UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ---------------------

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 1998

                         Commission file number 0-24606

                             NORTHWEST EQUITY CORP.
        (Exact name of small business issuer as specified in its charter)

         Wisconsin                                             39-1772981
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)


     234 Keller Avenue South
        Amery, Wisconsin                                          54001
(Address of principal executive offices)                        (Zip code)

                                 (715) 268-7105
              (Registrant's telephone number, including area code)

         Check whether the issuer (1) has 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 report(s) and
(2) has been subject to such filing requirements for the past 90 days.

                                               (1) Yes __x__ No_____
                                               (2) Yes __x__ No_____

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

         State  issuer's  revenues for its most recent  fiscal year:  $8,371,000
(Total interest and dividend income and total non-interest income).

         As of May 31, 1998 there were issued and outstanding  825,301 shares of
Common Stock of the Registrant.  The aggregate  market value of the voting stock
held by non-affiliates  of the Registrant,  computed by reference to the average
of the bid and asked  price of such shares of Common  Stock as of May 31,  1998,
was $13.0  million.  Solely for  purposes  of this  calculation,  all  executive
officers and directors of the Registrant  are considered to be affiliates;  also
included  as  "affiliate  shares" are  certain  shares held by various  employee
benefit  plans in which the  trustee  are  directors  of the  Registrant  or are
required to vote a portion of  unallocated  shares at the direction of executive
officers or directors of the  Registrant.  The exclusion from such amount of the
market  value of the shares owned by any person shall not be deemed an admission
by the Registrant that such person is an affiliate of the Registrant.

                           DOCUMENTS INCORPORATED BY REFERENCE

Parts II and IV of Form 10-KSB:  Portions of the Annual  Report to  Shareholders
for the fiscal year ended  March 31, 1998 are  incorporated  by  reference  into
Parts II and IV hereof.

Part III of Form  10-KSB:  Portions of the Proxy  Statement  for the 1998 Annual
Meeting of Shareholders are incorporated by reference into Part III hereof.



                                       1
<PAGE>



PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General

         Northwest  Equity Corp., a Wisconsin  corporation (the "Company" or the
"Registrant"),  is the holding  company for Northwest  Savings Bank, a Wisconsin
chartered  stock  savings  bank  (the  "Bank").  The  Bank is  regulated  by the
Wisconsin  Department  of  Financial  Institutions  (the  "DFI") and the Federal
Deposit Insurance Corporation (the "FDIC"). The Company and the Bank are subject
to extensive regulation, supervision and examination by the Wisconsin Department
of  Financial  Institutions  (the  "DFI")  and  the  Federal  Deposit  Insurance
Corporation  (the "FDIC").  The Bank was  organized in 1936,  and has three full
service  offices  located in Polk,  St. Croix and Burnett  Counties,  Wisconsin.
Because the Company's only significant business operations are that of the Bank,
the business of the Bank is essentially the only business of the Company.

         The Bank is a  community-oriented,  full-service  financial institution
offering  a  variety  of  retail  financial  services  to meet the  needs of the
communities it serves.  The Company's  principal business consists of attracting
funds in the form of deposits and other  borrowings  and  investing  such funds,
primarily  in  residential  real  estate  loans,   mortgage-backed  and  related
securities,  and various types of commercial  and consumer  loans.  At March 31,
1998,  the Company had total assets of $98.7  million,  total  deposits of $62.3
million,  and shareholders' equity of $11.5 million. The Bank is a member of the
FHLB-Chicago,  which is one of the twelve  regional banks that comprise the FHLB
system.  The Company's  executive  office is  headquartered  at 234 South Keller
Avenue,  Amery,  Wisconsin  54001.  Its  telephone  number  at that  address  is
715-268-7105. Its E-mail address is (nwsbank@win.bright.net).

         The  Company's  primary  sources of funds are  deposits,  repayments on
loans and  mortgage-backed  and  related  securities  and,  to a lesser  extent,
advances from the FHLB-Chicago.  The Company's deposits totaled $62.3 million at
March 31, 1998, of which 35.1% were core deposits,  consisting of NOW,  passbook
and money market deposit  accounts.  The Company  utilized these funds to invest
primarily  in  one-to-four  family  residential  loans and, to a lesser  extent,
consumer,  commercial  and other  loans,  and to invest in  mortgage-backed  and
related  securities  and other  investment  securities.  At March 31, 1998,  the
Company's  gross loan portfolio  totaled $78.9 million,  that consisted of $58.1
million of  one-to-four  family loans,  $8.6 million of other real estate loans,
$4.4 million of commercial  loans,  and $7.8 million of consumer loans. At March
31, 1998, the Company's gross loans included $61.4 million of ARM loans.

         The  Company's  strategic  business plan  provides for  investments  in
mortgage-backed  and related securities in addition to its investments in United
States  Treasury and agency  securities.  Management  believes  this  investment
portfolio  provides  numerous  benefits,  including  the  ability to provide and
maintain  adequate  regulatory  liquidity  levels,  maintain  a balance  of high
quality,  diversified  investments,  and better manage the interest rate risk of
the  Company.  At March 31,  1998,  the  Company's  mortgage-backed  and related
securities  held for  investment  and  FHLB-Chicago  stock  totaled $7.6 million
consisting  of $6.4  million  or 6.5% of total  assets  in  mortgage-backed  and
related securities held for investment and $1.2 million or 1.21% of total assets
in FHLB-Chicago stock.

Market Area and Competition

         The Company offers a variety of deposit products, services and mortgage
loans primarily in northwestern Wisconsin.  The Company's main office is located
at 234 South  Keller  Avenue,  Amery,  Wisconsin.  The City of Amery is  located
approximately  40 miles  northeast of Minneapolis and St. Paul,  Minnesota.  The
Company, in addition to its Amery office, has two full-service  branches. One is
located in New Richmond and the other in Siren, Wisconsin. Both are located near
Amery and  together  account  for  approximately  $21.7  million or 34.8% of the
Company's  total deposits at March 31, 1998. All of the Company's  locations are
in  counties  generally  characterized  as  rural  with a  total  population  of
approximately 100,000.



                                       2
<PAGE>




         The  Company  has  significant  competition  in both its  mortgage  and
consumer  lending  business,  as well as in attracting  deposits.  The Company's
primary  competition for loans are principally from other savings banks,  thrift
institutions,  mortgage banking  companies,  insurance  companies and commercial
banks. Its most direct competition for deposits historically has come from other
savings banks,  thrift  institutions,  commercial banks, and credit unions.  The
Company  has  faced   additional   competition   for  funds  from  a  number  of
institutions,  including the  availability of short-term  money market funds and
other  corporate and  government  securities  funds  offered by other  financial
service companies, such as brokerage firms and insurance companies.

-Recapitalizaiton of SAIF

         The  Savings  Association  Insurance  Fund  ("SAIF")  of the  FDIC  was
recapitalized  during 1996 by a one-time special  assessment imposed on all SAIF
members.  The $350,000  assessment paid by the Bank had a significant  impact on
the fiscal year ended March 31, 1997, financial results.  However, the effect of
the  recapitalization  is a significant  reduction in federal deposit  insurance
premiums for SAIF-insured  institutions on an ongoing basis.  See  "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Lending Activities

    General

         The  largest  component  of the  Company's  gross  loan  receivable  of
$78.9million   at  March  31,  1998,   was  first   mortgage  loans  secured  by
owner-occupied  one-to-four family residences and totaled $58.0 million at March
31, 1998, or 73.6% of gross loans.  Other real estate loans were $8.6 million or
10.9% of gross loans at March 31, 1998.  Of gross loans,  $61.4 million or 77.9%
were ARM loans.  As part of its  strategy  to manage  interest  rate  risk,  the
Company  originates  primarily  ARM loans that have short and  intermediate-term
maturities for its own loan portfolio. The Company also offers longer-term fixed
rate loans, most of which are sold immediately to secondary market investors. In
general, the Company's total loan portfolio has increased in recent years due to
its ability to originate ARM loans that it retains in its loan portfolio.




                                       3
<PAGE>



Composition of Loan Portfolio

    The following table sets forth the composition of the Company's loan
portfolio, including loans held for sale,  in dollar amounts and in percentages 
of the gross loan portfolio at the dates indicated.
<TABLE>


                                                                                   At March 31,
                                           -----------------------------------------------------------------------------------------
                                                          1998                        1997                          1996
<CAPTION>
                                          
                                                  Amount        Percent        Amount        Percent         Amount        Percent
<S>                                            <C>              <C>         <C>               <C>         <C>              <C>

                                                                               (Dollars in thousands)
Real estate loans:
    One-to-four family                          $ 58,120         73.64%      $ 55,581          71.14%      $ 48,360         68.00%
    Multi-family                                     536          0.67%           931           1.19%         1,266          1.78%
    Commercial                                     5,261          6.67%         6,443           8.25%         6,813          9.58%
    Construction and land                          2,785          3.53%         3,299           4.22%         3,165          4.45%
                                                ----------     ---------       ---------      --------     ----------      ---------
       Total real estate loans                    66,702         84.51%        66,254          84.80%        59,604         83.81%
                                                ----------     ---------       ---------      --------     ----------      ---------
Consumer loans:
    Home equity                                        -             -              -              -              7          0.01%
    Automobile                                     5,706          7.23%         4,856           6.22%         4,832          6.79%
    Credit card                                      312          0.40%           304           0.39%           241          0.34%
    Other consumer loans                           1,809          2.29%         2,047           2.62%         1,817          2.56%
                                                ----------      --------      --------        --------      ---------      ---------
       Total consumer loans                        7,827          9.92%         7,207           9.23%         6,897          9.70%
                                                ----------      --------      --------        --------      ---------      ---------
Commercial loans                                   4,397          5.57%         4,663           5.97%         4,612          6.49%
                                                ----------      --------      --------        --------      ---------      ---------
       Gross loans receivable                     78,926        100.00%        78,124         100.00%        71,113        100.00%
                                                                --------                      --------                     ---------
                                                                --------                      --------                     ---------
Add:
    Accrued interest, net                            492                          448                           506
Less:
    Loans in process                                   -                            -                             -
    Deferred fees and discounts                        -                            -                             -
    Allowance for uncollected interest                (3)                          (8)                            -
    Allowance for loan losses                       (484)                        (461)                         (433)
                                                 ---------                    ---------                     ---------
        Total additions/deductions                     5                          (21)                           73 
                                                 ---------                    ---------                     --------- 
          Loans receivable, net                 $ 78,931                      $ 78,103                     $ 71,186 
                                                ----------                    ---------                     ---------
                                                ----------                    ---------                     ---------

</TABLE>



                                       4
<PAGE>





         Loan Maturity

                  The  following  table  shows the  contractual  maturity of the
Company's loan and mortgage-backed and related securities portfolio at March 31,
1998.  Loans  that have  adjustable  rates are shown as being due in the  period
during which the underlying contracts mature. Demand loans that have no schedule
for  repayment  and no stated  maturity are reported as due in one year or less.
The  table  does  not  include  estimated  prepayments  or  scheduled  principal
amortization.

<TABLE>

                                                                          At March 31, 1998
                                   -------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                                      Total
                                                                                                                    Mortgage-
                                       One-to-            Commercial  Construction                                 Backed and
                                          Four     Multi-       Real           and                                    Related
                                        Family     Family     Estate          Land      Commercial     Consumer    Securities  Total
<S>                                    <C>         <C>        <C>         <C>            <C>           <C>           <C>     <C>
                                                   
Amounts due :
    Within one year                      $989       $ -        $191        $1,662         $2,938        $1,052        $ -     $6,832
After one year:                                                                                             
    One to three years                  1,975         -         469            36          1,004         2,743          -      6,227
    Three to five years                 3,045         -          16            92            293         3,655          -      7,101
    Five to ten years                   4,474        64       1,973           255            162           208          -      7,136
    Ten to twenty years                11,947         -       1,235           887              -           140      1,029     15,238
    Over twenty years                  34,760       472       1,377           783              -            29      5,369     42,790
                                      --------     -----     -------       -------        -------       -------    -------   -------
       Total due after one year        56,201       536       5,070         2,053          1,459         6,775      6,398     78,492
                                      ========     =====     =======       =======        =======       =======    =======   =======
                                      
        Total amounts due              57,190       536       5,261         3,715          4,397         7,827      6,398     85,324
                                      ========     =====     =======       =======        =======       =======    =======   =======
Less:                                              
    Allowance for loan losses             (50)       (1)         (5)           (2)          (346)          (80)       - -      (484)



Loans receivable and mortgage-
    backed securities, net            $57,140      $535      $5,256        $3,713         $4,051        $7,747      $6,398   $84,840
                                      ========     =====     =======       =======        =======       =======     =======  =======

</TABLE>





                                       5
<PAGE>



         The  following  table sets forth at March 31, 1998 the dollar amount of
all loans and  mortgage-backed  and related securities due after March 31, 1999,
such  loans and  whether  such loans have  fixed  interest  rates or  adjustable
interest rates.



                                       -----------------------------------------
                                                  Due After March 31, 1999
                                       -----------------------------------------
                                       -----------------------------------------
                                          Fixed        Adjustable         Total
                                       -----------------------------------------
                                                      (In thousands)
Mortgage loans:
  One-to-four family                     $ 7,202        $ 48,999        $ 56,201
  Multi-family                               -               536             536
  Commercial                                 904           4,166           5,070
  Construction and land                       46           2,007           2,053
    Total mortgage loans                   8,152          55,708          63,860
                                                                            
Consumer loans                             6,498             277           6,775
                                                                            
Comercial loans                              590             869           1,459

   Gross loans receivable                 15,240          56,854          72,094

Mortgage-backed securities                 5,833             565           6,398

 Gross loans receivable and mortgage-
  backed and related securities         $ 21,073        $ 57,419        $ 78,492






                                       6
<PAGE>




   One-to-Four Family Mortgage Lending

         The Company's  primary  lending  activity is the  origination  of first
mortgage loans secured by one-to-four family,  owner-occupied  residences within
the Company's  primary lending area. The Company sells  substantially all of its
fixed  rate  mortgage  loans  it  originates  to  government   secondary  market
investors.  Generally,  loans sold to government  secondary market investors are
sold as whole loans with servicing retained.  Substantially all of the ARM loans
originated  by the  Company  are  retained  in its loan  portfolio.  The Company
follows Federal Home Loan Mortgage Corporation ("FHLMC") underwriting guidelines
for its one-to-four  family mortgage loans and rarely originates loans in excess
of the FHLMC limit of $227,150.

         The  Company  offers a variety of rates,  fees,  origination  terms and
mortgage  products.  Mortgage loan  originations  are solicited from real estate
brokers, builders,  existing customers,  community groups and residents of local
communities  located in the  Company's  primary  market  area  through  its loan
origination  staff.  The Company  also  advertises  its products  through  local
newspapers,  periodicals  and  radio.  Upon  receipt  of  a  completed  mortgage
application  from a  prospective  borrower,  a  credit  report  is  ordered,  an
appraisal from an independent third party is obtained,  income and other deposit
information are verified, and, as necessary, additional financial information is
requested.  The Company requires title insurance or evidence of marketable title
and lien  position  (consisting  of an abstract and legal  opinion) on all first
mortgage loans.  Borrowers must present evidence of appropriate hazard insurance
and flood  insurance (if  applicable)  prior to the closing.  On loans with high
loan to value  ratios,  borrowers  are  required  to advance  funds on a monthly
basis,  together with payments of principal and interest,  to a mortgage  escrow
account from which the Company makes disbursements for items such as real estate
taxes, hazard insurance, and in some cases, flood insurance. On those loans with
no escrow  requirement,  the Company  verifies payment of real estate taxes on a
semi-annual  basis and requires  evidence  from the borrower  annually of hazard
insurance  and flood  insurance.  The lending  policy of the  Company  restricts
mortgage  loan amounts to 80% of the lesser of the  appraised  value or purchase
price of the real estate to be  mortgaged  to the  Company.  The  Company  makes
mortgage  loans in  amounts up to 95% of the  lesser of the  appraised  value or
purchase price,  subject to availability of private mortgage  insurance insuring
the amount in excess of 80% of the appraised value or purchase price. Exceptions
to this policy are ARM loans,  in which case the Company  loans up to 90% of the
appraised  value  or  purchase  price  with  the  appropriate  private  mortgage
insurance,  and loans to its most  credit  worthy  customers,  in which case the
Company  loans  up to  90% of  the  appraised  value  without  private  mortgage
insurance.  The  Company  also  currently  offers a program  for low to moderate
income families to lend up to 90% of the appraised value of the property without
private mortgage insurance,  provided certain credit, property and cost criteria
are met.

         The  Company's  underwriting   department  reviews  all  the  pertinent
information   and  makes  a  credit  decision  for  approval  or  denial  within
established  Company policy  guidelines.  Recommendations  to deny  applications
based on  underwriting  considerations  are  reviewed  by the  Company's  senior
underwriter prior to a final  disposition of the loan application.  Summaries of
all  one-to-four  family  mortgage loan  applications  are reviewed on a monthly
basis by the Board of Directors and the Loan  Committee.  Mortgage loans held in
the Company's  loan  portfolio  generally  include  due-on-sale  clauses,  which
provide the Company with the contractual  right to deem the loan immediately due
and payable in the event the borrower  transfers  the  ownership of the property
without the  Company's  prior  consent.  The Company  enforces  the  due-on-sale
clauses of its mortgage loans.

         The Company makes loans under various  governmental  programs including
the Wisconsin Housing and Economic Development Authority ("WHEDA"),  the Federal
Housing Administration,  the Farmers Home Administration ("FHA") and the Federal
Veterans Administration ("VA"). These programs generally have lower down payment
and less restrictive  qualification ratios. The WHEDA loans are serviced through
WHEDA and originated for them, and the Federal Housing  Administration,  FHA and
VA loans are sold in the secondary market with servicing retained.

         The  Company  offers  one,  three and  five-year  ARM loans.  ARM loans
currently  adjust a maximum  of two  percentage  points per year with a lifetime
interest cap of six percentage  points above the initial interest rate.  Monthly
payments of principal  and interest are adjusted  when the interest rate adjusts
to maintain full  amortization  of the mortgage loan within the remaining  term.
The initial  rates  offered on ARM loans  fluctuate  with general  interest rate
changes and are  determined by competitive  conditions  and the Company's  yield
requirements.  The Company currently uses the one-year,  three-year or five-year
as applicable,  Constant  Maturity United States Treasury index to determine the
interest rate payable upon the  adjustment  date of outstanding  ARM loans.  The
Company also  

                                       7
<PAGE>


originates  ARM loans with initial  interest rates below the fully
indexed  rate by  permitting  the  borrower  to choose the number of  percentage
points the  initial  interest  rate is below the fully  indexed  rate (up to two
points) and pay origination points in a corresponding amount. Borrowers choosing
these  ARM  loans  can  effectively  lower  the  lifetime  interest  rate cap by
decreasing the initial  interest rate. ARM loans  generally pose different risks
than fixed rate loans. In a rising interest rate environment, the underlying ARM
loan payment rises,  increasing the potential for default, and the marketability
of the underlying property may be adversely  affected.  In a decreasing interest
rate  environment,  mortgagors  tend to  refinance  to  fixed  rate  loans.  The
Company's   delinquency   experience  on  its  ARM  loans   generally  has  been
satisfactory to date.

         The  Company  has  continued  to  generate  a  significant   amount  of
adjustable rate loans. Adjustable rate loans originated amounted to 35.6%, 44.7%
and 52.8% of the  Company's  total loans  originated  for the fiscal years ended
March 31, 1998, 1997, and 1996, respectively. The Company's continued ability to
originate  ARM loans is primarily  due to the nature of its market  area,  which
includes  rural and vacation  properties.  Loans on  properties  with  excessive
acreage,  hobby farm activities or three-season  cabins generally cannot be sold
into  the  secondary  market,   thus  making  these  loans  less  attractive  to
competitors of the Company that only originate loans for sale into the secondary
market.  Furthermore,  many of the Company's  customers  desiring a loan term of
short-to-medium-duration  (i.e.,  less than ten  years)  often  prefer ARM loans
because of the generally  lower closing costs compared to fixed rate loans.  The
Company  generally  obtains an  abstract  and title  opinion,  rather than title
insurance,  on loans  originated  for  retention  in its  portfolio  and has not
experienced losses attributable to the lack of title insurance.

   Commercial Real Estate Lending

         At March 31, 1998, the Company's  commercial real estate loan portfolio
totaled $5.3 million or 6.67% of gross loans compared to $6.4 million or 8.3% of
gross loans at March 31, 1997. The decrease  reflects that principal  repayments
of $1.3 million exceeded commercial real estate loans originated of $0.2 million
for the fiscal year ended March 31, 1998.  The  commercial  real estate loans in
the Company's portfolio consist of fixed rate and ARM loans generally secured by
small office  buildings,  retail stores and farms, and occupied by the borrower.
The Company currently  originates ARM loans secured by commercial real estate at
375 to 525  basis  points  above  the  rate  on  U.S.  Treasury  securities  for
comparable maturities.  These loans typically do not exceed 65% of the lesser of
the purchase price or the appraised value of the underlying collateral. At March
31, 1998, the largest outstanding commercial real estate loan was $.8 million.

         In   underwriting   commercial   real  estate   loans,   the  Company's
underwriting  procedures require  verification of the borrower's credit history,
an analysis of the borrower's income taxes,  personal  financial  statements and
banking   relationships,   a  review  of  the  borrower's   property  management
experience,  and a review of the  property,  including  cash  flow  projections,
historical  operating  statements,   environmental  concerns,   compliance  with
regulations and prevailing market  conditions.  Loans secured by commercial real
estate  properties  involve a greater degree of risk than  residential  mortgage
loans.  Payments on loans secured by commercial real estate properties are often
susceptible to adverse conditions in the real estate market or the economy.  The
Company  seeks to minimize  these risks by  originating  commercial  real estate
loans  principally  in its primary  market area where it has the ability to more
closely monitor and anticipate adverse conditions.

   Commercial Lending

         The Company engages in a limited amount of commercial  business lending
activities,  generally with existing customers,  including secured and unsecured
loans and letters of credit. Commercial loans may not exceed 10% of total assets
and involve many different  industries.  At March 31, 1998, the Company had $4.4
million in commercial  business loans  outstanding,  which  represented  5.6% of
gross loans.  Term loans are amortized over a one to five year term and lines of
credit are reviewed annually.  Such loans generally are originated at 375 to 525
basis  points  above  the  rate  on  U.S.  Treasury  securities  for  comparable
maturities.  At March 31, 1998, the largest outstanding commercial loan was $0.6
million.

         The Company  originated a majority of the commercial  loans held in its
loan  portfolio in the  mid-1980's  when it hired a  commercial  loan officer to
expand its  activity  in this area.  During the last  three  fiscal  years,  the
Company charged off  approximately  $19,000 of such loans. The Company currently
is not actively seeking new commercial lending business and substantially all of
its commercial  lending consists of renewals of existing  commercial loans. With
the exception of the commercial loan discussed under Asset Quality in the Annual
Report  attached  to  this 

                                       8
<PAGE>


 document,  the  remaining  commercial  loans  in the portfolio  are  generally
 performing  and,  management   believes,   adequately reserved.

         Unlike residential mortgage loans which generally are made on the basis
of the borrower's ability to make repayment from his or her employment and other
income,  and which are  secured by real  property  whose  value tends to be more
easily ascertainable, commercial business loans are of higher risk and typically
are made on the basis of borrower's ability to make repayment from the cash flow
of the  borrower's  business.  As a result,  the  availability  of funds for the
repayment of commercial  business loans may be substantially  dependent upon the
general economic  environment.  The Company's  commercial business loans usually
include personal guarantees and are usually, but not always, secured by business
assets,  such as accounts  receivable,  equipment  and inventory as well as real
estate. However, the collateral securing the loans may depreciate over time, may
be difficult to appraise and may  fluctuate in value based on the success of the
business.

   Consumer Lending

         The  Company  originates  a  variety  of  consumer  loans,   consisting
primarily of new and used  automobile  loans.  At March 31, 1996, 1997 and 1998,
consumer   loans   totaled  $6.9   million,   $7.2  million  and  $7.8  million,
respectively,  or 9.7%,  9.2% and 10.0%,  respectively,  of gross loans at those
dates.  The Company's  marketing  strategy  emphasizes  auto loans as a means of
establishing more  relationships with its customers and developing new customers
through  soliciting auto dealerships for loans to non-customers.  Consumer loans
generally  have shorter terms and higher  interest rates than mortgage loans but
generally  involve more risk than mortgage  loans because of the type and nature
of the  collateral  and, in certain cases,  the absence of collateral.  Consumer
loans generally are dependent on the borrower's  continuing  financial stability
and thus are more likely to be affected by adverse personal circumstances. Often
the  loans  are  secured  by  rapidly  depreciable  personal  property,  such as
automobiles. Automobile loans generally are underwritten in amounts up to 90% of
the purchase  price for new and used vehicles.  The term of the loans  generally
cannot exceed six years for new vehicles and five years for used  vehicles.  The
Company's  delinquent  consumer  loans as a  percentage  of gross loans has been
minimal.

   Multi-Family Lending

         The Company held $.5million or .67% gross loans of  multi-family  loans
at March 31,  1998.  The  rates  charged  on the  Company's  multi-family  loans
typically are slightly higher than those charged on loans secured by one-to-four
family  residential  properties.  Multi-family  ARM loans typically  adjust in a
manner similar to that of the Company's other ARM loans, although generally at a
slightly higher margin.  An origination fee equal to 1% of the principal  amount
is usually charged on such loans.

         Multi-family  loans are generally  underwritten in amounts of up to 80%
of the  lesser  of the  appraised  value or  purchase  price  of the  underlying
property.  Appraisals  that  secure  multi-family  loans  are  performed  by  an
independent  appraiser  designated by the Company at the time the application is
submitted.   In  addition,   the  Company's   underwriting   procedures  require
verification  of the borrower's  credit  history,  an analysis of the borrower's
income,  personal financial statements and banking relationships and a review of
the property,  including cash flow projections and historical operating results.
The Company  evaluates all aspects of  multi-family  lending to mitigate risk to
the extent possible.  The Company seeks to ensure that the property securing the
loans will generate  sufficient cash flow to adequately cover operating expenses
and debt  service  payments.  The  Company  obtains  individual  guarantees  for
substantially all of its multi-family loans.

         Loans secured by multi-family  real estate generally  involve a greater
degree of credit risk than  one-to-four  family  mortgage loans and carry larger
loan  balances.  This  increased  credit  risk is a result of  several  factors,
including  the  concentration  of  principal  in a  limited  number of loans and
borrowers,  the  effects  of general  economic  conditions  on  income-producing
properties and the increased difficulty of evaluating and monitoring these types
of loans.  Furthermore,  the  repayment of loans  secured by  multi-family  real
estate is typically dependent upon the successful  operation of the related real
estate  project.  If the cash flow from the project is reduced,  the  borrower's
ability  to repay the loans  may be  impaired.  Despite  the risks  inherent  in
multi-family real estate lending, the Company's delinquent multi-family loans as
a percentage of gross loans has been minimal.


                                       9
<PAGE>


   Construction and Land Lending

         The  Company   offers   one-to-four   family   residential   and  other
construction loans. At March 31, 1998,  construction and land loans totaled $2.8
million or 3.53% of gross loans  compared to $3.3 million or 4.2% of gross loans
at March 31,  1997.  Construction  loans are made to  individuals  intending  to
occupying the home who have signed construction  contracts with a builder. These
loans have loan-to-value ratios not exceeding 90%. When the loan-to-value ratios
exceed 80%,  private  mortgage  insurance is required which insures payment of a
portion  of the  principal  balance,  reducing  the  Company's  exposure  to 75%
loan-to-value or less. The Company offers permanent financing,  primarily one-to
five-year ARM loans, on residential construction loans that enables borrowers to
avoid  duplicative  closing costs normally  associated with temporary  financing
during   construction   periods  and  permanent  financing  upon  completion  of
construction.  The Company has had minimal delinquent  residential  construction
loans to date.

   Loan Approval and Monitoring

         Loan  approval  is  based on a  customer's  aggregate  amount  of loans
outstanding,  including  the loan  application  under  review.  Loan  amounts of
$100,000 or less may be approved by one member of the Loan  Committee and a loan
officer.  Loan amounts exceeding $100,000 up to $500,000 require the approval of
two members of the Loan Committee and a loan officer.  Any single loan exceeding
$500,000 requires  approval from the Board of Directors and a loan officer.  Any
loans over $25,000 that exceed the  aggregate  amount of $625,000  require Board
approval.

         Loans held in the Company's  portfolio are reviewed  annually by a loan
officer  to  ensure  compliance  with  the  Company's  lending  policy  and  the
loans-to-one  borrower  limitations.  The  borrower's  financial  statements and
income  tax  returns  also are  reviewed  annually  to  enable  the  Company  to
anticipate potential problem loans and, if necessary, classify the loan or place
it on non-accrual status.

   Originations, Purchase and Sales of Loans

         Mortgage  loans are  solicited  from  real  estate  brokers,  builders,
developers,  existing or past customers,  and residents of the local communities
located in the  Company's  primary  market  areas.  The Company  advertises  its
mortgage  products in  newspapers  and other media in addition to using its loan
officers to directly solicit potential borrowers. The following table sets forth
the Company's loan originations,  purchases,  sales and principal repayments for
the periods indicated. Mortgage loans and mortgage-backed and related securities
held for sale are included in the totals.





                                       10
<PAGE>




                                                     
                                                    Fiscal Years Ended March 31,
                                                    ----------------------------
                                                       1998      1997      1996
                                                           (In thousands)
Mortgage loans (gross)
 At beginning of period                              $66,254   $59,604   $50,071
 Mortgage loans originated:                                 
     One-to-four family                               25,216    21,223    16,486
     Commercial                                          226     1,072       -
     Multi-family                                        -         -         490
     Construction and land                             3,809     6,690     5,737
                                                      ------    ------    ------
      Total mortgage loans originated                 29,251    28,985    22,713
                                                              
     Mortgage loans purchased                            368       101     2,466
                                                      ------    ------    ------
      Total mortgage loans originated and purchased   29,619    29,086    25,179

     Transfer of mortgage loans to foreclosed                
           real estate                                 (159)      (72)     (127)
     Principal repayments                           (17,796)  (17,890)   (9,606)
     Sales of fixed rate loans                      (11,216)   (4,474)   (5,913)
                                                    --------  --------  --------
      Total reductions                              (29,171)  (22,436)  (15,646)
                                                    --------  --------  --------
  At end of period                                   $66,702  $66,254    $59,604

Consumer loans:
  At beginning of period                              $7,207   $6,897     $4,313
     Consumer loans originated                         6,796    5,313      6,685
     Principal repayments                            (6,176)  (5,003)    (4,101)
                                                     -------  -------    -------
  At end of period                                    $7,827   $7,207     $6,897
                                                     -------   ------     ------
Commercial loans:                                              
  At beginning of period                              $4,663    4,612      4,450
     Commercial loans originated and purchased         3,879    3,356      5,402
     Principal repayments                            (4,145)  (3,305)    (5,240)
                                                     -------  -------    -------
  At end of period                                    $4,397   $4,6$3     $4,612
                                                      ------   ------     ------
Mortgage-backed and related securities:
  At beginning of period                              $7,421   $5,373     $2,001
     Mortgage-backed securities                              
         purchased                                       -      2,772       3917
     Amortization and repayments                     (1,023)    (724)      (545)
                                                     -------    -----      -----
  At end of period                                    $6,398   $7,421     $5,373

                                       11
<PAGE>



    The following table sets forth the Company's loan originations and purchases
 in various loan categories according to whether the loan  is fixed rate versus
 adjustable rate for the periods indicated.

<TABLE>

                                                                         Fiscal Years Ended March 31,
                                            ----------------------------------------------------------------------------------------
                                                       1998                         1997                          1996
                                            ----------------------------------------------------------------------------------------
<CAPTION>
                                            Fixed   Adjustable   Total     Fixed  Adjustable   Total     Fixed  Adjustable   Total
                                            ----------------------------------------------------------------------------------------
<S>                                         <C>       <C>       <C>       <C>       <C>       <C>       <C>      <C>       <C>

  Mortgage loans:
    One-to-four family                      $12,658   $12,926   $25,584    $7,796   $13,427   $21,222    $6,930    $9,556   $16,486
    Multi-family                                -         -         -         -         -         -         -         490       490
    Commercial                                  -         226       226        69     1,003     1,072        56     2,410     2,466
    Construction and land                     3,102       707     3,809     5,423     1,368     6,791     1,680     4,057     5,737
                                            -------   -------   -------    ------   -------   -------    ------    ------   ------- 
      Total mortgage loans                   15,760    13,859    29,619    13,288    15,798    29,086     8,666    16,513    25,179

  Consumer loans                              6,781        15     6,796     5,313       -       5,313     6,449       236     6,685
                                                                                                                                    
  Comercial loans                             3,432       447     3,879     2,308     1,048     3,356     2,493     2,909     5,402 
                                            -------   -------   -------   -------   -------   -------   -------   -------   -------
    Total loans originated and purchased    $25,973   $14,321   $40,294   $20,909   $16,846   $37,755   $17,608   $19,658   $37,266
                                            -------   -------   -------   -------   -------   -------   -------   -------   ------- 
                                                   
</TABLE>





                                       12
<PAGE>



   Participation Loans

         In  order  to  meet  asset/liability  management  objectives  that  are
enhanced by loans with higher rates and shorter repricing  periods,  the Company
has  purchased  from time to time  participation  interests in a variety of real
estate loans,  including  commercial real estate loans.  Prior to purchase,  the
Company reviews each  participation  to ensure that the underlying loan complies
with the Company's  lending  policy as in effect and the  loans-to-one  borrower
limitations.

         The  purchase of  participation  loans  involves  the same risks as the
origination  of the same types of loans as well as  additional  risks related to
the  purchaser's  lower level of control  over the  origination  and  subsequent
administration  of the loan.  Many of the  participation  loans purchased by the
Company  in the past also have been on  projects  located  outside  the State of
Wisconsin,  primarily in the Minneapolis/St.  Paul,  Minnesota area.  Management
does not anticipate  future  purchases to be  significant,  and will continue to
investigate purchase opportunities on an individual basis.

   Sale of Mortgage Loans

         The Company sells loans that it originates,  on a  non-recourse  basis,
into the secondary market to the FHLMC,  Federal National  Mortgage  Association
("FNMA") and WHEDA. The amount of loans sold by the Company is based upon market
conditions and the Company's asset/liability strategy. For the past three fiscal
years, the Company has sold substantially all of the fixed rate loans originated
to  governmental  secondary  market  purchasers in order to manage interest rate
risk.  For the fiscal year ended March 31, 1998,  the Company's  fixed rate loan
sales to governmental  investors  totaled $11.2 million with associated gains of
$130,000.  For the fiscal  years ended March 31,  1997 and 1996,  the  Company's
fixed rate loan sales to  governmental  investors  totaled $4.5 million and $5.9
million with associated gains of $59,000 and $61,000, respectively.

         The Company is subject to interest rate risk on fixed rate loans in its
pipeline from the point in time that the rate is locked with the borrower  until
it is sold into the secondary market. In a declining  interest rate environment,
the interest rate is locked in at the time of loan approval and held for sale to
take advantage of the market rate of interest. In order to minimize the interest
rate risk in a rising interest rate environment,  the interest rate is locked in
at the time of loan  approval  and a  commitment  to sell  the loan is  obtained
simultaneously.  These  loans are sold on an  individual  basis when the loan is
closed.

         All  mortgage  loans  are  made  and   underwritten   pursuant  to  the
requirements of secondary  market  investors.  The Company retains  servicing on
loans sold to FHLMC and FNMA,  receiving a servicing fee,  which  represents the
difference  between the  contract  rate on the loans sold and the yield at which
such loans are sold.  The  servicing  spread  earned by the Company is typically
0.25%.

         The Company  also acts as a conduit for loans sold to WHEDA.  For those
borrowers who qualify under WHEDA  guidelines,  the Company  originates the loan
for a $500 fee and sells the loan to WHEDA, on a non-recourse  basis,  servicing
released.

   Loan Origination, Servicing and Other Fees

         In addition to interest  earned on loans,  the Company  receives income
through  fees  in  connection   with  loan   originations,   loan  sales,   loan
modifications,  late  payments  and for  miscellaneous  services  related to its
loans, including loan servicing. Income from these activities varies from period
to period with the volume and type of loans originated.

         In  connection  with the  origination  of mortgage  loans,  the Company
requires  borrower   reimbursement  for  out-of-pocket   costs  associated  with
obtaining independent  appraisals,  credit reports,  title insurance or abstract
and title opinion, private mortgage insurance and other items. While origination
fees  ranging  from zero to two points  generally  have been  quoted on mortgage
loans in  recent  years,  most of the  Company's  borrowers  typically  accept a
slightly higher interest rate and pay zero points.

         For  loans  sold  to  FHLMC  and  FNMA,   the   Company   retains   the
responsibility  for servicing such loans.  At March 31, 1998, 1997 and 1996, the
Bank serviced $30.7  million,  $25.3 million and $22.9 million loans for others,
respectively.  Fee income  received in connection with loans serviced for others
was $77,000, $77,000 and $72,000 for the fiscal years ended March 31, 1998, 1997
and 1996, respectively.

                                       13
<PAGE>


         The  contractual  right to service  mortgage loans sold has an economic
value.  The value results from the future  income stream of the servicing  fees,
the  availability  of the cash balances  associated  with escrow funds collected
monthly for real estate taxes and insurance,  the  availability of the cash from
monthly  principal  and  interest  payments  from  the  collection  date  to the
remittance  date,  and the ability of the servicer to cross-sell  other products
and services.  The actual value of a servicing  portfolio is dependent upon such
factors as the age,  maturity and prepayment rate of the loans in the portfolio,
the  average  dollar  balance  of the  loans,  the  location  of the  collateral
property,  the average  amount of escrow  funds  held,  the  interest  rates and
delinquency experience of the loans, the types of loans and other factors.

Delinquencies, Nonperforming Assets and Classified Assets

   Delinquent Loans

         When a  borrower  fails to make a  required  payment  by the end of the
month in which the payment is due, the Company  generally  initiates  collection
procedures.   The  Company  will  send  a  late  notice,   and  in  most  cases,
delinquencies are cured promptly. However, if a loan becomes delinquent for more
than 60 days,  the Company  contacts the  borrower  directly,  to determine  the
reason for the delinquency and effect a cure. Where it believes appropriate, the
Company may review the condition of the property and the  financial  position of
the borrower.  At that time, the Company may: (i) accept a repayment program for
the  arrearage;  (ii) seek  evidence  of  efforts  by the  borrower  to sell the
property;  (iii)  request  a deed  in  lieu of  foreclosure;  or  (iv)  initiate
foreclosure  proceedings.  When a loan secured by a mortgage is  delinquent  for
three  or  more  monthly  installments,  the  Company  generally  will  initiate
foreclosure proceedings. With respect to delinquencies on loans sold to FHLMC or
FNMA, or insured by FHA or guaranteed by VA, the Company follows the appropriate
notification and foreclosure procedures prescribed by the respective agencies.

         On mortgage loans or loan participations  purchased by the Company, the
Company  receives monthly reports from its loan servicers with which it monitors
the loan  portfolio.  Based upon servicing  agreements with the servicers of the
loan,  the Company  relies upon the  servicer to contact  delinquent  borrowers,
collect  delinquent  amounts  and  to  initiate  foreclosure  proceedings,  when
necessary,  all in accordance with applicable laws, regulations and the terms of
the servicing agreements between the Company and its servicing agents.

         Total loans delinquent 90 days or more increased from 45 loans totaling
$1.1 million at March 31, 1997,  to 49 loans  totaling $1.4 million at March 31,
1998.  The increase in the amount is primarily  due to an increase in delinquent
commercial loans from 3 loans with a balance of $556,000 at March 31, 1997, to 9
loans with a balance of $858,000 at March 31, 1998. Total loans delinquent 31-89
days  decreased  from 95 loans  totaling $3.3 million to 61 loans  totaling $1.5
million.  One-to-four family loans delinquent 31-89 days decreased from 45 loans
totaling  $2.4 million at March 31, 1997,  to 22 loans  totaling $0.7 million at
March 31, 1998.  Management views the increase in total loans delinquent 90 days
or more as a major area of concern warranting  increased scrutiny.  However, the
latest available peer group  comparison of  nonperforming  loans and real estate
owned as a percentage of total loans as prepared by America's  Community Bankers
was 1.44% for the Company at September  30, 1997,  compared to 1.43% on a nation
wide basis,  0.90% of a geographic basis, 1.25% by an asset size basis and 1.70%
on an owner type basis.  Management  also views the decrease in loans 31-89 days
as a favorable trend that may indicate improved future performance.




                                       14
<PAGE>



At March 31, 1998, 1997, and 1996, delinquencies in the Company's loan portfolio
were as follows:
<TABLE>
                                          At March 31, 1998                At March 31, 1997                 At March 31, 1996
                          -------------------------------------------------------------------------------------------------
                             31-89 Days      90 Days or more     31-89 Days     90 Days or more   31-89 Days      90 Days or more
                          ------------------------------------------------------------------------------------------------
<CAPTION>
                         Number  Principal  Number  Principal Number  Principal Number Principal Number Principal  Number  Principal
                           of      Balance   of      Balance   of      Balance   of     Balance    of    Balance    of      Balance
                         Loans   of Loans   Loans   of Loans  Loans   of Loans  Loans   of Loans  Loans  of Loans  Loans   of Loans
                                   -------------------------------------------------------------------------------------------------
<S>                       <C>     <C>       <C>     <C>       <C>      <C>       <C>     <C>      <C>    <C>        <C>     <C>
Mortgage loans:
 One-to-four family        22    $  754       5     $ 109       45     $2,399      7     $ 179     34    $1,253       9     $ 386
 Multi-family             - -       - -     - -       - -      - -        - -    - -       - -    - -       - -     - -       - -
 Residential construction   1        62     - -       - -        1         84    - -       - -      2       252       2       121
 Commercial                 6       471       3       280        6        406      2       199      6       539     - -       - -
                           --    ------       -      ---         -     -----       -       ---     -        ---      ---      ---
   Total mortgage loans    29    $1,287       8     $ 389       52     $2,889      9     $ 378     42    $2,044      11       507

Consumer loans             31       161      32       129       39        191     33       137     37       166       9        60
                                                                                                                                    
Comercial loans             1         3       9       858        4        204      3       556      4       197       6        64
                           --    ------      --    ------       --     ------     --    ------     --    ------      --      ----
  Total                    61    $1,451      49    $1,376       95     $3,284     45    $1,071     83    $2,407      26     $ 631
                           --   -------      --    ------       --     ------     --    ------     --    ------      --      ----
Delinquent loans to               1.84%             1.74%               4.16%            1.36%            3.05%             0.80%
  gross loans(2)
<FN>

--------------------------------
 -1    The Company discontinues the accrual of interest on loans when the borrower is delinquent as to a contractually due principal
       or interest payment by 90 days or more.

 -2    Excluding mortgage-backed and related securities.

       The following table sets forth the Company's loan originations and purchases in various loan categories according to whether 
       the loan is fixed rate versus adjustable rate for the periods indicated.
</FN>

</TABLE>





                                       15
<PAGE>



   Classification of Assets

         Federal  regulators require each federally insured bank to classify its
assets on a regular basis.  In connection  with  examinations  of insured banks,
examiners have authority to identify problem assets as Substandard,  Doubtful or
Loss.  Substandard  assets  have  one  or  more  well  defined  weaknesses  that
jeopardize  the  liquidation of the debt and are  characterized  by the distinct
possibility  that the bank will  sustain some loss if the  deficiencies  are not
corrected.  Doubtful assets have the weaknesses of Substandard  assets, with the
additional characteristics that the weaknesses make collection or liquidation in
full, on the basis of currently  existing facts,  conditions and values,  highly
questionable  and  improbable.   An  asset  classified  as  Loss  is  considered
uncollectible  and of such little value that continuance as an asset of the bank
is not warranted.  The Company has adopted an asset  classification  methodology
that parallels  that required by federal  regulators.  At March 31, 1998,  based
upon the  Company's  asset  classification  methodology,  the Company had assets
classified as Substandard of $1.5 million, none as Doubtful and none as Loss. At
March 31, 1997,  assets  classified as  Substandard  were $1.1 million,  none as
Doubtful and none as Loss.  Assets that are  classified  as Loss are reserved at
100% of the  indicated  loss amount.  The FDIC  examination  policies  include a
Special Mention category,  consisting of assets that currently do not expose the
Company to a sufficient degree of risk to warrant adverse classification, but do
possess credit deficiencies deserving management's close attention. At March 31,
1998,  $289,000 of the Company's assets were classified as Special Mention.  The
Company's  classified assets consist of the non-performing  assets and the other
loans  and  assets  of  concern.   As  of  the  date   hereof,   the   Company's
classifications are consistent with those of the FDIC and DFI.

   Non-Performing Assets

         Loans are placed on non-accrual status when, in the judgment of Company
management,  the  probability  of  collection of principal or interest is deemed
insufficient to warrant further accrual of interest.  In any event,  the Company
discontinues the accrual of interest on loans when the borrower is delinquent as
to a contractually  due principal or interest payment by 90 days or more. When a
loan is placed on non-accrual  status,  all of the accrued interest on that loan
is  reversed  by way of a charge to  interest  income.  Accrual of interest on a
non-accrual  loan is resumed  when  payments  are less than 90 days past due and
when management  believes the outstanding loan principal and  contractually  due
interest is no longer doubtful of collection.

         Property acquired by the Company as a result of a foreclosure, property
upon which a judgment of  foreclosure  has been entered but prior to foreclosure
sale and property  that is deemed  in-substance  foreclosed  are  classified  as
foreclosed properties.  "In-substance foreclosed" loans are defined as loans for
which  current  and future  collection  is  dependent  on the  income  producing
capacity and fair market value of the underlying real estate collateral,  rather
than the  borrower's  ability to service  the debt.  Foreclosed  properties  are
recorded at the lower of the unpaid  principal  balance of the  related  loan or
fair value. The amount by which the recorded loan balance exceeds the fair value
at the time a property is classified a foreclosed property,  along with expenses
incurred to maintain or dispose of a  foreclosed  property,  is charged  against
current  earnings.  At March 31, 1998, the Company had $159,000 in foreclosed or
in foreclosure properties.



                                       16
<PAGE>



         Nonperforming  loans  include  loans placed on  non-accrual  status and
troubled debt restructurings. Non-performing assets include non-performing loans
and foreclosed  properties.  The following table sets forth non-performing loans
and assets.

                                                                March 31,
                                                       -------------------------
                                                        1998      1997     1996
                                                         (Dollars in Thousands)

Non-accrual mortgage loans 90 days or more past due    $  389    $  378    $ 386
Non-accrual consumer loans 90 days or more past due       116       128       47
Non-accrual commerical loans 90 days or more past due     858       556       64
Loans 90 days or more past due and still accruing          14         9      134
Troubled debt restructurings                               11        -        62
                                                       ------    ------    -----
    Total non-performing loans                         $1,388    $1,071    $ 693
                                                       ------    ------    -----
Total real estate owned and in judgement, net of
    related allowance for losses                          159        -       127
Total non-performing assets                            $1,547    $1,071    $ 820
                                                       ------    ------    -----
    
Total non-performing loans to gross loans receivable    1.76%     1.37%    0.97%
Total non-performing assets to total assets             1.57%     1.13%    0.95%

Total classified assets                                $1,885    $1,330    $ 778
Total classified assets to total assets                 1.91%     1.40%    0.90%

 Interest income that would have been recorded on non-
    performing loans if current                        $   89    $   59    $  13
Interest income on non-performing loans included
    in net income                                      $   21    $   13    $  17



         As of March 31,  1998,  there were no other  loans not  included in the
foregoing tables or discussed above where known  information  about the possible
credit problems of borrowers caused  management to have serious doubts as to the
ability of the borrower to comply with present  loan  repayment  terms and which
may result in disclosure of such loans in the future.

   Allowance for Loan Losses

         Under  federal  regulations,  when an  insured  institution  classifies
problem assets as either Substandard or Doubtful,  it is required to establish a
general allowance for loan losses in an amount deemed prudent by management.  In
addition to general  valuation  allowances,  the Company may establish  specific
loss reserves against  specific assets in which a loss may be realized.  General
allowances represent loss allowances that have been established to recognize the
inherent risks associated with lending  activities,  but which,  unlike specific
allowances,  have not been allocated to recognize  probable losses on particular
problem assets.  The Company's  determination as to its classification of assets
and the amount of its specific and general  valuation  allowances are subject to
review by the DFI and the FDIC,  either one of which can order the establishment
of additional general or specific loss allowances.

         The  allowance for loan losses is  established  through a provision for
loan losses based on  management's  evaluation  of the risk inherent in its loan
portfolio and the general economy.  Such evaluation,  which includes a review of
all loans on which full collectibility may not be reasonably assured, considers,
among other  matters,  the  estimated  net  realizable  value of the  underlying
collateral,  economic  conditions,  historical  loan loss  experience  and other
factors  that  warrant  recognition  in  providing  for an  adequate  loan  loss
allowance.  The ratio of  allowance  for loan losses to gross  loans  receivable
increased  from 0.59% at March 31, 1997,  to 0.61.% at March 31, 1998.  Based on
the actual loss  experience an allowance of 0.34% would be adequate at March 31,
1998. The ratio of allowance for loan losses to  nonperforming  loans  decreased
from 0.430 at March 31, 1997 to 0.349 at March 31,  1998 due to the  increase in
nonperforming loans over the period.



                                       17
<PAGE>



The following table sets forth activity in the Company's allowance for loan
losses during the periods indicated.

                                             For the Fiscal Year Ended March 31,
                                             -----------------------------------
                                                  1998        1997       1996 
                                                     (Dollars in thousands)
Balance at beginning of period                    $ 461      $ 433      $ 434
Additions charged to operations:
    One-to-four family                                0          0          0
    Multi-family and commercial real estate           0          0          0
    Commercial                                       76         75          0
    Consumer                                         24          6         24
                                                    ---         --         --
                                                    100         81         24
Recoveries:
    One-to-four family                                0         19          0
    Multi-family and commercial real estate           3          3          4
    Commercial                                        0          0          0
    Consumer                                          7          0          2
                                                     --         --          - 
                                                     10         22          6
Charge-offs:
    One-to-four family                                0          0         (5)
    Multi-family and commercial real estate           0          0          0
    Commercial                                        0        (19)         0
    Consumer                                        (87)       (56)       (26)
                                                    ---        ---        ---
                                                    (87)       (75)       (31)
Net charge-offs                                     (77)       (53)       (25)
                                                  -----      -----      -----
Balance at end of period                          $ 484      $ 461      $ 433 

Percentage of loans to gross loans receivable
    Mortgage loans                                84.51%     83.82%     85.11%
    Consumer loans                                 9.92%      9.70%      7.33%

Ratio of allowance for loan losses to gross
    loans receivable at the end of period          0.61%      0.65%      0.74%

Ratio of allowance for loan losses to
    non-performing loans at the end of period(1)  34.871      43.04      66.52

Ratio of net charge-offs to average gross
    loans during period                             0.10%     0.08%      0.05%

Average gross loans outstanding                   $79,471   $65,615    $54,783

Gross loans receivable at the end o period        $78,926   $71,113    $58,834



(1)  Non-performing loans include non-accrual loans, loans 90 days or more past 
     due and still accruing, and troubled debt restructurings.



                                       18
<PAGE>






         The following  table show the  Company's  allowance for loan losses and
the  allocation to the various  categories  of loans held for  investment at the
dates  indicated.  Allocations  to a  particular  category do not  restrict  the
Company's ability to use such allowance in any other category.

<TABLE>
                                                                      At March 31,
                                       -------------------------------------------------------------------------------
                                       -------------------------------------------------------------------------------
                                                1998                     1997                      1996
                                       -------------------------------------------------------------------------------
<CAPTION>
                                                        Loans In                 Loans In                    Loans In
                                                        Category                 Category                    Category
                                                % of    to Total        % of     to Total          % of      to Total
                                                total     Out-          total      Out-            total        Out-
                                              Loans by  standing       Loans by  standing         Loans by   standing
                                       Amount Category   Loans  Amount Category   Loans   Amount  Category     Loans

                                                                (Dollars in thousands)           

<S>                                    <C>       <C>     <C>       <C>     <C>    <C>       <C>      <C>      <C>
  Breakdown of allowance:
   Mortgage loans:
    One-to-four family                 $  50    0.09%    73.64%   $ 36    0.06%   71.14%   $  85    0.14%      72.24%
    Multi-family                           1    0.19%     0.67%     -       -      1.19%       1    0.08%       2.10%
    Commercial/nonresidential              5    0.10%     6.67%     34    0.65%    8.25%      22    0.50%       8.09%
    Construction and land                  2    0.07%     3.53%      1    0.04%    4.22%      19    0.13%       2.68%
                                          --             -----      --            -----            
     Total mortgage loans                 58             84.51%     71            84.80%     127               85.11%

   Consumer loans                         80    1.02%     9.92%     50    0.69%    9.23%      16    0.12%       7.33%

   Commercial loans                      346    7.87%     5.57%    340    7.29%    5.97%     290    7.71%       7.56%
                                       -----            ------     ---           ------    -----              ------                
    Total allowance for loan losses    $ 484            100.00%  $ 461           100.00%   $ 433              100.00%


</TABLE>




                                       19
<PAGE>



Investment Activities

   General

         The investment policy of the Company, which is established by the Board
of Directors and implemented by the Company's President,  is designed to provide
a required level of liquidity and minimize potential losses due to interest rate
fluctuations  without  incurring undue credit risk. The Company is authorized by
regulation to invest in various types of liquid assets,  including United States
Treasury  obligations,  securities  issued by various federal agencies and state
and municipal governments, deposits at the FHLB-Chicago, certain certificates of
deposit of federally  insured  institutions,  certain  bankers'  acceptances and
federal  funds.  The  Company  also  invests  in  mortgage-backed   and  related
securities,  securities  that  are  either  of  investment  grade or  issued  or
guaranteed by FHLMC, the FNMA or the Government  National  Mortgage  Association
("GNMA"), and investment grade corporate debt.

         The  Company   categorizes   the   securities   it  purchases   into  a
"Held-to-Maturity" or an "Available-For-Sale" portfolio as follows:

           1.  Securities  Held-to-Maturity.  The  Company  has the  ability and
           intent to hold these assets to maturity. Upon acquisition, securities
           are  classified as to the  Company's  intent and a sale would only be
           effected due to  deteriorating  investment  quality.  The  investment
           portfolio  is not used for  speculative  purposes  and is  carried at
           amortized  cost. In the event the Company 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 held for sale.

           2. Securities Available-for-Sale. The Company does not intend to hold
           the assets to maturity  and thus are carried at fair value,  with the
           unrealized  gains  or  losses,  net of tax,  reported  as a  separate
           component of the stockholders  equity. This portion of the securities
           portfolio  is  designed to meet  anticipated  loan demand and deposit
           runoff or to take advantage of market opportunities.

         Effective April 1, 1993, the Company adopted SFAS No. 115 that requires
that the Company  classify  investments  in marketable  equity  securities  with
readily  determinable  fair  value and all  investments  in debt  securities  as
held-to-maturity,  trading or  available-for-sale.  The Company  classified  the
securities as of the date of adoption of SFAS 115 and  subsequently  at the time
of purchase  and  reviews  the  appropriateness  of the  classification  at each
reporting date as follows:

           1. Securities  Held-to-Maturity.  The Company has both the intent and
           ability to hold these debt securities to maturity. Securities in this
           category are carried at amortized cost.

           2.  Securities  Classified  as Trading.  The Company  acquires  these
           securities  with the  intent to resell  them in the near term and are
           held only for a short period of time. Securities in this category are
           carried  at fair  value,  with  unrealized  holding  gains and losses
           included in earnings.

           3.  Securities   Available-for-Sale.   This  category   includes  all
           securities not classified as held-to-maturity or trading.  Securities
           in this category are carried at fair value,  with unrealized  holding
           gains  and  losses  reported,  net of  deferred  income  taxes,  in a
           separate  component  of equity.  These  securities  may be sold,  for
           example,  in response to changes in market interest rates,  liquidity
           needs,  availability  of higher  yielding  instruments and changes in
           funding sources.

         The  investment   activities  of  the  Company  consist   primarily  of
investments  in  mortgage-backed  and related  securities  and other  investment
securities,  consisting  primarily of  securities  issued or  guaranteed  by the
United  States  Government  or agencies  thereof.  Typical  investments  include
federally  sponsored  agency  mortgage  pass-throughs,  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 Company's  investment policy. The Company performs analyses on
mortgage  related  securities  prior  to  purchase  and on an  ongoing  basis to
determine  the impact on earnings and market  value  various  interest  rate and
prepayment conditions.


                                       20
<PAGE>


   Mortgage-Backed 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
(generally federal government-sponsored enterprises) that pool and repackage the
participation  interest  in the  form of  securities  to  investors  such as the
Company.  Such federal  government-sponsored  enterprises,  which  guarantee the
payment of principal and interest to investors,  include  FHLMC,  FNMA and GNMA.
Mortgage-backed  securities  generally  increase  the  quality of the  Company'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 Company.

         FHLMC,  and  FNMA  were  established  to  provide  support  for low and
middle-income  housing.  There are  limits  to the  maximum  size of loans  that
qualify  for these  programs.  Currently,  FNMA  limits a single  family loan to
$203,150 and FHLMC limits a single family loan to $227,150.

         Mortgage-backed  securities  typically are issued with stated principal
amounts and the  securities  are backed by pools of mortgage loans with interest
rates that are within a range and have varying  maturities.  The underlying pool
of mortgage  loans can be composed of either  fixed rate  mortgage or ARM loans.
Mortgage-backed  securities  commonly are referred to as mortgage  participation
certificates or pass-through  certificates.  As a result, the interest rate risk
characteristics  of the underlying pool of mortgage loans,  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 mortgage loans.

         The actual maturity of a mortgage-backed  security varies, depending on
when the mortgages prepay or repay the underlying mortgage loans. Prepayments of
the underlying  mortgage loans may shorten the life of the  investment,  thereby
adversely  affecting  its yield to maturity and the related  market value of the
mortgage-backed  security.  The yield is based upon the interest  income and the
amortization  of the  premium  or  accretion  of  the  discount  related  to the
mortgage-backed security.  Premiums and discounts on mortgage-backed  securities
are  amortized or accreted  over the estimated  term of the  securities  using a
level yield method. The prepayment assumption 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 prepayment of the underlying mortgage
loans  depends on many factors,  including  type of mortgage  loans,  the coupon
rate,  the age of the  mortgage  loans,  the  geographical  location of the real
estate  collateralizing the mortgage loans and general levels of market interest
rates.  The difference  between the interest  rates on the  underlying  mortgage
loans 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.  If the coupon rate of the underlying mortgage
loans  significantly  exceeds the prevailing  market  interest rates offered for
mortgage loans,  refinancing  generally increases and accelerates the prepayment
of the underlying  mortgage  loans.  Prepayment  experience is more difficult to
estimate for adjustable rate mortgage-backed securities.

   Investment Securities

         The  Company  invests  in  various  types  of  liquid  assets  that are
permissible investments for Wisconsin-chartered  savings banks, including United
States  Treasury  obligations and securities of various  federal  agencies.  The
Company also invests its assets in commercial paper and mutual funds, the assets
of which conform to the investments that a  Wisconsin-chartered  savings bank is
otherwise  authorized to make directly The Company's  current  investment policy
permits  purchases only of investments  rated  investment  grade by a nationally
recognized  rating  agency  and does  not  permit  purchases  of  securities  of
non-investment grade quality.

   Composition of Securities Held-to-Maturity

         At March 31,  1998,  the Company  held $9.4  million in its  securities
held-to-maturity  portfolio,  consisting  of  $6.4  million  in  mortgage-backed
certificates  issued by various federal agencies.  The estimated market value of
those  securities  at that  date  was  $6.5  million.  At March  31,  1998,  the
mortgage-backed  securities  portfolio  represented  6.5% of the Company's total
assets.  At March 31,  1998,  the Company  held $3.0  million in its  investment
securities,  consisting of securities of various federal agencies.  At March 31,
1998,  the investment  securities  portfolio  represented  3.0% of the Company's
total assets.

                                       21
<PAGE>

Composition of Securities Classified as Trading

         At March 31, 1998 and 1997,  the  Company  did not have any  investment
securities or mortgage-related securities classified as trading.

   Composition of Securities Available for Sale

         At March 31, 1998, the Company did not have any  investment  securities
or mortgage-related securities classified as available for sale.



                                       22
<PAGE>




         The table below sets forth certain  information  regarding the carrying
value,  composition and market value of the Company's  securities  available for
sale and  mortgage-backed  and related securities  held-to-maturity at March 31,
1998, 1997, 1996.

<TABLE>
                                                    At March 31, 1998           At March 31, 1997            At March 31, 1996
<CAPTION>
                                                Carrying  % of    Market   Carrying   % of      Market  Carrying    % of     Market
                                                 Value    Total   Value     Value     Total     Value     Value    Total      Value
                                                                             (Dollars in thousands)
<S>                                             <C>      <C>      <C>       <C>      <C>       <C>        <C>      <C>        <C>
Securities available-for-sale:
  U.S. govt securities and other agency
   obligations                                                                                                                     
     FNMA                                          $ -        -     $ -     $1,963    71.33%    $1,963    $1,956    68.42%    $1,956
     FHLB                                            -        -       -        488    17.73%       488       485    16.96%       485
     FHLMC                                           -        -       -        300    10.90%       300       304    10.63%       304
  Money Market Mutual Fund                           -        -       -          1     0.04%         1       114     3.99%       114

    Total securities available-for-sale            $ -        -     $ -     $2,752   100.00%    $2,752    $2,859   100.00%    $2,859


Securities held-to-maturity
  Mortgage-backed securities
    FNMA                                         $3,868   41.16%  $3,926     4,622    62.28%    $4,523     $2,220    41.32%   $2,206
    FHLMC                                           377    4.01%     384       434     5.85%       420        494     9.19%      487
    GNMA                                          2,153   22.91%   2,236     2,365    31.87%     2,365      2,659    49.49%    2,693
  U.S. govt securities and other agency
   obligations
     FFCB                                           500    5.32%     500        -        -          -          -        -         -
     FHLB                                         1,700   18.09%   1,700        -        -          -          -        -         -
     FHLMC                                          800    8.51%     799        -        -          -          -        -         -

      Total securities held-to-maturity          $9,398  100.00%  $9,545    $7,421   100.00%    $7,308     $5,373   100.00%   $5,386

</TABLE>

         At March 31, 1998,  the aggregate  book value and the aggregate  market
value of  securities  issued by FNMA  totaled  $3.9  million  and $3.9  million,
respectively.  At March 31, 1998,  the  aggregate  book value and the  aggregate
market value of securities issued by GNMA totaled $2.2 million and $2.2 million,
respectively.  Both FNMA and GNMA securities exceed 10% of stockholder equity at
March 31, 1998.




                                       23
<PAGE>





  The following table shows the maturity or period to repricing of the Company's
mortgage-backed  securities portfolio held-to-maturity at March 31, 1998:

                                                    At March 31, 1998
                                         ---------------------------------------
                                         Adjustable       Fixed
                                            Rate          Rate          Total
                                          Mortgage      Mortgage      Mortgage-
                                           Backed        Backed        backed
                                         Securities    Securities    Securities

Amounts due or repricing:
    Within one year                         $565           - -        $  565

    After one year:
       One to three years                    - -           - -           - -
       Five to ten years                     - -           - -           - -
       Ten to 20 years                       - -          1029          1029
       Over 20 years                         - -         4,804         4,804 
                                             ---         -----         -----
   Total due or repricing after one year     - -         5,833         5,833

        Total due or repricing               565         5,833         6,398 
                                             ---         -----         -----
Less:
    Unearned discounts
      and premiums, net                      - -          - -           - - 

Mortgage-backed  securities, net            $565        $5,833        $6,398 


         At March  31,  1998,  the  stated  average  maturity  of the  Company's
mortgage-backed and related securities was 23.9 years.



Sources of Funds

   General

         The Company's  primary  sources of funds for use in lending,  investing
and for other  general  purposes  are  deposits,  proceeds  from  principal  and
interest  payments  on  loans,   mortgage-backed   and  related  securities  and
investment   securities,   and  to  a  lesser  extent,   FHLB-Chicago  advances.
Contractual loan payments are a relatively stable source of funds, while deposit
inflows and outflows and loan payments are  significantly  influenced by general
market  interest  rates and  economic  conditions.  Borrowings  may be used on a
short-term  basis to  compensate  for  seasonal  or other  reductions  in normal
sources  of  funds  or for  deposit  inflows  at  less  than  projected  levels.
Borrowings also may be used on a longer-term  basis to support  expanded lending
or  investment  activities.  The Company  primarily  utilizes  advances from the
FHLB-Chicago as sources for its borrowings. At March 31, 1998, 1997 and 1996 the
Company had advances  from the  FHLB-Chicago  of $19.1 million or 19.3% of total
assets,  $17.6 million or 18.5% of total  assets,  and $12.6 million or 14.6% of
total assets,  respectively.  Of the Company's outstanding FHLB-Chicago advances
at March 31, 1998,  $5.1 million will mature before March 31, 1999.  The Company
also had borrowings  consisting of repurchase agreements and a note payable from
a bank of $5.3  million,  $4.5 million and $4.4 million at March 31, 1998,  1997
and 1996, respectively.


                                       24
<PAGE>



   Deposits

         The  Company  offers a variety  of deposit  accounts  having a range of
interest rates and terms.  The Company's  deposits  principally  consist of core
deposits (NOW,  money market deposit and passbook  accounts) and certificates of
deposits.  The flow of deposits is influenced  significantly by general economic
conditions,  changes in prevailing interest rates and competition. The Company's
deposits  are  obtained  primarily  from the  areas in which  its  branches  are
located,  and the Company  relies  principally  on customer  service,  marketing
programs and  long-standing  relationships  with customers to attract and retain
these deposits. Various types of advertising and promotion to attract and retain
deposit accounts also are used. The Company does not currently solicit or accept
brokered  deposits.  Management  monitors the Company's  certificates of deposit
and, based on historical experience,  management believes it will retain a large
portion  of  such  accounts  upon   maturity.   Management   considers   Company
profitability,  the matching of term lengths with assets,  the attractiveness to
customers and rates offered by competitors in considering its deposit  offerings
and  promotions.  The Company  believes it has been  competitive in the types of
accounts and interest rates it has offered on its deposit products.  The Company
intends to  continue  its  efforts to attract  and retain  deposits as a primary
source of funds for supporting its lending and investing activities.

                                              Fiscal Year Ended March 31, 
                                               1998      1997       1996 
                                                    (In thousands)

Net Deposits (Withdrawals)                  $(1,613)   $ 1,627    $ 4,486
Interest credited on deposits                 2,334      2,674      2,143
                                              -----      -----      ----- 
     Total increase (decrease) in deposits  $   721    $ 4,301    $ 6,629


         The Company  attributes  the  increase in deposits  during the two most
recent  fiscal years to  maintaining  competitive  rates on deposits and general
market conditions.








         At March  31,  1998,  the  Company  had  outstanding  $3.2  million  in
certificates of deposit in amounts of $100,000 or more maturing as follows:

                                            Amount at
                                          March 31, 1998
                                         (In thousands)

Three months or less                           $   891
Over three through six months                      406
Over six through 12 months                         309
Over 12 months                                   1,637
                                               -------
     Total                                     $ 3,243
                                               -------



                                       25
<PAGE>



         The following  table sets forth the  distribution of the Company's core
deposits  and  certificate  accounts  at the dates  indicated  and the  weighted
average nominal interest rates on each category of deposits presented:



<TABLE>
                                                                             At March 31, 
                                 ---------------------------------------------------------------------------------------------------
                                                1998                             1997                              1996
                                 ---------------------------------   -------------------------------   -----------------------------
<CAPTION>
                                                          Weighted                         Weighted                         Weighted
                                              Percent     Average               Percent     Average               Percent    Average
                                              of total     Nominal              of total     Nominal              of total   Nominal
                                    Amount    deposits      Rate      Amount    deposits      Rate       Amount   deposits    Rate
                                                                              (Dollars in thousands)
<S>                               <C>         <C>           <C>      <C>         <C>          <C>       <C>        <C>         <C>
Core Deposits:
    Non-interest bearing           $ 3,823      6.14%         -      $ 2,792       4.54%        -       $ 2,069      3.61%       -
    NOW accounts                     5,910      9.49%       2.15%      5,989       9.73%      2.26%       6,173     10.78%     2.57%
    Money market                     6,026      9.68%       4.87%      5,029       8.17%      4.61%       2,314      4.04%     4.77%
    Passbook                         6,091      9.78%       2.31%      5,905       9.59%      2.16%       6,829     11.93%     2.51%
                                    ------     -----        ----      ------      -----       ----       ------     -----      ----
  Total                             21,850     35.08%       2.57%     19,715      32.03%      2.51%      17,385     30.36%     2.53%
  
Certificates accounts
(current term to maturity):
One to six months                   22,514     36.15%       5.69%     15,941      25.90%      5.43%      14,332     25.03%     5.68%
six to 12 months                     6,889     11.06%       5.75%      9,443      15.34%      5.71%      14,499     25.32%     5.60%
13 to 36 months                      9,435     15.15%       6.05%     14,151      22.99%      6.07%       7,524     13.14%     5.97%
37 to 60 months                      1,389      2.22%       6.08%      2,110       3.44%      6.11%       3,226      5.63%     6.35%
61 to 96 months                        167      0.27%       6.54%        120       0.19%      6.33%         290      0.51%     6.44%
97 to 132 months                        34      0.05%       6.35%         77         -        6.96%          -         -         - 
                                    ------     -----        ----      ------      -----       ----       ------     -----      -----
  Total certificates                40,428     64.92%       5.75%     41,842      67.97%      5.75%      39,871     69.64%     5.85%

Total deposits                     $62,278    100.00%       4.62%    $61,557     100.00%      4.71%     $57,256    100.00%     4.84%
                                   -------    ------        ----     -------     ------       ----      -------    ------      ----
</TABLE>

                                       26
<PAGE>

         The following table presents, by various rate categories, the amount of
 certificates of deposit outstanding at March 31, 1997 and March 31, 1998:

                                                           At March 31,
                                                           ------------
                                                        1998         1997
                                                        ----         ----
Certificates of Deposit:                                 (In thousands)
                                                         --------------
    2.00% to 2.99%                                        100           -
    3.00% to 3.99%                                         -            -
    4.00% to 4.99%                                        538        1,442
    5.00% to 5.99%                                     22,861       21,018
    6.00% to 6.99%                                     16,229       18,527
    7.00% to 7.99%                                        670          825
    8.00% to 8.99%                                         30           30
                                                      -------      -------
       Total                                          $40,428      $41,842 
                                                      -------      -------

   Borrowings and Other Financing Transactions

         Although  deposits  are the  Company's  primary  source of  funds,  the
Company's policy has been to utilize borrowings as part of its  assets/liability
management  strategy.  Borrowings  are secured when  management  believes it can
profitably  re-invest those funds for the benefit of the Company.  The Company's
primary  form of borrowing  consists of advances  from the  FHLB-Chicago.  These
advances are collateralized by the capital stock of the FHLB-Chicago held by the
Company  and  certain of its  mortgage  loans and  mortgage-backed  and  related
securities.  Such  advances  are  made  pursuant  to  several  different  credit
programs,  each of which has its own interest rate and range of maturities.  The
maximum amount the FHLB-Chicago will advance to member  institutions,  including
the Company, for purposes other than meeting withdrawals fluctuates from time to
time in  accordance  with  policies the  FHLB-Chicago.  The Company will have to
purchase  additional FHLB stock, if advances exceed $19.1 million.  At March 31,
1998, the Company's  FHLB-Chicago  advances totaled $19.1 million,  representing
21.9% of total  liabilities,  an increase from the $17.6 million  outstanding at
March 31, 1997. The Company  intends to continue to leverage its capital base by
utilizing FHLB borrowings to originate or purchase loans in fiscal 1999.

         The  Company's   borrowings  from  time  to  time  include   repurchase
agreements.  These  agreements  generally are entered into with local businesses
and institutions that seek to deposit funds in excess of insurable limits. These
transactions  are treated as borrowings  collateralized  by the securities sold,
which generally are  mortgage-backed  securities,  and are therefore included as
other borrowings in the Company's Consolidated Financial Statements.

         While  increases  in  borrowings  and changes in the  collateralization
levels due to market  interest  rate  changes  could  require the Company to add
collateral to secure its  borrowings,  the Company does not anticipate  having a
shortage of qualified collateral to pledge against its borrowings.  At March 31,
1998 and March 31,  1997,  there were $5.3  million and $4.4  million in reverse
repurchase agreements outstanding.









                                       27
<PAGE>



         The  following  table  sets forth  certain  information  regarding  the
Company's FHLB-Chicago advances and repurchases agreements at or for the periods
ended on the dates indicated.
                                      At or For the Fiscal Years Ended March 31,
                                                 1998       1997       1996
                                                   (Dollars in thousands)

FHLB- Chicago advances:
  Average balance outstanding                $ 17,912   $ 15,751    $ 7,629
  Maximum amount outstanding at any
    month-end during the period                23,173     18,245     12,556
  Balance outstanding at end of period         19,062     17,634     12,556
  Weighted average interest rate during
    the period(1)                               5.88%      5.87%      6.00%
  Weighted average interest rate at end
    of period                                   5.49%      5.91%      5.92%

Repuchase agreements:
  Average balance outstanding                 $ 4,937    $ 4,808    $ 3,634
  Maximum amount outstanding at any
    month-end during the period                 6,501      5,761      4,442
  Balance outstanding at end of period          5,258      4,463      4,356
  Weighted average interest rate during
    the period                                  6.00%       5.74%     6.58%
  Weighted average interest rate at end
    of period                                   6.08%       6.13%     6.08%

Total advances and repurchase agreements:
  Average balance outstanding                $ 22,850    $ 20,559  $ 11,263
  Maximum amount outstanding at any
    month-end during the period                29,674      24,006    16,998
  Balance outstanding at end of period         24,320      22,097    16,912
  Weighted average interest rate during 
    the period                                  5.91%       5.78%     6.19%
  Weighted average interest rate at end
    of period                                   5.62%       5.95%     5.96%

-------------------------------
(1) Computed on the basis of average monthly balances.

Subsidiary Activities

         The Bank has two wholly owned subsidiaries,  Amery Service Agency, Inc.
("ASA"), organized as a Wisconsin corporation in 1970 and Northwest Investments
Inc. ("NWI") organized as a Nevada corporation in 1997.

         ASA engages in insurance agency activities  permissible under state and
federal law,  including  the sale of credit life and  disability  products,  and
maintenance of a third party brokerage  relationship.  The ASA and the Bank have
received approval of the Wisconsin Department of Financial  Institutions and the
FDIC to engage in the insurance and brokerage activities.

         In January 1983, ASA formed the Pondhurst  Condominium  Association and
developed 64 residential  lots for condominium  duplexes and four-plexes on land
adjacent to a golf course in Amery,  Wisconsin (the "Pondhurst Project").  As of
March 31, 1998, all 64 residential  lots had been sold. On May 8, 1998, ASA sold
an adjacent  undeveloped  7.5 acre parcel of land for $65,000.  The parcel has a
book value $15,163.  With the sale of the 7.5 acre parcel , the Bank and ASA has
complied  with a request by the Federal  Reserve  bank of  Minneapolis  that ASA
divest its holdings in the  Pondhurst  Project by May 31, 2000.  As of March 31,
1998, ASA had total assets of $53,000.


                                       28
<PAGE>


         Because the  establishment  and  operation of a  investment  subsidiary
through  incorporation  and operation in the state of Nevada may provide certain
corporate tax  advantages to the Bank and the  subsidiary,  on May 30, 1997, NWI
was  established as an investment  subsidiary of Bank to manage a portion of its
investments. As of March 31, 1998, NWI had total assets of $22.9 million.

Personnel

         At March  31,  1998,  the  Company  had 30  full-time  employees  and 5
part-time  employees.  The  employees  of the Company are not  represented  by a
collective  bargaining unit and the Company believes its  relationship  with its
employees to be good.

Federal Taxation

   General

         The  following  discussion  of tax matters is intended to be a summary
of the  material tax rules  applicable  to the Company and the Bank and does not
purport to be a comprehensive description of all applicable tax rules.

         The Bank and the  Company  report  their  income on a fiscal year basis
using the accrual  method of  accounting  and will be subject to federal  income
taxation  in the  same  manner  as  other  corporations  with  some  exceptions,
including  particularly  the Bank's reserve for bad debts discussed  below.  The
Company  and  its  subsidiaries  currently  file  and  will  continue  to file a
consolidated federal income tax return. For its taxable year end March 31, 1998,
the Bank was subject to a blended federal income tax rate of approximately 34%.

   Bad Debt Reserves

         On August 20, 1996, the President of the United States signed the Small
Business Job Protection  Act of 1996 ("the Act").  The Act repealed the "reserve
method" of accounting for bad debts by most thrift  institutions,  effective for
taxable years beginning after 1996.  Most thrift  institutions  such as the Bank
are now required to use the "specific  charge-off  method".  The Act also grants
partial  relief from reserve  recapture  provisions  which are  triggered by the
change in method.  This legislation is not expected to have a material impact on
the Bank's financial condition or results of operations.

Distributions

         To  the  extent  that  Bank  makes   "non-dividend   distributions"  to
stockholders that are considered to result in distributions  from (i) the Bank's
reserve for losses on  qualifying  real  property  loans exceeds the amount that
would have been allowed under an  experience  method,  or (ii) the  supplemental
reserve for losses on loans  ("Excess  Distributions"),  then an amount equal to
such  Excess  Distributions  must be  included  in the  Bank's  taxable  income.
Non-dividend distributions include distributions in excess of the Bank's current
and accumulated  earnings and profits,  distributions in redemption of stock and
distributions  in partial or complete  liquidation.  In contrast,  distributions
made from the Bank's current or accumulated  earnings and profits, as calculated
for federal  income tax  purposes,  rather than the Bank's bad debt reserves are
generally  considered  dividends  for federal  income tax purposes and therefore
would not be included  in the Bank's  taxable  income.  Further,  under  certain
circumstances, such as tax-free reorganizations,  non-dividend distributions may
not be required to be included in the Bank's taxable income.

         The  amount  of  additional  taxable  income  created  from  an  Excess
Distribution  is an amount  that,  when reduced by the tax  attributable  to the
income,  is  equal  to the  amount  of the  distribution.  Thus,  if  after  the
Conversion,  certain portions of the Bank's accumulated tax bad debt reserve are
used for any purpose other than to absorb qualified bad debt loans,  such as for
the  payment of  dividends  or other  distributions  with  respect to the Bank's
capital stock (including  distributions upon redemption or liquidation) and such
payments or other  distribution  is not otherwise  excluded from the  provisions
generally  applicable to Excess  Distributions,  approximately  one and one-half
times the amount so used would be includable in gross income for federal  income
tax  purposes,  assuming a 34%  corporate  income tax rate  (exclusive  of state
taxes).


                                       29
<PAGE>



State Taxation

         The State of Wisconsin imposes a tax on the Wisconsin taxable income of
corporations,  including  savings banks, at the rate of 7.9%.  Wisconsin taxable
income is generally  similar to federal taxable income except that interest from
state and municipal  obligations  is taxable,  no deduction is allowed for state
income  taxes and net  operating  losses  may be carried  forward  but not back.
Wisconsin  law does not  provide  for filing of  consolidated  state  income tax
returns. The income of NWI is only subject to taxation in Nevada which currently
does not impose a corporate income or franchise tax.


Regulation

         The Bank is a  Wisconsin-chartered  stock  savings bank and its deposit
accounts  are  insured up to  applicable  limits by the FDIC  under the  Savings
Association Insurance Fund ("SAIF"). The Bank is subject to extensive regulation
by the DFI, as its chartering  agency,  and by the FDIC, as its deposit  insurer
and principal  federal  regulator.  The lending and investment  authority of the
Bank is  prescribed  by Wisconsin  law and  regulations,  as well as  applicable
federal law and  regulations,  and the Bank is  prohibited  from engaging in any
activities not permitted by such law and regulations.  The Company is a one-bank
holding  company  subject to regulatory  oversight by the Federal  Reserve Board
("FRB"),  the  Wisconsin  Department of Financial  Institutions  ("DFI") and the
Securities and Exchange Commission ("SEC").


Wisconsin Savings Bank Regulation

         Regulations adopted by the Department of Financial  Institutions govern
various aspects of the activities and operation of  Wisconsin-chartered  savings
banks.

   Examinations and Assessments

         As a  Wisconsin-chartered  stock savings  bank,  the Bank is subject to
regulation  and  supervision  by the DFI. The Bank is required to file  periodic
reports with and is subject to periodic  examinations by the DFI.  Savings banks
are  required  to pay  examination  fees  and  annual  assessments  to fund  the
supervisory operations of the DFI. On June 25, 1997, the DFI assessed the Bank a
$3,376 fee based the Bank's total assets of $96.5 million at December 31, 1996.

   Loans and Investments

         Under  Wisconsin law, the Bank is authorized to make,  invest in, sell,
purchase,  participate  or  otherwise  deal in mortgage  loans or  interests  in
mortgage  loans  without  geographic  restriction,  including  loans made on the
security of  residential  and commercial  property.  Savings banks may also lend
funds for  commercial  or  consumer  purposes.  Loans  are  subject  to  certain
limitations,  including  percentage  restrictions,  based  on the  Bank's  total
assets.

         Savings  banks may  invest  funds in  certain  types of debt and equity
securities,  including  obligations  of  federal,  state and  local  governments
agencies.  Investment  in debt  securities of local  governmental  units may not
exceed 50% of capital and temporary  borrowings of any local  governmental  unit
maturing  within one year from the date of issue may not exceed 60% of  capital.
Investment in  short-term  commercial  paper issued by a financial  institution,
corporation  or other  borrower  must have a maturity  of two to 270 days and be
rated in one of the four highest  categories by a nationally  recognized  rating
service.  Subject to the prior  approval  of the DFI,  compliance  with  capital
requirements  and  certain  other  restrictions,  savings  banks  may  invest in
residential housing development projects.

         Savings banks may invest in service  corporations or subsidiaries  with
the prior  approval  of the DFI and  subject to the  condition  that the service
corporation or subsidiary  engages in only those activities  pre-approved by the
DFI, agrees to be audited annually by a certified public  accountant,  agrees to
bear the expense of all examinations and audits conducted by the DFI, and agrees
not to enter into a business venture,  directly or indirectly,  with an officer,
director or employee of the savings bank.


                                       30
<PAGE>


         The lending and investment  powers of Wisconsin  savings banks also are
limited by FDIC regulations and other federal law and regulations.  See "Federal
Deposit  Insurance  Corporation   Improvement  Act  of  1991-Restrictions   Upon
State-Chartered Banks".

   Loans to One Borrower

         Wisconsin-chartered  savings  banks may make  loans and  extensions  of
credit,  both  direct  and  indirect,  to one  borrower  in amounts up to 15% of
capital plus an  additional  10% for loans fully  secured by readily  marketable
collateral.  In addition,  savings  banks may make loans to one borrower for any
purpose in an amount not to exceed $500,000,  or to develop domestic residential
housing  units in an amount not to exceed  the  lesser of $30  million or 30% of
capital, provided certain conditions are satisfied.
At  March  31,  1998,  the  Bank  did not  have  any  loans  that  exceeded  the
loans-to-one borrower limitations.

   Qualified Thrift Requirement

         As a  Wisconsin-chartered  savings bank,  the Bank must qualify for and
maintain a level of qualified thrift  investments  equal to 60% of its assets as
prescribed  in Section  7701(a)(19)  of the Internal  Revenue  Code of 1986,  as
amended  ("Internal Revenue Code"). At March 31, 1998, the Bank maintained 97.8%
of its assets in qualified  thrift  investments  and therefore met the qualified
thrift requirement.

   Dividend Limitations

         A  savings  bank that  meets its  regulatory  capital  requirement  may
declare  dividends on capital  stock based upon net profits,  provided  that its
paid-in  surplus equals its capital stock. If the paid-in surplus of the savings
bank does not equal its capital stock,  the board of directors may not declare a
dividend  unless at least 10% of the net profits of the  preceding  half year in
the case of quarterly or semi-annual dividends, or 10% of the net profits of the
preceding half year in the case of quarterly or semi-annual dividends, or 10% of
the net  profits of the  preceding  year in case of annual  dividends,  has been
transferred  to paid-in  surplus.  In  addition,  prior  approval  of the DFI is
required before dividends  exceeding 50% of profits for any calendar year may be
declared and before a dividend may be may be declared out of retained  earnings.
Under the DFI's  regulations,  a savings bank that has converted  from mutual to
stock form also is prohibited from paying a dividend on its capital stock if the
effect  thereof  would cause the  regulatory  capital of the savings  bank to be
reduced below the amount required for its liquidation account.

   Liquidity

         Under the DFI's regulations,  savings banks are required to maintain an
average  daily balance of liquid assets of not less than 8% of its average daily
balance  during the preceding  calendar month of its net  withdrawable  accounts
plus its short-term borrowings.  At least 50% of the minimum liquid assets shall
consist of primary liquid assets, including cash, certain time deposits, certain
banker's  acceptances,  certain  corporate  debt  securities  and  highly  rated
commercial paper, securities of certain mutual funds and specified United States
government,  state or federal agency  obligations.  Other liquid assets that are
not primary liquid assets include mortgage backed  securities,  certain mortgage
derivative   securities,   securities  issued  by  other  states  and  political
subdivisions  in other  states,  and other  securities  authorized by the DFI as
investments  for which a secondary  resale market exists,  including  authorized
mutual fund  investments.  On March 31,  1998,  the Bank's  liquidity  ratio was
15.2%.

Federal Deposit Insurance Corporation Improvement Act of 1991

         The Federal Deposit Insurance  Corporation  Improvement Act ("FDICIA"),
enacted  in  December  1991,  addressed  the  safety  and  soundness  of deposit
insurance funds,  and supervision and other  regulatory  actions relating to the
banking industry.  The goal of FDICIA was to reduce the overall risks within the
thrift and banking system and financial markets.  FDICIA addressed the following
issues: (i) development of a system of risk-based deposit insurance assessments;
(ii)  supervisory and accounting  reforms;  (iii) prompt  corrective  regulatory
action;  (iv)  brokered  deposits and interest  rate  limitations  thereon;  (v)
establishment  of uniform  lending  standards;  and (vi) general  standards  for
safety and soundness of insured financial institutions.


                                       31
<PAGE>



   Risk-Based Insurance Assessments

         FDICIA  required the FDIC to develop a system of  risk-based  insurance
assessments.  Under a system  implemented in 1994,  higher insurance  assessment
rates are charged to those banks and thrifts  deemed to pose greater risk to the
deposit  insurance  funds.  Under this  system,  the FDIC  places  each  insured
depository  in one of nine risk  categories  based on its level of  capital  and
other relevant information (such as supervisory evaluations). Each institution's
insurance  assessment  rate is then  determined by the risk category in which it
has been  classified by the FDIC.  There is an  twenty-seven  basis point spread
between the highest and lowest  assessment rates for SAIF-insured  institutions,
so that  institutions  classified  as  strongest  by the FDIC are  subject to an
annual  rate of $0.00 per one  hundred  dollars of  deposits,  and  institutions
classified as weakest by the FDIC are subject to an annual rate of $0.27 per one
hundred  dollars of deposits (with  intermediate  annual rates of $0.03,  $0.10,
$0.17 and $0.24 per $100 of deposits).

         The Bank has been  classified  in a risk  category  that will result in
annual  assessments  of $0.00 per one hundred  dollars of  deposits.  The (FICO)
quarterly multiplier is not tied to the FDIC risk calculation.  The FICO rate is
determined quarterly.  For the second quarter of 1997, the FICO SAIF annual rate
is $0.065 per one hundred dollars of deposits. The FICO debt service requirement
became applicable to all insured  institutions on January 1, 1997, in accordance
with the Deposit  Insurance Act of 1996. The Bank's  expense  related to federal
deposit  insurance  premiums  to the SAIF was  $39,000 for the fiscal year ended
March  31,  1998.  Placement  of the Bank in any risk  category  other  than the
category  having  the  lowest  assessment  rate will  result in  increased  SAIF
insurance  assessments,  with  a  corresponding  decrease  in net  earnings  and
capital.  The Bank does not  presently  expect that any  reasonable  foreseeable
insurance  assessments would  significantly  impair the Bank's overall financial
condition or results of operations. (See Insurance of Deposits)

   Improved Examinations and Audits

         FDICIA  revised  examination  and audit  procedures  to require  annual
on-site   examinations   for   all   depository    institutions   except   those
well-capitalized institutions with assets of less $100 million; annual audits by
independent  public  accountants  for all  insured  institutions  with assets in
excess of $500 million; management of depository institutions to prepare certain
financial  reports  annually and to establish  internal  compliance  procedures;
implementation  of accounting  objectives,  standards and  requirements  through
regulations;  and  restrictions  on the receipt of "brokered  deposits"  and the
rates of interest  which may be paid on any deposits by  institutions  which are
not  "well   capitalized"   (even  if  they  meet  minimum   regulatory  capital
requirements).

   Prompt Corrective Regulatory Action

         FDICIA  established a system of prompt corrective action to resolve the
problems of  undercapitalized  institutions.  Under this  system,  federal  bank
regulators  are  required to take  certain  supervisory  actions with respect to
undercapitalized   institutions,   the  severity  of  which   depends  upon  the
institution's degree of capitalization.

         The  regulations  provide  that an insured  institution  that has total
capital to  risk-based  assets of less than  8.0%,  core  capital to  risk-based
assets of less than 4.0%, or a leverage  ratio that is less than 4.0%,  would be
considered "undercapitalized".  An insured institution that has total capital to
risk-based  assets of less than 6.0%, core capital to risk-based  assets of less
than 3.0%,  or a leverage  ratio  that is less than  3.0%,  would be  considered
"significantly  undercapitalized"  and an insured  institution that has tangible
capital to assets  ratio equal to or less than 2.0% would be deemed  "critically
undercapitalized".

         Subject  to  limited  exceptions,  insured  institutions  in any of the
undercapitalized  categories are prohibited from declaring dividends, making any
other capital  distribution or paying a management fee to a controlling  person.
Undercapitalized  and  significantly  undercapitalized  institutions  face  more
severe  restrictions.  The Bank  currently  exceeds  all  applicable  regulatory
capital requirements and therefore is not subject to prompt corrective action.

   Brokered Deposits; Interest Rate Limitations

         FDIC regulations  govern the acceptance of brokered deposits by insured
depository  institutions.  The  capital  position of an  institution  determines
whether and with what limitations an institution may accept brokered deposits. A
"well-capitalized" institution (one that significantly exceeds specified capital
ratios) may accept brokered  deposits 

                                       32
<PAGE>


without  restriction.  "Undercapitalized" institutions  (those that fail to 
meet minimum regulatory capital  requirements) may not accept  brokered  
deposits  and  "adequately  capitalized"  institutions (those that are not
"well-capitalized" or  "under-capitalized")  may only accept such   deposits 
with   the   consent   of  the   FDIC.   The   definition   of 
"well-capitalized",  "adequately  capitalized" and "undercapitalized"  governing
the  acceptance  of brokered  deposits  conform to the  definitions  used in the
regulations  implementing the prompt corrective action provisions of the FDICIA.
The Bank is a  "well-capitalized"  institution and therefore may accept brokered
deposits  without  restriction.  At March  31,  1998,  the Bank had no  brokered
deposits.

Uniform Lending Standards

         Savings  institutions  must adopt and maintain  written  policies  that
establish  appropriate  limits and standards for extensions of credit secured by
liens or interests in real estate or made for the purpose of financing permanent
improvements  to real estate.  Those  policies  must  establish  loan  portfolio
diversification    standards,    prudent   underwriting   standards   (including
loan-to-value  limits)  that  are  clear  and  measurable,  loan  administration
procedures  and  documentation,  approval and reporting  requirements.  The real
estate lending policies must reflect consideration of the Interagency Guidelines
for Real Estate Lending Policies  adopted by federal bank  regulators.  The Bank
has adopted and maintains such policies.

   Standards for Safety and Soundness

         FDICIA required  federal bank  regulators to prescribe  operational and
managerial  standards for all insured  depository  institutions  and  depository
institution holding companies relating to internal controls, information systems
and audit systems;  loan documentation;  credit underwriting  interest rate risk
exposure;  asset growth;  and compensation  fees and benefits.  The compensation
standards  would  prohibit   employment   contracts,   compensation  or  benefit
arrangements,  stock  option  plans,  fee  arrangements  or  other  compensatory
arrangements  that would  provide  excessive  compensation,  fees or benefits or
could lead to material financial loss. In addition, federal bank regulators were
required to prescribe  standards  relating to asset quality,  earnings and stock
valuation that the regulators determined to be appropriate.

         On September 23, 1994, the Riegle Community  Development and Regulatory
Improvement  Act of 1994 (the "RCDRIA") was enacted.  The RCDRIA amended Section
39 of the Federal  Deposit  Insurance Act of 1950 ("FDI Act"):  (1) To authorize
the federal bank  regulators  to  establish  safety and  soundness  standards by
regulation or by guideline for all insured depository institutions;  (2) to give
the regulators  greater  flexibility  in prescribing  asset quality and earnings
standards;  and (3) to eliminate the requirement that standards prescribed under
Section 39 apply to depository institution holding companies.

         On  July  10,  1996,  federal  bank  regulators   adopted   Interagency
Guidelines  Establishing  Standards for Safety and Soundness (the  "Guidelines")
and also adopted a final rule  establishing  deadlines for submission and review
of  safety  and  soundness   compliance  plans.   Federal  bank  regulators  are
authorized,  but not required, to soundness standards set out in the Guidelines.
An institution must file a compliance plan within 30- days of a request to do so
from the institution's primary federal regulator. Regulators expect to request a
compliance  plan from an  institution  whose  failure to meet one or more of the
standards  is of such  severity  that it  could  threaten  the  safe  and  sound
operation of the institution.

         With  respect to internal  controls,  information  systems and internal
audit systems of  institutions,  the  Guidelines  prescribe  the functions  that
adequate  internal  controls  and  information  systems must be able to perform,
rather than  providing  the types of controls or systems that must be present in
every case.  Each  institution is required to have an internal audit system that
provides for adequate  testing and review of internal  controls and  information
systems.

         The  Guidelines do not specify in detail what loan  documentation  must
contain.   Documentation   practices   would  be   evaluated   based  upon  each
institution's  ability to: make informed decisions and assess risk on an ongoing
basis;  identify  the purpose of the loan and assess the ability of the borrower
to repay the  indebtedness  in a timely manner;  insure that any claim against a
borrower is legally  enforceable;  demonstrate  appropriate  administration  and
monitoring of the loan; and take account of the size and complexity of the loan.
The  Guidelines  would  establish  general  parameters  of safe and sound credit
underwriting  practices,  and require each institution to establish and 

                                       33
<PAGE>

maintain prudent  credit  underwriting  practices  commensurate  with  the size
of  the institution and the nature and scope of its lending activities

         With respect to interest rate risk management,  the Guidelines  require
institutions to manage interest rate risk in a manner appropriate to the size of
the  institution  and the  complexity  of its  assets  and  liabilities.  Larger
institutions  that are  exposed  to  significant  interest  rate  risk  would be
expected to significant  interest rate risk would be expected to maintain a more
formal  system for the  measurement  and  management of such risk.  Further,  an
institution  is  required  to base its  asset  growth  on a plan  that  reflects
consideration  of: (i) the source,  volatility and use of the funds that support
asset  growth;  (ii) any increase in credit risk or interest rate as a result of
growth; and (iii) the effect of growth on institution's capital.

         The Guidelines  also require an institution to base its asset growth on
a plan that fully  considers the source of an  institution's  growth,  the risks
presented by such growth and the effect of growth on the institution's  capital.
Regulators will evaluate asset growth against an institution's overall strategic
plan for growth.

         In addition,  the  Guidelines  require that each  institution  maintain
safeguards  to prevent the payment of  compensation,  fees, or benefits that are
excessive  or  could  lead to  material  financial  loss.  Compensation  that is
unreasonable  or  disproportionate  to the  services  actually  performed by the
individual being  compensated  would be considered  excessive.  In making such a
determination,  the federal  regulators  would  consider all  relevant  factors,
including the compensation  history of the individual and other individuals with
comparable  expertise  at  the  institution,  the  financial  condition  of  the
institution,  comparable compensation packages at comparable  institutions,  and
any connection between an individual and any wrongdoing at the institution.

         The  final  rule  does not set forth  any  standards  related  to asset
quality and earnings in the final Guidelines.  Federal  regulators intend to add
revised asset quality and earnings  standards to the Guidelines  after receiving
comments and finalizing  such standards.  The federal  regulators also concluded
that establishing stock valuation  standards for publicly traded institutions is
not appropriate.  Regulators  intend to continue  monitoring of  publicly-traded
institutions  through  the  review of stock  price  market  price to book  value
rations,  bond ratings and other  indicators  of the market's  assessment  of an
institution's performance.

         The  Bank  believes  that  its  operational  and  managerial  standards
substantially  comply with the  standards set forth in the  Guidelines  and that
compliance with the Guidelines will therefore not impose a significant burden on
Bank operations.

   Restrictions Upon State-Chartered Banks

         The FDICIA added a new Section 24 to the Federal Deposit  Insurance Act
of 1050 ("FDI Act") which generally limits the activities and equity investments
of  FDIC-insured   state-chartered   banks  and  their   subsidiaries  to  those
permissible  for  federally  chartered  national  banks and their  subsidiaries,
unless such activities and investments are  specifically  exempted by Section 24
or consented to by the FDIC.

         FDIC  regulations  governing  the  equity  investments  of  such  banks
generally  prohibit  certain  equity  investments  by such banks and require the
divestiture   of  such   investments   by  December  19,  1996.   Banks  holding
impermissible  equity  investments that do not receive FDIC approval must submit
to the FDIC a plan for divesting such investments as quickly and as prudently as
possible. The Bank had FDIC approval to hold its impermissible equity investment
until May 31,  2000.  On May 8,  1998,  the Bank  sold all of its  impermissible
equity investments.

         Under FDIC  regulations,  insured  savings banks must obtain the FDIC's
prior  approval  before  directly,   or  indirectly   through  a  majority-owned
subsidiary,  engaging "as principal" in any activity that is not permissible for
a national bank unless certain exceptions apply. Under the activity regulations,
FDIC-supervised  state  banks  will  not be  permitted  to  directly  engage  in
commercial  ventures or any insurance  underwriting  activity  other than to the
extent such activities are  permissible in commercial  ventures or any insurance
underwriting  activity other than to the extent such  activities are permissible
for a national bank or a national bank  subsidiary or except for certain limited
insurance underwriting activities. In addition, the activity regulations provide
that state banks which meet all regulatory  capital  requirements  may engage in
certain  activities that are not permissible for national banks which are deemed
not to present a significant risk to the insurance fund, including  guaranteeing
certain  obligations of other,  activities which the FRB has found to be closely
related  to  banking  and  certain  securities   activities   conducted  through


                                      34
<PAGE>




subsidiaries.  The FDIC will not approve an activity it determines would present
a significant  risk to the FDIC insurance  funds. The activities of the Bank are
of a type permissible under the FDICIA and FDIC regulations.

         As an SAIF-insured,  state-chartered  savings bank which was formerly a
state-chartered savings association, the Bank continues to be subject to certain
restrictions  which  are  imposed  by  federal  law on  state-chartered  savings
associations, including a prohibition against engaging in activities (other than
as agent for its customers) that are not  permissible for a federally  chartered
savings association or engaging in activities authorized for federally chartered
associations,  but to a greater extent than  authorized for federally  chartered
associations,   unless  the  association   met  its  fully   phased-in   capital
requirements  and  the  FDIC  determined  that  the  activity  will  not  pose a
significant risk to the deposit insurance fund.  Effective December 8, 1993, the
FDIC amended its regulations to delete certain provisions requiring SAIF-insured
state  banks to  continue  to comply with  certain  restrictions  applicable  to
state-chartered  savings associations.  The effect of such amendment is to treat
SAIF-insured  state banks and Bank Insurance Fund ("BIF") member state banks the
same rather than subject such institutions to additional  restrictions  based on
insurance fund membership.

   Effect of FDICIA on Operations and Financial Condition of the Bank

         While  management of the Bank cannot predict the final impact of FDICIA
upon the financial  condition and  operations of the Bank,  management  believes
that FDICIA may subject the Bank to significantly  increased  operational  costs
through  higher  deposit  insurance  premiums and  compliance  costs and, if the
capital  ratios of the Bank should  decline  significantly,  the Bank may become
subject to more severe  regulatory  action than was possible under prior law and
regulations.


Capital Maintenance

   FDIC Regulation

         FDIC-insured  institutions  are  required  to  follow  certain  capital
adequacy  guidelines  that prescribe  minimum levels of capital and require that
institutions meet certain  risk-based and leverage capital  requirements.  Under
the FDIC capital regulations, the Bank is required to meet the following capital
standards:  (i) "Tier 1 capital" in an amount not less than 3% of total  assets;
(ii) "Tier 1 capital" in an amount not less than 4% of risk-weighted assets; and
(iii) "total capital" in an amount not less than 8% of risk-weighted assets.

         FDIC-insured  institutions  in the strongest  financial and  managerial
condition  (with  a  composite  rating  of  "1"  under  the  Uniform   Financial
Institutions  Rating System  established by the Federal  Financial  Institutions
Examination Council) are required to maintain "Tier 1 capital" equal to at least
3% of total assets (the "leverage limit requirement"). Tier 1 capital is defined
to  include  the sum of common  stockholders'  equity,  noncumulative  perpetual
preferred  stock  (including  any related  surplus),  and minority  interests in
consolidated   subsidiaries,   minus  all   intangible   assets  (with   certain
exceptions),   identified  losses  and  qualifying   investments  in  securities
subsidiaries.  An  institution  that fails to meet the  minimum  leverage  limit
requirement  must file a capital  restoration  plan  with the  appropriate  FDIC
regional  director  that  details  the  steps  it  will  take to  reach  capital


                                       35

                                      
<PAGE>


compliance.  At March 31,  1998,  the  Bank's  ratio of Tier 1 capital  to total
assets was 9.21% or 6.21% in excess of the minimum leverage limit requirement.

         FDIC-insured  institutions  also are  required  to  adhere  to  certain
risk-based  capital guidelines that are designed to provide a measure of capital
more sensitive to the risk profiles of individuals  banks. In evaluating capital
adequacy,  the FDIC also will assess the  exposure  to declines in the  economic
value of the  Bank's  capital  due to  changes  in  interest  rates.  Under  the
risk-based capital guidelines,  capital is divided into two tiers: core (Tier 1)
capital, as defined above, and supplementary capital (Tier 2). Tier 2 capital is
limited to 100% of core  capital and  includes  cumulative  perpetual  preferred
stock, perpetual preferred stock, mandatory convertible securities, subordinated
debt,  unrealized  losses  on  securities,   intermediate  preferred  stock  and
allowance for possible  loan and lease  losses.  Allowance for possible loan and
lease  losses  includable  in  supplementary  capital is limited to a maximum of
1.25% of  risk-weighted  assets.  Total  capital is the sum of Tier 1 and Tier 2
capital. The risk-based capital framework assigns balance sheet assets to one of
four broad risk  categories  that are assigned  risk-weights  ranging from 0% to
100% based  primarily on the degree of credit risk  associated with the obligor.
Off-balance sheet items are converted to an on-balance sheet "credit equivalent"
amount  utilizing  certain  conversion  factors.  The  weighted  sum of the four
risk-weighted  categories  equals  risk-weighted  assets. At March 31, 1998, the
Bank's  risk-weighted  capital ratio was 14.74%,  or 6.74% in excess of the FDIC
requirement  and the Bank's total  capital ratio was 9.72% or 5.72% in excess of
the FDIC requirement.

   Wisconsin Regulation

         Wisconsin-chartered  savings  banks are  required to maintain a minimum
capital to assets  ratio of 6% and must  maintain  total  capital  necessary  to
ensure the continuation of insurance of deposit accounts by the FDIC. If the DFI
determines  that  the  financial  condition,   history,  management  or  earning
prospects  of a  savings  bank are not  adequate,  the DFI may  require a higher
minimum  capital level for the savings bank. If a savings  bank's  capital ratio
falls below the required level, the DFI may direct the savings bank to adhere to
a specific  written plan  established  by the DFI to correct the savings  bank's
capital  deficiency,  as well as a number of other  restrictions  on the savings
bank's operations,  including a prohibition on the declaration of dividends.  At
March 31, 1998, the Bank's total capital, as calculated under Wisconsin law, was
$ 9.2  million  or 9.06% of total  assets,  which  was  3.06% in  excess  of the
required amount.

Insurance of Deposits

         The FDIC is an independent federal agency that insures the deposits, up
to  prescribed   statutory  limits,  of  federally  insured  banks  and  savings
institutions  and safeguards the safety and soundness of the banking and savings
industries.  Two separated  insurance funds, the Bank Insurance Fund ("BIF") and
the Savings Associations Insurance Fund ("SAIF") are maintained and administered
by the FDIC. The Bank is a member of SAIF and the FDIC has examination authority
over the Bank. The FDIC is authorized to establish  separate  annual  assessment
rates for  deposit  insurance  for  members  of the BIF and  SAIF.  The FDIC may
increase  assessment  rates for either fund if  necessary  to restore the fund's
ratio of reserves to insured  deposits to it target  level  within a  reasonable
time and may decrease such  assessment  rates if such target level has been met.
The FDIC has  established a risk-based  assessment  system for both SAIF and BIF
members.  Under this system,  assessments are set within a range,  based on the
risk the  institution  poses to its deposit  insurance  fund. This risk level is
determined  based on the  institution's  capital  level and the FDIC's  level of
supervisory concern about the institution.

         Because a significant  portion of the assessments paid into the SAIF by
savings  associations  were used to pay the cost of prior thrift  failures,  the
reserves of the SAIF were below the level required by law. The BIF had, however,
met its required  reserve level during the third calendar  quarter of 1995. As a
result,  deposit  insurance  premiums  for  deposits  insured  by the  BIF  were
substantially  less than premiums for  SAIF-insured  deposits.  On September 30,
1996,  President  Clinton  signed  banking  legislation  to resolve  the deposit
insurance  premium  disparity.  The  banking  package  also  included  extensive
regulatory  relief for banks and  thrifts.  The  BIF-SAIF  package  contains the
following core elements for resolving the deposit premium disparity:

         Special Assessment.  A one-time special assessment on SAIF deposits was
imposed to bring the fund's reserve  ration to the statutory  1.25 percent.  The
assessment rate was approximately  65.7 basis points on deposits as of March 31,
1995.  The bill  clarifies  that the special  assessment is  deductible  for tax
purposes in the year paid.  The special  assessment  amounted to $350,000 to the
Bank and is reflected in the financial data reported as of March 31, 1997.

         FICO Sharing.  Pro-rata sharing of the Financing Corporation obligation
among  BIF-SAIF  members  will begin by January l,  2000.  This  obligation  was
previously  paid by only SAIF members.  From 1997 through 1999,  partial sharing
will occur,  with SAIF deposits assessed 6.44 basis points and BIF deposits 1.29
basis points.

         SAIF and BIF Rates.  Through December 31, 1998, the assessment rate for
SAIF deposits cannot be lower than the rate for BIF deposits.

         Reserve  Ratio,  Rebates  The  FDIC  is  prohibited  from  setting  the
semiannual  assessment at a rate in excess of what is needed to maintain or meet
the required reserve ratio. Until the funds are merged, the FDIC is permitted to
rebate or credit excess premiums to BIF members only.

         Deposit Migration For a three-year  period,  the banking regulators are
authorized  to  prevent   SAIF-insured   institutions   from   "facilitating  or
encouraging" customers to shift their deposits to BIF-insured affiliates for the
purpose of evading the SAIF premium.


                                       36
<PAGE>



         Funds Merger.  The BIF and SAIF insurance  funds will merge to form the
Deposit Insurance Fund on January 1, 1999, if there are no savings  associations
(not  including  state savings  banks) in existence on that date. The statute is
silent on when, how or if rechartering will occur.

         Timetable.  Pro-rata FICO sharing will begin and the ban on deposit 
shifting will end on the earlier of January 1, 2000, or when the last savings  
association  ceases to exist.

         Charter  Reform.  The Treasury  Department  was directed to report to
Congress by March 31, 1997,  with its  recommendations  on a common charter for 
banks and savings institutions.

         Under the FDI Act,  insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound  practices,
is in an unsafe or unsound  condition  operations or has violated any applicable
law,  regulation,  rule,  order  or  condition  imposed  by the FDIC or the DFI.
Management  of the Bank does not know of any  practice,  condition  or violation
that might lead to the termination of deposit insurance.

         On October 5, 1994,  the FDIC  issued an  "Advanced  Notice of Proposed
Rulemaking"  pursuant  to which the FDIC is  soliciting  comments on whether the
deposit-insurance   assessment  base  currently   provided  for  in  the  FDIC's
assessment regulations should be redefined. As a result of the recent transition
to a  risk-based  deposit  insurance  system,  effective  January 1,  1994,  the
assessment  base,  which had been determined by statute pursuant to the FDI Act,
is now determined by the FDIC by  regulation.  At present,  however,  the FDIC's
assessment  base  regulations  continue to be based on the statutory  provisions
under the FDI Act.  Under current law,  insurance  premiums paid to the FDIC are
calculated by multiplying the institution's  assessment base (which equals total
domestic deposits, as adjusted for certain elements) by its assessment rate.

         Based on the change to the new deposit insurance  system,  developments
in the  financial  services  industry,  changes in the  activities of depository
institutions  and  other  factors,  the  FDIC  seeks  comments  on  whether  the
assessment  base  should be  redefined.  The FDIC has stated  that review of the
definition of "assessment  base" does not signal any intent to enhance the total
dollar amount of assessments  collected,  but that such  redefinition may impact
the  assessments  paid  on  an  institution-by-institution  basis.  Until  final
regulations are adopted affecting the definition of an institution's  assessment
base,  the Bank cannot  predict  what impact  such  regulation  may have on Bank
operations.


Restrictions on Loans to and Transactions with Insiders and Affiliates

         In accordance with Section 22(h) of the Federal Reserve Act of 1913, as
amended  ("Federal  Reserve  Act"),  FRB  regulations  limit the total  amount a
savings  bank  may  lend  to  its  executive  officers,   directors,   principal
shareholders and their related interests ("affiliated  persons").  Generally, an
affiliated  person may borrow an aggregate amount not exceeding 15% of a savings
bank's  unimpaired  capital and unimpaired  surplus on an unsecured basis and an
additional  10%  on  a  secured  basis.  The  regulations  limit,  with  certain
exceptions, the aggregate amount a depository institution may lend to affiliated
persons  as a class to an amount  not  exceeding  the  institution's  unimpaired
capital and surplus.

         FRB regulations also provide for certain exceptions from the definition
of  :extension  of credit" that pose a minimal risk to  institutions,  including
extensions  of credit  secured by  obligations  fully  guaranteed by the federal
government,  unconditional takeout commitments or guarantees of any U.S. agency,
department or wholly owned  corporation,  or a segregated deposit account at the
institution.

         In addition,  the DFI's regulations establish restrictions on loans and
other transactions with the Bank's affiliated persons, to ensure that such loans
and  transactions are on terms that would be available to members of the general
public of similar credit status.

         FDIC-insured  state-chartered  savings  banks must comply with Sections
23A and 23B of the Federal  Reserve  Act  ("Sections  23A and 23B")  relating to
transactions with affiliates in the same manner and to the same extent as if the
savings banks were a Federal  Reserve member bank.  Generally,  Sections 23A and
23B limit the extent to which an insured  institution  or its  subsidiaries  may
engage in certain covered  transactions  with an affiliate to an amount equal to
10% of such institution's capital and surplus, and require that all transactions


                                       37
<PAGE>



be on terms  substantially the same, or at least as favorable to the institution
or  subsidiary,  as  those  provided  to  a  non-affiliate.  The  term  "covered
transaction" includes the making of loans, the purchase of assets, issuance of a
guaranty  and similar  other  types of  transactions.  The FDIC,  for safety and
soundness reasons,  may impose more stringent  restrictions on savings banks but
may not exempt transactions from or otherwise abridge Sections 23A and 23B.

         Unless prior  approval of the DFI is  obtained,  a savings bank may not
purchase,  lease or acquire a site for an office building or an interest in real
estate from an affiliated  person,  including a stockholder owning more than 10%
of its capital stock, or from any firm,  corporation,  entity or family in which
an affiliated person or 10% stockholder has a direct or indirect interest.

         The  Bank  has  not  been  significantly  affected  by  the  applicable
restrictions on loans to and transactions with affiliates.

Community Reinvestment Act

         Under the Community  Reinvestment Act of 1977, as amended  ("CRA"),  as
implemented  by FDIC  regulations,  the Bank has a  continuing  and  affirmative
obligation  consistent with its safe and sound operation to help meet the credit
needs of its entire community,  including low and moderate income neighborhoods.
The CRA does  not  establish  specific  lending  requirements  or  programs  for
financial institutions nor does it limit an institution's  discretion to develop
the types of products and services it believes are best suited to its particular
community.  The CRA requires the FDIC, in connection  with its  examination of a
bank,  to assess the  institution's  record of meeting  the credit  needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications by such institution. The Financial Institutions Reform Recovery and
Enforcement Act of 1989 ("FIRREA") amended the CRA to require, effective July 1,
1990,  public  disclosure of an institution's CRA rating and require the FDIC to
provide a written evaluation of an institution's CRA performance. The Bank had a
CRA examination on February 12, 1998, and received a "Outstanding" CRA rating.

         On May 4, 1995,  the federal  banking  regulators  adopted a final rule
("Final CRA Rule") governing  compliance with CRA. The Final CRA Rule eliminates
the  previous CRA  regulation's  twelve  assessment  factors and  substitutes  a
performance based evaluation system. The Final CRA Rule will be phased in over a
period of time and become fully  effective by July 1, 1997.  Under the Final CRA
Rule,  an  institution's  performance  in meeting the credit needs of its entire
community,  including low- and  moderate-income  areas,  as required by the CRA,
will generally be evaluated  under three  assessment  tests relating to lending,
investment and service.

         The lending test analyzes lending performance using five criteria:  (i)
the number and amount of loans in the  institution's  assessment  area, (ii) the
geographic  distribution of lending,  including the proportion of lending in the
assessment  area,  the  dispersion of lending in the  assessment  area,  and the
number of  amount of loans in low-,  moderate-,  and  upper-income  areas in the
assessment  area.  (iii) borrower  characteristics,  such as the income level of
individual  borrowers and the size of  businesses or farms,  (iv) the number and
amount,  as  well  as the  complexity  and  innovativeness  of an  institution's
community  development lending and (v) the use of innovative or flexible lending
practices  in a safe and sound  manner to address  the  credit  needs of low- or
moderate-income individuals or areas.

         The  investment  test  analyzes   investment   performance  using  four
criteria:   (i)  the  dollar   amount  of   qualified   investments,   (ii)  the
innovativeness or complexity of qualified investments,  (iii) the responsiveness
of qualified investments to credit and community development needs, and (iv) the
degree  to which  the  qualified  investments  made by the  institution  are not
routinely provided by private investors.

         The service test analyzes service  performance using six criteria:  (i)
the institution's  branch distribution among low-,  moderate-,  and upper-income
areas, (ii) its record of opening and closing branches, particularly in low- and
moderate-income  areas,  (iii) the availability and effectiveness of alternative
systems  for  delivering  retail  banking  services,  (iv) the rate of  services
provided in low-, moderate-,  middle- and upper-income areas and extent to which
those services are tailored to meet the needs of those areas,  (v) the extent to
which the institution  provides  community  development  services,  and (vi) the
innovativeness and responsiveness of community development services provided.

         Financial  institutions  with  assets of less than $250  million,  or a
financial institution with assets of less than $250 million that is a subsidiary
of a holding  company  with  assets of less than $1 billion,  will be  evaluated


                                       38
<PAGE>



under a streamlined assessment method based primarily on its lending record. The
streamlined test considers an institution's  loan-to-deposit ration adjusted for
seasonal variation and special lending  activities,  its percentage of loans and
other lending related  businesses and farms of different  sizes,  the geographic
distribution  of its loans and its record of taking  action,  if  warranted,  in
response  to  written  complaints.  In lieu of being  evaluated  under the three
assessment  tests or the streamlined  test, a financial  institution can adopt a
"strategic  plan" and elect to be evaluated on the basis of achieving  the goals
and benchmarks  outline in the strategic plan.  Based upon a review of the Final
CRA  Rule,  management  of the  Company  does  not  anticipate  that the new CRA
regulations will adversely affect the Bank.


Federal Reserve System

         Regulation D, promulgated by the FRB,  imposes reserve  requirements on
all depository  institutions,  including  savings  institutions,  which maintain
transaction  accounts or  non-personal  time deposits.  Checking  accounts,  NOW
accounts and certain other types of accounts  that permit  payments or transfers
to third  parties fall within the  definition  of  transaction  accounts and are
subject to  Regulation  D reserve  requirements,  as are any  non-personal  time
deposits  (including  certain  money  market  deposit  accounts)  at  a  savings
institution. A depository institution must maintain average daily reserves equal
to 3% of the  first  $47.8 million of net  transaction  accounts  and 10% of net
transaction  accounts  in excess of $47.8 million.  There has been a 0%  reserve
requirement on non-personal  deposits since December 27, 1990. In addition,  the
first $4.4  million of  otherwise  reserveable  liabilities  are exempt from the
reserve requirement. These percentages and tranches are subject to adjustment by
the FRB. The Bank  satisfies its reserve  requirements  on an on-going  basis by
maintaining  average  balances of vault cash and  non-interest  bearing  reserve
deposits with the  FHLB-Chicago  (which are passed  through to the FRB) which in
total are greater than or equal to its required daily average balance.

         Thrift  institutions  also have  authority  to borrow  from the Federal
Reserve  Bank  "discount  window",  but FRB  policy  generally  requires  thrift
institutions  to exhaust all sources before  borrowing from the Federal  Reserve
System. The Bank had no discount window borrowings as of March 31, 1998.


Federal Home Loan Bank System

         The Federal  Home Loan Bank System,  consisting  of twelve  FHLBs,  is
under the  jurisdiction  of the Federal  Housing  Finance  Board  ("FHFB").  The
designated  duties of the FHFB are to  supervise  the  FHLBs;  ensure  that the
FHLBs carry out their housing  finance  mission;  ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital market; and ensure
that the FHLBs operate in a safe and sound manner.

         The Bank, as a member of the  FHLB-Chicago,  is required to acquire and
hold  shares of  capital  stock in the  FHLB-Chicago  in an amount  equal to the
greater of (i) 1% of the aggregate  outstanding  principal amount of residential
mortgage loans, home purchase contracts and similar obligations at the beginning
of  each  year,  (ii)  0.3% of  total  assets,  or  (iii)  1/20 of its  advances
(borrowings)  from  the  FHLB-Chicago.  The  Bank  is in  compliance  with  this
requirement with an investment in FHLB-Chicago  stock of $1,159,000 at March 31,
1998.

         Among other  benefits,  the FHLBs  provide a central  credit  facility
primarily for member institutions.  It is funded primarily from proceeds derived
from the sale of consolidated  obligations of the FHLB System. It makes advances
to members in accordance  with policies and  procedures  established by the FHFB
and the Board of Directors of the FHLB-Chicago.  At March 31, 1998, the Bank had
$19.1 million in advances from the FHLB-Chicago.

Holding Company Regulation

   Federal Regulation

         The Company is a registered bank holding  company  pursuant to the Bank
Holding Company Act of 1956, as amended (the "BHCA").  The Company is subject to
examination,  regulation and periodic  reporting under the BHCA, as administered
by the FRB. The FRB has adopted  capital  adequacy  guidelines  for bank holding
companies (on a consolidated basis)  substantially  similar to those of the FDIC
for the Bank. The Company's total and Tier 1 capital  significantly  exceed such
capital adequacy requirements.


                                       39
<PAGE>



         The  Company is  required  to obtain the prior  approval  of the FRB to
acquire  all, or  substantially  all, of the assets of any bank or bank  holding
company.  Prior FRB approval will be required for the Company to acquire  direct
or indirect  ownership or control of any voting  securities  of any bank or bank
holding company if, after giving effect to such acquisition,  it would, directly
or indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding  company.  The BHCA also  prohibits the  acquisition by the
Company of more than 5% of the voting shares or substantially  all the assets of
a bank located  outside the State of  Wisconsin  unless such an  acquisition  is
specifically authorized by the laws of the state in which such bank is located

         The  Company is required  to give the FRB prior  written  notice of any
purchase  or  redemption  of its  outstanding  equity  securities  of the  gross
consideration  for the  purchase  or  redemption,  when  combined  with  the net
consideration  paid for all such purchases or redemption's  during the preceding
twelve months, is equal to 10% or more of the Company's  consolidated net worth.
The FRB may disapprove  such a purchase or redemption if it determines  that the
proposal  would  constitute  an unsafe and unsound  practice,  or would  violate
redemption if it  determines  that the proposal  would  constitute an unsafe and
unsound practice, or would violate any law, regulation,  FRB order or directive,
or any condition imposed by, or written agreement with, the FRB.

         A bank holding  company  generally is  prohibited  from engaging in, or
acquiring  direct or  indirect  control of any company  engaged in,  non-banking
activities.  One  of  the  principal  exceptions  to  this  prohibition  is  for
activities  found by the FRB to be so closely  related to banking or managing or
controlling  banks as to be a proper  incident  thereto.  Some of the  principal
activities  the FRB has  determined by  regulation  to be so closely  related to
banking  are:  (i)making  or  servicing  loans;  (ii)  performing  certain  data
processing services; (iii) providing discount brokerage services; (iv) acting as
fiduciary,  investment  or  financial  advisor;  (v)  leasing  personal  or real
property; (vi) making investments in corporations or projects designed primarily
to promote community welfare; and (vii) acquiring and/or operating a savings and
loan association.

         Under FIRREA, depository institutions are liable to the FDIC for losses
suffered or anticipated by the FDIC in connection with the default of a commonly
controlled depository institution or any assistance provided by the FDIC to such
an institution in danger of default. This law would have potential applicability
if the Company ever acquired as a separate  subsidiary a depository  institution
in addition to the Bank.

         Pursuant  to FRB policy,  dividends  should be paid only out of current
earnings  and only if the  prospective  rate of earnings  retention  by the bank
holding  company appears  consistent  with its capital needs,  asset quality and
overall  financial  condition.  The FRB policy also requires that a bank holding
company  serve as a source of  financial  strength  to its  subsidiary  banks by
standing ready to use available  resources to provide  adequate capital funds to
those banks during  periods of financial  stress or  adversity.  These  policies
could affect the ability of the Company to pay cash dividends.

         Subsidiary  banks of a bank  holding  company  are  subject  to certain
quantitative and qualitative  restrictions imposed by the Federal Reserve Act on
any  extension of credit to, or purchase of assets from,  or letter of credit on
behalf of, the bank holding company or its  subsidiaries,  and on the investment
in or  acceptance  of  stocks  or  securities  of such  holding  company  or its
subsidiaries  as collateral  for loans.  In addition,  provisions of the Federal
Reserve Act and FRB  regulations  limit the amounts of, and  establish  required
procedures and credit  standards with respect to, loans and other  extensions of
credit to  officers,  directors  and  principal  shareholders  of the Bank,  the
Company,  any  subsidiary of the Company and related  interests of such persons.
See  "Restrictions of Loans to and  Transactions  with Insiders and Affiliates".
Moreover, subsidiaries of bank holding companies are prohibited from engaging in
certain tie-in  arrangements  (with the Company or any of its  subsidiaries)  in
connection with any extension of credit, lease or sale of property or furnishing
of services.

         The Company and its  subsidiary,  the Bank are affected by the monetary
and  fiscal  policies  of various  agencies  of the  United  States  government,
including  the Federal  Reserve  System.  In view of changing  conditions in the
national  economy and in the money  markets,  it is impossible for management of
the Company to  accurately  predict  future  changes in  monetary  policy or the
effect of such changes on the business or financial condition of the Company.



                                       40
<PAGE>



   State Savings Bank Holding Company Regulation

         In addition to the FRB bank holding company regulations, a bank holding
company  that owns or  controls,  directly or  indirectly,  more than 25% of the
voting  securities  of a state  savings bank also is subject to  regulation as a
savings bank holding  company by the  Commissioner.  The FDIC has not yet issued
proposed regulations governing savings bank holding companies.

Acquisition of the Holding Company

         Under  the  federal  Change in Bank  Control  Act of 1978,  as  amended
("CBCA"),  a notice  must be  submitted  to the FRB if any person  (including  a
company),  or group  acting  in  concert,  seeks to  acquire  10% or more of the
Company's shares of Common Stock outstanding,  unless the FRB has found that the
acquisition  will not result in a change in control  of the  Company.  Under the
CBCA,  the FRB has 60 days  within  which to act on such  notices,  taking  into
consideration certain factors,  including the financial and managerial resources
of the acquirer,  the  convenience  and needs of the  communities  served by the
Company and the Bank, and the anti-trust  effects of the acquisition.  Under the
BHCA,  any company  would be  required to obtain  prior  approval  generally  is
defined  to mean the  ownership  to control  in any  manner  the  election  of a
majority  of the  Company's  directors.  in  addition,  the BHCA  prohibits  the
acquisition of the Company by a bank holding  company  located outside the State
of Wisconsin,  unless such  acquisition is specifically  authorized by Wisconsin
law.


Federal Securities Laws

         The  Company  filed  with  the  SEC  a  registration   statement  under
Securities Act of 1933, as amended (the "Securities  Act"), for the registration
of the Common Stock issued  pursuant to the  Conversion.  Upon completion of the
Conversion,  the  Company's  Common  Stock  was  registered  with the SEC  under
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements under the Exchange Act.

         The  registration  under the Securities Act of the shares of the Common
Stock does not cover the resale of such shares. Shares of Common Stock purchased
by  persons  who  are  not  affiliates  of the  Company  may be  resold  without
registration. Shares purchased by an affiliate of the Company will be subject to
the resale  restrictions  of Rule 144 under the  Securities  Act. If the Company
meets  the  current  public  information  requirements  of Rule  144  under  the
Securities  Act,  each  affiliate  of the  Company who  complies  with the other
conditions of Rule 144 (including  those that require the affiliate's sale to be
aggregated  with those of certain  other  persons)  would be able to sell in the
public market,  without  registration,  a number of shares not to exceed, in any
three-month  period,  the greater of (i) 1% of the outstanding  shares of Common
Stock of the  Company,  or (ii) the  average  weekly  volume of  trading in such
shares during the preceding four calendar weeks.




                                       41
<PAGE>



ITEM 2.  DESCRIPTION OF PROPERTY.

Properties

         The Company  conducts its business  through three  full-service  office
locations that are located in Polk, St. Croix and Burnett  Counties,  Wisconsin.
The  Company  owns all of the  properties  on which  its  offices  are  located.
Management  believes the Company's  current  facilities are adequate to meet its
present and immediately foreseeable needs. A list of the Company's offices is as
follows:

                                                                  Net Book Value
                                                               of Properties and
                                              Year               Improvements at
Office Location                             Opened                March 31, 1998
---------------                             -------               --------------
Amery/Home Office                            1936                     $1,210,000
234 S Keller Avenue
PO Box 46
Amery, WI  54001

New Richmond Office                          1972                        910,000
532 S. Knowles Avenue
New Richmond, WI  54017

Siren Office                                 1975                        127,000
24082 Highway 35 N                                                    ----------
Siren, WI  54872                                                                
                                                  Net Book Value      $2,247,000
                                                                      ----------
                                           


                                       42
<PAGE>



ITEM 3.  LEGAL PROCEEDINGS

         The Company is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business, which in
the aggregate  involve amounts that are believed by management to be material to
the financial condition of the Company.

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

         No matters  were  submitted  to a vote of  shareholders  of the Company
 during the three months ended March 31, 1998.


                                            PART II

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

         Information  required by this item is included under the heading "Notes
to Financial Statements of Northwest Equity Corp." and "Shareholder Information"
in the  Registrant's  Annual  Report to  Shareholders  for the fiscal year ended
March 31, 1998, which has been filed separately pursuant to Rule 14a-3 under the
Securities  Exchange  Act of 1934 as  amended  and in  accordance  with  General
Instruction  E(2) to Form 10-KSB,  and which  sections  are hereby  incorporated
herein by reference.

         The Board of Directors of the  Registrant  declared a dividend of $0.16
per  share to  shareholders  of record on April 24,  1998.  Future  payments  of
dividends will be subject to  determination  and declaration by the Registrant's
Board of  Directors,  which will take into  account the  Registrant's  financial
condition,  results  of  operations,  tax  considerations,  industry  standards,
economic  conditions  and other factors,  including the regulatory  restrictions
which affect the payment of  dividends by the Bank to the Company.  There can be
no assurance  that dividends will be paid on the shares of Common Stock or that,
if paid, such dividends will not be reduced or eliminated in future periods.

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

         Information  required  by  this  item is  included  under  the  heading
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  of Northwest  Equity  Corp." in the  Registrant's  Annual  Report to
Shareholders for the fiscal year ended March 31, 1998, which has been filed with
the Securities and Exchange  Commission  separately pursuant to Rule 14a-3 under
the  Securities  Exchange Act of 1934 as amended and in accordance  with General
Instruction E(2) to Form 10-KSB, and which section is hereby incorporated herein
by reference.

ITEM 7.  FINANCIAL STATEMENTS.

         Information   required  by  this  item  is  included   under   headings
"Consolidated  Financial  Statements  of Northwest  Equity  Corp." and "Notes to
Consolidated Financial Statements of Northwest Equity Corp." in the Registrant's
Annual Report to  Shareholders  for the fiscal year ended March 31, 1998,  which
has been filed with Securities and Exchange  Commission  separately  pursuant to
Rule  14a-3  under  the  Securities  Exchange  Act of 1934,  as  amended  and in
accordance with General  Instruction E(2) to Form 10-KSB, and which sections are
hereby incorporated herein by reference.

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

                  None.



                                       43
<PAGE>



                                            PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS:   
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
         ---------------------------------------------------- 

         Information required by this item with respect to directors is included
under  the  heading  "Matter  1.  Election  of  Directors"  in the  Registrant's
definitive  Proxy  Statement  dated June 17,  1998,  relating to the 1998 Annual
Meeting of the  Shareholders  scheduled for July 14, 1998,  which has been filed
separately  with the Securities and Exchange  Commission  pursuant to Rule 14a-6
under the  Securities  Exchange Act of 1934, as amended and in  accordance  with
General  Instruction E(3) to Form 10-KSB,  not later than 120 days after the end
of the Registrant's fiscal year, and which section is hereby incorporated herein
by reference.

         The following information as to the business experience during the past
five years is supplied with respect to executive  officers of the Registrant who
do not serve on the Registrant's  Board of Directors.  There are no arrangements
or  understandings  between the persons  named and any other person  pursuant to
which such officers were selected,  nor are there any family relationships among
them.

         James L. Moore has been Senior Vice  President  of the Bank since 1990.
Mr. Moore joined the Bank in 1975 as an assistant branch  manager and was 
promoted to Vice President in 1988.

         Information  required by this item with respect to Item 405, Compliance
with Section 16(a) of the Securities Exchange Act of 1934 as amended is included
under the heading "Section 16 Compliance" in the  Registrant's  definitive Proxy
Statement   dated  June  17,  1998  relating  to  the  1998  Annual  Meeting  of
Shareholders  scheduled for July 14, 1998,  which has been filed separately with
the  Securities  and  Exchange  Commission  pursuant  to Rule  14a-6  under  the
Securities  Exchange  Act of 1934,  as amended and in  accordance  with  General
Instruction  E(3) to Form  10-KSB,  not later than 120 days after the end of the
Registrant's  fiscal year,  and which section is hereby  incorporated  herein by
reference.


ITEM 10. EXECUTIVE COMPENSATION.

         Information  required  by  this  item is  included  under  the  heading
"Compensation   of  Executive   Officers  and  Directors"  in  the  Registrant's
definitive  Proxy  Statement  dated June 17,  1998,  relating to the 1998 Annual
Meeting  of  Shareholders  scheduled  for July 14,  1998,  which was been  filed
separately  with the Securities and Exchange  Commission  pursuant to Rule 14a-6
under Securities Exchange Act of 1934, as amended and in accordance with General
Instruction  E(3) to Form  10-KSB,  not later than 120 days after the end of the
Registrant's  fiscal year,  and which section is hereby  incorporated  herein by
reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Information  required  by  this  item is  included  under  the  heading
"Security Ownership of Certain Beneficial Owners" in the Registrant's definitive
Proxy  Statement  dated June 17,  1998,  relating to the 1998 Annual  Meeting of
Shareholders  Scheduled for July 14, 1998,  which has been filed separately with
the  Securities  and  Exchange  Commission  pursuant  to Rule  14a-6  under  the
Securities  Exchange  Act of 1934,  as amended and in  accordance  with  General
Instruction  E(3) to Form  10-KSB,  not later than 120 days after the end of the
Registrant's  fiscal year,  and which section is hereby  incorporated  herein by
reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Information  required  by  this  item is  included  under  the  heading
"Indebtedness  of  Management  and  Certain  Transactions"  in the  Registrant's
definitive  Proxy  Statement  dated June 17,  1998,  relating to the 1998 Annual
Meeting  of  Shareholders  scheduled  for July 14,  1998,  which has been  filed
separately  with the Securities and Exchange  Commission  pursuant to Rule 14a-6
under the  Securities  Exchange Act of 1934, as amended and in  accordance  with
General  Instruction E(3) to Form 10-KSB,  not later than 120 days after the end
of the Registrant's fiscal year, and which section is hereby incorporated herein
by reference.


                                       44
<PAGE>


                                PART IV


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

  (a)  Exhibits Required by Item 601:                                Page Number

 2.1   Plan of Conversion of Northwest Savings Bank (as amended)(1)
 3.1   Articles of Incorporation of Registrant (1)
 3.2   By-Laws of Registrant(1)
 3.3   Stock Articles of Incorporation of Northwest Savings Bank (1)
 3.4   By-Laws of Northwest Savings Bank (1)
 4.1   Specimen Stock Certificate of Registrant (1)
 4.2   Specimen Stock Certificate of Northwest Savings Bank (1)
10.1   Northwest Savings Bank Money Purchase Pension Plan (1)
10.2   Northwest Savings Bank Employee Stock Ownership Plan (1)
10.3   Credit Agreement by and between Northwest Savings Bank
         Employee Stock Ownership Trust and Registrant (1)
10.4   Northwest Savings Bank Incentive Plan (as amended) (1)
10.5   1994 Northwest Equity Corp. Stock Option Plan (1)
10.6   Northwest Equity Corp. Incentive Plan (2)
10.7   Northwest Equity Corp. 1995 Stock Option Plan(2)
10.8   Employment Agreement - Mr. Brian L. Beadle (1)
10.9   Employment Agreement - Mr. James L. Moore (1)
11.1   Statement Regarding Computation of Per Share Earnings                50
13.1   1998 Annual Report to Shareholders                                   51
21.1   Subsidiaries of Registrant                                           52
23.1   Consent of Wipfli Ullrich Bertelson LLP                              53
99.1   Proxy Statement for 1998 Annual Meeting of Shareholders              54

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

(1)    Incorporated by reference to exhibits filed with Registrant's Form SB-2 
       Registrant Statement declared effective on August 5, 1994 (Registration
       Number 33-73264).

(2)    Incoporated by reference to exhibits filed with Registrant's Form S-8
       Registration Statement declared effective on January 23, 1996
       (Registration Number 333-878).

       (b) Reports on Form 8-K


                   A report on Form 8-K dated January 2, 1998,  was filed by the
Registrant  during the three  months  ended March 31,  1998.  Item 4. Changes in
Registrant's  Certifying  Account  notified  the SEC that Keller and Yoder,  the
principal accountants that reported on the consolidated  financial statements of
Northwest  Equity Corp.  and  subsidiaries  on April 24,  1997;  was acquired by
Wipfli Ullrich Bertelson LLP.



                                       45
<PAGE>




                                   SIGNATURES

      In  accordance  with  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.

                                 NORTHWEST EQUITY CORP.

Dated:  June 9, 1998             By____/s/Brian L. Beadle______
                                 Brian L. Beadle, President (Principal Executive
                                 Officer and Principal Financial and Accounting
                                 Officer)

         In accordance with 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.


   Signature                            Title                          Date


__/s/Brian L. Beadle       President (Principal Executive Officer   June 9, 1998
  Brian L. Beadle          and Principal Financial Accounting
                           Officer) and Director


__/s/Gerald J. Ahlin                   Director                     June 9, 1998
  Gerald J. Ahlin


__/s/Verm E. Albrecht                  Director                     June 9, 1998
  Vern E. Albrecht


__/s/Michael D. Jensen                 Director                     June 9, 1998
  Michael D. Jensen


__/s/Donald M. Michels                 Director                     June 9, 1998
  Donald M. Michels


__/s/Norman M. Osero                   Director                     June 9, 1998
   Norman M. Osero




                                       46
<PAGE>



                                INDEX TO EXHIBITS

                                                            Sequentially
                                                            Numbered Page
Exhibit                                                     Where Attached
Number                                                      Exhibits are located

11.l     Statement Regarding Computation of Per Share Earnings     48

13.1     1998 Annual Report to Shareholders                        49

21.1     Subsidiaries of the Registrant                            50

23.1     Consent of Wipfli Ullrich Bertelson LLP                   51

99.1     Proxy Statement for 1998 Annual Meeting of Shareholders   52



                                       47
<PAGE>




EXHIBIT 11.1  STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS

Earnings per share is calculated by dividing net income for the period by the 
weighted average number of shares of common stock outstanding.

The computation of net income per common share is as follows:

<TABLE>

                                                      For the twelve months        For the twelve months
                                                       ended March 31, 1998         ended March 31, 1997
                                                    ------------------------      -----------------------
<CAPTION>
                                                      Basic         Diluted          Basic        Diluted
<S>                                                 <C>              <C>            <C>          <C>    

Net income                                          1,120,000      1,120,000        710,000        710,000

Common shares issued                                1,032,517      1,032,517      1,032,517      1,032,517

Net treasury shares                                   198,405        198,405        111,677        111,677

Unallocated ESOP shares                                59,000         59,000         73,750         73,750

Ungranted shares in incentive plan                         -              -              -              -

Weighted average common shares outstanding            775,112        775,112        847,090        847,090

Common stock equivalents based on the
   treasury stock method                                   -          39,603             -          11,198
 
Total weighted average common shares                  775,112        814,715        847,090        858,288
   and equivalents outstanding

Earnings per share                                      $1.44          $1.37          $0.84          $0.83


</TABLE>



                                       48
<PAGE>



EXHIBIT 13.1

1998 ANNUAL REPORT TO SHAREHOLDERS




                                       49
<PAGE>



EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

                                                           State of Subsidiary's
                                                  Ownership    Incorporation or
     Parent                   Subsidiary          Percentage     Organization

Northwest Equity Corp.   Northwest Savings Bank      100%          Wisconsin

Northwest Savings Bank   Amery Service Agency, Inc.  100%          Wisconsin

Northwest Savings Bank   Northwest Investments, Inc. 100%            Nevada



                                       50
<PAGE>



EXHIBIT 23.1

CONSENT OF WIPFLI ULLRICH BERTELSON LLP

ACCOUNTANT'S CONSENT

We consent to the use and/or  incorporation by reference in the Annual Report on
Form n10-KSB of Northwest Equity Corp. for the year ended March 31, 1998, of our
report dated April 30, 1998, accompanying the financial statements and schedules
of the Company contained, or incorporated by reference, in such Annual Report.

                                             __/s/Wipfli Ullrich Bertelson LLP__

                                                Wipfli Ullrich Bertelson LLP

Wisconsin Rapids, Wisconsin
June 9, 1998



                                       51
<PAGE>




EXHIBIT 99.1

PROXY STATEMENT
 FOR 1998 ANNUAL MEETING OF  SHAREHOLDERS

                                       52
<PAGE>