SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------
                                   FORM 10-KSB

[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
For the Fiscal Year Ended June 30, 2000
[   ]   TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

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

                         Commission File Number: 0-23409

                           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 Act: None

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

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

     Check  whether  the issuer:  (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  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: $10,126,314

     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 ($11.75 per
share on September 15, 2000), was approximately $8,963,969.  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,  2000,  there were issued and  outstanding  1,071,225
shares of the  registrant's  common stock,  of which 308,334 shares were held by
affiliates (as defined above).

     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, 2000 (Parts I and II)

     2. Portions of Proxy  Statement for the 2000 Annual Meeting of Stockholders
(Part III)
<PAGE>



                                     PART I
ITEM 1.  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 offering
of Common  Stock  through the sale and  issuance of  1,322,500  shares of Common
Stock at a price of $10.00 per share,  realizing gross proceeds of $13.2 million
and net  proceeds of $12.7  million.  The Company  purchased  all of the capital
stock of the Bank with $5.8 million of the offering  proceeds.  On May 24, 1999,
the Company  announced  that it was  commencing  a stock  repurchase  program to
acquire up to 10% of the Company's  outstanding shares of Common Stock, or up to
132,250 shares, over a 12-month period. On March 20, 2000, the Company announced
a  second  stock  repurchase  program  to  acquire  up to 10%  of the  Company's
outstanding  shares of Common Stock,  or up to 119,025  shares,  over a 12-month
period. These repurchase programs,  both of which have been completed,  resulted
in the repurchase of 251,275 shares of Company 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  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.

     In April 2000, the Company  relocated its executive offices to its new main
office  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 Salida, Colorado (2), Buena Vista, Colorado
and Leadville,  Colorado and serving Chaffee, Lake, Western Fremont and Saguache
Counties  in   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 FHLB 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  association.  In  November  1999,  the Bank
incorporated  a new  subsidiary,  High Country Title and Escrow  Company  ("High
Country  Title").  High Country Title offers title  insurance and escrow closing
services  within the Bank's  market area.  At June 30, 2000,  the Bank had total
assets of $137.7  million,  loans  receivable  (net) of  $119.9  million,  total
deposits of $82.8 million and stockholders' equity of $16.1 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,  all 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 Federal  Home
Loan Bank  ("FHLB")  of Topeka,  which is one of 12  regional  banks in the FHLB
System.  The Bank is further subject to regulations of 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."

     In April 2000,  the Bank  relocated its  executive  offices to its new main
office located at 7360 West US Highway 50, Salida, Colorado 81201-0309. The Bank
retained  the location at 130 West 2nd Street as a branch  office,  and its main
telephone number is (719) 539-2516.

                                       2

<PAGE>

LENDING ACTIVITIES

     GENERAL. The Bank's loan portfolio, net, totaled $119.9 million at June 30,
2000, representing 87.05% of total assets at that date.  Substantially all loans
are originated in the market area. At June 30, 2000, $67.2 million, or 56.01% of
the Bank's gross loan portfolio  consisted of one- to  four-family,  residential
mortgage  loans.  Other loans  secured by real estate  include  commercial  real
estate  loans  which  amounted  to $18.7  million  or 15.59%  of the gross  loan
portfolio and land development loans, which amounted to $4.6 million or 3.84% of
the gross loan portfolio at June 30, 2000. The Bank also  originates  commercial
business loans and consumer loans,  most of which are automobile  loans. At June
30, 2000,  consumer  loans  totaled $14.4  million,  or 12.00% of the gross loan
portfolio,  and commercial  business loans totaled $11.6 million or 9.68% 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, 2000, the Bank had no  concentrations of loans exceeding
10% of total loans other than as disclosed below.
<TABLE>
<CAPTION>

                                                                                 AT JUNE 30,
                                                            -----------------------------------------------------
                                                                  2000                             1999
                                                            --------------------            ---------------------
                                                            AMOUNT            %             AMOUNT            %
                                                            ------          -----           ------          -----
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                         <C>             <C>             <C>            <C>
MORTGAGE LOANS:
  One- to four-family.....................................  $   67,150      56.01%          $  63,965      64.98%
  Commercial..............................................      18,695      15.59               8,504       8.64
  Construction............................................       7,522       6.27               4,468       4.54
  Land development........................................       4,601       3.84%              3,209       3.26
                                                            ----------     ------           ---------    -------
     Total mortgage loans.................................      97,968      81.71              80,146      81.42
                                                            ----------     ------           ---------    -------
Consumer loans............................................      14,387      12.00              11,921      12.11
Loans on savings accounts.................................         588       0.49                 691       0.70
Commercial loans..........................................      11,602       9.68               9,058       9.20
Other loans...............................................          21       0.02                  15       0.02
                                                            ----------    -------           ---------     ------
Total loans...............................................     124,566     103.90             101,831     103.45
                                                            ----------    -------           ---------     ------

Less:
  Undisbursed loans in process............................       3,069       2.56               1,954       1.99
  Deferred fees and discounts............................          596       0.50                 534       0.54
  Allowance for losses....................................       1,003       0.84                 910       0.92
                                                            ----------    -------           ---------     ------
Loan portfolio, net.......................................  $  119,898     100.00%          $  98,433     100.00%
                                                            ==========    =======           =========     ======
</TABLE>
                                       3

<PAGE>

     LOAN MATURITY SCHEDULE.  The following table sets forth certain information
at June 30, 2000  regarding  the dollar  amount of loans  maturing in the Bank's
portfolio  based on their  contractual  terms to maturity.  Demand loans,  loans
having no stated schedule of repayments and no stated  maturity,  and overdrafts
are reported as due in one year or less.
<TABLE>
<CAPTION>

                                                              Due after
                                       Due during             1 through             Due after
                                     the year ending        5 years after         5 years after
                                      June 30, 2001         June 30, 2001         June 30, 2001          Total
                                      -------------         -------------         -------------         -------
                                 (In thousands)

<S>                                    <C>                    <C>                   <C>                <C>
Mortgage loans:
  One-to four-family...................$    1,143             $   3,888             $  62,119          $ 67,150
  Commercial...........................     2,538                12,610                 3,547            18,695
  Construction.........................     7,522                    --                    --             7,522
  Land development.....................     2,198                 2,170                   233             4,601
                                       ----------             ---------             ---------          --------
     Total.............................$   13,401             $  18,668             $  65,899          $ 97,968
                                       ==========             =========             =========          ========
</TABLE>

     The next table sets forth at June 30, 2000,  the dollar amount of all loans
which have predetermined interest rates and have floating or adjustable interest
rates.
<TABLE>
<CAPTION>

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

<S>                                                     <C>                         <C>
Mortgage loans
   One-to four-family................................   $   61,651                  $    5,499
   Commercial........................................       18,261                         434
   Construction......................................        7,522                          --
   Land development..................................        4,601                          --
                                                        ----------                  ----------
     Total...........................................   $   92,035                  $    5,933
                                                        ==========                  ==========
</TABLE>

     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 and the loan is not repaid. 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  ranging from 1.00% to 2.00% of
the principal base. As of June 30, 2000, the Bank serviced $4.7 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 located in its primary market area. At June
30, 2000, $67.2 million,  or 56.01%,  of the Bank's loan portfolio  consisted of
loans  secured  by one- to  four-family  residential  properties,  of which $5.5
million,  or 8.18%,  carried adjustable  interest rates. The Bank estimates that
the average size of the  residential  mortgages that it currently  originates is
$105,000.

     The Bank  originates  both  fixed-rate  mortgage loans and  adjustable-rate
mortgage loans ("ARMs").  Due to customer  preferences for fixed-rate loans, the
Bank has had difficulty originating a large volume of ARMs in recent years. Most
fixed-rate  mortgage loans are originated for terms of 15 or 30 years.  ARMs are
originated for terms of

                                       4
<PAGE>

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,  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, 2000 and 1999, the Bank sold fixed rate loans of $12.0 million and $5.7
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 requires  private mortgage
insurance.  Originated loans in the Bank's portfolio include due-on-sale clauses
which provide the Bank with the contractual  right to deem the loan  immediately
due and  payable  in the event  that the  borrower  transfers  ownership  of the
property without the Bank's consent.

     The  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, 2000,  $7.6 million or 6.31% of the Bank's 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  fully  amortizing  over the term of the  loan.  Home  equity  loans are
underwritten  with terms of 20 years with an adjustable  rate.  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 developers for construction of small residential developments.  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,  although this is
not  necessarily  the case.  Loans to finance the  construction  of  residential
property on a speculative basis are offered on a fixed-rate basis only, with the
rate indexed to the prime rate plus a negotiated increment.  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
requirements 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, 2000, $7.5 million,  or 6.04%, of the Bank's
gross loan portfolio consisted of construction loans to fund the construction of
one- to four-family  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

                                       5
<PAGE>

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

     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,
and loans secured by raw land, such as cattle ranching  acreage.  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 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  developed,  sold and  released.  All of the  Bank's  land 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, 2000, the
Bank had $4.6 million of land development  loans, which constituted 3.69% of the
gross loan  portfolio  at such date.  This total  includes one loan of $451,000,
which is one of the Bank's  fifteen  largest  loans.  The Bank  originated  $3.5
million and $1.8 million in land development loans during fiscal 2000 and fiscal
1999, respectively.  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.  Although the Bank has attempted to
reduce these risks, as noted above, potential investors should be aware of these
factors in making their investment decision.

     COMMERCIAL REAL ESTATE LOANS. At June 30, 2000, loans secured by commercial
real estate  properties  totaled $18.7 million,  and  represented  15.59% of the
Bank's loan  portfolio.  Commercial  real  estate  loans are secured by ranches,
motels,  small  office  buildings  and retail  stores and other  non-residential
property.  Some of the Bank's  commercial  real  estate  loans are made to local
businesses connected to the tourism and recreational  rafting industries,  which
predominate  in the Bank's  primary  market area.  At June 30, 2000,  the Bank's
three  largest  loans were a $1.2  million  loan  secured by a cattle  ranch,  a
$998,000  loan secured by a cattle ranch and a $965,000  loan secured by a motel
in Salida,  Colorado.  Substantially  all 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, 2000.

     Commercial real estate loans generally have terms of up to 10 years and are
underwritten on either a fixed or adjustable-rate basis.  Commercial real estate
loans have a maximum 20-year amortizing,  although the term of the loan may be a
fixed  ten-year  balloon  loan.   Adjustable-rate  commercial  and  multi-family
mortgages  are  indexed  to the  prime  rate  and  adjust  on an  annual  basis.
Loan-to-value ratios may not exceed 70% 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 for
office and retail  space,  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.

                                       6
<PAGE>

     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, 2000, the maximum
amount that the Bank could have  loaned to any one  borrower  without  prior OTS
approval was approximately $2.1 million. At June 30, 2000, the largest aggregate
amount of loans  that the Bank had  outstanding  to any one  borrower  and their
related  interests  was $1.6 million and  consisted of eight loans,  including a
$629,000  commercial loan and a $565,000  commercial real estate loan secured by
real estate located in Salida, Colorado. The largest single loan outstanding was
a $1.2  million  loan  secured by a cattle  ranch  property,  which is discussed
above.

     COMMERCIAL  BUSINESS LOANS. At June 30, 2000, the Bank had $11.6 million in
commercial  business  loans  which  represented  9.31% 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, 2000, the Bank had
dealer  floor-plan  loans of $953,000 and $645,000,  and an  inventory/equipment
loan of $629,000  to a rafting and retail  company.  Commercial  business  loans
usually carry a fixed rate and generally are  underwritten 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 $15.0 million or
12.04% of the gross loan portfolio at June 30, 2000,  includes  primarily  loans
secured by deposit  accounts,  automobile loans and other personal loans,  which
represented 0.49%, 12.00%, and 0.02% of its total loan portfolio,  respectively,
at June 30, 2000. The Bank also makes RV and boat loans,  tractor loans and home
improvement  loans  pursuant to its  consumer  lending  authority.  The Bank has
recently   emphasized   consumer  lending  because  of  the  higher  yields  and
shorter-terms of such loans.

     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 the trade-in 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  requires the borrower to insure the  automobile  under a policy
listing the Bank as loss payee. The Bank also makes unsecured  personal loans of
up to $10,000. The terms of such loans do not exceed 12 months.

     In recent years,  the Bank has increased its consumer  lending,  especially
auto  loans,  by hiring a consumer  loan  officer,  and has also  increased  its
commercial  business  lending.  The Bank  intends to continue to  emphasize  the
origination  of consumer  loans,  especially  automobile  loans,  and commercial
business loans. Consumer loans and commercial business 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,  RVs, boats, tractors 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,  consumer loan
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

                                       7
<PAGE>

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.

     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 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 lawyer's  opinion of title 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.

     Secured  loans in amounts of up to $260,000  may be approved by two members
of the Bank's loan  committee.  All loans in excess of $500,000 must be approved
by the Board of Directors.  Branch Managers may approve  consumer loans of up to
$10,000,  or up to $30,000  with the  approval  of the  consumer  loan  officer.
Consumer  loans of up to  $100,000  may be  approved  by two members of the loan
committee,  while  consumer loans over $100,000 must be approved by four members
of the loan Committee. Commercial loans of up to $100,000 may be approved by two
members of the loan  committee,  while such loans over  $100,000 to $500,000 are
approved by three loan committee members and loans of $500,000 or over go to the
full Board.

     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.  Beginning in
April  1999,  the Bank  began  ongoing  sales of new fixed  rate  single  family
residential terms 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 has not
purchased any loans in the periods presented.
<TABLE>
<CAPTION>

                                                                      At June 30,
                                                              --------------------------
                                                                2000              1999
                                                              --------          --------
                                                                      (In thousands)
<S>                                                           <C>               <C>
Net loans, beginning of period..............................  $  98,433         $ 81,359


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

Mortgage loans:
   One- to four-family......................................     39,117         $ 41,451
   Commercial...............................................     11,288            3,560
   Land development.........................................      3,492            1,814
Consumer loans..............................................     10,034            9,455
Loans on savings accounts...................................        308              325
Commercial loans............................................     11,717            5,570
                                                              ---------         --------
     Total loans originated.................................     75,956           62,175
                                                              ---------         --------
Loans sold..................................................     11,994            5,666
                                                              ---------         --------
Repayments..................................................     43,767           39,671
                                                              ---------         --------
Decrease (increase) in other items, net.....................      1,270              236
                                                              ---------         --------
     Net increase (decrease) in loans receivable, net.......     21,465           17,074
                                                              ---------         --------
Net loans, end of period....................................  $ 119,898         $ 98,433
                                                              =========         ========
</TABLE>


     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.  Loans which are delinquent 15 days incur a late fee of 5.0%
of 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.

     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.
<TABLE>
<CAPTION>

                                                                      At June 30,
                                                              --------------------------
                                                                2000              1999
                                                              --------          --------
                                                                      (In thousands)
<S>                                                           <C>               <C>
Loans accounted for on a non-accrual basis:
  Real estate:
    One- to four-family.....................................  $     378         $     55
    Commercial..............................................         --               34
    Land development........................................         --               --
Consumer....................................................         41               34
Commercial..................................................        114              152
Other.......................................................         --               --
                                                              ---------         --------
        Total...............................................        533              275
                                                              ---------         --------

Accruing loans delinquent 90 days or more:
  Real estate:
    One- to four-family.....................................  $      --         $     --
    Commercial..............................................         --               --
    Land development........................................         --               --
  Consumer..................................................        149               --
Commercial..................................................         --               --
Other.......................................................         --               --
                                                              ---------         --------
        Total...............................................        149               --
                                                              ---------         --------
            Total nonperforming loans.......................        682              275
                                                              ---------         --------
Repossessed assets..........................................         18               18
                                                              ---------         --------
Total non-performing assets.................................  $     700         $    293
                                                              =========         ========
Total non-performing loans as a
  percentage of total net loans.............................       0.57%            0.28%
                                                              =========         ========
Total non-performing assets as a
  percentage of total assets................................       0.51%            0.26%
                                                              =========         ========
</TABLE>

     At June 30,  2000,  the Bank had  $533,000 in loans  outstanding  that were
classified as  non-accrual,  of which  $378,000 were one- to four- family loans,
$41,000 were  automobile  loans and $114,000 were secured  commercial  loans. At
that  date,  the Bank had no  loans  outstanding  that  were not  classified  as
non-accrual, 90 days past due or restructured, but as to which known information
about possible  credit problems of borrowers  caused  management to have serious
concerns  as to the  ability  of the  borrowers  to  comply  with  present  loan
repayment terms and may result in disclosure as non-accrual, 90 days past due or
restructured.

     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
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

                                       10
<PAGE>

Bank  regularly  reviews  its assets to  determine  whether  any assets  require
classification or re-classification. At June 30, 2000, the Bank had $1.5 million
in assets  classified  as special  mention,  $559,000  in assets  classified  as
substandard,  $102,000 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 fiscal 2000,  the Bank increased its
allowance for loan losses by $94,000 to $1.0 million at June 30, 2000.  The Bank
took this action due to the continued  significant increase in multi-family real
estate,  commercial real estate,  commercial business and consumer loans and due
to the additional risks inherent in these types of lending.

     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.

     Banking  regulatory  agencies,  including  the OTS,  have  adopted a policy
statement  regarding  maintenance  of an adequate  allowance  for loan and lease
losses and an  effective  loan  review  system.  The Bank's  policy  includes an
arithmetic  formula for  determining  the  reasonableness  of the  institution's
allowance for loan loss estimate  compared to the average loss experience of the
industry as a whole.  Management  reviews the  institution's  allowance for loan
losses  and  compare it against  the sum of:  (i) 50% of the  portfolio  that is
classified  doubtful;  (ii) 15% to 20% of the  portfolio  that is  classified as
substandard;  and (iii) for the  portions  of the  portfolio  that have not been
classified  (including  those loans  designated as special  mention),  estimated
credit losses over the upcoming 12 months given the facts and  circumstances  as
of the evaluation date. This amount is considered  neither a "floor" nor a "safe
harbor"  of the  level  of  allowance  for loan  losses  an  institution  should
maintain,  but  examiners  will view a  shortfall  relative  to the amount as an
indication  that they should  review  management's  policy on  allocating  these
allowances to determine whether it is reasonable based on all relevant factors.

                                       11

<PAGE>


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

                                                                 Year Ended June 30,
                                                              -------------------------
                                                                2000              1999
                                                              --------          --------
                                                                      (In thousands)

<S>                                                           <C>               <C>
Balance at beginning of period..............................  $     909         $    751
                                                              ---------         --------
Charge-offs:
  One- to four-family.......................................         (6)              --
  Multi-family..............................................         --               --
  Non-residential...........................................         --               --
  Construction..............................................         --               --
  Consumer..................................................         --              (25)
  Commercial................................................        (48)             (61)
  Other.....................................................        (66)              --
                                                              ---------         --------
                                                                   (120)             (86)
                                                              ---------         --------
Recoveries..................................................          4               14
                                                              ---------         --------
Net recoveries (charge-offs)................................       (116)             (72)
                                                              ---------         --------
Additions charged to operations.............................        210              230
                                                              ---------         --------
Balance at end of period....................................  $   1,003         $    909
                                                              =========         ========
Allowance for loan losses to total
  non-performing loans at end of period.....................     147.07%          330.55%
                                                              =========         ========
Allowance for loan losses to net loans
  at end of period..........................................       0.84%             .92%
                                                              =========         ========
</TABLE>

     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.
<TABLE>
<CAPTION>

                                                                            June 30,
                                                     -------------------------------------------------------
                                                                 2000                        1999
                                                     --------------------------   --------------------------

                                                                    Percent of                   Percent of
                                                                       Loans to                    Loans to
                                                                    Category to                  Category to
                                                     Amount         Total Loans   Amount         Total Loans
                                                     ------         -----------   ------         -----------
                                                                     (Dollars in thousands)

<S>                                                  <C>                <C>       <C>                 <C>
Mortgage loans:
   Residential.....................................  $     186          18.54%    $    207            22.77%
   Commercial......................................        121          12.06           65             7.15
   Land............................................         49           4.89           63             6.93
Consumer loans.....................................        267          26.62          270            29.70
Commercial loans...................................        380          37.89%         304            33.45
                                                     ---------         ------     --------           ------
                                                     $   1,003         100.00%    $    909           100.00%
                                                     =========         ======     ========           ======
</TABLE>

                                       12

<PAGE>



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.  Federal  regulations
require the Bank to maintain an investment in FHLB stock and a minimum amount of
liquid assets which may be invested in cash and specified securities.  From time
to time, the OTS adjusts the percentage of liquid assets which savings banks are
required to maintain. See "Regulation of the Bank -- Liquidity Requirements."

     The Bank makes investments in order to maintain the levels of liquid assets
required by regulatory  authorities and 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 and on an ongoing basis 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, 1999 and 2000.  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  effected  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.

     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,

                                       13
<PAGE>

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  mortgage-backed  securities  portfolio  consists solely of $2.6
million in  mortgage-backed  securities of which $6,000 had fixed interest rates
and $2.6 million had adjustable  interest rates at June 30, 2000. 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.

<TABLE>
<CAPTION>

                                                                      At June 30,
                                                              --------------------------
                                                                2000              1999
                                                              --------          --------
                                                                      (In thousands)
<S>                                                           <C>               <C>
School district securities..................................  $     200         $    310
Interest-bearing deposits...................................      1,321            4,410
Mortgage-backed securities..................................      2,643            3,329
Federal Home Loan Bank stock................................      1,857            1,201
                                                              ---------         --------
      Total.................................................  $   6,021         $  9,250
                                                              =========         ========
</TABLE>

                                       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, 2000.

<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>
School district securities.......   $  200      4.10%     $   --         --%      $   --        --%       $  200       4.10%
Interest-bearing deposits........    1,321      6.01          --         --           --        --         1,321       6.01
Mortgage-backed securities.......       --        --          --         --        2,643      6.85         2,643       6.85
Federal Home Loan Bank stock.....       --        --          --         --        1,857      7.75         1,857       7.75
                                    ------                ------                  ------                  ------
Total investment securities......   $1,521                $   --                  $4,500                  $6,021
                                    ======                ======                  ======                  ======
</TABLE>


     The Bank is required to maintain  average  daily  balances of liquid assets
(cash, deposits maintained pursuant to Federal Reserve Board requirements,  time
and savings deposits in certain institutions, obligations of state and political
subdivisions thereof,  shares in mutual funds with certain restricted investment
policies,  highly rated corporate  debt, and mortgage loans and  mortgage-backed
securities  with less than one year to maturity or subject to repurchase  within
one year)  equal to a monthly  average of not less than a  specified  percentage
(currently  4%)  of  its  net  withdrawable  savings  deposits  plus  short-term
borrowings.  Monetary  penalties  may be imposed for  failure to meet  liquidity
requirements.  The average  liquidity  ratio of the Bank for the quarter  ending
June 30, 2000 was 6.18%.

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
FHLB 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 and liquidity  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.

                                       15

<PAGE>


     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
                                             2000       Deposits       (Decrease)        1999       Deposits
                                         ------------   --------       ----------    ------------   --------
                                                                         (Dollars in thousands)
<S>                                       <C>               <C>        <C>           <C>                <C>
NOW accounts...........................   $ 22,152          26.76%     $   3,955     $  18,197          25.06%
Money market deposit...................     19,007          22.96          2,066        16,941          23.33
Certificates of deposit................     30,505          36.86          3,141        27,364          37.69
Jumbo certificates.....................     11,106          13.42          1,004        10,102          13.92
                                          --------         ------      ---------     ---------         ------
                                          $ 82,770         100.00%     $  10,166     $  72,604         100.00%
                                          ========         ======      =========     =========         ======
</TABLE>



     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,
2000.

                                                 Certificates
   Maturity Period                                of Deposits
   ---------------                                -----------
                                                  (In thousands)

   Three months or less..........................  $  3,560
   Over three through six months.................     2,058
   Over six through 12 months....................     2,965
   Over 12 months................................     2,523
                                                   --------
   Total.........................................  $ 11,106
                                                   ========


     The following  table sets forth the savings  activities of the Bank for the
periods indicated.

<TABLE>
<CAPTION>
                                                                      At June 30,
                                                              --------------------------
                                                                2000              1999
                                                              --------          --------
                                                                      (In thousands)
<S>                                                           <C>               <C>
Opening balance.............................................  $  72,604         $ 63,425
Net increase (decrease) before interest credited............      7,844            7,042
Interest credited...........................................      2,322            2,137
                                                              ---------         --------
    Ending balance..........................................  $  82,770         $ 72,604
                                                              =========         ========

Net increase (decrease).....................................  $  10,166         $  9,179
                                                              =========         ========

Percent increase (decrease).................................     14.00%            14.47%
                                                              ========          ========
</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
which at June 30, 2000,  allowed  borrowings of $48.0 million  subject to normal
collateral  underwriting  requirements.  Advances  from the FHLB of  Topeka  are
secured  by  mortgage-backed  securities,   investments  and  residential  first
mortgage loans.

                                       16
<PAGE>

     At June 30,  2000,  the Bank had an approved  line of credit with the FHLB,
which the Bank had drawn to $4.0  million on at that date.  In  addition,  as of
June 30, 2000, the Bank had $32.2 million in FHLB advances  outstanding of which
$12.6 million were at interest  rates which range from 5.46% to 6.80% and mature
within one year;  $3.0 million were at interest  rates which range from 6.44% to
6.96% and mature in 2002;  $6.8  million  were at an  interest  rate of 5.87% to
7.05% and mature in 2003;  $3.0  million at an  interest  rate which  range from
6.18% to 7.34% and mature in 2005;  $1.5  million  were at an  interest  rate of
5.54% to 5.58% and mature in 2006;  $1.0  million  were at an  interest  rate of
6.10% and mature in 2008;  and $4.3 million were at an interest rate of 5.42% to
5.77% and mature in 2009.

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, 2000, the
Bank was authorized to invest up to  approximately  $4.1 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.

     In November 1999,  the Bank  incorporated  a new  subsidiary,  High Country
Title and Escrow  Company.  High Country Title is offering  title  insurance and
escrow closing  services within the Bank's market area. As of June 30, 2000, the
Bank's  investment  in High  Country  Title was  $200,000 or 0.14% of the Bank's
assets.  High Country Title  reported a net loss before taxes of $15,000 for the
year ended June 30, 2000.

MARKET AREA

     The Bank's market area for gathering  deposits and making loans is Chaffee,
Lake,  Western  Fremont and Saguache  Counties in Colorado,  which is 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 1999,  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 (5,600),  Buena Vista (2,100) and
Leadville (2,600).

COMPETITION

     The Company has no significant  business,  except the business of the Bank.
The Bank faces strong  competition  both in originating real estate and consumer
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 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

                                       17
<PAGE>

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, Western Fremont and Saguache 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 1999,  the
latest date for which information was available,  it had 26.45% of deposits held
by all financial institutions in its market area.

EMPLOYEES

     As of June 30, 2000, the Bank had 58 full-time and one part-time  employee,
and  High  Country  Title  had  four  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
Savings   Association   Insurance  Fund  (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  adequacy  regulations  require savings
institutions such as the Bank to meet three minimum capital standards:  a "core"
capital  equal to 4.0% (or 3% if the  institution  is rated  composite  1 CAMELS
under the OTS examination  rating system) of adjusted total assets, a "tangible"
capital requirement of 1.5% of adjusted total assets, and a "risk-based" capital
requirement of 8% of total risk-based capital to total risk-weighted  assets. In
addition,  the OTS has adopted  regulations  imposing  certain  restrictions  on
savings institutions that have a total risk-based capital ratio of less than 8%,
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."

     The core capital, or "leverage ratio," requirement  mandates that a savings
institution  maintain  core capital  equal to at least 4% of its adjusted  total
assets.  "Core capital" includes 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  and  "qualifying  supervisory
goodwill."  Core  capital is  generally  reduced  by the  amount of the  savings
institution's  intangible assets for which no market exists.  Limited exceptions
to the reduction of intangible  assets include  permissible  mortgage  servicing
rights, purchased credit card relationships, qualifying supervisory goodwill and
certain  intangible assets arising from prior regulatory  accounting  practices.
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 the savings

                                       18
<PAGE>

association's  intangible  assets with only a limited  exception  for  purchased
mortgage servicing rights. Both core and tangible capital are further reduced by
an amount  equal to the savings  institution's  debt and equity  investments  in
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, 2000, the Bank had no such investments.

     Adjusted  total  assets  are  a  savings   institution's  total  assets  as
determined under generally accepted accounting principles,  adjusted for certain
goodwill  amounts  and  increased  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 portion of the savings  institution's
investments in unconsolidated  includable  subsidiaries 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  capital  and  supplementary
capital  in its total  capital  provided  the  amount of  supplementary  capital
included does not exceed the savings  institution's core 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 and a portion of
the savings  institution's  general loss  allowances and up to 45% of unrealized
gains in 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 by that portion of the savings institution's land
loans and  non-residential  construction  loans in  excess of 80%  loan-to-value
ratio and all  equity  investments,  other  than  those  deducted  from core and
tangible  capital.  At  June  30,  2000,  the  Bank  had no high  ratio  land or
nonresidential  construction  loans and 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  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, one- to four-family first mortgages not more than
90 days past due with loan-to-value  ratios under 80% are assigned a risk weight
of 50%. Consumer and residential  construction  loans are assigned a risk weight
of 100%.  Mortgage-backed securities issued, or fully guaranteed as to principal
and interest, by the FNMA or FHLMC are assigned a 20% risk weight. Cash and U.S.
Government securities backed by the full faith and credit of the U.S. Government
are given a 0% risk weight.

     The table below provides  information with respect to the Bank's compliance
with its regulatory capital requirements at June 30, 2000.
<TABLE>
<CAPTION>

                                                                             Percent of
                                                       Amount               Assets  (1)
                                                       ------               -----------
                                                       (Dollars in thousands)
<S>                                                    <C>                      <C>
Tangible capital.....................................  $   13,118               9.49%
Tangible capital requirement.........................       2,074                1.5
                                                       ----------             ------
     Excess (deficit)................................  $   11,044               7.99%
                                                       ==========             ======

     Core capital (2)................................  $   13,118               9.49%

Core capital requirement.............................       5,530                4.0
                                                       ----------             ------
     Excess (deficit)................................  $    7,588               5.49%
                                                       ==========             ======

Risk-based capital...................................  $   14,121              14.37%
Risk-based capital requirement.......................       7,864                8.0
                                                       ----------             ------
     Excess (deficit)...............................   $    6,257               6.37%
                                                       ==========             ======
</TABLE>

                                       19
<PAGE>

----------
(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.  The core requirement  applicable to the
         Bank may increase to 5.0% if the OTS amends its capital regulations, as
         it has  proposed,  to  conform  to the more  stringent  leverage  ratio
         adopted by the Office of the  Comptroller  of the Currency for national
         banks.



     The OTS' risk-based capital  requirements require savings institutions with
more than a "normal"  level of interest rate risk to maintain  additional  total
capital. A savings institution's  interest rate risk is measured in terms of the
sensitivity  of its "net  portfolio  value" to changes in  interest  rates.  Net
portfolio  value is defined,  generally,  as the present  value of expected cash
inflows from existing  assets and  off-balance  sheet contracts less the present
value of expected cash outflows from existing liabilities. A savings institution
is  considered  to have a "normal"  level of interest  rate risk exposure if the
decline in its net portfolio  value after an immediate 200 basis point  increase
or decrease in market interest rates (whichever  results in the greater decline)
is less than two percent of the current estimated  economic value of its assets.
A savings  institution with a greater than normal interest rate risk is required
to deduct from total capital, for purposes of calculating its risk-based capital
requirement,  an amount (the "interest rate risk  component")  equal to one-half
the difference  between the  institution's  measured  interest rate risk and the
normal level of interest  rate risk,  multiplied  by the  economic  value of its
total assets.

     The OTS calculates the sensitivity of a savings institution's net portfolio
value based on data submitted by the  institution in a schedule to its quarterly
Thrift  Financial  Report and using the  interest  rate risk  measurement  model
adopted by the OTS. The amount of the interest rate risk  component,  if any, to
be  deducted  from  a  savings  institution's  total  capital  is  based  on the
institution's  Thrift  Financial  Report  filed two  quarters  earlier.  Savings
institutions  with less than $300  million  in assets and a  risk-based  capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their  Thrift  Financial  Reports.  However,  the OTS  requires  any exempt
savings  institution  that it determines  may have a high level of interest rate
risk  exposure  to file  such  schedule  on a  quarterly  basis.  The  Bank  has
determined  that, on the basis of current  financial data, it will not be deemed
to have more than normal level of interest rate risk under the rule and believes
that it will not be required to  increase  its total  capital as a result of the
rule.

     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
non-traditional  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"

                                       20
<PAGE>

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  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  association'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%
-----------
*  3.0% if institution has a composite 1 CAMELS rating.
</TABLE>


A  "critically  undercapitalized"  savings  association  is defined as a savings
association  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 association as adequately  capitalized
and may require an adequately  capitalized  or  undercapitalized  association to
comply with the supervisory actions applicable to associations 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  association is in an unsafe
or unsound  condition or that the  association  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 final rule and guidelines  became effective August
9,  1995.  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

                                       21
<PAGE>

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.

     Additionally  under FDICIA, as amended by the CDRI Act, the Federal banking
agencies were required to establish  standards relating to the asset quality and
earnings that the agencies  determine to be  appropriate.  On July 10, 1995, the
Federal banking agencies, including the OTS, issued proposed guidelines relating
to asset  quality  and  earnings.  Under  the  proposed  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 believes that the asset quality and earnings  standards,  in the form
proposed by the banking agencies, would not 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  investment in FHLB of
Topeka stock at June 30, 2000 of $1.9  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 Cincinnati. Long-term advances may only be made for the
purpose of providing funds for residential  housing  finance.  At June 30, 2000,
the Bank had $19.6  million in long-term  advances,  $12.6 million in short-term
advances  and $4.0  million  on a line of  credit  outstanding  from the FHLB of
Topeka.

     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 between $4.9 million and $46.5 million, plus 10% on the
amount over $46.5  million.  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, 2000,  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.

                                       22
<PAGE>

     The special assessment in 1996 recapitalized the SAIF, and as a result, the
FDIC  lowered  the  SAIF  deposit  insurance  assessment  rates to zero for well
capitalized  institutions  with the  highest  supervisory  ratings  and 0.31% of
insured deposits for institutions in the highest  risk-based  premium  category.
Since  the BIF is above  its  designated  reserve  ratio  of  1.25%  of  insured
deposits,  "well-capitalized"  institutions  in  Subgroup  A,  numbering  95% of
BIF-insured  institutions,  pay no federal deposit insurance premiums,  with the
remaining 5% of  institutions  paying a graduated  range of rates up to 0.27% of
insured deposits for the highest risk-based premium category. Until December 31,
2000, SAIF-insured  institutions will be required to pay assessments to the FDIC
at the rate of 6.5 basis points 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.  During this
period,  BIF members will be assessed for these  obligations  at the rate of 1.3
basis  points.  After  December  31,  2000,  both BIF and SAIF  members  will be
assessed at the same rate for FICO payments.

     LIQUIDITY REQUIREMENTS.  The Bank generally is required to maintain average
daily  balances  of liquid  assets  (generally,  cash,  certain  time  deposits,
bankers'  acceptances,   highly  rated  corporate  debt  and  commercial  paper,
securities of certain  mutual funds,  and  specified  United States  government,
state or federal agency  obligations) in each calendar  quarter that is equal or
greater than 4% of its net  withdrawable  accounts  plus  short-term  borrowings
either at the end of the  preceding  calendar  quarter or on the  average  daily
balance  during the  preceding  quarter.  The Bank also is  required to maintain
sufficient liquidity to ensure its safe and sound operation.  Monetary penalties
may be imposed for failure to meet  liquidity  requirements.  The average  daily
balance of liquid assets ratio of the Bank for June 30, 2000 was 6.18%.

     QUALIFIED THRIFT LENDER TEST. The HOLA and OTS regulations require that all
savings institutions satisfy one of two Qualified Thrift Lender ("QTL") tests or
suffer a number of sanctions,  including restrictions on activities.  To qualify
as a QTL, a savings  institution must either qualify as a "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, property used by a savings institution
in its business and  liquidity  investments  in an amount not  exceeding  20% of
assets.  All of the following may be included as Qualified  Thrift  Investments:
investments in mortgage-backed  securities,  residential mortgages,  home equity
loans, loans made for educational  purposes,  small business loans,  credit card
loans and shares of stock issued by a Federal  Home Loan Bank.  Subject to a 20%
of  portfolio  assets  limit,  savings  institutions  are also able to treat the
following  as  Qualified  Thrift  Investments:  (i) 50% of the dollar  amount of
residential  mortgage  loans  subject to sale  under  certain  conditions,  (ii)
investments,  both debt and equity,  in the capital stock or  obligations of and
any other  security  issued by a service  corporation  or operating  subsidiary,
provided that such subsidiary  derives at least 80% of its annual gross revenues
from  activities  directly  related to  purchasing,  refinancing,  constructing,
improving or repairing  domestic  residential  housing or manufactured  housing,
(iii) 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, (iv) loans
for the purchase, construction,  development or improvement of community service
facilities,  and (v)  loans  for  personal,  family,  household  or  educational
purposes,   provided  that  the  dollar  amount  treated  as  Qualified   Thrift
Investments may not exceed 10% of the savings institution's portfolio assets.

     A savings  institution must maintain its status as a QTL on a monthly basis
in at least nine out of every 12 months.  An initial failure to qualify as a QTL
results in a number of sanctions,  including the imposition of certain operating
restrictions and a restriction on obtaining additional advances from its Federal
Home Loan Bank. If a savings  institution  does not requalify under the QTL test
within the  three-year  period after it fails the QTL test, it would be required
to  terminate  any  activity not  permissible  for a national  bank and repay as
promptly as possible any  outstanding  advances from its Federal Home Loan Bank.
In addition,  the holding company of such an  institution,  such as the Company,
would  similarly  be required to register  as a bank  holding  company  with the
Federal Reserve Board. At June 30, 2000, the Bank qualified as a QTL.

     RESTRICTIONS ON CAPITAL DISTRIBUTIONS.  Under OTS regulations,  the Bank is
not permitted to pay dividends on its capital  stock if its  regulatory  capital
would  thereby be reduced  below the amount then  required  for the  liquidation
account  established  for the benefit of certain  depositors  of the Bank at the
time of its conversion to stock form.

                                       23

<PAGE>

     Under  the OTS'  prompt  corrective  action  regulations,  the Bank is also
prohibited   from  making  any  capital   distributions   if  after  making  the
distribution,  the Bank would have: (i) a total risk-based capital ratio of less
than 8%;  (ii) a Tier 1  risk-based  capital  ratio of less  than 4%; or (iii) a
leverage  ratio of less  than 4%.  The OTS,  after  consultation  with the FDIC,
however,  may  permit  an  otherwise  prohibited  stock  repurchase  if  made in
connection  with the issuance of additional  shares in an equivalent  amount and
the repurchase will reduce the institution's  financial obligations or otherwise
improve the institution's financial condition.

     OTS regulations require that savings  institutions submit notice to the OTS
prior to making a capital distribution 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 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,  President
Clinton  signed  legislation  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.  Among the new  activities  that will be  permitted  to bank holding
companies are  securities  and  insurance  brokerage,  securities  underwriting,
insurance  underwriting  and  merchant  banking.  The Board of  Governors of the
Federal Reserve System (the "Federal Reserve Board"),  in consultation  with the
Secretary of the Treasury, may approve additional financial activities. National
bank subsidiaries  will be permitted to engage in similar  financial  activities
but only on an agency basis  unless they are one of the 50 largest  banks in the
country.   National  bank   subsidiaries   will  be  prohibited  from  insurance
underwriting,  real estate  development  and, for at least five years,  merchant
banking.  The G-L-B Act,  however,  prohibits  future  acquisitions  of existing
unitary savings and loan holding companies, like the Company, by firms which are
engaged  in  commercial  activities  and limits the  permissible  activities  of
unitary holding companies formed after May 4, 1999.

     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  non-affiliated  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 Securities and
Exchange  Commission 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 will become
effective six months thereafter.

                                       24

<PAGE>

     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.  The G-L-B  Act  makes  membership  in the FHLB  voluntary  for
federal savings associations.

     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 Community  Reinvestment Act  examinations for smaller  institutions
and imposes certain reporting requirements on depository  institutions that make
payments  to   non-governmental   entities  in  connection  with  the  Community
Reinvestment  Act.  The  G-L-B  Act  eliminates  the SAIF  special  reserve  and
authorizes a federal  savings  association  that converts to a national or state
bank charter to continue to use the term "federal" in its name and to retain any
interstate branches.

     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.

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 non-savings 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.  There are
generally  no  restrictions  on the  activities  of a unitary  savings  and loan
holding  company.  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 shall 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."

     Legislation  currently  pending in the United  States  Congress  would,  if
enacted,  restrict the business  activities of unitary  savings and loan holding
companies;  however,  the legislation in its present form would  grandfather the
current  absence of restriction on business  activities for unitary  savings and
loan holding  companies in existence on the bill's date of enactment.  Since the
Company  currently  is a unitary  savings  and loan  holding  company,  it would
qualify  for  such  grandfathered  treatment  under  the  current  form  of  the
legislation. See " --Proposed Regulatory and Legislative Changes."

     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

                                       25
<PAGE>

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 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  non-affiliate.  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

                                       26
<PAGE>

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 the voting shares of an under-capitalized 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 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 of 1977 in connection with any branch application.

TAXATION

     GENERAL. The Company and the Bank file separate 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.

                                       27
<PAGE>

     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.

     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 4.75% 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                                      2000                Title
----                                      ----                -----

<S>                                        <C>                <C>
Larry D. Smith                             42                 President
Scott G. Erchul                            38                 Vice President
Frank L. DeLay                             36                 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.

     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.

     Frank L. DeLay has served as the Chief Financial  Officer of the Bank since
1992 and he serves in a similar capacity for the Company.  He is a member of the
Kiwanis  Club and has served as  Treasurer  and on the Board of Directors of the
Heart of the Rockies Chamber of Commerce.

                                       28

<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

     The following table sets forth information  regarding the Bank's offices at
June 30, 2000.

<TABLE>
<CAPTION>

                                                           Book Value at
                         Year                Owned or         June 30,             Approximate
                        Opened                Leased          2000 (1)           Square Footage
                        ------                ------          --------           --------------
                                                       (Dollars in thousands)
<S>                      <C>                 <C>             <C>                     <C>
MAIN OFFICE:
7360 West US
  Highway 50
Saldia, Colorado         2000 (2)              Owned          $ 3,020                 11,800

BRANCH OFFICES:
130 West 2nd
Salida, Colorado         1886 (3)              Owned              756                 10,750

600 Harrison (4)
Leadville, Colorado      1978                  Owned              737                  3,800

713 East Main (4)
Buena Vista, Colorado    1996                  Owned              436                  2,400
<FN>

(1)      Cost less accumulated depreciation and amortization.
(2)      Opened in April 2000.
(3)      The current location and building in Salida, Colorado was occupied in 1974.
(4)      The Bank constructed new building facilities at each of these locations in 1996.
</FN>
</TABLE>

     The book value of the Bank's  investment in premises and equipment  totaled
approximately  $6.1 million at June 30,  2000.  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, 2000, 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, 2000.

                                       29
<PAGE>


                                     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.

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.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
----------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

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

     Pursuant to regulations  promulgated  under the Securities  Exchange Act of
1934,  the  Company's  officers,  directors  and  persons  who own more than ten
percent of the Company's outstanding shares of common stock are required to file
reports detailing their ownership and changes of ownership in such Common Stock,
and to furnish the Company with copies of all such reports.  Based solely on the
Company's  review of such  reports  which the Company  received  during the last
fiscal year, or written  representations from such persons that no annual report
of change in  beneficial  ownership  was required,  the Company  believes  that,
during the last fiscal year, all persons subject to such reporting  requirements
have complied with the reporting requirements.

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

         (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.

                                       30
<PAGE>


         (b)      Security Ownership of Management

                  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.

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, 2000
                         and 1999
                    (b)  Statements  of Income for the Years Ended June 30, 2000
                         and 1999
                    (c)  Statements  of Equity for the Years Ended June 30, 2000
                         and 1999
                    (d)  Statements  of Cash Flows for the Years  Ended June 30,
                         2000 and 1999
                    (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:

   Exhibit No.

    * 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

                                       31
<PAGE>


    * 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

    * 10.9      Change-in-Control Protective Agreement between Salida Building
                and Loan Association and Francis L. Delay

    * 10.10     Change-in-Control Guaranty Agreement between High Country
                Bancorp, Inc. and Francis L. DeLay

      13        Annual Report to Stockholders for the year ended June 30, 2000

      21        Subsidiaries

      23        Consent of Grimsley, White & Company

      27        Financial Data Schedule

-------------
*  Incorporated  by  reference  from  Registration  Statement on Form SB-2 filed
January 27, 1997 (File No. 333-34153).


     (b)  Reports on Form 8-K.  No  current  reports on Form 8-K have been filed
          -------------------
          during the last quarter of the fiscal year covered by this report.


                                       32
<PAGE>



                                   SIGNATURES

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

                                          HIGH COUNTRY BANCORP, INC.


Date:  September 27, 2000             By: /s/ Larry D. Smith
                                          -----------------------------
                                          Larry D. Smith
                                          President and Chief Executive Officer
                                            (Duly Authorized Officer)

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


By: /s/ Larry D. Smith                                 Date: September 27, 2000
    ------------------------------------
    Larry D. Smith
    President and Chief Executive Officer
     (Principal Executive and Officer)


By: /s/ Frank L. DeLay                                 Date: September 27, 2000
    ------------------------------------
    Frank L. DeLay
    Chief Financial Officer
     (Principal Financial and Accounting Officer)


By: /s/ Scott G. Erchul                                Date: September 27, 2000
    ------------------------------------
    Scott G. Erchul
    Vice President and Director


By: /s/ Robert B. Mitchell                             Date: September 27, 2000
    ------------------------------------
    Robert B. Mitchell
    Chairman of the Board


By: /s/ Timothy R. Glenn                               Date: September 27, 2000
    ------------------------------------
    Timothy R. Glenn
    Director


By: /s/ Richard A. Young                               Date: September 27, 2000
    ------------------------------------
    Richard A. Young
    Director


By: /s/ Philip W. Harsh                                Date: September 27, 2000
    -------------------------------------
    Philip W. Harsh
    Director