---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

FORM 10-Q

|(Mark One)                                        |                                                                                        
|------------------------------------------------- | ---------------------------------------------------------------------------------------
|ý                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|for the quarterly period ended September 30, 2002
|o                                                 | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT                        
|For the transition period from  to               
|                                                  |                                                                                        

Commission File Number: 001-15215

---

SPECTRUM BANCORPORATION, INC.(Exact name of registrant as specified in its charter)

|Iowa(State or other jurisdiction
of incorporation or organization)                                   |  | 42-0867112(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|10834 Old Mill Road, Suite One, Omaha, NE 68154(Address of principal executive office)    (Zip code)
|(402) 333-8330(Registrant's telephone number, including area code)                                  

---

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past
90 days.
Yes ý No o

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

|Class                         |  | Outstanding at
November 1, 2002
|----------------------------- |  | -------------------------------
|Common Stock, $1.00 par value |  | 125,132 shares                 

---



SPECTRUM BANCORPORATION, INC.  INDEX TO FORM 10-Q FOR THE QUARTERLY  PERIOD ENDED SEPTEMBER 30, 2002

|                                 |         |                                                                                                                |  | PAGE
|-------------------------------- | ------- | -------------------------------------------------------------------------------------------------------------- |  | ----
|FORWARD-LOOKING STATEMENTS       |         | 3                                                                                                             
|PART I:    FINANCIAL INFORMATION |         | 4                                                                                                             
|                                 | ITEM 1: | FINANCIAL STATEMENTS                                                                                           |  | 4   
|                                 |         | Consolidated Balance Sheets at September 30, 2002 and June 30, 2002 (unaudited)                                |  | 4   
|                                 |         | Consolidated Statements of IncomeThree months ended September 30, 2002 and September 30, 2001(unaudited)      |  | 5   
|                                 |         | Consolidated Statements of Cash FlowsThree months ended September 30, 2002 and September 30, 2001 (unaudited) |  | 6   
|                                 |         | Notes to Consolidated Financial Statements                                                                     |  | 7   
|                                 | ITEM 2: | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION                           |  | 9   
|                                 | ITEM 3: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                     |  | 11  
|                                 | ITEM 4: | DISCLOSURE CONTROLS AND PROCEDURES                                                                             |  | 11  
|PART II:    OTHER INFORMATION    |         | 12                                                                                                            
|                                 | ITEM 1: | LEGAL PROCEEDINGS                                                                                              |  | 12  
|                                 | ITEM 2: | CHANGES IN SECURITIES AND USE OF PROCEEDS                                                                      |  | 12  
|                                 | ITEM 3: | DEFAULTS UPON SENIOR SECURITIES                                                                                |  | 12  
|                                 | ITEM 4: | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            |  | 12  
|                                 | ITEM 5: | OTHER INFORMATION                                                                                              |  | 12  
|                                 | ITEM 6: | EXHIBITS AND REPORTS ON FORM 8-K                                                                               |  | 12  
|                                 |         | SIGNATURES                                                                                                     |  | 13  
|                                 |         | CERTIFICATION BY CHIEF EXECUTIVE OFFICER                                                                       |  | 14  
|                                 |         | CERTIFICATION BY CHIEF FINANCIAL OFFICER                                                                       |  | 15  

2

---

FORWARD-LOOKING STATEMENTS

This report includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements can include
words such as "may", "believe", "will", "anticipated", "estimated", "projected", "could", "should", "plan" or similar expressions. Forward-looking statements are based on management's current
expectations. Factors that might cause future results to differ from management's expectations include, but are not limited to: fluctuations in interest rates, inflation, the effect of regulatory or
government legislative changes, expected cost savings and revenue growth not fully realized, the progress of strategic initiatives and whether realized within expected time frames, general economic
conditions, adequacy of allowance for loan losses, costs or difficulties associated with restructuring initiatives, changes in accounting policies or guidelines, changes in the quality or composition
of the Company's loans and investment portfolios, technology changes and competitive pressures in the geographic and business areas where the Company conducts its operations.

These
risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning
the Company and its business, including other factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission.

3

---



PART I        FINANCIAL INFORMATION

ITEM 1:    FINANCIAL STATEMENTS

SPECTRUM BANCORPORATION, INC.  Consolidated Balance Sheets(In thousands, except share data)  (unaudited)

|                                                                          |                                                                                                                                                                                                                                       | September 30,
2002   |                                 | June 30,
2002
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------------------------- | -------------
|Assets                                                                    |                                                                                                                                                                                                                                       |                      |                                 |              
|Cash and due from banks                                                   |                                                                                                                                                                                                                                       | $                    | 65,323                          |              
|Federal funds sold and other                                              |                                                                                                                                                                                                                                       |                      | 31,520                          |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          |                                                                                                                                                                                                                                       |                      | Total cash and cash equivalents |              
|Certificates of deposit                                                   |                                                                                                                                                                                                                                       |                      | 497                             |              
|Securities available for sale                                             |                                                                                                                                                                                                                                       |                      | 301,959                         |              
|Securities held to maturity                                               |                                                                                                                                                                                                                                       |                      | 110                             |              
|Loans receivable, net of allowance for loan losses of $20,966 and $20,344 |                                                                                                                                                                                                                                       |                      | 1,524,856                       |              
|Premises and equipment, net                                               |                                                                                                                                                                                                                                       |                      | 41,821                          |              
|Accrued interest receivable                                               |                                                                                                                                                                                                                                       |                      | 16,075                          |              
|Core deposit intangible and other, net                                    |                                                                                                                                                                                                                                       |                      | 4,819                           |              
|Goodwill, net                                                             |                                                                                                                                                                                                                                       |                      | 43,913                          |              
|Mortgage servicing rights, net                                            |                                                                                                                                                                                                                                       |                      | 12,122                          |              
|Other assets                                                              |                                                                                                                                                                                                                                       |                      | 11,234                          |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          |                                                                                                                                                                                                                                       | $                    | 2,054,249                       |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|Liabilities and Stockholders' Equity                                      |                                                                                                                                                                                                                                       |                      |                                 |              
|Liabilities:                                                              |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          | Deposits                                                                                                                                                                                                                              |                      |                                 |              
|                                                                          |                                                                                                                                                                                                                                       | Non interest bearing |                                 | $            
|                                                                          |                                                                                                                                                                                                                                       | Interest bearing     |                                 |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          |                                                                                                                                                                                                                                       |                      | Total deposits                  |              
|                                                                          | Federal funds purchased and securities sold under agreements to repurchase                                                                                                                                                            |                      |                                 | 57,816       
|                                                                          | Notes payable                                                                                                                                                                                                                         |                      |                                 | 143,817      
|                                                                          | Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures                                                                                                              |                      |                                 | 48,000       
|                                                                          | Accrued interest and other liabilities                                                                                                                                                                                                |                      |                                 | 20,152       
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          |                                                                                                                                                                                                                                       |                      | 1,934,600                       |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|Minority interest in subsidiaries                                         |                                                                                                                                                                                                                                       |                      | 4,741                           |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|Commitments and contingencies                                             |                                                                                                                                                                                                                                       |                      |                                 |              
|Stockholders' equity:                                                     |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          | Preferred stock, $100 par value; 500,000 shares authorized; issued and outstanding: 9,000 shares of 8% cumulative, nonvoting; 8,000 shares of 10% noncumulative, nonvoting; 100,000 shares of variable rate, noncumulative,
nonvoting |                      |                                 | 11,700       
|                                                                          | Common stock, $1.00 par value, authorized 1,000,000 shares, issued and outstanding 125,132 and 125,132 shares, respectively                                                                                                           |                      |                                 | 125          
|                                                                          | Additional paid in capital                                                                                                                                                                                                            |                      |                                 | 2,058        
|                                                                          | Retained earnings                                                                                                                                                                                                                     |                      |                                 | 95,092       
|                                                                          | Accumulated other comprehensive income, net                                                                                                                                                                                           |                      |                                 | 5,933        
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          |                                                                                                                                                                                                                                       |                      | Total stockholders' equity      |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              
|                                                                          |                                                                                                                                                                                                                                       | $                    | 2,054,249                       |              
|                                                                          |                                                                                                                                                                                                                                       |                      |                                 |              

See Notes to Consolidated Financial Statements.

4

---



SPECTRUM BANCORPORATION, INC.  Consolidated Statements of Income  For The Three Months Ended(In thousands, except share and per share data)  (unaudited)

|                                                |                                                                                 | September 30,
2002                                                             |         | September 30,
2001
|----------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------- | ------------------
|Interest income on:                             |                                                                                 |                                                                                |         |                   
|                                                | Loans receivable                                                                |                                                                                | $       | 28,189            
|                                                | Taxable securities                                                              |                                                                                |         | 3,731             
|                                                | Nontaxable securities                                                           |                                                                                |         | 422               
|                                                | Dividends on securities                                                         |                                                                                |         | 61                
|                                                | Federal funds sold and other                                                    |                                                                                |         | 156               
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 |                                                                                | 32,559  |                   
|                                                |                                                                                 |                                                                                |         |                   
|Interest expense on:                            |                                                                                 |                                                                                |         |                   
|                                                | Deposits                                                                        |                                                                                |         | 10,158            
|                                                | Federal funds purchased and securities sold under agreements to repurchase      |                                                                                |         | 257               
|                                                | Notes payable and company obligated mandatorily redeemable preferred securities |                                                                                |         | 2,881             
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 |                                                                                | 13,296  |                   
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 | Net interest income                                                            |         |                   
|Provision for loan losses                       |                                                                                 |                                                                                | 1,241   |                   
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 | Net interest income after provision for loan losses                            |         |                   
|                                                |                                                                                 |                                                                                |         |                   
|Other income:                                   |                                                                                 |                                                                                |         |                   
|                                                | Service charges and other fees                                                  |                                                                                |         | 3,116             
|                                                | Net gains from sale of loans                                                    |                                                                                |         | 1,345             
|                                                | Loan servicing fees                                                             |                                                                                |         | 916               
|                                                | Gain on securities, net                                                         |                                                                                |         | 84                
|                                                | Trust department income                                                         |                                                                                |         | 412               
|                                                | Other                                                                           |                                                                                |         | 880               
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 |                                                                                | 6,753   |                   
|                                                |                                                                                 |                                                                                |         |                   
|Other expenses:                                 |                                                                                 |                                                                                |         |                   
|                                                | Salaries and employee benefits                                                  |                                                                                |         | 7,627             
|                                                | Occupancy expenses, net                                                         |                                                                                |         | 1,059             
|                                                | Data processing                                                                 |                                                                                |         | 767               
|                                                | Equipment expenses                                                              |                                                                                |         | 694               
|                                                | Advertising                                                                     |                                                                                |         | 909               
|                                                | Amortization of core deposit intangible and other                               |                                                                                |         | 475               
|                                                | Amortization and valuation adjustments for mortgage servicing rights            |                                                                                |         | 4,403             
|                                                | Other operating expenses                                                        |                                                                                |         | 3,085             
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 |                                                                                | 19,019  |                   
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 | Income before income taxes and minority interest in net income of subsidiaries |         |                   
|Income taxes                                    |                                                                                 |                                                                                | 2,242   |                   
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 | Income before minority interest in net income of subsidiaries                  |         |                   
|Minority interest in net income of subsidiaries |                                                                                 |                                                                                | 196     |                   
|                                                |                                                                                 |                                                                                |         |                   
|                                                |                                                                                 | Net income                                                                     |         | $                 
|                                                |                                                                                 |                                                                                |         |                   
|Basic earnings per common share                 |                                                                                 | $                                                                              | 23.93   |                   
|                                                |                                                                                 |                                                                                |         |                   
|Dividends per share declared on common stock    |                                                                                 | $                                                                              | 1.50    |                   
|                                                |                                                                                 |                                                                                |         |                   
|Weighted average shares outstanding             |                                                                                 |                                                                                | 125,132 |                   
|                                                |                                                                                 |                                                                                |         |                   

See Notes to Consolidated Financial Statements.

5

---



SPECTRUM BANCORPORATION, INC.  Consolidated Statements of Cash Flows  For The Three Months Ended(In thousands)  (unaudited)

|                                                                      |                                                                                                       | September 30,
2002                                   |   | September 30,
2001 |       
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | - | ------------------ | ------
|Cash Flow from Operating Activities                                   |                                                                                                       |                                                      |   |                    |       
|                                                                      | Net cash (used in) operating activities                                                               |                                                      | $ | (3,408             | )     
|                                                                      |                                                                                                       |                                                      |   |                    |       
|Cash Flow from Investing Activities                                   |                                                                                                       |                                                      |   |                    |       
|                                                                      | Purchase of certificate of deposit                                                                    |                                                      |   | 0                  |       
|                                                                      | Proceeds from sales and maturities of securities available for sale                                   |                                                      |   | 46,969             |       
|                                                                      | Purchase of securities available for sale                                                             |                                                      |   | (12,057            | )     
|                                                                      | Proceeds from sale of other real estate owned                                                         |                                                      |   | 1,030              |       
|                                                                      | Net increase in loans                                                                                 |                                                      |   | (37,685            | )     
|                                                                      | Proceeds from sale of premises and equipment                                                          |                                                      |   | 50                 |       
|                                                                      | Purchase of premises and equipment                                                                    |                                                      |   | (875               | )     
|                                                                      | Purchase of mortgage servicing rights                                                                 |                                                      |   | (42                | )     
|                                                                      |                                                                                                       |                                                      |   |                    |       
|                                                                      |                                                                                                       | Net cash (used in) investing activities              |   |                    | (2,610
|                                                                      |                                                                                                       |                                                      |   |                    |       
|Cash Flows from Financing Activities                                  |                                                                                                       |                                                      |   |                    |       
|                                                                      | Net increase (decrease) in deposits                                                                   |                                                      |   | 28,848             |       
|                                                                      | Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase |                                                      |   | (13,835            | )     
|                                                                      | Proceeds from notes payable                                                                           |                                                      |   | 22,501             |       
|                                                                      | Payment of other liabilities                                                                          |                                                      |   | (837               | )     
|                                                                      | Principal payments on notes payable                                                                   |                                                      |   | (1,841             | )     
|                                                                      | Purchase of minority interest in subsidiaries                                                         |                                                      |   | (673               | )     
|                                                                      | Dividends paid, including ($69) and ($54) paid to minority interest, respectively                     |                                                      |   | (580               | )     
|                                                                      |                                                                                                       |                                                      |   |                    |       
|                                                                      |                                                                                                       | Net cash provided by financing activities            |   |                    | 33,583
|                                                                      |                                                                                                       |                                                      |   |                    |       
|                                                                      |                                                                                                       | Net increase (decrease) in cash and cash equivalents |   |                    | 27,565
|Cash and cash equivalents:                                            |                                                                                                       |                                                      |   |                    |       
|                                                                      | Beginning                                                                                             |                                                      |   | 69,278             |       
|                                                                      |                                                                                                       |                                                      |   |                    |       
|                                                                      | Ending                                                                                                |                                                      | $ | 96,843             |       
|                                                                      |                                                                                                       |                                                      |   |                    |       
|Supplemental Disclosures of Cash Flow Information:                    |                                                                                                       |                                                      |   |                    |       
|                                                                      | Cash payments for interest                                                                            |                                                      | $ | 14,434             |       
|                                                                      | Cash payments for income taxes                                                                        |                                                      |   | 1,641              |       
|Supplemental Schedules of Noncash Investing and Financing Activities: |                                                                                                       |                                                      |   |                    |       
|                                                                      | Net change in unrealized gain (loss) on securities available for sale                                 |                                                      |   | 1,938              |       
|                                                                      | Purchase of mortgage servicing rights for other liabilities                                           |                                                      |   | 1,750              |       
|                                                                      | Reduction of other liabilities related to mortgage servicing rights                                   |                                                      |   | 836                |       
|                                                                      | Loans transferred to other real estate owned and other assets                                         |                                                      |   | 368                |       

See
Notes to Consolidated Financial Statements.

6

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The
consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions with subsidiaries are eliminated in
consolidation.

The
consolidated subsidiaries are as follows: Great Western Bank (100.0% owned), which is chartered in Omaha, Nebraska; F & M Bank (95.6% owned), which is chartered in Watertown,
South Dakota; Rushmore Bank and Trust (90.0% owned), which is chartered in Rapid City, South Dakota; Citizens Bank (100.0% owned), which is chartered in Mount Ayr, Iowa; Citizens Bank (100.0% owned),
which is chartered in Clive, Iowa; Citizens Bank of Princeton (100.0% owned), which is chartered in Princeton, Missouri; Spectrum Banc Service Corporation (100.0% owned by bank subsidiaries, excluding
Great Western Bank), a data processing organization; Spectrum Capital Trust I (100.0% owned); and Spectrum Capital Trust II (100.0% owned). Great Western Bank also owns 100.0% of GW
Leasing, Inc., a leasing company.

The
June 30, 2002 consolidated balance sheet has been derived from the Company's audited balance sheet as of that date. The consolidated financial statements as of
September 30, 2002 and for the three months ended September 30, 2002 and 2001 are unaudited but include all adjustments (consisting only of normal recurring adjustments), which the
Company considers necessary for a fair presentation of financial position and results of its operation and its cash flows for those periods. Results for the three months ended September 30,
2002 are not necessarily indicative of the results to be expected for future periods.

Earnings
per share have been computed on the basis of weighted average number of common shares outstanding during each period presented. Dividends accumulated or declared on cumulative
and noncumulative preferred
stock, which totaled $323,000 and $359,000 in the three months ended September 30, 2002 and 2001, reduced earnings available to common stockholders in the computation.

Comprehensive
income was $5,256,000 and $2,690,000 for the three months ended September 30, 2002 and 2001. The difference between comprehensive income and net income presented in
the Consolidated Statements of Income is attributed solely to change in unrealized gains and losses on securities available for sale during the periods presented.

On
October 1, 2002, the Company elected adoption of Statement of Financial Accounting Standard No. 147, "Acquisitions of Certain Financial Institutions." This Statement
addresses the financial accounting and reporting for the acquisition of all or part of a financial institution, except for a transaction between two or more mutual enterprises. This Statement removes
acquisitions of financial institutions, other than transactions between two or more mutual enterprises, from the scope of FASB Statement No. 72, "Accounting for Certain Acquisitions of Banking
or Thrift Institutions", and FASB Interpretation No. 9, "Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business
Combination Accounted for by the Purchase Method." Transaction provisions for previously recognized unidentifiable intangible assets are effective on October 1, 2002, with earlier application
permitted. The carrying amount of an unidentifiable intangible asset shall continue to be amortized as set forth in paragraph 5 of Statement 72 after October 1, 2002, unless the
transaction in which the asset arose was a business combination. If the transaction that gave rise to the unidentifiable intangible asset was a business combination, the carrying amount of the asset
shall be reclassified to goodwill as of the later of the date of acquisition or the date Statement 142 was applied in its entirety.

The
Company has identified those unidentifiable intangible assets that arose from a business combination. In applying SFAS 147, the Company has reclassified the carrying amount of
unidentifiable intangible assets of $4,598,000 to goodwill as of July 1, 2002. As of June 30, 2002 total goodwill (including reclassified unidentifiable intangible asset of $4,598,000)
was $43,913,000 and core deposit intangible and other, net was $5,294,000. As of September 30, 2002, total goodwill (including reclassified unidentifiable intangible assets of $4,598,000) was
$43,913,000 and core deposit intangible and other was $4,819,000. Amortization expense was $92,000 for the three months period ended September 30, 2001. Net income for three months ended
September 30, 2001 has not been restated regarding the $92,000 amortization expense; the Company has classified this amount as an immaterial item.

7

---

On
July 1, 2001, the Company elected early adoption of Statement of Financial Accounting Standards No. 141, "Business Combinations," and No. 142, "Goodwill and Other
Intangible Assets" (SFAS 141 and 142). SFAS 141 addresses financial accounting and reporting for business combinations and replaces APB Opinion No. 16, "Business Combinations"
(APB 16). SFAS 141 no longer allows the pooling of interests method of accounting for acquisitions, provides new recognition criteria for intangible assets and carries forward without
reconsideration the guidance in APB 16 related to the application of the purchase method of accounting. SFAS 142 addresses financial accounting and reporting for acquired goodwill and other
intangible assets and replaces APB Opinion No. 17, "Intangible Assets." SFAS 142 addresses how intangible assets should be accounted for upon their acquisition and
after they have been initially recognized in the financial statements. The new standards provide specific guidance on measuring goodwill for impairment annually using a two-step process.
The first step identifies potential impairment and the second step measures the amount of goodwill impairment loss to be recognized.

The
Company has identified those intangible assets that remain separable under the provisions of the new standard and those that are to be included in goodwill. In applying
SFAS 142, the Company has re-evaluated the useful lives of these separable intangible assets. The weighted average life of the remaining amortized intangible assets is
7 years. In the year of adoption, SFAS 142 requires the first step of the goodwill impairment test to be completed within the first six months and the final step to be completed within
twelve months of adoption. The first step of the test was completed as of July 1, 2001 and no indications of goodwill impairment were found; therefore, step two of the goodwill impairment test
was not applicable. As of July 1, 2002 the fair value of each reporting unit was reviewed and it was determined that the fair values were equal to or greater than the fair value as of
July 1, 2001.

Spectrum
and its subsidiary banks are from time to time parties to various legal actions arising in the normal course of business. Management of Spectrum believes there is no proceeding
threatened or pending against Spectrum or its subsidiaries, which, if determined adversely, would have a material adverse effect on its financial condition or results of operation.

As
of February 28, 2002 F&M acquired by merger First Western Bank, N.A., Atkinson, Nebraska ("First Western") and Marquette Bank Nebraska, N.A., O'Neill, Nebraska ("Marquette")
for $17,484,000. At February 28, 2002 First Western and Marquette had assets of $110,429,000, deposits of $99,589,000, net loans of $62,981,000 and stockholders' equity of $10,217,000. The
acquisition has been accounted for as a purchase and results of operation of First Western Bank and Marquette after the date of acquisition are included in the consolidated financial statements.

A
summary of the fair value of net assets acquired and net cash and cash equivalents received (in thousands) on the date of acquisition is as follows:

|                                         |                                   | First Western &
Marquette |    
|---------------------------------------- | --------------------------------- | ------------------------- | ---
|Assets acquired:                         |                                   |                           |    
|                                         | Securities                        |                           | $  
|                                         | Loans receivable                  |                           |    
|                                         | Other assets                      |                           |    
|                                         | Premises and equipment            |                           |    
|                                         | Core deposit intangible and other |                           |    
|                                         | Goodwill                          |                           |    
|Liabilities assumed:                     |                                   |                           |    
|                                         | Deposits                          |                           |    
|                                         |                                   |                           |    
|Net cash and cash equivalents (received) |                                   | $                         | (83
|                                         |                                   |                           |    

On
September 30, 2002, the Company acquired 1,688 shares (4.8%) of the common stock of Citizen Bank, Clive for $673,288 in cash from a minority shareholder. The transaction was
accounted for as a purchase.

8

---

Great
Western Bank has agreed to acquire by merger Peoples Bank, Overland Park, Kansas. As of September 30, 2002, Peoples Bank had approximately $27,443,000 in total assets,
$3,184,000 in net loans, $25,321,000 in deposits, $1,914,000 in goodwill, $412,000 in core deposit intangible and $2,000,000 in stockholders' equity. Peoples Bank has one location, which will upon
closing, become a branch of Great Western Bank. The cash merger is subject to regulatory approval and is expected to close in the last calendar quarter of 2002.

In
October of 2002, the Company purchased a total of 24 shares of minority interest in a subsidiary bank, F & M Bank, from two minority stockholders for $90,765. This transaction
was accounted for as a purchase.

The
Company has issued 10,000 shares, $1,000 par value, of Company Capital Trust Pass-Through Securities (Preferred Securities) of Spectrum Capital Trust III on
October 29, 2002 through a private placement. The distribution rate is set quarterly at three month LIBOR plus 345 basis points, which was set on October 25, 2002 at 5.27%, with a
maximum rate of 12.50% through November 7, 2007. Distribution payment dates are February 7, May 7, August 7 and November 7 of each year, beginning February 7,
2003 and are payable in arrears. The Company may, at one or more times, defer interest payments on the capital securities for up to 5 consecutive years
following suspension of dividends on all other capital stock. At the end of any deferral period, all accumulated and unpaid distributions will be paid. The capital securities will be redeemed thirty
years from the issuance date; however, the Company has the right, subject to the prior approval of the Federal Reserve Board or applicable regulator, if required, to redeem the securities in whole or
in part on or after November 7, 2007. Proceeds from the issue were used for general corporate purposes.

ITEM 2:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATION

GENERAL

The Company is a multi-bank holding company organized under the laws of Iowa whose primary business is providing trust, commercial, consumer, and
mortgage banking services through its Nebraska, South Dakota, Iowa and Missouri based subsidiary banks. Substantially all of the Company's income is generated from banking operations.

The
Company's fiscal year end is June 30.

CRITICAL ACCOUNTING POLICIES

Spectrum's critical accounting policies involving the more significant judgments and assumptions used in the preparation of the consolidated financial statements
as of September 30, 2002, have remained unchanged from June 30, 2002. These policies involve the provision and allowance for loan losses, and valuation of mortgage servicing rights and
intangibles. Disclosure of these critical accounting policies is incorporated by reference under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation"
in Spectrum's Annual report on Form 10-K for Spectrum's year ended June 30, 2002.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Average assets were $2,042,608,000 for the three months ended September 30, 2002, compared to $1,790,620,000 for the three months ended
September 30, 2001, a 14.1% increase. Average interest-earning assets were $1,871,561,000 for the three months ended September 30, 2002 and $1,633,837,000 for the three months ended
September 30, 2001, representing a 14.6% increase. Average assets and average interest-earning assets increased due to increases in loans, net unearned and securities. Increases in average
loans, net unearned and securities are due to internal growth and an acquisition in the third quarter of fiscal 2002.

Total
assets were $2,054,249,000 at September 30, 2002, an increase of $42,092,000 or 2.1% from June 30, 2002. Loans, net of unearned fees, grew $49,622,000 or 3.3% during
the three months ended September 30, 2002 due to internal growth.

The
allowance for loan losses increased to $20,966,000 at September 30, 2002 from $20,344,000 at June 30, 2002. The allowance represented 1.4% and 1.4% of loans, net
unearned as of September 30, 2002 and June 30, 2002.The increase in allowance for loan losses was due to an increase in loan loss
provisions in the three months ended September 30, 2002. See "Provision for Loan Losses".

For
the three months ended September 30, 2002, the Company's annualized return on average assets ("ROA") was 0.7%, compared to 0.3% for the three months ended September 30,
2001. Return on average

9

---

stockholders' equity ("ROE") for the three months ended September 30, 2002 and 2001 was 11.8% and 4.6%, respectively. The increases in ROA and ROE are due to a 192.9% increase in net income
for the three months ending September 20, 2002 when compared to the same period a year ago.

Cash
and cash equivalents, certificates of deposit and securities available for sale totaled $399,299,000 or 19.4% of total assets at September 30, 2002, compared to $403,834,000
or 20.1%, at June 30, 2002. The decrease occurred primarily because proceeds from sales and proceeds of securities available for sale exceeded purchases of such securities during the period.

At
September 30, 2002, the Company's leverage ratio was 5.1%, Tier 1 risk-based capital ratio was 6.3%, and total risk-based capital ratio was 10.5%,
compared to minimum required levels of 4% for leverage and Tier 1 risk-based capital ratios and 8% for total risk-based capital ratio, subject to change at the discretion of
regulatory authorities to impose higher standards in individual cases. At September 30, 2002, the Company had net risk-weighted assets of $1,601,813,000.

ACQUISITIONS

As of February 28, 2002 F & M Bank acquired by merger First Western Bank, N.A., Atkinson, Nebraska ("First Western") and Marquette Bank Nebraska,
N.A., O'Neill, Nebraska ("Marquette") for $17,484,000. At February 28, 2002 First Western and Marquette had assets of $110,429,000, deposits of $99,589,000, net loans of $62,981,000 and
stockholders' equity of $10,217,000. The acquisition has been accounted for as a purchase and results of operation of First Western Bank and Marquette after the date of acquisition are included in the
consolidated financial statements. Both banks are located in the North Central area of Nebraska with locations in Atkinson and O'Neill, Nebraska.

RESULTS OF OPERATION

Comparison of the Three Months Ended September 30, 2002 and September 30, 2001.

Net Interest Income

Total interest income for the three months ended September 30, 2002 was $32,559,000, a 1.0% decrease from $32,870,000 for the three months ended
September 30, 2001. The slight decrease was due to a decrease of interest earned on federal funds sold for the current fiscal period 2003 when compared to the same fiscal period 2002.

Total
interest expense for the three months ended September 30, 2002 was $13,296,000, a 24.5% decrease over $17,613,000 for the three months ended September 30, 2001. The
decrease was the result of lower interest rates paid for interest bearing deposits for current fiscal year 2003 when compared to the same period a year ago. Average interest-bearing liabilities were
$1,696,308,000 and $1,501,603,000 for the three months ended September 30, 2002 and three months ended September 30, 2001, respectively. Average interest-bearing liabilities increased
between these periods $194,705,000 or 13.0%. This increase is primarily due to a $176,805,000 increase in average interest-bearing deposits when compared to the same period for fiscal year 2002.

Net
interest income was $19,263,000 for the three months ended September 30, 2002, compared to $15,257,000 for the same period in 2001, an increase of 26.3%. The Company's net
interest margin increased to 4.1% for the three months ended September 30, 2002 from 3.7% for the three months ended September 30, 2001.The increase in the net interest margin was caused by a larger decrease in the cost of average interest-bearing liabilities such as deposits and borrowings when compared to the decrease in income
earned from average interest-bearing assets such as loans, securities and federal funds sold.

Provision for Loan Losses

The provision for loan losses for the three months ended September 30, 2002, was $1,241,000, compared to $1,161,000 for the three months ended
September 30, 2001. The increase was due to internal growth.

Noninterest Income

Noninterest income for the three months ended September 30, 2002 was $6,753,000, an increase of $1,575,000, or 30.4%, over the same period last fiscal
year. The increase resulted primarily from an $849,000 increase in net gains from sale of loans and a $603,000 increase in service charges and other fees.

10

---

Noninterest Expense

Noninterest expense for the three months ended September 30, 2002 was $19,019,000, an increase of $1,824,000, or 10.6%, over the same period last fiscal
year. The increase resulted primarily from an $897,000 increase in salaries and employee benefits and an $805,000 increase in other operating expenses.

Amortization
and valuation adjustment of mortgage servicing rights decreased $391,000 to $4,403,000 for the three months ended September 30, 2002 from $4,794,000 for the three
months ended September 30, 2001. Mortgage servicing rights amortization and valuation adjustment of $4,403,000 and $4,794,000 includes the recognition of a valuation allowance due to a change
in the estimated future prepayment rates of the servicing portfolio, caused by a declining interest rate environment in the three months ended September 30, 2002 and three months ended
September 30, 2001. A valuation allowance of $2,704,000 was recognized in the three months ended September 30, 2002 and $4,017,000 for the three months ended September 30, 2001. A
decline in mortgage interest rates in future periods may result in further changes in prepayment rates and further acceleration in amortization expenses, the result of which will be estimated at the
end of each quarter.

Income Taxes

Income taxes for the three months ended September 30, 2002 and September 30, 2001 were $2,242,000 and $722,000. The effective tax rates for the
periods were 39.0% and 34.7%. The increase in the effective tax rate is due to adjustments made in the first quarter of fiscal 2003 for fiscal year 2002 taxes. The effective tax rate is expected to be
approximately 35% in the future.

ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset/liability management refers to management's efforts to minimize fluctuations in net interest income caused by interest rate changes. This is accomplished by
managing the repricing of interest rate sensitive interest-earning assets and interest-bearing liabilities. Controlling the maturity or repricing of an institution's liabilities and assets in order to
minimize interest rate risk is commonly referred to as gap management. Close matching of the repricing of assets and liabilities will normally result in little change in net interest income when
interest rates change. A mismatched gap position will normally result in changes in net interest income as interest rates change.

Management
regularly monitors the interest sensitivity position and considers this position in its decisions with regard to the Company's interest rates and maturities for
interest-earning assets acquired and interest-bearing liabilities accepted.

There
has not been a material change in the interest rate sensitivity of the Company during the three months ended September 30, 2002.

ITEM 4:        DISCLOSURE CONTROLS AND PROCEDURES

The Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures, as defined in
Exchange Act Rule 13a-14(c), based on their evaluation of such controls and procedures conducted within 90 days prior to the date hereof, are effective to ensure that
information required to be disclosed by the Company in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company's management, including its principal
executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There
have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation
referred to above.

11

---



PART II  OTHER INFORMATION

ITEM 1:    LEGAL PROCEEDINGS

None

ITEM 2:    CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3:    DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5:    OTHER INFORMATION

None

ITEM 6:    EXHIBITS AND REPORTS ON FORM 8-K

(a
).


Exhibits:99.1



Chief Executive Officer's Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)99.2



Chief Financial Officer's Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)(b
).


Reports on Form 8-K:


No
reports on Form 8-K were filed during the three months ended September 30, 2002.

---

12

---



SIGNATURES

Pursuant to the requirements 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.

|                                                                       |  | SPECTRUM BANCORPORATION, INC.
|---------------------------------------------------------------------- |  | -----------------------------
|Date: November 4, 2002                                                 |  | By:                          
|(Authorized officer and principal financial officer of the registrant)
|Date: November 4, 2002                                                 |  | By:                          

13

---

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Deryl F. Hamann, certify that:





|Date: November 4, 2002 | /s/DERYL F. HAMANNDeryl F. Hamann,
Chief Executive Officer
|---------------------- | ----------------------------------------------------------

14

---

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James R. Clark, certify that:





|Date: November 4, 2002 | /s/JAMES R. CLARKJames R. Clark,
Chief Financial Officer
|---------------------- | --------------------------------------------------------

15

---

QuickLinks