, prepayments generally increase, and, conversely,  during periods
of rising mortgage interest rates, prepayments generally decrease. If the coupon
rate of the underlying  mortgage  significantly  exceeds the  prevailing  market
interest rates offered for mortgage loans,  refinancing  generally increases and
accelerates the prepayment of the underlying mortgages. Prepayment experience is
more difficult to estimate for adjustable-rate mortgage-backed securities.

     The Bank's  investment  securities  portfolio  consists  primarily of $10.2
million in mortgage-backed securities of which nearly all of them had adjustable
rates at June 30, 2003. The Bank makes such  investments in order to manage cash
flow,  mitigate interest rate risk,  diversify assets,  obtain yield, to satisfy
certain  requirements  for  favorable tax treatment and to satisfy the qualified
thrift  lender test.  See  "Regulation  of the Bank -- Qualified  Thrift  Lender
Test."

     The  following  table  sets  forth  the  carrying  value  of the  Company's
investment  securities  at the  dates  indicated.

                                     At June  30,
                                  -----------------
                                    2003      2002
                                  -------   -------
                                    (In thousands)

County bonds ..................   $   302   $   303
Interest-bearing deposits .....     7,492     8,590
Mortgage-backed securities ....    10,168    10,307
Federal Home Loan Bank stock...     2,422     2,422
                                  -------   -------
      Total ...................   $20,384   $21,622
                                  =======   =======

                                       14
<PAGE>

     The following  table sets forth  information  in the scheduled  maturities,
amortized  cost,  market values and average yields for the Company's  investment
portfolio at June 30, 2003.


<TABLE>
<CAPTION>
                                        One Year or Less       One to Five Years      Over Five Years     Total Investment Portfolio
                                        ----------------       -----------------      ---------------     --------------------------
                                               Weighted                 Weighted                Weighted                Weighted
                                       Book     Average       Book       Average      Book       Average      Book      Average
                                       Value     Yield        Value       Yield       Value       Yield      Value       Yield
                                       -----     -----        -----       -----       -----       -----      -----       -----
                                                                            (Dollars in thousands)

<S>                                   <C>          <C>        <C>          <C>        <C>          <C>       <C>          <C>
County bonds .......................  $   --        --%       $   202      3.38%      $   100      4.25%     $   302      3.67%
Interest-bearing deposits ..........   7,492      1.07             --        --            --        --        7,492      1.07
Mortgage-backed securities .........      --        --             --        --        10,168      4.00       10,168      4.00
Federal Home Loan Bank stock........      --        --             --        --         2,422      4.19        2,422      4.09
                                      ------                  -------                 -------                -------
  Total investment securities.......  $7,492                  $   202                 $12,690                $20,384      3.39
                                      ======                  =======                 =======                =======      ====
</TABLE>

DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS

     GENERAL.  Deposits are the primary  source of the Bank's funds for lending,
investment activities and general operational purposes. In addition to deposits,
the Bank derives funds from loan principal and interest  repayments,  maturities
of investment  securities and  mortgage-backed  securities and interest payments
thereon.  Although  loan  repayments  are a relatively  stable  source of funds,
deposit inflows and outflows are  significantly  influenced by general  interest
rates and money market conditions.  Borrowings may be used on a short-term basis
to compensate for reductions in the  availability  of funds, or on a longer term
basis for general operational  purposes.  The Bank has access to borrow from the
Federal Home Loan Bank of Topeka.

     DEPOSITS.  The Bank attracts  deposits  principally  from within its market
area by offering competitive rates on its deposit  instruments,  including money
market accounts, passbook savings accounts,  Individual Retirement Accounts, and
certificates  of deposit  which  range in  maturity  from three  months to eight
years. Deposit terms vary according to the minimum balance required,  the length
of time the funds must  remain on deposit  and the  interest  rate.  Maturities,
terms,  service  fees and  withdrawal  penalties  for its deposit  accounts  are
established  by the Bank on a periodic  basis.  The Bank reviews its deposit mix
and pricing on a weekly basis. In determining the characteristics of its deposit
accounts,  the Bank  considers  the rates  offered  by  competing  institutions,
lending  requirements,  growth goals and federal regulations.  The Bank does not
accept  brokered  deposits,  but does  accept  jumbo  deposits  from its regular
customers.

     The Bank  attempts to compete for deposits with other  institutions  in its
market  area by  offering  competitively  priced  deposit  instruments  that are
tailored  to the needs of its  customers.  Additionally,  the Bank seeks to meet
customers'  needs by providing  convenient  customer  service to the  community,
efficient staff and convenient hours of service. Substantially all of the Bank's
depositors are Colorado residents who reside in the Bank's market area.

     The  following  table sets forth the change in dollar amount of deposits in
the various types of accounts offered by the Bank between the dates indicated.

<TABLE>
<CAPTION>
                                Balance at                              Balance at
                                 June 30,        % of        Increase    June 30,         % of
                                   2003         Deposits    (Decrease)     2002         Deposits
                                   ----         --------    ----------     ----         --------
                                                       (Dollars in thousands)
<S>                              <C>               <C>       <C>         <C>               <C>
Noninterest bearing demand....   $   9,215         7.13%     $  1,884    $   7,331         6.31%
NOW accounts .................      19,593        15.16        (3,139)      22,732        19.57
Money market and savings .....      35,851        27.75         7,576       28,275        24.35
Certificates of deposits .....      42,327        32.76         2,847       39,480        33.99
Jumbo certificates ...........      22,230        17.20         3,906       18,324        15.78
                                 ---------       ------      --------    ---------       ------
                                 $ 129,216       100.00%     $ 13,074    $ 116,142       100.00%
                                 =========       ======      ========    =========       ======
</TABLE>

                                       15

<PAGE>

     The following  tables set forth the average  balances and average  interest
rates based on month-end  balances for various types of deposits as of the dates
indicated.
<TABLE>
<CAPTION>

                                                                    Year Ended June 30,
                                                        ---------------------------------------------
                                                                 2003                  2002
                                                        ---------------------  ----------------------
                                                        Average     Average    Average     Average
                                                        Balance      Rate (1)  Balance        Rate
                                                        -------     ---------  -------     ----------
<S>                                                       <C>         <C>        <C>         <C>
                                                                   (Dollars in thousands)

         Noninterest bearing demand...................  $  9,379        0.00%  $  8,504       0.00%
         NOW..........................................    21,896        1.76     20,922       1.04
         Money market and savings.....................    29,206        1.40     26,051       1.87
         Certificates of deposits.....................    39,378        3.61     36,379       4.88
         Jumbo certificates...........................    22,207        3.70     19,679       5.05
                                                       ---------               --------
             Total.................................... $ 122,066        2.17   $111,535       3.11
                                                       =========               ========
</TABLE>

--------
(1) Annualized.


         The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of June 30,
2003.
<TABLE>
<CAPTION>

                                                                         Certificates
                           Maturity Period                                of Deposit
                           ---------------                               ------------
                                <S>                                           <C>
                                                                         (In thousands)

                           Three months or less..........................  $    7,797
                           Over three through six months.................       5,034
                           Over six through 12 months....................       4,300
                           Over 12 months................................       5,100
                                                                           ----------
                           Total.........................................  $   22,231
                                                                           ==========
</TABLE>


     The following  table sets forth the savings  activities of the Bank for the
periods indicated.
<TABLE>
<CAPTION>
                                                                      At June 30,
                                                              --------------------------
                                                                2003              2002
                                                              --------          --------
<S>                                                              <C>              <C>
                                                                      (In thousands)

Opening balance.............................................  $116,142         $ 98,517
Net increase (decrease) before interest credited............    10,976           14,803
Interest credited...........................................     2,098            2,822
                                                              --------         --------
    Ending balance..........................................  $129,216         $116,142
                                                              ========         ========

Net increase (decrease).....................................  $ 13,074         $ 17,625
                                                              ========         ========

Percent increase (decrease).................................     11.26%           17.89%
                                                              =========        ========
</TABLE>

     BORROWINGS.  Savings deposits  historically have been the primary source of
funds for the Bank's lending,  investments and general operating activities. The
Bank is  authorized,  however,  to use  advances  from  the  FHLB of  Topeka  to
supplement  its  supply  of  lendable  funds  and  to  meet  deposit  withdrawal
requirements.  The FHLB of Topeka  functions as a central reserve bank providing
credit for savings institutions and certain other member financial institutions.
As a member of the FHLB System, the Bank is required to own stock in the FHLB of
Topeka and is authorized to apply for advances. Advances are pursuant to several
different  programs,  each of  which  has its own  interest  rate  and  range of
maturities.  The Bank has a Blanket  Agreement  for advances with the FHLB under


                                       16
<PAGE>

which at June 30, 2003,  allowed  borrowings of $50.1 million  subject to normal
collateral  underwriting  requirements.  Advances  from the FHLB of  Topeka  are
secured by residential  first mortgage loans and commercial real estate mortgage
loans.

     At June 30, 2003,  the Bank had an approved line of credit with the FHLB of
Topeka,  on which the Bank has not drawn. In addition,  as of June 30, 2003, the
Bank had $39.3 million in FHLB advances  outstanding  of which $7.5 million were
at interest  rates  which range from 5.14% to 6.91% and mature  within one year;
$7.0 million  were at interest  rates which range from 1.68% to 7.34% and mature
in 2005;  $6.5 million were at an interest  rate of 2.17% to 6.98% and mature in
2006;  $3.0  million at an  interest  rate  which  range from 4.97% to 5.31% and
mature in 2007;  $3.0  million  were at an  interest  rate of 3.63% to 6.10% and
mature in 2008; and $12.3 million were at an interest rate of 3.97% to 5.93% and
mature after 2008.

SUBSIDIARY ACTIVITIES

     As a federally  chartered  savings bank, the Bank is permitted to invest an
amount equal to 2% of its assets in subsidiaries,  with an additional investment
of 1% of assets where such investment serves primarily community, inner-city and
community development purposes. Under such limitations, as of June 30, 2003, the
Bank was authorized to invest up to  approximately  $5.6 million in the stock of
or loans to  subsidiaries,  including the additional 1% investment for community
inner-city  and  community  development  purposes.  Institutions  meeting  their
applicable minimum regulatory capital requirements may invest up to 50% of their
regulatory  capital in conforming  first mortgage loans to subsidiaries in which
they own 10% or more of the capital stock.

     The Bank's wholly owned subsidiary,  High Country Title and Escrow Company,
offers title  insurance  and escrow  closing  services  within the Bank's market
area.  As of June 30, 2003,  the Bank's  investment  in High  Country  Title was
$290,000 or .15% of the Bank's  assets.  High Country Title  reported a net loss
before taxes of $22,000 for the year ended June 30, 2003.

MARKET AREA

     The Bank's market area for gathering  deposits and making loans is Chaffee,
Lake,  Western Fremont and Saguache  Counties in Colorado,  which are located in
central Colorado.

     Tourism related  businesses are the base of the market area's economy.  The
primary  employers  in  the  market  area  are  the  tourism  industry  and  the
government.  As of 2000,  the  market  area had a  population  of  approximately
30,000.  Major  employers  in  the  area  include  the  Colorado  Department  of
Corrections, the Heart of the Rockies Medical Center, local school districts and
governments  and Wal Mart. In addition,  the area is a frequent  destination for
retirees, self-employed individuals and telecommuters who wish to take advantage
of the  recreation  and  beauty  that the Rocky  Mountains  offer.  Major  towns
(population) in the market area include Salida (5,500),  Buena Vista (2,200) and
Leadville (2,800).

COMPETITION

     The Company has no significant  business,  except the business of the Bank.
The Bank faces strong  competition  both in originating  loans and in attracting
deposits.  The Bank competes for real estate and other loans  principally on the
basis of interest rates, the types of loans it originates,  the deposit products
it offers and the quality of services  it provides to  borrowers.  The Bank also
competes by offering  products  which are tailored to the local  community.  Its
competition  in  originating  real  estate  loans  comes  primarily  from  other
commercial  banks and  mortgage  bankers  making  loans  secured by real  estate
located in the Bank's market area.  Commercial banks,  credit unions and finance
companies  provide  vigorous  competition in consumer  lending.  Competition may
increase  as a  result  of  the  continuing  reduction  of  restrictions  on the
interstate operations of financial institutions.

     The Bank attracts its deposits through its offices primarily from the local
communities  of  the  offices.   Consequently,   competition   for  deposits  is
principally from other savings institutions, commercial banks and brokers


                                       17
<PAGE>

in the local  communities as well as from the corporate  credit unions sponsored
by the large private  employers in the Bank's market area. The Bank competes for
deposits  and loans by  offering  what it  believes  to be a variety  of deposit
accounts at  competitive  rates,  convenient  business  hours,  a commitment  to
outstanding  customer service and a well-trained staff. The Bank believes it has
developed strong relationships with local realtors and the community in general.

     Management  considers its market area for gathering deposits to be Chaffee,
Lake and  Western  Fremont  counties in  Colorado.  The Bank  estimates  that it
competes with five banks, and two credit unions for deposits and loans. Based on
data provided by the FDIC,  the Bank  estimates that as of June 2002, the latest
date for which  information was available,  it had 37.4% of deposits held by all
financial institutions in its market area.

EMPLOYEES

     As of June 30, 2003,  the Bank had 74 full-time and 5 part-time  employees,
and High Country Title had 5 full-time employees,  none of whom were represented
by  a  collective   bargaining   agreement.   Management  considers  the  Bank's
relationships with its employees to be good.

REGULATION OF THE BANK

     GENERAL. The Bank is a federally chartered savings institution, is a member
of the FHLB of Topeka and its deposits are insured by the FDIC through the SAIF.
As a  federal  savings  institution,  the  Bank is  subject  to  regulation  and
supervision  by the OTS and  the  FDIC  and to OTS  regulations  governing  such
matters  as  capital  standards,  mergers,   establishment  of  branch  offices,
subsidiary investments and activities and general investment authority.  The OTS
periodically   examines  the  Bank  for  compliance   with  various   regulatory
requirements and for safe and sound operations.  The FDIC also has the authority
to conduct special  examinations of the Bank because its deposits are insured by
the SAIF.  The Bank must file reports with the OTS describing its activities and
financial  condition  and must obtain the  approval of the OTS prior to entering
into  certain  transactions,  such as  mergers  with or  acquisitions  of  other
depository institutions.

     As a  federally  insured  depository  institution,  the Bank is  subject to
various  regulations   promulgated  by  the  Federal  Reserve  Board,  including
Regulation B (Equal Credit  Opportunity),  Regulation D (Reserve  Requirements),
Regulations  E  (Electronic  Fund  Transfers),  Regulation Z (Truth in Lending),
Regulation CC (Availability of Funds and Collection of Checks) and Regulation DD
(Truth in Savings).

     The system of regulation and supervision applicable to the Bank establishes
a  comprehensive  framework  for the  operations  of the  Bank  and is  intended
primarily  for the  protection  of the  depositors  of the Bank.  Changes in the
regulatory framework could have a material effect on the Bank and its operations
that in turn, could have a material adverse effect on the Company.

     CAPITAL REQUIREMENTS.  OTS capital regulations require savings institutions
such as the Bank to meet three minimum capital standards: (1) "tangible" capital
of at least 1.5% of adjusted total assets, (2) Tier 1 or "core" capital equal to
at least 4.0% (or 3.0% if the  institution has a composite 1 CAMELS rating under
the  OTS  examination   rating  system)  of  adjusted  total  assets,   and  (3)
"risk-based" capital of at least 8% of total risk-weighted  assets. In addition,
the OTS has adopted  regulations which impose certain  restrictions on a savings
institutions  that have a total  risk-based  capital  ratio of less than 8.0%, a
ratio of Tier 1 capital  to  risk-weighted  assets of less than 4% or a ratio of
Tier 1 capital  to total  assets of less than 4%, (or 3% if the  institution  is
rated  composite 1 CAMELS  under the OTS  examination  rating  system).  See "--
Prompt Corrective Regulatory Action."

     For the purposes of this regulation,  Tier 1 and core capital is defined as
common  stockholders'   equity  (including  retained  earnings),   noncumulative
perpetual preferred stock and related surplus,  minority interests in the equity
accounts of fully consolidated  subsidiaries,  certain nonwithdrawable  accounts
and pledged deposits of mutual savings  institutions and qualifying  supervisory
goodwill.  Tangible  capital is given the same  definition as core capital,  but
does not include an exception for qualifying supervisory goodwill and is reduced
by the amount of all

                                       18
<PAGE>

the savings  institution's  intangible  assets with only a limited exception for
mortgage servicing rights.  Tier 1 and core capital are generally reduced by the
amount  of the  savings  institution's  intangible  assets  for  which no market
exists.  Limited  exceptions to the deduction of intangible  assets are provided
for  mortgage  and  nonmortgage   servicing   rights,   purchased   credit  card
relationships  and  qualifying  supervisory  goodwill.  Both  core and  tangible
capital are further reduced by an amount equal to the savings institution's debt
and equity investments in nonincludable  subsidiaries  engaged in activities not
permissible  to national  banks (other than  subsidiaries  engaged in activities
undertaken  as  agent  for  customers  or in  mortgage  banking  activities  and
subsidiary  depository  institutions  or their holding  companies).  At June 30,
2003, the Bank had no such investments.

     Adjusted  total  assets  are  a  savings   institution's  total  assets  as
determined under generally accepted accounting principles,  increased by certain
goodwill  amounts  and by a pro rated  portion of the  assets of  unconsolidated
includable  subsidiaries  in which  the  savings  institution  holds a  minority
interest.  Adjusted  total  assets are reduced by the amount of assets that have
been deducted from capital,  the  investments in any  unconsolidated  includable
subsidiary  in which the savings  institutions  has minority  interest  and, for
purposes of the core capital requirement, qualifying supervisory goodwill.

     In  determining  compliance  with the  risk-based  capital  requirement,  a
savings  institution  is  allowed  to use both core and  supplementary  capital,
provided  the amount of  supplementary  capital used does not exceed the savings
institution's  core capital.  Total capital  equals the sum of core capital plus
supplementary  capital.  Supplementary  capital is  defined  to include  certain
preferred stock issues,  nonwithdrawable  accounts and pledged  deposits that do
not qualify as core capital,  certain approved  subordinated debt, certain other
capital instruments,  a portion of the savings institution's allowances for loan
and lease  losses and up to 45% of  unrealized  net gains on equity  securities.
Total  core and  supplementary  capital  are  reduced  by the  amount of capital
instruments  held  by  other  depository  institutions  pursuant  to  reciprocal
arrangements  and equity  investments  other than those  deducted  from core and
tangible capital. At June 30, 2003, the Bank had no equity investments for which
OTS regulations require a deduction from total capital.

     The risk-based capital requirement is measured against risk-weighted assets
which  equal the sum of each  on-balance-sheet  asset and the  credit-equivalent
amount of each off-balance sheet-item after being multiplied by an assigned risk
weight.  Under the OTS risk-weighting  system  single-family first mortgages not
more  than 90 days  past  due  with  loan-to-value  ratios  not  exceeding  80%,
multi-family  first mortgages not more than 90 days past due with  loan-to-value
ratios not exceeding  80% (75% if rate is  adjustable),  and certain  qualifying
loans for the  construction of one- to four-family  residences  pre-sold to home
purchasers are assigned a risk weight of 50%.  Consumer,  commercial real estate
and home equity loans,  residential and nonresidential  construction loans, land
loans and  repossessed  assets and assets more than 90 days past due, as well as
all other  assets not  specifically  categorized,  are assigned a risk weight of
100%.  Mortgage-backed  securities  that qualify  under the  Secondary  Mortgage
Enhancement Act, including those issued, or fully guaranteed as to principal and
interest,  by the  FNMA or  FHLMC  are  assigned  a 20%  risk  weight.  Cash and
securities backed by the full faith and credit of the U.S.  Government are given
a 0% risk weight.


                                       19
<PAGE>
         The table below provides information with respect to the Bank's
compliance with its regulatory capital requirements at June 30, 2003.
<TABLE>
<CAPTION>
                                                                                        Percent of
                                                                     Amount             Assets  (1)
                                                                  -----------           -----------
                <S>                                                     <C>                 <C>
                                                                          (Dollars in thousands)

            Tangible capital.....................................  $   17,652                 9.42%
            Tangible capital requirement.........................       2,811                 1.50
                                                                   ----------             --------
            Excess...............................................  $   14,841                 7.92%
                                                                   ==========             ========

            Core capital (2).....................................  $   17,652                 9.42%
            Core capital requirement.............................       7,495                 4.00
                                                                   ----------             --------
            Excess...............................................  $   10,157                 5.42%
                                                                   ==========             ========

            Risk-based capital...................................  $   19,160                13.84%
            Risk-based capital requirement.......................      11,074                 8.00
                                                                   ----------             --------
            Excess..............................................   $    8,086                 5.84%
                                                                   ==========             ========
</TABLE>

-------------------------
(1)  Based on adjusted  total assets for  purposes of the  tangible  capital and
     core  capital  requirements  and  risk-weighted  assets for  purpose of the
     risk-based capital requirement.
(2)  Reflects  the  capital  requirement  which the Bank must  satisfy  to avoid
     regulatory  restrictions  that may be imposed pursuant to prompt corrective
     action regulations.

     In addition to requiring generally applicable capital standards for savings
institutions,  the OTS is  authorized  to establish the minimum level of capital
for a savings  institution at such amount or at such ratio of  capital-to-assets
as the OTS  determines to be necessary or  appropriate  for such  institution in
light of the particular  circumstances  of the institution.  Such  circumstances
would include a high degree of exposure of interest rate risk,  prepayment risk,
credit risk and  concentration  of credit risk and certain  risks  arising  from
nontraditional  activities.  The  OTS  may  treat  the  failure  of any  savings
institution  to maintain  capital at or above such level as an unsafe or unsound
practice and may issue a directive requiring any savings institution which fails
to maintain  capital at or above the minimum level required by the OTS to submit
and adhere to a plan for  increasing  capital.  Such an order may be enforced in
the same manner as an order issued by the FDIC.

     PROMPT CORRECTIVE  REGULATORY  ACTION.  Under the Federal Deposit Insurance
Corporation  Improvement Act of 1991 ("FDICIA"),  the federal banking regulators
are  required  to  take  prompt  corrective  action  if  an  insured  depository
institution  fails  to  satisfy  certain  minimum  capital   requirements.   All
institutions, regardless of their capital levels, are restricted from making any
capital  distribution  or paying any management  fees if the  institution  would
thereafter   fail  to  satisfy  the  minimum  levels  for  any  of  its  capital
requirements.  An  institution  that  fails to meet the  minimum  level  for any
relevant capital measure (an "undercapitalized institution") may be: (i) subject
to increased  monitoring by the  appropriate  federal  banking  regulator;  (ii)
required to submit an acceptable capital  restoration plan within 45 days; (iii)
subject to asset growth  limits;  and (iv)  required to obtain prior  regulatory
approval for  acquisitions,  branching and new lines of businesses.  The capital
restoration plan must include a guarantee by the  institution's  holding company
that the  institution  will  comply  with the plan until it has been  adequately
capitalized on average for four  consecutive  quarters,  under which the holding
company would be liable up to the lesser of 5% of the institution's total assets
or the amount necessary to bring the institution  into capital  compliance as of
the date it failed to comply with its capital restoration plan. A "significantly
undercapitalized"  institution, as well as any undercapitalized institution that
did not  submit an  acceptable  capital  restoration  plan,  may be  subject  to
regulatory demands for recapitalization,  broader application of restrictions on
transactions  with  affiliates,  limitations on interest rates paid on deposits,
asset  growth  and other  activities,  possible  replacement  of  directors  and
officers,  and restrictions on capital distributions by any bank holding company
controlling the institution.  Any company controlling the institution could also
be required to divest the  institution or the  institution

                                       20
<PAGE>

could be required to divest  subsidiaries.  The senior  executive  officers of a
significantly  undercapitalized institution may not receive bonuses or increases
in  compensation  without prior approval and the  institution is prohibited from
making  payments of principal  or interest on its  subordinated  debt.  In their
discretion,  the  federal  banking  regulators  may also  impose  the  foregoing
sanctions on an  undercapitalized  institution if the regulators  determine that
such actions are  necessary  to carry out the purposes of the prompt  corrective
action provisions. If an institution's ratio of tangible capital to total assets
falls  below a "critical  capital  level,"  the  institution  will be subject to
conservatorship or receivership within specified time periods.

     Under  regulations  jointly  adopted by the federal banking  regulators,  a
savings  institution's  capital  adequacy  for  purposes  of the  FDICIA  prompt
corrective  action rules is determined on the basis of the  institution's  total
risk-based  capital  ratio  (the  ratio of its total  capital  to  risk-weighted
assets),  Tier 1  risk-based  capital  ratio (the  ratio of its core  capital to
risk-weighted  assets)  and  leverage  ratio  (the  ratio  of its Tier 1 or core
capital to adjusted total assets).  The following  table shows the capital ratio
requirements for each prompt corrective action category:
<TABLE>
<CAPTION>

                                                     Adequately                                  Significantly
                           Well Capitalized          Capitalized         Undercapitalized      Undercapitalized
                           ----------------          -----------         ----------------      ----------------
<S>                             <C>                     <C>                     <C>                     <C>
Total risk-based
    capital ratio           10.0% or more            8.0% or more        Less than 8.0%          Less than 6.0%
Tier 1 risk-based
    capital ratio            6.0% or more            4.0% or more        Less than 4.0%          Less than 3.0%
Leverage ratio               5.0% or more            4.0% or more*       Less than 4.0%*         Less than 3.0%

</TABLE>

-----------
*  3.0% if the institution has a composite 1 CAMELS rating.

A  "critically  undercapitalized"  savings  institution  is defined as a savings
institution  that has a ratio of "tangible  equity" to total assets of less than
2.0%.  Tangible  equity is defined as core  capital  plus  cumulative  perpetual
preferred stock (and related surplus) less all intangibles other than qualifying
supervisory  goodwill and certain purchased  mortgage  servicing rights. The OTS
may reclassify a well capitalized savings institution as adequately  capitalized
and may require an adequately  capitalized  or  undercapitalized  institution to
comply with the supervisory actions applicable to institutions in the next lower
capital  category  (but  may not  reclassify  a  significantly  undercapitalized
institution as critically  undercapitalized) if the OTS determines, after notice
and an opportunity for a hearing,  that the savings  institution is in an unsafe
or unsound  condition or that the  institution  has received and not corrected a
less-than-satisfactory  rating for any CAMELS rating  category.  For information
regarding the position of the Bank with respect to the FDICIA prompt  corrective
action rules, see Note 10 of Notes to Consolidated Financial Statements included
under Item 8 hereof.

     SAFETY AND  SOUNDNESS  STANDARDS.  Under  FDICIA,  as amended by the Riegle
Community Development and Regulatory  Improvement Act of 1994, each federal bank
regulatory  agency is required to establish safety and soundness  standards,  by
regulation or guideline.  The OTS and the other federal bank regulatory agencies
have adopted a set of  guidelines  prescribing  safety and  soundness  standards
pursuant to the statute.  The safety and soundness  guidelines establish general
standards relating to internal controls and information systems,  internal audit
systems,  loan documentation,  credit  underwriting,  interest rate exposure and
asset growth.  The guidelines further provide that savings  institutions  should
maintain  safeguards to prevent the payment of  compensation,  fees and benefits
that are  excessive or that could lead to material  financial  loss,  and should
take  into  account  factors  such  as  comparable   compensation  practices  at
comparable institutions. If the OTS determines that a savings institution is not
in  compliance  with the safety and  soundness  guidelines,  it may  require the
institution  to  submit  an  acceptable  plan to  achieve  compliance  with  the
guidelines.  A savings institution must submit an acceptable  compliance plan to
the OTS  within 30 days of  receipt  of a request  for such a plan.  Failure  to
submit or implement a compliance  plan may subject the institution to regulatory
sanctions. Management believes that the Bank already meets substantially all the
standards adopted in the interagency guidelines,  and therefore does not believe
that  implementation of these regulatory  standards has materially  affected the
Bank's operations.


                                       21

<PAGE>

     Additionally,  FDICIA  required  each federal  banking  agency to establish
standards  relating  to asset and  earnings  quality.  In 1995,  the OTS  issued
guidelines  relating to asset and earnings quality.  Under these  guidelines,  a
savings institution should maintain systems,  commensurate with its size and the
nature and scope of its  operations,  to  identify  problem  assets and  prevent
deterioration  in those assets as well as to evaluate  and monitor  earnings and
ensure that earnings are sufficient to maintain  adequate  capital and reserves.
Management does not believe that the asset quality and earnings standards have a
material effect on the Bank's operations.

     FEDERAL  HOME LOAN BANK  SYSTEM.  The FHLB  System  consists of 12 district
FHLBs subject to supervision and regulation by the Federal Housing Finance Board
("FHFB").  The FHLBs  provide a central  credit  facility  primarily  for member
institutions. As a member of the FHLB of Topeka, the Bank is required to acquire
and hold  shares  of  capital  stock in the FHLB of Topeka in an amount at least
equal to 1% of the aggregate unpaid  principal of its home mortgage loans,  home
purchase  contracts,  and similar  obligations at the beginning of each year, or
1/20 of its advances (borrowings) from the FHLB of Topeka, whichever is greater.
The Bank was in compliance with this  requirement  with an investment in FHLB of
Topeka stock at June 30, 2003 of $2.4  million.  The FHLB of Topeka  serves as a
reserve  or  central  bank  for its  member  institutions  within  its  assigned
district.  It is  funded  primarily  from  proceeds  derived  from  the  sale of
consolidated  obligations of the FHLB System.  It offers  advances to members in
accordance with policies and procedures established by the FHFB and the Board of
Directors of the FHLB of Topeka. At June 30, 2003, the Bank had $31.8 million in
long-term advances and $7.5 million in short-term advances.

     FEDERAL  RESERVE  SYSTEM.  Pursuant to regulations  of the Federal  Reserve
Board, a thrift  institution must maintain average daily reserves equal to 3% on
transactions  accounts of over $6.0 million up to $42.1 million, plus 10% on the
remainder.  This  percentage  is subject to  adjustment  by the Federal  Reserve
Board. Because required reserves must be maintained in the form of vault cash or
in a non-interest  bearing  account at a Federal Reserve Bank, the effect of the
reserve   requirement   is  to   reduce   the   amount   of  the   institution's
interest-earning  assets.  As of  June  30,  2003,  the  Bank  met  its  reserve
requirements.

     FEDERAL DEPOSIT INSURANCE. The Bank is required to pay assessments based on
a percentage  of its insured  deposits to the FDIC for insurance of its deposits
by the FDIC through the SAIF. Under the Federal Deposit  Insurance Act, the FDIC
is required to set semi-annual  assessments for  SAIF-insured  institutions at a
level necessary to maintain the designated reserve ratio of the SAIF at 1.25% of
estimated  insured  deposits  or at a higher  percentage  of  estimated  insured
deposits that the FDIC determines to be justified for that year by circumstances
indicating a significant risk of substantial future losses to the SAIF.

     Under the  FDIC's  risk-based  deposit  insurance  assessment  system,  the
assessment rate for an insured depository  institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the  institution's  capital level and supervisory  evaluations.  Based on the
data reported to regulators  for the date closest to the last day of the seventh
month preceding the semi-annual assessment period,  institutions are assigned to
one of three  capital  groups -- well  capitalized,  adequately  capitalized  or
undercapitalized  -- using the same  percentage  criteria  as under  the  prompt
corrective action  regulations.  See "-- Prompt Corrective  Regulatory  Action."
Within each capital group,  institutions  are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority and such other  information  as the FDIC  determines to be relevant to
the  institution's  financial  condition  and  the  risk  posed  to the  deposit
insurance fund.  Subgroup A consists of financially sound institutions with only
a few minor  weaknesses.  Subgroup B consists of institutions  that  demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the  institution  and  increased  risk of loss to the  deposit  insurance  fund.
Subgroup C consists of institutions that pose a substantial  probability of loss
to the deposit insurance fund unless effective corrective action is taken.

     The FDIC has set the SAIF deposit  insurance  assessment  rates at zero for
well capitalized  institutions with the highest supervisory ratings and 0.27% of
insured deposits for institutions in the highest risk-based premium category. In
addition,  FDIC-insured institutions are required to pay assessments to the FDIC
to help  fund  interest  payments  on  certain  bonds  issued  by the  Financing
Corporation ("FICO"), an agency of the federal government established to finance
takeovers  of  insolvent   thrifts.   Until  December  31,  2000,   SAIF-insured
institutions  were

                                       22
<PAGE>

required  to pay FICO  assessments  at five times the rate at which BIF  members
were  assessed.  After  December 31,  2000,  both BIF and SAIF members have been
assessed at the same rate for FICO payments.

     QUALIFIED THRIFT LENDER TEST. A savings  institution that does not meet the
Qualified  Thrift  Lender test must either  convert to a bank  charter or comply
with the following  restrictions on its operations:  (i) the institution may not
engage in any new activity or make any new  investment,  directly or indirectly,
unless such activity or investment is permissible  for a national bank; (ii) the
branching  powers of the institution  shall be restricted to those of a national
bank; and (iii) payment of dividends by the institution  shall be subject to the
rules regarding  payment of dividends by a national bank. Upon the expiration of
three  years  from the date the  institution  ceases  to be a  Qualified  Thrift
Lender,  it must cease any activity,  and not retain any investment,  unless the
investment  or  activity  is  permissible  for a  national  bank  and a  savings
association.

     To qualify as a Qualified Thrift Lender, a savings  institution must either
satisfy the  definition of "domestic  building and loan  association"  under the
Internal  Revenue  Code or  maintain at least 65% of its  "portfolio"  assets in
Qualified Thrift Investments.  Portfolio assets are defined as total assets less
intangibles, the value of property used by a savings institution used to conduct
its business and  investments  in an amount not  exceeding  20% of total assets.
Qualified  Thrift  Investments  consist  of:  (i)  loans,  equity  positions  or
securities related to domestic,  residential real estate or manufactured housing
and  educational,  small  business  and credit card  loans,  and (ii) 50% of the
dollar  amount of  residential  mortgage  loans  subject to sale  under  certain
conditions  but  do not  include  any  intangible  assets.  Subject  to a 20% of
portfolio  assets  limit,  savings  institutions  are able to treat as Qualified
Thrift Investments 200% of their investments in loans to finance "starter homes"
and loans for construction,  development or improvement of housing and community
service facilities or for financing small businesses in "credit-needy"  areas. A
savings  institution  must maintain its status as a Qualified  Thrift Lender for
nine out of every 12  months.  A  savings  institution  that  fails to  maintain
Qualified  Thrift  Lender  status will be permitted to requalify  once and if it
fails the Qualified Thrift Lender Test a second time, it will become immediately
subject to all  penalties as if all time limits on such  penalties  had expired.
Upon failure to qualify as a Qualified  Thrift  Lender for two years,  a savings
institution must convert to a commercial bank.

     At June 30, 2003, approximately 78.6% of the Bank's assets were invested in
Qualified Thrift Investments as currently defined.

     RESTRICTIONS ON CAPITAL DISTRIBUTIONS. Except in limited circumstances, the
Bank is not  permitted to pay a dividend or other  capital  distribution  if the
Bank would be undercapitalized after the distribution. In addition, the Bank may
not declare or pay a cash  dividend on its capital  stock if the effect would be
to reduce its regulatory  capital below the amount  required for the liquidation
account  established  for the benefit of certain  depositors  of the Bank at the
time of its conversion to stock form.

     OTS regulations require that savings  institutions submit notice to the OTS
prior  to  making  a  capital  distribution  (which  includes  dividends,  stock
repurchases and amounts paid to  stockholders  of another  institution in a cash
merger) if (a) they would not be  well-capitalized  after the distribution,  (b)
the  distribution  would result in the  retirement  of any of the  institution's
common or preferred stock or debt counted as its regulatory  capital, or (c) the
institution is a subsidiary of a holding  company.  A savings  institution  must
make application to the OTS to pay a capital distribution if (x) the institution
would  not  be  adequately  capitalized  following  the  distribution,  (y)  the
institution's   total   distributions   for  the   calendar   year  exceeds  the
institution's net income for the calendar year to date plus its net income (less
distributions)  for the  preceding  two  years,  or (z) the  distribution  would
otherwise violate applicable law or regulation or an agreement with or condition
imposed by the OTS. If neither the savings  institution nor the proposed capital
distribution meet any of the foregoing  criteria,  then no notice or application
is required to be filed with the OTS before making a capital  distribution.  The
OTS may disapprove or deny a capital distribution if in the view of the OTS, the
capital distribution would constitute an unsafe or unsound practice.

     LOANS TO  DIRECTORS,  EXECUTIVE  OFFICERS AND PRINCIPAL  STOCKHOLDERS.  The
Bank's ability to extend credit to its directors,  executive  officers,  and 10%
stockholders,  as well as to entities controlled by such persons, is governed by
the  requirements  of Sections  22(g) and 22(h) of the  Federal  Reserve Act and
Regulation O of the Federal Reserve Board thereunder.  Among other things, these
provisions require that an institution's extensions of


                                       23
<PAGE>

credit to insiders (a) be made on terms that are  substantially  the same as and
follow credit  underwriting  procedures  that are not less  stringent than those
prevailing for comparable transactions with unaffiliated persons and that do not
involve  more than the normal risk of  repayment  or present  other  unfavorable
features,  and (b) not  exceed  certain  limitations  on the  amount  of  credit
extended to such persons,  individually  and in the aggregate,  which limits are
based,  in part,  on the  amount  of the  institution's  capital.  In  addition,
extensions of credit in excess of certain  limits must be approved by the Bank's
Board of Directors.

FINANCIAL MODERNIZATION LEGISLATION

     On  November  12,  1999,   legislation  was  enacted  which  could  have  a
far-reaching impact on the financial services industry.  The  Gramm-Leach-Bliley
("G-L-B") Act authorizes affiliations between banking,  securities and insurance
firms and  authorizes  bank holding  companies and national banks to engage in a
variety  of new  financial  activities.  Under the  G-L-B  Act any bank  holding
company whose depository  institution  subsidiaries have satisfactory  Community
Reinvestment Act ("CRA") records may elect to become a financial holding company
if it  certifies  to the  Federal  Reserve  Board  that  all  of its  depository
institution  subsidiaries  are  well  capitalized  and  well-managed.  Financial
holding  companies  may engage in any activity that the Federal  Reserve  Board,
after  consultation  with  the  Secretary  of  the  Treasury,  determines  to be
financial in nature or incidental  to a financial  activity.  Financial  holding
companies  may also engage in  activities  that are  complementary  to financial
activities  and do not pose a  substantial  risk to the safety and  soundness of
their depository institution subsidiaries or the financial system generally. The
G-L-B Act specifies that activities that are financial in nature include lending
and investing  activities,  insurance and annuity  underwriting  and  brokerage,
financial,   investment  and  economic  advice,   selling  interests  in  pooled
investment vehicles,  securities underwriting,  engaging in activities currently
permitted to bank holding companies (including  activities in which bank holding
companies may currently  engage outside the United States) and merchant  banking
through a securities or insurance  underwriting  affiliate.  The Federal Reserve
Board, in consultation with the Department of Treasury,  may approve  additional
financial activities.

     The  G-L-B  Act  imposes  functional  regulation  on  bank  securities  and
insurance  activities.  Banks  will  only  be  exempt  from  regulation  by  the
Securities and Exchange  Commission  ("SEC") as securities brokers if they limit
their  activities to those  described in the G-L-B Act. Banks that advise mutual
funds will be subject to the same SEC regulation as other  investment  advisors.
Bank common trust funds will be regulated as mutual funds if they are advertised
or offered for sale to the general public. National banks and their subsidiaries
will be prohibited from underwriting  insurance  products other than those which
they were lawfully  underwriting  as of January 1, 1999 and are prohibited  from
underwriting title insurance or tax-free annuities. National banks may only sell
title insurance in states in which  state-chartered banks are authorized to sell
title  insurance.  The  G-L-B  Act  directs  the  federal  banking  agencies  to
promulgate  regulations governing sales practices in connection with permissible
bank sales of insurance.

     The G-L-B Act imposes  new  requirements  on  financial  institutions  with
respect to customer  privacy.  The G-L-B Act generally  prohibits  disclosure of
customer information to nonaffiliated third parties unless the customer has been
given  the  opportunity  to  object  and has not  objected  to such  disclosure.
Financial  institutions  are further required to disclose their privacy policies
to customers  annually.  Financial  institutions,  however,  will be required to
comply,  with state law if it is more  protective  of customer  privacy than the
G-L-B Act.  The G-L-B Act directs the federal  banking  agencies,  the  National
Credit Union  Administration,  the  Secretary of the  Treasury,  the SEC and the
Federal Trade Commission,  after  consultation with the National  Association of
Insurance  Commissioners,  to  promulgate  implementing  regulations  within six
months of enactment. The privacy provisions became effective in July 2001.

     The G-L-B Act contains significant  revisions to the FHLB System. The G-L-B
Act imposes new capital  requirements  on the FHLBs and authorizes them to issue
two classes of stock with differing dividend rates and redemption  requirements.
The G-L-B Act deletes the current requirement that the FHLBs annually contribute
$300 million to pay interest on certain government obligations in favor of a 20%
of net  earnings  formula.  The G-L-B Act expands the  permissible  uses of FHLB
advances by community  financial  institutions (under $500 million in assets) to
include   funding   loans  to  small   businesses,   small   farms   and   small
agri-businesses.


                                       24

<PAGE>

     The  G-L-B  Act  contains  a  variety  of  other  provisions   including  a
prohibition  against ATM surcharges  unless the customer has first been provided
notice of the  imposition  and  amount of the fee.  The  G-L-B Act  reduces  the
frequency  of CRA  examinations  for smaller  institutions  and imposes  certain
reporting  requirements  on  depository,  institutions  that  make  payments  to
non-governmental entities in connection with the CRA.

     The  Company  is  unable  to  predict  the  impact  of the G-L-B Act on its
operations  at this time.  Although the G-L-B Act reduces the range of companies
which may acquire control of the Company,  it may facilitate  affiliations  with
companies in the financial services industry.

     PATRIOT  ACT.  The  Patriot  Act  is  intended  to   strengthen   U.S.  law
enforcement's and the intelligence  communities' abilities to work cohesively to
combat terrorism on a variety of fronts. The potential impact of the Patriot Act
on financial  institutions  of all kinds is  significant  and wide ranging.  The
Patriot Act contains sweeping anti-money  laundering and financial  transparency
laws and imposes various  regulations  including  standards for verifying client
identification  at  account  opening,  and rules to  promote  cooperation  among
financial  institutions,  regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.

REGULATION OF THE COMPANY

     GENERAL.  The Company is a savings and loan  holding  company as defined by
the  Home  Owners'  Loan Act (the  "HOLA")  and,  as  such,  is  subject  to OTS
regulation,  supervision and examination.  In addition,  the OTS has enforcement
authority over the Company and its nonsavings  institution  subsidiaries and may
restrict or prohibit  activities that are determined to represent a serious risk
to the  safety,  soundness  or  stability  of the Bank or any  other  subsidiary
savings institution.  As a subsidiary of a savings and loan holding company, the
Bank is subject to certain  restrictions  in its  dealings  with the Company and
affiliates thereof.

     ACTIVITIES  RESTRICTIONS.  The Board of Directors of the Company  presently
operates the Company as a unitary  savings and loan holding  company.  Since the
Company was formed prior to May 4, 1999 and  continues  to be a unitary  savings
and loan holding company, there are generally no restrictions on its activities.
However,  if the Director of OTS  determines  that there is reasonable  cause to
believe  that the  continuation  by a savings  and loan  holding  company  of an
activity  constitutes  a serious risk to the  financial  safety,  soundness,  or
stability of its subsidiary savings institution,  the Director of OTS may impose
such  restrictions as deemed necessary to address such risk including  limiting:
(i) payment of dividends by the savings  institution,  (ii) transactions between
the savings  institution  and its  affiliates;  and (iii) any  activities of the
savings institution that might create a serious risk that the liabilities of the
holding  company and its affiliates  may be imposed on the savings  institution.
Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding  companies,  if the savings  institution  subsidiary of
such a holding  company fails to meet the Qualified  Thrift Lender ("QTL") Test,
then  within one year after the  institution  ceased to be a QTL,  such  unitary
savings and loan  holding  company  must  register as and be deemed to be a bank
holding  company  and  will  become  subject  to  the  activities   restrictions
applicable to a bank holding  company.  See "Regulation of the Bank -- Qualified
Thrift Lender Test."

     If the  Company  were to acquire  control of another  savings  institution,
other than  through  merger or other  business  combination  with the Bank,  the
Company  would  thereupon  become a multiple  savings and loan holding  company.
Except where such acquisition is pursuant to the authority to approve  emergency
thrift  acquisitions and where each subsidiary savings institution meets the QTL
Test, the activities of the Company and any of its subsidiaries  (other than the
Bank or other subsidiary  savings  institutions)  would thereafter be subject to
further  restrictions.  The HOLA provides that, among other things,  no multiple
savings and loan holding  company or  subsidiary  thereof which is not a savings
institution may commence or continue for a limited period of time after becoming
a multiple savings and loan holding company or subsidiary thereof,  any business
activity,  upon prior  notice to, and no  objection  by the OTS,  other than (i)
furnishing  or  performing   management   services  for  a  subsidiary   savings
institution,  (ii)  conducting  an insurance  agency or escrow  business,  (iii)
holding,  managing, or liquidating assets owned by or acquired from a subsidiary
savings  institution,  (iv) holding or managing properties used or occupied by a
subsidiary savings institution, (v) acting as trustee under deeds of trust, (vi)
those activities  previously  authorized by regulation as of March 5, 1987 to be
directly  engaged in by multiple  savings and loan holding  companies,  or (vii)
those activities authorized by the Federal Reserve Board as permissible for bank
holding


                                       25
<PAGE>

companies,  unless the  Director of OTS by  regulation  prohibits or limits such
activities for savings and loan holding companies. Those activities described in
(vii) above must also be approved by the Director of OTS prior to being  engaged
in by a multiple savings and loan holding company.

     TRANSACTIONS WITH AFFILIATES. Transactions between savings institutions and
any affiliate  are governed by Sections 23A and 23B of the Federal  Reserve Act.
An affiliate of a savings  institution is any company or entity which  controls,
is controlled by or is under common control with the savings  institution.  In a
holding company  context,  the parent holding  company of a savings  institution
(such as the  Company) and any  companies  which are  controlled  by such parent
holding company are affiliates of the savings institution.  Generally,  Sections
23A and 23B (i)  limit  the  extent  to which  the  savings  institution  or its
subsidiaries may engage in "covered  transactions"  with any one affiliate to an
amount equal to 10% of such institution's capital stock and surplus, and contain
an aggregate  limit on all such  transactions  with all  affiliates to an amount
equal to 20% of such capital  stock and surplus,  and (ii) require that all such
transactions be on terms  substantially  the same, or at least as favorable,  to
the  institution  or subsidiary as those  provided to a  nonaffiliate.  The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee  and  similar  other  types of  transactions.  In addition to the
restrictions  imposed by Sections  23A and 23B, no savings  institution  may (i)
loan or otherwise extend credit to an affiliate,  except for any affiliate which
engages only in activities which are permissible for bank holding companies,  or
(ii)  purchase  or invest in any  stocks,  bonds,  debentures,  notes or similar
obligations of any affiliate,  except for affiliates  which are  subsidiaries of
the savings institution. Section 106 of the Bank Holding Company Act of 1956, as
amended  ("BHCA")  which  also  applies  to the  Bank,  prohibits  the Bank from
extending  credit to or offering  any other  services,  or fixing or varying the
consideration  for such  extension of credit or service,  on condition  that the
customer obtain some additional  services from the institution or certain of its
affiliates or not obtain services of a competitor of the institution, subject to
certain exceptions.

     Savings  institutions  are also  subject to the  restrictions  contained in
Section 22(h) and Section 22(g) of the Federal Reserve Act on loans to executive
officers, directors and principal stockholders.  Under Section 22(h), loans to a
director,  executive  officer or to a greater than 10%  stockholder of a savings
institution,  and certain affiliated entities of the foregoing,  may not exceed,
together with all other outstanding loans to such person and affiliated entities
the  institution's  loan to one borrower  limit  (generally  equal to 15% of the
institution's  unimpaired  capital  and surplus  and an  additional  10% of such
capital  and  surplus  for loans  fully  secured by certain  readily  marketable
collateral). Section 22(h) also prohibits loans, above amounts prescribed by the
appropriate federal banking agency, to directors, executive officers and greater
than 10% stockholders of a savings institution, and their respective affiliates,
unless such loan is approved in advance by a majority of the board of  directors
of the  institution  with any  "interested"  director not  participating  in the
voting. The Federal Reserve Board has prescribed the loan amount (which includes
all other  outstanding  loans to such  person),  as to which such prior board of
director approval is required,  as being the greater of $25,000 or 5% of capital
and surplus (up to $500,000).  Further,  the Federal  Reserve Board  pursuant to
Section 22(h) requires that loans to directors, executive officers and principal
stockholders  be made on terms  substantially  the same as offered in comparable
transactions  to  other  persons.  Section  22(h)  also  generally  prohibits  a
depository  institution  from  paying  the  overdrafts  of any of its  executive
officers or directors.

     Section  22(g) of the Federal  Reserve Act requires that loans to executive
officers of depository  institutions  not be made on terms more  favorable  than
those  afforded to other  borrowers,  requires  approval for such  extensions of
credit by the board of  directors  of the  institution,  and  imposes  reporting
requirements  for and additional  restrictions on the type,  amount and terms of
credits to such  officers.  In addition,  Section 106 of the BHCA  extensions of
credit to executive officers,  directors, and greater than 10% stockholders of a
depository  institution  by any  other  institution  which  has a  correspondent
banking relationship with the institution, unless such extension of credit is on
substantially  the same  terms as those  prevailing  at the time for  comparable
transactions  with other  persons and does not involve more than the normal risk
of repayment or present other unfavorable features.

     RESTRICTIONS ON ACQUISITIONS. The HOLA generally prohibits savings and loan
holding companies, without prior approval of the Director of OTS, from acquiring
(i) control of any other savings institution or savings and loan holding company
or  substantially  all the  assets  thereof,  or (ii) more than 5% of the voting
shares  of a savings  institution  or  holding  company  thereof  which is not a
subsidiary.  Under certain circumstances,  a registered savings and loan holding
company is permitted to acquire, with the approval of the Director of OTS, up to
15% of

                                       26
<PAGE>

the voting  shares of an  undercapitalized  savings  institution  pursuant  to a
"qualified  stock  issuance"  without  that  savings  institution  being  deemed
controlled  by the  holding  company.  In  order  for  the  shares  acquired  to
constitute a "qualified  stock  issuance," the shares must consist of previously
unissued  stock or treasury  shares,  the shares must be acquired for cash,  the
savings and loan holding company's other subsidiaries must have tangible capital
of at least 6 1/2% of total  assets,  there  must  not be more  than one  common
director or officer between the savings and loan holding company and the issuing
savings  institution and  transactions  between the savings  institution and the
savings and loan  holding  company  and any of its  affiliates  must  conform to
Sections 23A and 23B of the Federal  Reserve Act. Except with the prior approval
of the  Director of OTS,  no  director or officer of a savings and loan  holding
company or person owning or  controlling  by proxy or otherwise more than 25% of
such company's stock, may also acquire control of any savings institution, other
than a subsidiary savings institution,  or of any other savings and loan holding
company.

     The  Director  of  OTS  may  only  approve  acquisitions  resulting  in the
formation of a multiple  savings and loan holding company which controls savings
institutions  in more than one  state  if:  (i) the  multiple  savings  and loan
holding company involved controls a savings institution which operated a home or
branch  office in the state of the  institution  to be  acquired  as of March 5,
1987;  (ii) the  acquiror  is  authorized  to  acquire  control  of the  savings
institution  pursuant to the  emergency  acquisition  provisions  of the Federal
Deposit  Insurance Act; or (iii) the laws of the state in which the  institution
to be acquired is located  specifically  permit  institutions  to be acquired by
state-chartered  institutions or savings and loan holding  companies  located in
the state where the  acquiring  entity is located (or by a holding  company that
controls such state-chartered savings institutions).

     OTS regulations permit federal savings  institutions to branch in any state
or states of the United States and its territories.  Except in supervisory cases
or when  interstate  branching  is  otherwise  permitted  by state  law or other
statutory  provision,  a  federal  savings  institution  may  not  establish  an
out-of-state  branch  unless  (i)  the  institution  qualifies  as a QTL or as a
"domestic  building and loan association"  under  ss.7701(a)(19) of the Internal
Revenue  Code  and  the  total  assets  attributable  to  all  branches  of  the
institution  in the  state  would  qualify  such  branches  taken as a whole for
treatment as a QTL or as a domestic building and loan association, and (ii) such
branch would not result in (a)  formation of a prohibited  multi-state  multiple
savings  and loan  holding  company,  or (b) a  violation  of certain  statutory
restrictions  on branching by savings  institution  subsidiaries of bank holding
companies. Federal savings institutions generally may not establish new branches
unless the institution meets or exceeds minimum regulatory capital requirements.
The OTS will also  consider  the  institution's  record of  compliance  with the
Community Reinvestment Act in connection with any branch application.

     SARBANES-OXLEY  ACT OF 2002. On July 30, 2002,  the  Sarbanes-Oxley  Act of
2002 ("SOX") was signed into law which mandated a variety of reforms intended to
address corporate and accounting fraud. SOX contained provisions which amend the
Securities  Exchange Act of 1934,  as amended (the "Act") and  provisions  which
directed the SEC to promulgate  rules.  The resultant law and regulations  under
the Act as of the time of this  annual  report  is set  forth  in the  following
paragraphs.  SOX  provides  for  the  establishment  of  a  new  Public  Company
Accounting  Oversight  Board  ("PCAOB"),  which will enforce  auditing,  quality
control and independence  standards for firms that audit Securities and Exchange
Commission  ("SEC")-reporting  companies  and will be  funded  by fees  from all
SEC-reporting  companies.  SOX imposed higher standards for auditor independence
and restricts  provision of consulting  services by auditing  firms to companies
they audit.  Any  non-audit  services  being  provided  to an audit  client will
require  preapproval  by the Company's  audit  committee  members.  In addition,
certain  audit  partners  must  be  rotated  periodically.  SOX  requires  chief
executive officers and chief financial officers, or their equivalent, to certify
to the  accuracy of periodic  reports  filed with the SEC,  subject to civil and
criminal  penalties if they  knowingly or willfully  violate this  certification
requirement. In addition, under SOX, counsel will be required to report evidence
of a material  violation of the securities laws or a breach of fiduciary duty by
a company to its chief  executive  officer or its chief legal  officer,  and, if
such  officer does not  appropriately  respond,  to report such  evidence to the
audit  committee  or other  similar  committee  of the board of directors or the
board itself.

     Longer  prison  terms  will also be  applied to  corporate  executives  who
violate federal  securities laws, the period during which certain types of suits
can be brought against a company or its officers has been extended,  and bonuses
issued  to  top  executives  prior  to  restatement  of  a  company's  financial
statements  are now  subject  to  disgorgement  if such  restatement  was due to
corporate  misconduct.  Executives  are  also  prohibited  from  trading

                                       27
<PAGE>

during retirement plan "blackout"  periods,  and loans to company executives are
restricted.  In addition, a provision directs that civil penalties levied by the
SEC as a result  of any  judicial  or  administrative  action  under  the Act be
deposited in a fund for the benefit of harmed investors. Directors and executive
officers  must also  report  most  changes  in their  ownership  of a  company's
securities  within two  business  days of the change,  and as of the end of June
2003, all ownership reports must be electronically filed.

     SOX also  increases  the  oversight  and  authority of audit  committees of
publicly traded  companies.  Audit committee members must be independent and are
barred from accepting  consulting,  advisory or other compensatory fees from the
issuer. In addition, all SEC-reporting  companies must disclose whether at least
one member of the committee is an audit  committee  "financial  expert" (as such
term is  defined  by the SEC rules) and if not,  why not.  Audit  committees  of
publicly  traded  companies  will have authority to retain their own counsel and
other advisors funded by the company. Audit committees must establish procedures
for the receipt,  retention and treatment of complaints regarding accounting and
auditing  matters and  procedures  for  confidential,  anonymous  submission  of
employee concerns regarding  questionable  accounting or auditing matters. It is
the  responsibility  of the  audit  committee  to  hire,  oversee  and  work  on
disagreements with the Company's independent auditor.

     Beginning  six months  after the SEC  determines  that the PCAOB is able to
carry  out its  functions,  it will be  unlawful  for any  person  that is not a
registered  public  accounting firm ("RPAF") to audit an SEC-reporting  company.
Under the Act, a RPAF is prohibited from performing  statutorily  mandated audit
services  for a  company  if  such  company's  chief  executive  officer,  chief
financial officer,  comptroller,  chief accounting officer or any person serving
in equivalent  positions has been employed by such firm and  participated in the
audit of such company during the one-year period  preceding the audit initiation
date.  SOX also  prohibits  any  officer or  director  of a company or any other
person  acting  under their  direction  from  taking any action to  fraudulently
influence,  coerce,  manipulate or mislead any  independent  public or certified
accountant  engaged in the audit of the Company's  financial  statements for the
purpose of rendering the financial statement's  materially  misleading.  The SEC
has  prescribed  rules  requiring  inclusion of an internal  control  report and
assessment by management in the annual report to shareholders.  SOX requires the
RPAF that  issues  the audit  report  to  attest to and  report on  management's
assessment of the Company's  internal controls.  In addition,  SOX requires that
each financial  report required to be prepared in accordance with (or reconciled
to) generally accepted accounting  principles and filed with the SEC reflect all
material correcting adjustments that are identified by a RPAF in accordance with
generally  accepted  accounting  principles and the rules and regulations of the
SEC.

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

TAXATION

     GENERAL.  The Company  and the Bank file  consolidated  federal  income tax
returns.

     FEDERAL INCOME TAXATION. Earnings appropriated to an institution's bad debt
reserve and claimed as a tax deduction are not available for the payment of cash
dividends or for distribution to shareholders  (including  distributions made on
dissolution or liquidation),  unless such amount was included in taxable income,
along with the amount deemed necessary to pay the resulting federal income tax.

     Beginning  with the first taxable year  beginning  after December 31, 1995,
savings  institutions,  such as the Bank,  were  treated the same as  commercial
banks.  Institutions  with $500  million or more in assets  will only be able to
take a tax deduction when a loan is actually charged off. Institutions with less
than $500 million in assets will still be permitted to make  deductible bad debt
additions to reserves, but only using the experience method.

     In 1996,  the Bank's  federal  corporate  income tax  returns for 1995 were
audited  with no  significant  correction.  The Bank's tax returns have not been
otherwise audited in the last five years.


                                       28
<PAGE>

     Under provisions of the Revenue Reconciliation Act of 1993 ("RRA"), enacted
on August 10, 1993, the maximum federal  corporate income tax rate was increased
from 34% to 35% for taxable income over $10.0 million,  with a 3% surtax imposed
on taxable income over $15.0 million.  Also under  provisions of RRA, a separate
depreciation calculation requirement has been eliminated in the determination of
adjusted  current  earnings  for  purposes of  determining  alternative  minimum
taxable income,  rules relating to payment of estimated  corporate  income taxes
were  revised,  and certain  acquired  intangible  assets  such as goodwill  and
customer-based intangibles were allowed a 15-year amortization period. Beginning
with tax years  ending on or after  January  1,  1993,  RRA also  provides  that
securities  dealers must use  mark-to-market  accounting  and generally  reflect
changes in value  during the year or upon sale as taxable  gains or losses.  The
IRS has indicated that  financial  institutions  which  originate and sell loans
will be subject to the rule.

     STATE INCOME TAXATION.  The State of Colorado imposes no franchise taxes on
savings  institutions.  The State of Colorado taxes the Bank's  federal  taxable
income, adjusted for interest income received directly from federal agencies, at
a 4.63% rate.

EXECUTIVE OFFICERS

     The  following  table sets forth  certain  information  with respect to the
executive officers of the Company.
<TABLE>
<CAPTION>

                                         Ages at
                                        June 30,
Name                                      2003                Title
----                                    --------              -----
<S>                                        <C>                  <C>
Larry D. Smith                             45                 President
Scott G. Erchul                            41                 Vice President
Frances Pasquale                           49                 Chief Financial Officer

</TABLE>

     LARRY D. SMITH has been  President of the Bank since 1991 and a Director of
the Bank since 1987. He serves as the President and Chief  Executive  Officer of
the  Company and the Bank.  From 1978 to 1991,  he served as  Controller  of the
Bank.  He is active in the Salida school system and youth sports by serving as a
coach for  various  sports  teams and by  serving  on the High  School  Building
Accountability  and  Business  Advisory  Committees.  He is also  involved  with
several organizations which promote the academic and athletic development of the
youth  of  Salida.  He is a member  of the  board of  directors  of the  Midwest
Conference for Community Bankers and it's past president.

     SCOTT G.  ERCHUL  has been a member of the Board of  Directors  of the Bank
since 1997. He has served as Vice President of the Bank since 1991 and serves as
Vice  President  of the  Company and the Bank.  His past and  current  community
involvement  include the Rotary Club, Academic Booster Club committee member and
youth sports coach for football, baseball and soccer.

     FRANCES E. PASQUALE has been employed by the Bank since  November 1991. She
served as  Controller  of High  Country  Bank until  August  2003,  when she was
promoted to Chief Financial Officer.  She is a family person who enjoys numerous
outdoor activities.


                                       29
<PAGE>
ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

     The following table sets forth information  regarding the Bank's offices at
June 30, 2003.
<TABLE>
<CAPTION>

                                                           Book Value at
                         Year                Owned or         June 30,             Approximate
                        Opened                Leased          2003 (1)           Square Footage
                        ------                ------          --------           --------------
<S>                       <C>                   <C>             <C>                  <C>
                                             (Dollars in thousands)
MAIN OFFICE:
7360 West US
Highway 50
Salida, Colorado         2000                  Owned          $ 2,841                 11,800

BRANCH OFFICES:
130 West 2nd
Salida, Colorado         1886 (2)              Owned              693                 10,750

600 Harrison
Leadville, Colorado      1978 (3)              Owned              629                  3,800

713 East Main
Buena Vista, Colorado    1996 (3)              Owned              381                  2,400

516 Hwy 24         Future Bldg Sight           Owned              603
</TABLE>

------------------
(1)  Cost less accumulated depreciation and amortization.
(2)  The current location and building was occupied in 1974.
(3)  The Bank constructed new building  facilities at each of these locations in
     1996.
(4)  Property held for new building

     The book value of the Bank's  investment in premises and equipment  totaled
approximately  $6.4 million at June 30,  2003.  See Note 6 of Notes to Financial
Statements.

ITEM 3.  LEGAL PROCEEDINGS
---------------------------

     From  time to  time,  the  Bank is a party  to  various  legal  proceedings
incident to its business.  At June 30, 2003, there were no legal  proceedings to
which the Company or the Bank was a party, or to which any of their property was
subject,  which were  expected by management to result in a material loss to the
Company or the Bank.  There are no pending  regulatory  proceedings to which the
Company,  the  Bank or its  subsidiaries  is a party  or to  which  any of their
properties is subject which are currently expected to result in a material loss.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ended June 30, 2003.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

     The  information  contained under the section  captioned  "Market Price and
Dividend Information" in the Annual Report is incorporated herein by reference.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------

     The information contained in the section captioned "Management's Discussion
and Analysis of Financial  Condition  and Results of  Operations"  in the Annual
Report is incorporated herein by reference.


                                       30


<PAGE>

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

     The  financial  statements  contained in the Annual Report which are listed
under Item 13 herein are incorporated herein by reference.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

         None.

ITEM 8A.  CONTROLS AND PROCEDURES
---------------------------------

     As of the end of the  period  covered  by this  report,  management  of the
Company  carried  out  an  evaluation,   under  the  supervision  and  with  the
participation  of  the  Company's  principal  executive  officer  and  principal
financial officer, of the effectiveness of the Company's disclosure controls and
procedures.  Based on this evaluation, the Company's principal executive officer
and principal financial officer concluded that the Company's disclosure controls
and  procedures  are  effective  in  ensuring  that  information  required to be
disclosed  by the  Company  in  reports  that it  files  or  submits  under  the
Securities Exchange Act of 1934, as amended, is recorded, processed,  summarized
and reported,  within the time periods  specified in the Securities and Exchange
Commission's rules and forms.

     In addition,  there have been no changes in the Company's  internal control
over financial  reporting (to the extent that elements of internal  control over
financial  reporting are subsumed  within  disclosure  controls and  procedures)
identified in connection  with the evaluation  described in the above  paragraph
that occurred  during the Company's  last fiscal  quarter,  that has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------------

     The  information  contained  under the  section  captioned  "Proposal  I --
Election  of  Directors"  in the  Proxy  Statement  is  incorporated  herein  by
reference.

     For  information  regarding  compliance  with Section 16(a) of the Exchange
Act,  the  information  contained  under the section  captioned  "Section  16(a)
Beneficial   Ownership   Reporting   Compliance"  in  the  Proxy   Statement  is
incorporated herein by reference.

     For certain  information  regarding the executive  officers of the Company,
see "Item 1. Business --Executive Officers" herein.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

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

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

     (a)  Security Ownership of Certain Beneficial Owners

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

     (b)  Security Ownership of Management



                                       31
<PAGE>

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

     (c)  Changes in Control

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

     (d)  Equity Compensation Plans

          The following table sets forth certain information with respect to the
          Company's equity compensation plans as of June 30, 2003.
<TABLE>
<CAPTION>
                                                                                                              (c)
                                                                                                 NUMBER OF SECURITES REMAINING
                                                (a)                             (b)              AVAILABLE FOR FUTURE ISSUANCE
                                NUMBER OF SECURITIES TO BE ISSUED    WEIGHTED-AVERAGE EXERCISE     UNDER EQUITY COMPENSATION
                                 UPON EXERCISE OF OUTSTANDING           PRICE OF OUTSTANDING      PLANS (EXCLUDING SECURITIES
PLAN CATEGORY                   OPTIONS, WARRANTS AND RIGHTS       OPTIONS, WARRANTS AND RIGHTS    REFLECTED IN COLUMN (a))
-------------                   ---------------------------------  ----------------------------  -----------------------------
<S>                                             <C>                             <C>                            <C>
Equity compensation plans                     116,376                        $13.125                        29,099
  approved by security holders

Equity compensation plans not                       0                              0                             0
  approved by security holders

       Total                                  116,376                         13.125                        29,099
</TABLE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the section captioned "Transactions with Management" in the Proxy Statement.

ITEM 13.  EXHIBITS LIST AND REPORTS ON FORM 8-K
-----------------------------------------------

     (a)  List of Documents Filed as Part of This Report
          ----------------------------------------------

          (1)  Consolidated   Financial  Statements.   The  following  financial
               -------------------------------------
               statements of the  registrant  are included  herein under Item 7.
               The remaining  information  appearing in the Annual Report is not
               deemed to be filed as part of this Annual  Report on Form 10-KSB,
               except as expressly provided herein.

               Independent Auditor's Report

                    (a)  Statements  of Financial  Condition as of June 30, 2003
                         and 2002
                    (b)  Statements  of Income for the Years Ended June 30, 2003
                         and 2002
                    (c)  Statements  of Equity for the Years Ended June 30, 2003
                         and 2002
                    (d)  Statements  of Cash Flows for the Years  Ended June 30,
                         2003 and 2002
                    (e)  Notes to Financial Statements

          (2)  Financial Statement Schedules. None
               ------------------------------

          (3)  Exhibits. The following exhibits are either filed as part of this
               ---------
               Annual Report on Form 10-KSB or incorporated herein by reference:

                                       32



<PAGE>

Exhibit No.         Description
-----------         -----------

* 3.1               Articles of Incorporation of High Country Bancorp, Inc.

* 3.2               Bylaws of High Country Bancorp, Inc.

* 10.1              Employment Agreement between Salida Building and Loan
                     Association and Larry D. Smith+

* 10.2              Guaranty Agreement between High Country Bancorp, Inc. and
                     Larry D. Smith+

* 10.3              High Country Bancorp, Inc. 1997 Stock Option and Incentive
                     Plan+

* 10.4              High Country Bancorp, Inc. Management Recognition Plan and
                     Trust+

* 10.5              Salida Building and Loan Association Long-Term Incentive
                     Plan+

* 10.6              Salida Building and Loan Association Incentive Compensation
                     Plan+

* 10.7              Employment Agreement between Salida Building and Loan
                     Association and Scott G. Erchul+

* 10.8              Guaranty Agreement between High Country Bancorp, Inc. and
                     Scott G. Erchul+

  13                Annual Report to Stockholders for the year ended June 30,
                     2003

  21                Subsidiaries

  23                Consent of Grimsley, White & Company

  31                Rule 13a-14(a) Certifications

  32                Certification Pursuant to 18 U.S.C. Section 1350

-------------
*    Incorporated  by reference from  Registration  Statement on Form SB-2 filed
     January 27, 1997 (File No. 333-34153).
+    Management contract or compensatory plan or arrangement.

         REPORTS ON FORM 8-K.
         --------------------

     The  Company  filed the  following  Current  Report on Form 8-K  during the
fourth quarter of the fiscal year ended June 30, 2003:

 DATE OF REPORT            ITEM(S) REPORTED           FINANCIAL STATEMENTS FILED
 --------------            ----------------           --------------------------
  May 1, 2003                   7, 12                            N/A


                                       33
<PAGE>



                                   SIGNATURES

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

                            HIGH COUNTRY BANCORP, INC.


Date:  September 29, 2003   By:  /s/   Larry D. Smith
                                 -----------------------------------------------
                                 Larry D. Smith
                                 President and Chief Executive Officer
                                 (Duly Authorized Officer)

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


By: /s/  Larry D. Smith                                Date: September 29, 2003
    -------------------------------------------
      Larry D. Smith
      President and Chief Executive Officer
      (Principal Executive and Officer)


By: /s/  Frances Pasquale                              Date: September 29, 2003
    -------------------------------------------
      Frances Pasquale
      Chief Financial Officer
      (Principal Financial and Accounting Officer)


By: /s/  Scott G. Erchul                               Date: September 29, 2003
    -------------------------------------------
      Scott G. Erchul
      Vice President and Director


By: /s/  Timothy R. Glenn                              Date: September 29, 2003
    -------------------------------------------
      Timothy R. Glenn
      Director


By: /s/  Richard A. Young                              Date: September 29, 2003
    -------------------------------------------
      Richard A. Young
      Director


By: /s/  Philip W. Harsh                               Date: September 29, 2003
    -------------------------------------------
       Philip W. Harsh
       Director

                                       34