10-Q 1 l96710ae10vq.txt METROPOLITAN FINANCIAL 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10 - Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002 Commission file number 000-21553 --------- METROPOLITAN FINANCIAL CORP. -------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Ohio 34-1109469 ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 22901 Millcreek Blvd., Highland Hills, Ohio 44122 --------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (216) 206-6000 -------------------------------------------------------- (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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- ------- As of November 8, 2002, there were 16,151,564 common shares of the Registrant issued and outstanding. METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2002 TABLE OF CONTENTS

~~JUNE~~PART ~~30,~~I. ~~DECEMBER~~FINANCIAL ~~31,~~INFORMATION ~~2002~~PAGE ~~2001~~Item ~~----------~~1. ~~------------~~Financial ~~ASSETS~~Statements: ~~Cash~~Consolidated ~~and~~Statements ~~due~~of ~~from~~Financial ~~banks~~Condition $as ~~38,488~~of $September 4630,~~699~~ ~~Interest-bearing~~2002 ~~deposits~~and inDecember ~~other~~31, ~~banks~~2001 3~~,053~~ ~~577~~Consolidated ~~Securities~~Statements ~~available~~of ~~for~~Operations ~~sale 122,288 94,354 Securities held to maturity 325 14,829 Mortgage-backed securities available~~ for ~~sale~~the ~~174,405~~three ~~167,313~~and ~~Loans~~nine ~~held~~months ~~for~~ended ~~sale~~September 4730,~~446~~ ~~169,320~~2002 ~~Loans~~and ~~receivable,~~2001 ~~net~~4 ~~999,997~~Condensed ~~974,452~~Consolidated ~~Federal~~Statements ~~Home~~of ~~Loan~~Cash ~~Bank~~Flows ~~stock~~for ~~17,279~~the ~~16,889~~nine ~~Premises~~months ~~and~~ended ~~equipment,~~September ~~net 29~~30,~~973~~ ~~62,831~~2002 ~~Premises~~ and ~~equipment~~2001 ~~held~~5 ~~for~~Consolidated ~~sale~~Statements ~~31,397~~of ~~8,669~~Changes ~~Loan~~in ~~servicing~~Shareholders' ~~rights,~~Equity ~~net~~for ~~23,333~~the ~~22,951~~three ~~Accrued income, prepaid expenses~~ and ~~other~~nine ~~assets~~months ~~23,531~~ended ~~24,233~~September ~~Real estate owned~~30, ~~net~~2002 ~~5,128 2,791 Goodwill~~ and ~~other~~2001 ~~intangible~~6 ~~assets~~Notes ~~2,633~~to ~~2,512~~Consolidated ~~----------~~Financial ~~-----------~~Statements ~~Total assets $1,519,276 $ 1,608,420 ========== =========== LIABILITIES Noninterest~~7-~~bearing~~19 ~~deposits~~Independent $Accountants' ~~123,377~~Review $Report ~~146,055~~20 ~~Interest-bearing~~Item ~~deposits~~2. ~~949,679~~Management's ~~996,339~~Discussion ~~----------~~and ~~-----------~~Analysis ~~Total~~of ~~deposits~~Financial ~~1,073,056~~Condition ~~1,142,394~~and ~~Borrowings~~Results ~~326,310~~of ~~340,897~~Operations ~~Other liabilities~~ 21~~,817 35,862 Guaranteed preferred beneficial interests in the Company's junior subordinated debentures 43,750 43,750~~ -~~---------~~32 ~~-----------~~Item ~~Total~~3. ~~liabilities~~Quantitative ~~1,464,933~~and ~~1,562,903~~Qualitative ~~SHAREHOLDERS'~~Disclosures ~~EQUITY~~About ~~Preferred~~Market ~~stock,~~Risk ~~10,000,000 shares authorized, none issued~~ 32--34 --Item ~~Common~~4. ~~stock,~~Controls ~~no par value, 30,000,000 shares authorized, 16,142,987~~ and ~~8,128,663~~Procedures ~~shares issued and outstanding, respectively~~ 34--35 --PART ~~Additional~~II. ~~paid-in~~OTHER ~~capital~~INFORMATION ~~42,073~~Item ~~20,978~~6. ~~Retained~~Exhibits ~~earnings~~and ~~15,122~~Reports ~~26,100~~on ~~Accumulated~~Form ~~other comprehensive loss (2,852) (1,561)~~ 8-~~---------~~K 35-~~----------~~36 ~~Total~~SIGNATURE ~~shareholders' equity 54,343 45,517 ---------- ----------- Total liabilities and shareholders' equity $1,519,276 $ 1,608,420 ========== ===========~~37

2 METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands)

~~THREE~~SEPTEMBER ~~MONTHS ENDED JUNE~~ 30, ~~SIX~~DECEMBER ~~MONTHS ENDED JUNE 30~~31, ~~--------------------------- -------------------------~~ 2002 2001 ~~2002 2001~~ ---------- -~~--------~~ ---------- -~~--------~~ ~~INTEREST~~ASSETS ~~INCOME~~Cash ~~Interest~~ and ~~fees~~due onfrom ~~loans~~banks $~~19,072~~ ~~$25~~20,~~342~~336 $~~39,053~~ ~~$52~~46,~~340~~699 Interest ~~on mortgage~~-~~backed~~bearing ~~securities~~deposits ~~2,460~~in ~~3,414~~other ~~4,972~~banks ~~6,775~~191 ~~Interest~~577 ~~and~~Securities ~~dividends~~available onfor ~~other~~sale ~~investments 1~~103,~~565~~842 194,~~314~~354 ~~2,840~~Securities ~~2,590~~held ~~----------~~to ~~---------~~maturity ~~----------~~325 14,829 Mortgage-~~--------~~backed ~~Total~~securities ~~interest~~available ~~income~~for ~~23,097~~sale 30163,~~070~~949 46167,~~865~~313 ~~61,705~~Loans ~~INTEREST~~held ~~EXPENSE~~for ~~Interest~~sale on70,912 ~~deposits 9~~169,~~399~~320 14Loans receivable,~~670~~ 19net 1,~~500~~011,372 29974,~~800~~452 ~~Interest~~Federal onHome ~~borrowings~~Loan ~~5,194~~Bank ~~5,997~~stock 1012,~~491~~371 1216,~~415~~889 ~~Interest~~Premises onand ~~Junior Subordinated Debentures 1~~equipment,~~039~~ ~~999~~net 223,~~078~~164 162,~~997~~831 ~~----------~~Premises ~~---------~~and ~~----------~~equipment ~~---------~~held ~~Total~~for ~~interest~~sale ~~expense~~36,682 158,~~632~~669 21Loan servicing rights,~~666~~ 32net 13,~~069~~846 4422,~~212~~951 ~~----------~~Accrued ~~---------~~income, ~~----------~~prepaid ~~---------~~expenses ~~NET~~and ~~INTEREST~~other ~~INCOME~~assets 731,~~465~~504 824,~~404~~233 14Real estate owned,~~796~~ 17net 5,~~493~~713 ~~Provision~~2,791 ~~for~~Goodwill ~~loan~~and ~~losses~~other ~~6,185~~intangible ~~3,145~~assets 62,~~285~~631 42,~~200~~512 ---------- -~~--------~~ ---------- -~~--------~~ ~~NET~~Total ~~INTEREST~~assets ~~INCOME~~$ ~~AFTER PROVISION FOR LOAN LOSSES~~ 1,~~280 5~~496,~~259~~838 ~~8,511~~$ ~~13,293 NONINTEREST INCOME Net gain on sale of loans~~ 1,~~523 1~~608,~~782~~420 ~~3,230~~=========== ~~2,451~~=========== ~~Loan~~LIABILITIES ~~servicing~~Noninterest-bearing ~~loss,~~deposits ~~net~~$ (1139,~~492)~~247 ~~(674)~~$ (1146,~~999)~~055 ~~(783)~~Interest-bearing ~~Service~~deposits ~~charges on deposit accounts 849 489 1~~919,~~309~~629 ~~893 Net gain on sale of securities 828 1~~996,~~145~~339 ~~1,819 1,545 Other operating income 1,441 1,569 3,390 2,625~~ ---------- -~~--------~~ ---------- -~~--------~~ Total ~~noninterest~~deposits ~~income 3~~1,~~149 4~~058,~~311~~876 71,~~749 6~~142,~~731~~394 ~~NONINTEREST~~Borrowings ~~EXPENSE Salaries and related personnel costs 5~~308,~~672~~388 6340,~~323~~897 ~~11,486~~Other ~~12,093~~liabilities ~~Occupancy and equipment expense 1~~35,~~636~~482 235,~~016~~862 ~~3,298~~Guaranteed ~~3,783~~preferred ~~Federal~~beneficial ~~deposit~~interests ~~insurance~~in ~~premiums~~the ~~332~~Company's ~~340~~junior ~~659~~subordinated ~~687~~debentures Data processing expense 540 508 932 925 Marketing expense 256 302 478 581 State franchise taxes (15) 244 45 488 Amortization of intangibles 3 62 6 131 Loss on impairment of premises and equipment held for sale 843,~~800~~750 ~~- 8~~43,~~800~~750 - ~~Other operating expenses 4,663 2,758 7,796 5,083~~ ---------- --------- --~~--------~~ ~~---------~~ Total ~~noninterest~~liabilities ~~expense~~1,446,496 211,~~887~~562,903 12SHAREHOLDERS' EQUITY Preferred stock,~~553~~ 3310,~~500~~000,000 23shares authorized,~~771~~ ~~----------~~none ~~---------~~issued --~~--------~~ --~~-------~~ ~~LOSS~~Common ~~BEFORE~~stock, ~~INCOME~~no ~~TAXES~~par ~~(17~~value,~~458)~~ (230,~~983)~~000,000 ~~(17~~shares authorized,~~240)~~ (316,~~747)~~149,532 ~~Benefit~~and ~~for~~8,128,663 ~~income~~shares ~~taxes~~issued ~~(6,319)~~and ~~(905) (6~~outstanding,~~262)~~ ~~(1,246)~~respectively --~~--------~~ --~~-------~~ ~~----------~~Additional paid-~~--------~~in ~~NET~~capital ~~LOSS $ (11~~42,~~139)~~094 ~~$ (2~~20,~~078)~~978 $Retained (earnings 10,~~978)~~851 ~~$ (2~~26,~~501)~~100 ~~==========~~Accumulated ~~=========~~other ~~==========~~comprehensive ~~========= Basic and diluted~~ loss ~~per share $~~ (~~0.69~~2,603) $ (~~0.26~~1,561) ~~$ (0.89) $ (0.31) ========== ========= ========== ========= Weighted average shares outstanding for basic earnings per share 16,139,868 8,110,822 12,379,304 8,107,170 Effect of dilutive options~~ - - - - ------- --- --------- Total shareholders' equity 50,342 45,517 ----------- ----------- ~~Weighted~~Total ~~average~~liabilities ~~shares~~and ~~outstanding~~shareholders' ~~for~~equity ~~diluted~~$ ~~earnings per share 16~~1,~~139~~496,~~868~~838 ~~8,110,822~~$ 121,~~379~~608,~~304~~420 ~~8,107,170~~ ========== =~~========~~ ========== =~~========~~

See accompanying notes to consolidated financial statements. 3 METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)

~~SIX~~THREE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------- 2002 2001 2002 2001 ------------ ------------ ~~CASH~~------------ ~~FLOWS~~------------ ~~FROM~~INTEREST ~~OPERATING~~INCOME ~~ACTIVITIES~~Interest and fees on loans $ 4119,~~386~~367 $ (923,~~313)~~604 ~~CASH~~$ ~~FLOWS~~58,420 ~~FROM~~$ ~~INVESTING~~75,944 ~~ACTIVITIES~~Interest ~~Disbursement~~on ofmortgage-backed ~~loan~~securities ~~proceeds~~2,454 ~~(205~~3,~~001)~~195 ~~(117~~7,~~115)~~426 ~~Purchases~~9,970 ~~of:~~Interest ~~Loans~~and ~~(233)~~dividends ~~(46,187)~~on ~~Mortgage-backed~~other ~~securities~~investments ~~(52~~1,~~222)~~323 ~~(19~~1,~~395)~~350 ~~Securities~~4,163 ~~available~~3,940 ~~for~~------------ ~~sale~~------------ ~~(138~~------------ ------------ Total interest income 23,~~802)~~144 ~~(83~~28,~~836)~~149 ~~Mortgage~~70,009 ~~servicing~~89,854 ~~rights~~INTEREST (1EXPENSE Interest on deposits 8,~~372)~~637 (213,~~228)~~387 ~~Premises~~28,137 ~~and~~43,187 ~~equipment~~Interest (1on borrowings 4,~~120)~~933 (65,~~679)~~591 15,424 18,007 Interest ~~bearing~~on ~~deposits~~Junior inSubordinated ~~other~~Debentures ~~banks~~1,032 (998 3,110 2,~~476)~~995 ------------ ~~Proceeds~~------------ ~~from~~------------ ~~maturities~~------------ ~~and~~Total ~~repayments~~interest ~~of:~~expense ~~Loans~~14,602 ~~238~~19,~~315~~976 ~~205~~46,~~812~~671 ~~Mortgage~~64,189 -~~backed~~----------- ~~securities~~------------ 42------------ ------------ NET INTEREST INCOME 8,~~481~~542 178,~~766~~173 ~~Securities~~23,338 ~~available~~25,665 Provision for ~~sale~~loan ~~125~~losses (565) 1,~~394~~150 235,~~000~~720 ~~Securities~~5,350 ~~held~~------------ to------------ ~~maturity~~------------ ~~155~~ ------------ ~~Proceeds~~NET ~~from~~INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,107 7,023 17,618 20,315 NONINTEREST INCOME Net gain on sale of: ~~Loans~~loans 61,~~500~~907 493,~~336~~091 ~~FHLB~~4,817 ~~stock~~5,542 -Loan servicing loss, net (5,~~000~~005) ~~Premises~~(683) (11,338) ~~equipment~~(1,466) ~~and~~Service ~~real~~charges ~~estate~~on ~~owned~~deposit accounts 959 499 2,268 1,~~614~~392 ~~348~~Net gain on sale of securities 946 84 2,553 1,629 Other operating income 2,156 1,642 5,546 4,268 ------------ ------------ ~~Net cash used in investing activities 13,233 25,822~~ ------------ ------------ ~~CASH~~Total ~~FLOWS~~noninterest ~~FROM~~income ~~FINANCING~~963 ~~ACTIVITIES~~4,633 ~~Net~~3,846 ~~change~~11,365 inNONINTEREST ~~deposit~~EXPENSE ~~accounts~~Salaries ~~(69~~and related personnel costs 5,~~338)~~465 565,~~350~~935 ~~Proceeds~~16,951 ~~from~~18,028 ~~borrowings~~Occupancy 22and equipment expense 1,~~000~~375 201,~~000~~931 ~~Repayment~~4,673 of5,714 ~~borrowings~~Federal ~~(34~~deposit insurance premiums 130 343 789 1,~~587)~~030 ~~(31~~Data processing expense 448 459 1,~~328)~~380 ~~Net~~1,384 ~~activity~~Marketing expense 204 215 682 796 State franchise taxes 60 -- 105 488 Amortization of intangibles 3 63 9 194 Loss on ~~lines~~impairment of ~~credit~~premises and equipment held for sale 803 -- ~~(49~~9,~~000)~~603 ~~Proceeds~~-- ~~from~~Other ~~issuance~~operating ofexpenses ~~common~~2,870 ~~stock~~2,112 1910,~~095~~666 467,195 ------------ ------------ ~~Net~~------------ ~~cash~~------------ ~~provided~~Total bynoninterest ~~(used~~expense ~~in)~~11,358 ~~financing~~11,058 ~~activities (62~~44,~~830)~~858 (334,~~932)~~829 ------------ ------------ ~~Net~~------------ ~~change~~------------ in(LOSS) ~~cash~~INCOME ~~and~~BEFORE ~~cash~~INCOME ~~equivalents~~TAXES (81,~~211~~288) 12598 (23,~~577~~394) ~~Cash~~(3,149) ~~and~~(Benefit) ~~cash~~provision ~~equivalents~~for atincome ~~beginning~~taxes of(368) ~~period~~60 46(8,~~699~~145) 17(1,~~010~~186) ------------ ------------ ~~Cash~~------------ ~~and~~------------ ~~cash~~NET ~~equivalents~~(LOSS) atINCOME ~~end~~$ of(920) ~~period~~$ 538 $ 38(15,~~488~~249) $ 29(1,~~587~~963) ============ ============ ~~Supplemental~~============ ~~disclosures~~============ ofBasic ~~cash~~and ~~flow~~diluted ~~information:~~(loss) ~~Cash~~earnings ~~paid~~per ~~during~~share ~~the~~$ ~~period~~(0.06) ~~for: Interest~~ $ ~~32,515~~0.07 $ ~~43,246 Income taxes 402~~ (1~~,418~~.12) ~~Transfer~~$ ~~from~~(0.24) ~~loans~~============ ~~receivable~~============ to============ ~~real~~============ ~~estate~~Weighted ~~owned~~average ~~4,045~~shares ~~593~~outstanding ~~Transfer~~for ~~from~~basic ~~loans~~earnings ~~receivable~~per toshare ~~loans~~16,146,209 ~~held~~8,117,288 ~~for sale 3~~13,~~783~~648,737 608,~~759~~110,567 ~~Transfer~~Effect ~~from~~of ~~loans~~dilutive ~~held~~options ~~for~~-- ~~sale~~-- to-- ~~loans~~-- ~~receivable~~------------ ~~81,510~~------------ ------------ ~~Loans~~------------ ~~securitized~~Weighted ~~142,719~~average ~~104,032~~shares ~~Net~~outstanding ~~transfer~~for ~~from~~diluted ~~premises~~earnings ~~and~~per ~~equipment~~share to16,146,209 ~~premises~~8,117,288 ~~and~~13,648,737 ~~equipment held for sale 22~~8,~~728~~110,567 -============ ~~Exchange~~============ of============ ~~loan for common stock 2,000 -~~============

See accompanying notes to consolidated financial statements. 4 METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

~~ACCUMULATED~~NINE ~~ADDITIONAL~~MONTHS ~~OTHER~~ENDED ~~TOTAL~~SEPTEMBER ~~COMMON~~30, ~~PAID~~-~~IN RETAINED COMPREHENSIVE SHAREHOLDERS' STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY~~ ------ ---------- -------- ------ 2002 2001 ------- -- ----------- ~~BALANCE~~CASH ~~MARCH~~FLOWS ~~31,~~FROM ~~2001~~OPERATING ACTIVITIES $ -54,993 $20 10,~~907~~016 ~~$29~~CASH FLOWS FROM INVESTING ACTIVITIES Disbursement of loan proceeds (365,~~245~~288) $(2199,~~089~~693) ~~$48~~Purchases of: Loans (212) (86,~~063~~184) ~~Comprehensive~~Mortgage-backed ~~income~~securities (~~loss~~52,243): ~~Net~~(19,395) ~~income~~Securities available for sale (2141,~~078~~878) (2115,~~078~~111) ~~Change~~Mortgage inservicing ~~unrealized~~rights ~~gain~~(3,283) on(4,425) ~~securities~~Premises and equipment (1,651) ~~net~~(7,119) ofFHLB ~~tax~~stock (20) -- Proceeds from maturities and ~~net~~repayments of: ~~reclassification~~Loans of357,253 ~~gain~~309,875 ofMortgage-backed ~~$744~~securities 54,~~000~~247 ~~from~~37,998 ~~net~~Securities ~~income~~available ~~823~~for ~~823~~sale 142,494 108,540 Securities held to maturity 155 305 Interest bearing accounts in other banks 386 --~~-----~~ ~~Total~~Proceeds ~~comprehensive~~from ~~income~~sale ~~(loss)~~of: (1Loans 11,~~255)~~459 ~~Issuance~~86,029 ofSecurities ~~shares~~available offor ~~common~~sale 4,400 -- FHLB stock ~~Stock~~5,104 ~~purchase~~5,000 ~~plan-8~~Premises,~~181~~ ~~shares~~equipment, 21and 21real estate owned 2,632 348 --------- --------- Net cash provided by investing activities 13,555 116,168 --------- --------- ~~BALANCE~~CASH ~~JUNE~~FLOWS ~~30,~~FROM ~~2001~~FINANCING $ACTIVITIES -Net ~~$20,928~~change ~~$27,167~~in $deposit accounts (183,~~266~~518) ~~$46~~(27,~~829~~280) ~~=======~~Proceeds ~~=======~~from ~~=======~~borrowings ~~=======~~55,111 ~~BALANCE DECEMBER 31~~20,000 ~~2000~~Repayment $of -borrowings ~~$20~~(89,~~882~~627) ~~$29,668 $~~(139,~~091~~046) ~~$49,459~~Net ~~Comprehensive~~activity ~~income~~on ~~(loss):~~lines ~~Net~~of ~~income~~credit (24,~~501)~~007 (266,~~501~~000) ~~Change~~Proceeds infrom ~~unrealized~~issuance ~~gain~~of oncommon ~~securities~~stock 19,116 ~~net~~72 of--------- ~~tax~~--------- ~~and~~Net ~~net~~cash ofprovided ~~reclassification~~by of(used ~~gain~~in) offinancing ~~$1,004,000~~activities ~~from net income~~ (~~175~~94,911) (~~175~~112,254) --------- ~~Total~~--------- ~~comprehensive~~Net ~~income~~change ~~(loss)~~in cash and cash equivalents (226,~~676~~363) ~~Issuance~~13,930 ofCash ~~shares~~and ofcash ~~common~~equivalents ~~stock:~~at ~~Stock~~beginning ~~purchase~~of ~~plan-13,144~~period ~~shares~~ 46,699 4617,010 ------- --~~-----~~ ------- --~~-----~~ ~~BALANCE~~Cash ~~JUNE~~and ~~30,~~cash ~~2001~~equivalents $at -end of period $ 20,~~928~~336 $~~27,167~~ ~~$(1~~30,~~266)~~940 ~~$46,829~~ ======= ==~~=====~~ ======= ==~~=====~~ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 48,588 $ 66,469 Income taxes 1,492 1,418 Transfer from loans receivable to real estate owned 5,594 607 Transfer from loans receivable to loans held for sale 27,823 75,578 Transfer from loans held for sale to loans receivable 80,754 -- Loans securitized 212,764 191,653 Net transfer from premises and equipment to premises and equipment held for sale 28,013 -- Exchange of loan for common stock 2,000 --

See accompanying notes to consolidated financial statements. 5 METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands, except per share data)

ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID-IN RETAINED COMPREHENSIVE SHAREHOLDERS' STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY ------ -------~~---~~ -------- ------------- ------~~-------~~ BALANCE ~~MARCH~~JUNE 3130, ~~2002~~2001 $ -- $42 20,~~050~~928 $26 27,~~261~~167 $ (31,~~581~~266) $64 46,~~730~~829 Comprehensive income (loss): Net ~~loss~~income ~~(11,139)~~538 ~~(11,139)~~538 Change in unrealized gain on securities, net of tax ~~729~~and ~~729~~net of reclassification of gain of $55,000 from net income (1,529) (1,529) -------- Total comprehensive income (loss) (~~10,410~~991) Issuance of shares of common stock Stock purchase plan-67,~~357~~681 shares 2326 2326 -------- -------- -------- -------- BALANCE ~~JUNE~~SEPTEMBER 30, ~~2002~~2001 $ -- $42 20,~~073~~954 $15 27,~~122~~705 $ (2,~~852~~795) $54 45,~~343~~864 ======== ======== ======== ======== BALANCE DECEMBER 31, ~~2001~~2000 $ -- $ 20,~~978~~882 $26 29,~~100~~668 $ (1,~~561~~091) $45 49,~~517~~459 Comprehensive income (loss): Net income (101,~~978~~963) (101,~~978~~963) Change in unrealized gain on securities, net of tax and net of reclassification of gain of $1,075,000 from net income (1,~~291~~704) (1,~~291~~704) -------- Total comprehensive income (loss) (123,~~269~~667) ~~Net~~Issuance ~~proceeds from issuance~~ of shares of common stock: Stock ~~offerings-8,000,000 shares 21,050 21,050 Stock~~ purchase plan-1420,~~322~~825 shares 4572 4572 -------- -------- -------- -------- BALANCE ~~JUNE~~SEPTEMBER 30, ~~2002~~2001 $ -- $42 20,~~073~~954 $15 27,~~122~~705 $ (2,~~852~~795) $54 45,~~343~~864 ======== ======== ======== ========

~~JUNE~~ACCUMULATED ~~30,~~ADDITIONAL ~~2002~~OTHER TOTAL COMMON PAID-IN RETAINED COMPREHENSIVE SHAREHOLDERS' STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY ----- ------- -------- ------------- ------ BALANCE JUNE 30, 2002 $ -- $ 42,073 $ 11,771 $ (2,852) $ 50,992 Comprehensive income (loss): Net loss (920) (920) Change in unrealized gain on securities, net of tax 249 249 --------~~--------------~~ ~~GROSS~~Total ~~GROSS~~comprehensive ~~AMORTIZED~~income ~~UNREALIZED~~(loss) ~~UNREALIZED~~(671) ~~FAIR~~Issuance ~~COST~~of ~~GAINS~~shares ~~LOSSES~~of ~~VALUE~~common stock Stock purchase plan-6,545 shares 21 21 -------- ---------- ---------- -------- ~~AVAILABLE~~BALANCE ~~FOR~~SEPTEMBER ~~SALE~~30, ~~Mutual~~2002 ~~funds~~$ -- $ 542,~~936~~094 $ 510,~~936~~851 ~~Freddie~~$ ~~Mac~~(2,603) ~~preferred~~$ ~~stock 7~~50,~~500~~342 $======== ~~(562)~~======== ~~6.938~~======== ~~Fannie~~======== ~~Mae~~BALANCE ~~notes~~DECEMBER 531,~~002~~ 2001 $ 25-- 5$ 20,~~027~~978 ~~Federal~~$ ~~Home~~26,100 ~~Loan~~$ ~~Bank~~(1,561) ~~note~~$ 945,~~999~~517 53Comprehensive ~~10,052~~income ~~Treasury~~(loss): ~~notes~~Net ~~and~~income ~~bills~~(15,249) 80(15,~~144~~249) ~~388~~Change ~~80,532~~in ~~Tax-exempt~~unrealized ~~municipal~~gain ~~bond~~on 13securities,~~803~~ ~~13,803~~net ~~Mortgage-backed~~of ~~securities~~tax ~~175~~(1,~~213~~042) ~~407~~ (1,~~215~~042) ~~174,405~~ ------- --- ~~------~~Total ~~-------~~comprehensive ~~297,597~~income ~~873~~(loss) (116,~~777~~291) ~~296,693~~Net ~~HELD~~proceeds TOfrom ~~MATURITY~~issuance ~~Revenue~~of ~~bond~~shares ~~325~~of common stock: Stock offerings-8,000,000 ~~333~~shares 21,050 21,050 Stock purchase plan-20,869 shares 66 66 ------ --- ------- ~~325 8~~ - ~~333~~ -------- --- ------ BALANCE SEPTEMBER 30, 2002 $ --~~-----~~ ~~Total~~$ ~~securities~~42,094 $~~297~~ 10,~~922~~851 $~~881~~ $(12,~~777~~603) $~~297~~ 50,~~026~~342 ======== ======== ======== ========

6 METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data. Metropolitan Financial Corp. (the "Company") is a savings and loan holding company and an Ohio corporation. The Company is engaged primarily in the business of originating one-to four-family, multifamily and commercial real estate loans secured by properties located primarily in Ohio and Pennsylvania, and purchasing multifamily and commercial real estate loans secured by properties throughout the United States. The Company offers full service banking services to communities in Northeast Ohio where its additional lending activities include originating construction, business and consumer loans. The accounting policies of the Company conform to generally accepted accounting principles ("GAAP") and prevailing practices within the financial services industry. All significant intercompany transactions have been eliminated. In the opinion of management, the accompanying financial statements include all adjustments and disclosures which the Company considers necessary for a fair presentation of (a) the results of operations for the three- and nine-month periods ended September 30, 2002 and 2001; (b) the financial condition at September 30, 2002 and December 31, 2001; (c) the statement of cash flows for the nine-month periods ended September 30, 2002 and 2001; and (d) the statement of changes in shareholders' equity for the three- and nine-month periods ended September 30, 2002 and 2001. The results of operations for the three- and nine-month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for any other period. The annual report for the Company for the year ended December 31, 2001, contains consolidated financial statements and related notes, which should be read in conjunction with the accompanying consolidated financial statements. A summary of significant accounting policies follows: CONSOLIDATION POLICY: The Company and its wholly-owned subsidiaries, MetroCapital Corporation, Metropolitan Capital Trust I, Metropolitan Capital Trust II, Metropolitan I Corporation and its subsidiary, and Metropolitan Bank and Trust Company (the "Bank") and its subsidiaries, are included in the accompanying consolidated financial statements. All significant intercompany balances have been eliminated. USE OF ESTIMATES: In preparing financial statements, management must make estimates and assumptions. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues, and expenses as well as the disclosures provided. Future results could differ from current estimates. Areas involving the use of management's estimates and assumptions primarily include the allowance for losses on loans, the valuation of loan servicing rights, the value of loans held for sale, fixed assets held for sale, fair value of certain securities, the carrying value and amortization of intangibles, the value of real estate owned, the determination and carrying value of impaired loans, and the fair value of financial instruments. Estimates that are more susceptible to change in the near term include the allowance for loan losses, the valuation of loan servicing rights, the value of loans held for sale, the value of real estate owned, and the fair value of certain securities. EARNINGS PER SHARE: Basic and diluted earnings per share are computed based on weighted average shares outstanding during the period. Basic earnings per share has been computed by dividing net income or loss by the weighted average shares outstanding. Diluted earnings per share has been computed by dividing net income or loss by the diluted weighted average shares outstanding. Diluted weighted average shares were calculated assuming the exercise of stock options less the treasury shares assumed to be purchased using the average market price of the Company's stock. Stock options totaling 1,437,488 and 1,168,878, respectively were not considered in computing diluted earnings per common share for September 30, 2002 and 2001 because they were antidilutive. NEW ACCOUNTING PRONOUNCEMENTS: A new accounting standard requires all business combinations to be recorded using the purchase method of accounting for any transaction initiated after June 30, 2001. Under the purchase method, all identifiable tangible assets and intangible assets and liabilities of the acquired company must be recorded at fair value at date of acquisition, and the excess of cost over fair value of net assets acquired is recorded as goodwill. 7 Identifiable intangible assets must be separated from goodwill. Identifiable intangible assets with finite useful lives will be amortized under the new standard, whereas goodwill, both amounts previously recorded and future amounts purchased, ceased being amortized starting in 2002. Periodic impairment testing will be required for goodwill with impairment being recorded if the carrying amount of goodwill exceeds its implied fair value. 2. SUPERVISORY AGREEMENTS/DIRECTIVE On July 8, 2002, the Office of Thrift Supervision ("OTS") issued a Supervisory Directive (the "Supervisory Directive") to the Company and the Bank. The Supervisory Directive, requires the Boards of Directors of the Bank and the Company to act immediately to take corrective action to address certain weaknesses and to halt certain unsafe and unsound practices, regulatory violations, and violations of the Supervisory Agreement, dated July 26, 2001 (the "Supervisory Agreement"), between the Bank, the OTS, and the Ohio Division of Financial Institutions ("ODFI"). The Supervisory Directive includes the following provisions: 1. The Bank is prohibited from making "unauthorized payments", as defined in the Supervisory Directive, that directly or indirectly benefit Robert M. Kaye, a director and the former Chairman and Chief Executive Officer of the Company and the Bank. 2. The Bank must obtain reimbursement for unauthorized payments made to or for the benefit of Mr. Kaye and related parties since January 1, 1992, and suspend all future payments to Mr. Kaye and related parties of any kind until such time as there has been a full accounting of such payments and the Bank has been fully reimbursed, if appropriate. 3. The Bank must retain an independent certified public accounting firm acceptable to the OTS to conduct a review and accounting of all payments that the Bank has made since January 1, 1992, to or for the direct or indirect benefit of Robert M. Kaye and related parties. The accounting firm must submit to the Audit Committee of the Bank's Board and to the OTS a written report relating to its review identifying, among other things, any payments that are suspected of being unauthorized payments. Based on the information in the report, the Audit Committee of the Bank's Board must determine the amount of any unauthorized payments, subject to the review and concurrence of the OTS. The Bank must then submit to Mr. Kaye a written demand for repayment of any unauthorized payments. The Supervisory Directive sets various deadlines for completion of the foregoing matters. 4. To facilitate compliance with the targets and deadlines specified in the Supervisory Agreement, the Bank must retain a qualified marketing agent, acceptable to the OTS, to manage the Bank's efforts to sell its artwork collection. The OTS noted that the Supervisory Agreement (as modified) required the Bank to reduce its investment in artwork by $1.3 million by March 31, 2002, and that the Bank had failed to meet the March 31, 2002 requirement. 5. The Bank must take appropriate actions to reduce its investment in fixed assets so that the Bank's investment in fixed assets (other than artwork) is no more than 25% of core capital by December 31, 2002, as required by the Supervisory Agreement. 6. The Bank is prohibited from engaging in any transactions with a particular out-of-state bank on whose board Mr. Kaye sits. 7. The Bank is prohibited from originating and purchasing commercial real estate loans secured by property in California until the Bank adopts and implements a written plan for diversification of credit risk that is acceptable to the OTS. 8. The Bank is prohibited from engaging in any transactions with the Company or any of its affiliates without prior approval of the OTS. 8 9. Without prior OTS approval, the Company is prohibited from paying any dividends, or making any other payments except those that it was obligated to make pursuant to written contracts in effect on July 5, 2002, and payment of expenses incurred in the ordinary course of business. 10. The Company is prohibited from making any payment or engaging in any transaction that would have the effect of circumventing any of the restrictions imposed on the Bank in the Supervisory Directive. The Company has engaged, with OTS approval, an independent audit firm, which has concluded its review of the payments specified above in accordance with the Supervisory Directive. On September 26, 2002, the Audit Committee of the Bank filed its report with the OTS concluding that total unauthorized payments to Mr. Kaye are $4.8 million. On October 2, 2002, the OTS stated that it had no objection to the Bank's seeking reimbursement from Mr. Kaye of the $4.8 million. On October 7, 2002, the Bank made a written request to Mr. Kaye seeking reimbursement of the $4.8 million of unauthorized payments by October 25, 2002, which date was extended until December 12, 2002. Refer to Note 15 for further information regarding these payments. The Company and the Bank have commenced taking actions to comply with the remainder of the Supervisory Directive, including the sale of artwork, and expect to comply with the Supervisory Agreement and the Supervisory Directive, except for the timing requirements for the sale of fixed assets. The provisions of the Supervisory Directive do not prohibit the Company from using its unconsolidated resources to make scheduled contractual payments to Metropolitan Capital Trust I ("Trust I") and Metropolitan Capital Trust II ("Trust II"). Payments by the Company to Trust I and Trust II are used by the trusts to pay dividends on the cumulative trust preferred securities of Trust I and Trust II. The Supervisory Directive does not prohibit Trust I and Trust II from paying dividends on their respective cumulative trust preferred securities. On July 26, 2001, the Company entered into a separate Supervisory Agreement with the OTS (the "Company Supervisory Agreement"), which required the Company to prepare and adopt a plan for raising capital that uses sources other than increased debt or additional dividends from the Bank. On January 31, 2002, the Company initiated an offer of common stock for sale under a rights offering and a concurrent offering to the public. Management used the net proceeds of the 2002 offerings to raise the capital required by the Company Supervisory Agreement. Additionally, the Bank entered into the Supervisory Agreement between the Bank, the OTS and the ODFI, which requires the Bank to do the following: - Develop a capital improvement and risk reduction plan by September 28, 2001, which date was extended to December 28, 2001; - Achieve or maintain compliance with core and risk-based capital standards at the "well-capitalized" level, including a risk-based capital ratio of 10% by December 31, 2001, which date was extended to March 31, 2002. The Bank had achieved a "well capitalized" level at March 31, 2002 and maintained that level at September 30, 2002; - Reduce investment in fixed assets (other than artwork) to no more than 25% of core capital by December 31, 2002; - Attain compliance with board approved interest rate risk policy requirements; - Reduce volatile funding sources, such as brokered and out-of-state deposits; - Increase earnings; - Improve controls related to credit risk; and - Restrict total assets to not more than $1.7 billion. 9 Any major deviations from the plan require prior OTS approval. Both supervisory agreements also contain restrictions on adding, entering into employment contracts with, or making golden parachute payments to directors and senior executive officers and in changing responsibilities of senior officers. During January 2002, the regulatory authorities approved the capital and risk reduction plan submitted by the Company. If the Company or the Bank is unable to comply with the terms and conditions of the Supervisory Directive or the supervisory agreements, the OTS and the ODFI could take additional regulatory action, including the issuance of a cease and desist order requiring further corrective action such as raising additional capital, obtaining additional or new management, requiring the sale of assets and a reduction in the overall size of the Company, imposing operating restrictions on the Bank and restricting dividends from the Bank to the Company. These additional restrictions could make it impossible to service existing debt of the Company. 3. SECURITIES The amortized cost, gross unrealized gains and losses and fair values of investment securities available for sale and held to maturity at September 30, 2002 and December 31, 2001 are as follows:

~~DECEMBER~~SEPTEMBER 3130,~~2001~~ 2002 ------------------------------------------------------~~----------~~ GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----~~----~~ -----~~-----~~ ------~~----~~ ------- AVAILABLE FOR SALE Mutual funds $ 51,~~784~~013 $ 51,~~784~~013 Freddie Mac preferred stock 73,~~500~~100 $ (~~750~~112) 62,~~750~~988 ~~Fannie~~Agency ~~Mae~~ notes 10,~~003~~000 ~~(129)~~$ 926 10,~~874~~026 Treasury notes and bills 7275,~~056~~671 $304 7475,975 ~~(184)~~Tax-exempt 71municipal bond 13,~~946~~805 35 13,840 Mortgage-backed securities ~~165~~163,~~508~~323 1,~~895~~167 (90541) ~~167~~163,~~313~~949 --------- --------- --------- --------- ~~260~~266,~~851~~912 1,~~969~~532 (~~1,153~~653) ~~261~~267,~~667~~791 HELD TO MATURITY ~~Tax-exempt~~Revenue ~~municipal~~ bond ~~14,349~~325 ~~(2,737)~~7 ~~11,612~~332 ------ ~~Revenue bond 480 15 495~~ --- ---- ------ --------- ~~14,829~~325 157 ~~(2,737)~~-- ~~12,107~~332 --------- --------- --------- --------- Total securities $~~275~~ 267,~~680~~237 $ 1,~~984~~539 $ (~~3,890~~653) $~~273~~ 268,~~774~~123 ========= ========= ========= =========

~~JUNE 30, 2002~~ DECEMBER 31, 2001 ------------- ----------------- ~~Real estate loans Construction loans: One~~- ~~to four~~-~~family~~------------------------ ~~$165,992~~GROSS ~~$150,705~~GROSS ~~Multifamily~~AMORTIZED ~~9,073~~UNREALIZED ~~6,360~~UNREALIZED ~~Commercial~~FAIR ~~4,854~~COST ~~2,134~~GAINS ~~Land~~LOSSES ~~80,187~~VALUE ~~74,305~~--------- ~~Loans~~--------- ~~in process (90,500) (80,214)~~ --------- --------- ~~Construction~~AVAILABLE ~~loans,~~FOR ~~net~~SALE ~~169,606~~Mutual ~~153~~funds $ 5,~~290~~784 ~~Permanent~~$ ~~loans:~~5,784 ~~One-~~Freddie toMac ~~four-family~~preferred ~~150,084~~stock ~~171~~7,~~813~~500 ~~Multifamily~~$ ~~263,341~~(750) ~~224~~6,~~542~~750 ~~Commercial~~Fannie ~~181,999~~Mae ~~164~~notes 10,~~786~~003 ~~-------~~(129) ~~-------~~9,874 ~~Total~~Treasury ~~real~~notes ~~estate~~and ~~loans~~bills ~~765~~72,~~030~~056 ~~714,431~~$ ~~Consumer~~74 ~~loans~~(184) ~~123~~71,~~342~~946 ~~138,698~~Mortgage-backed ~~Business~~securities ~~and~~165,508 ~~other~~1,895 ~~loans~~(90) ~~128~~167,~~487~~313 ~~133,684~~--------- --------- --------- ~~Total~~--------- ~~loans~~260,851 1,~~016,859~~969 ~~986~~(1,~~813~~153) ~~Premiums on loans~~261,667 ~~net~~HELD ~~5,814~~TO ~~6,969~~MATURITY ~~Deferred~~Tax-exempt ~~loan~~municipal ~~fees,~~bond ~~net (1~~14,~~998)~~349 (2,~~080~~737) ~~Allowance~~11,612 ~~for~~--------- ~~losses~~Revenue onbond ~~loans~~480 ~~(20~~15 495 --------- --------- 14,~~678)~~829 15 (172,~~250~~737) 12,107 --------- --------- --------- --------- Total ~~loans~~securities ~~receivable~~$ 275,680 $~~999~~ 1,~~997~~984 $~~974~~ (3,~~452~~890) $ 273,774 ========= ========= ========= =========

The tax-exempt municipal bond represents a single issue secured by a multifamily property. The bond was reclassified to available for sale as of June 30, 2002, due to management's decision to market this security when the property, which serves as collateral for the bond, becomes fully occupied. In conjunction with this reclassification, it was determined that there was a permanent impairment to the bond's fair value and a realized loss of $550 thousand was booked in the second quarter of 2002. 4. LOANS RECEIVABLE The composition of the loan portfolio at September 30, 2002 and December 31, 2001 is as follows:

~~SIX~~SEPTEMBER ~~MONTHS~~30, ~~ENDED~~DECEMBER ~~JUNE~~31, 302002 2001 Real estate loans Construction loans: One- to four-family $ 171,060 $ 150,705 Multifamily 7,290 6,360 Commercial 9,702 2,134 Land 75,023 74,305 Loans in process (91,169) (80,214) ----------- ----------- Construction loans, net 153,290 171,906 Permanent loans: One- to four-family 149,012 171,813 Multifamily 297,534 224,542 Commercial 169,475 164,786 ------- ~~2002 2001~~ ---- ----------- ~~Balance~~Total atreal ~~the~~estate ~~beginning~~loans of787,927 ~~the~~714,431 ~~period~~Consumer ~~$17~~loans 111,~~250~~305 ~~$13~~138,~~951~~698 ~~Provision~~Business ~~for~~and ~~loan~~other ~~losses~~loans 6126,~~285~~151 4133,~~200~~684 ~~Charge~~-~~offs~~---------- ----------- Total loans 1,025,383 986,813 Premiums on loans, net 5,471 6,969 Deferred loan fees, net (2,~~969~~095) (12,~~234~~080) ~~Recoveries~~Allowance ~~112~~for ~~111~~losses on loans (17,387) (17,250) ----------- ----------- ~~Balance~~Total atloans ~~end~~receivable ~~of period~~ $20 1,~~678~~011,372 $17 974,~~028~~452 =========== ===========

11 Activity in the allowance for losses on loans for the periods ended September 30, 2002 and 2001 is as follows: NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 -------- -------- Balance at the beginning of the period $ 17,250 $ 13,951 Provision for loan losses 5,720 5,350 Charge-offs (5,756) (2,286) Recoveries 173 189 -------- -------- Balance at end of period $ 17,387 $ 17,204 ======== ======== Nonperforming loans are as follows at: SEPTEMBER 30, DECEMBER 31, 2002 2001 ---- ---- Loans past due over 90 days still on accrual $ 578 $ 85 Nonaccrual loans 27,498 30,602 Management analyzes loans both on an individual and collective basis and considers a loan to be impaired when it is probable that all principal and interest amounts will not be collected according to the loan contract based on current information and events. Loans which are past due two payments or less and that management feels are probable of being restored to current status within 90 days are not considered to be impaired loans. All impaired loans are included in nonperforming loans. Information regarding impaired loans is as follows: SEPTEMBER 30, DECEMBER 31, 2002 2001 ------- ------- Balance of impaired loans $13,470 $15,260 Less portion for which no allowance for losses on loans is allocated 1,594 3,147 ------- ------- Balance of impaired loans for which an allowance for loan losses is allocated $11,876 $12,113 ======= ======= Portion of allowance for losses on loans allocated to the impaired loan balance $ 3,265 $ 3,476 ======= ======= NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 ------- ------- Average investment in impaired loans during the period $14,188 $12,834 ======= ======= Interest income recognized during impairment $ 752 $ 515 ======= ======= Interest income recognized on a cash basis during the period $ 752 $ 515 ======= ======= 5. LOAN SERVICING Mortgage loans serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balances of these loans at September 30, 2002 and December 31, 2001 are summarized as follows: 12 SEPTEMBER 30, DECEMBER 31, 2001 2002 ---------- ---------- Mortgage loan portfolios serviced for: Freddie Mac $1,559,046 $1,292,009 Fannie Mae 484,064 617,305 Other 239,142 294,559 ---------- ---------- Total loans serviced for others $2,282,252 $2,203,873 ========== ========== Custodial balances maintained in noninterest-bearing checking accounts in connection with the foregoing loan servicing were approximately $36.9 million and $48.5 million at September 30, 2002 and December 31, 2001, respectively. The following is an analysis of the changes in the cost of loan servicing rights for the nine-month periods ended September 30, 2002 and 2001: NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 -------- -------- Balance at the beginning of the period $ 22,951 $ 20,597 Acquired or originated 6,759 9,317 Provision for impairment (6,210) -- Amortization (9,654) (5,744) -------- -------- Balance at the end of the period $ 13,846 $ 24,170 ======== ======== The following is an analysis of the changes in the valuation allowance for impairment of loan servicing rights for the nine-month period ended September 30, 2002. No impairment was recorded for the nine-month period ended September 30, 2001: NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 ------- ---- Balance at the beginning of the period $ (863) N/A Write-offs of impaired rights -- N/A Provision for impairment (6,210) N/A -------- ---- Balance at the end of the period $(7,073) N/A ======= ==== 6. DEPOSITS Deposits consist of the following:

~~JUNE~~SEPTEMBER 30, 2002 DECEMBER 31, ~~2002~~ 2001 ------------------ ----------------- ~~Loans~~AMOUNT ~~past~~PERCENT ~~due~~AMOUNT ~~over~~PERCENT 90------ ~~days~~------- ~~still~~------ on------- ~~accrual~~Noninterest-bearing checking accounts $ ~~191~~139,247 13% $ 85146,055 ~~Nonaccrual~~13% ~~loans~~---------- 31---------- Interest-bearing checking accounts 202,~~396~~852 3019 198,~~602~~414 17 Passbook savings and statement savings 88,655 9 82,619 7 Certificates of deposit 628,122 59 715,306 63 ---------- --- ---------- --- Total interest-bearing deposits 919,629 87 996,339 87 ---------- --- ---------- --- $1,058,876 100% $1,142,394 100% ========== === ========== ===

13 At September 30, 2002, scheduled maturities of certificates of deposit were as follows: YEAR WEIGHTED AVERAGE ENDED AMOUNT INTEREST RATE ----- ------ ------------- 2002 $133,320 4.02% 2003 316,735 4.11 2004 73,742 4.33 2005 39,609 4.60 2006 27,012 5.44 Thereafter 37,704 5.10 -------- $628,122 4.27% ======== Brokered and out-of-state deposits decreased from $127.8 million at December 31, 2001 to $79.2 million at September 30, 2002. 7. BORROWINGS Borrowings consist of the following at September 30, 2002 and December 31, 2001:

~~JUNE~~SEPTEMBER 30, 2002 DECEMBER 31, ~~2002~~ 2001 ------------------ ----------------- ~~Balance~~AMOUNT ofRATE ~~impaired~~AMOUNT ~~loans~~RATE ------ ---- ------ ---- Federal Home Loan Bank Advances $14240,~~277~~913 5.5% $15278,~~260~~912 ~~Less~~6.2% ~~portion~~Reverse ~~for~~repurchase ~~which~~agreements no49,508 ~~allowance~~5.0 ~~for~~41,000 ~~losses~~5.9 onCommercial ~~loans~~bank isline ~~allocated~~of 2credit maturing December 31,~~375~~2003 34,~~147~~007 4.8 --~~---~~ --~~---~~ ~~Balance~~Commercial ofbank ~~impaired~~note ~~loans~~maturing ~~for~~December ~~which~~31, an2002 ~~allowance~~-- ~~for~~-- ~~loan~~5,000 ~~losses~~4.8 isLoan ~~allocated~~from ~~$11,902~~majority ~~$12,113~~stockholder ~~======~~-- ~~======~~-- ~~Portion~~2,000 of0.0 ~~allowance~~Subordinated ~~for~~debt ~~losses~~maturing onJanuary ~~loans~~1, ~~allocated~~2005 to13,960 ~~the~~9.6 ~~impaired~~13,985 ~~loan~~9.6 ~~balance~~-------- $-------- 3$308,~~276~~388 $ 3340,~~476~~897 ======== ========

At September 30, 2002, scheduled payments on borrowings are as follows: WEIGHTED AVERAGE YEAR ENDED AMOUNT INTEREST RATE ---------- ------ ------------- 2002 $ 35,298 5.12% 2003 72,829 5.77 2004 69,102 5.99 2005 97,824 5.01 2006 4,284 6.62 Thereafter 29,051 6.45 ------- Total $308,388 5.58% ======== At September 30, 2002, Federal Home Loan Bank advances are collateralized by all of the Company's FHLB stock, one- to-four-family first mortgage loans, multifamily loans and securities, with aggregate carrying values of approximately $12.4 million, $143.2 million, $240.9 million and $191.0 million, respectively. During 1995, the Company issued subordinated notes ("1995 Subordinated Notes") totaling $14.0 million. Interest on the notes is paid quarterly and principal will be repaid when the notes mature January 1, 2005. Total issuance costs of approximately $1.2 million are being amortized on a straight-line basis over the life of the notes. The notes are unsecured. Effective November 30, 2000, the notes may be redeemed at par at any time. The Company obtained a $5.0 million line of credit from Sky Bank ("line of credit") in September 2002. The proceeds from the line of credit were used to pay off the Company's commercial bank note that was maturing on December 31, 2002. The line of credit matures on December 31, 2003 but has an annual renewal option. As collateral for the loan, the 14 Company's largest shareholder has agreed to pledge a portion of his common stock of the Company, which exceeds 50% of the outstanding stock of the Company. The interest rate for the line of credit varies at prime rate. The Company had a note payable to a commercial bank. During September 2002, the current balance outstanding was paid off with the proceeds from the line of credit. The loan was scheduled to mature December 31, 2002. In December 2001, the Company entered into a loan agreement with Robert Kaye, its majority shareholder, for a non-interest bearing loan in the principal amount of $2.0 million. The Company repaid the loan to Mr. Kaye with proceeds from the stock offerings in March 2002. 8. OFF-BALANCE SHEET ACTIVITIES The Bank can be a party to financial instruments with off-balance-sheet risk in the normal course of business to meet financing needs of its customers. These financial commitments include commitments to make loans. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans is represented by the contractual amount of these instruments. The Bank follows the same credit policy to make such commitments as is followed for those loans recorded in the financial statements. As of September 30, 2002, the Bank had fixed and variable rate commitments to originate and/or purchase loans (at market rates) of approximately $78.3 million and $58.8 million, respectively. In addition, the Bank had firm commitments to sell loans totaling $114.9 at September 30, 2002. The Bank's commitments to originate and purchase loans are for loans with rates ranging from 4.75% to 19.9% and commitment periods up to one year. The Bank maintains two standby letters of credit at the Federal Home Loan Bank of Cincinnati for the benefit of Fannie Mae as secondary security for credit risk on multifamily loans securitized in prior years. These standby letters of credit, aggregating approximately $8.6 million, do not accrue interest and are renewed on an annual basis. The Bank has entered into two interest rate swap contracts to hedge variable rate advances with each having a notional amount of $20.0 million. Both contracts mature within five years and have the same counterparty, a nationally recognized broker/dealer. The Bank receives from the contracts variable interest based on one-month or three-month LIBOR, respectively. The Bank in turn pays to the counterparty interest at fixed rates of 6.450% and 6.275%, respectively. The counterparty has the option to terminate the interest rate swap in the event LIBOR exceeds certain rates set on specific dates per the terms of the contracts. The market value of the two swap contracts at September 30, 2002 was an unrealized loss of $4.8 million. 9. SEGMENT REPORTING The Company's operations include two major operating segments. A description of these segments is as follows: RETAIL AND COMMERCIAL BANKING--Retail and commercial banking is the segment of the business that brings in deposits and lends those funds out to businesses and consumers. The local market for deposits is the consumers and businesses in the neighborhoods surrounding the Bank's 24 retail sales offices in Northeastern Ohio. The market for lending is Ohio and the surrounding states. The majority of loans are secured by multifamily and commercial real estate. Loans are also made to businesses secured by business assets and to consumers secured by real or personal property. Business loans are concentrated in Northeastern Ohio. MORTGAGE BANKING--Mortgage banking is the segment of the Company's business that originates, sells and services permanent or construction loans secured by one- to four-family residential properties. These loans are primarily originated through commissioned loan officers located in Ohio and Western Pennsylvania. In general, fixed rate loans are originated for sale and adjustable rate loans may be originated for sale or may be retained in the portfolio. Loans that the Bank services include loans originated and retained by the Bank, loans originated by the Bank but sold to others with servicing rights retained by the Bank, and servicing rights to loans originated by 15 others but purchased by the Bank. The servicing rights the Bank purchases may be for loans located in a variety of states and the loans are typically serviced for Fannie Mae or Freddie Mac. PARENT AND OTHER--This consists of the remaining segments of the Company's business. It includes corporate treasury, interest rate risk, and financing operations, which do not generate revenue from outside customers. The net interest income that results from investing in assets and liabilities with different terms to maturity or repricing has been eliminated from the two major operating segments and is included in this category. Operating results and other financial data for the current and preceding year were as follows (in thousands):

~~SIX~~AS OF OR FOR THE NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2002 ----------------------------------------------------------------------------- ~~2002~~RETAIL ~~2001~~AND COMMERCIAL MORTGAGE PARENT BANKING BANKING AND OTHER TOTAL ----------- ----------- ~~Average~~----------- ~~investment~~----------- inOPERATING ~~impaired~~RESULTS: ~~loans~~Net ~~during~~interest ~~the~~income ~~period~~$ 18,544 $ 11,261 $ (6,467) $ 23,338 Provision for losses on loans 4,878 842 -- 5,720 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 13,666 10,419 (6,467) 17,618 Noninterest income 4,558 (2,681) 1,969 3,846 Direct noninterest expense 14,~~553~~397 7,309 2,084 23,790 Allocation of overhead 13,974 7,094 -- 21,068 ----------- ----------- ----------- ----------- Net income (loss) before income taxes $11 (10,~~082~~147) $ (6,665) $ (6,582) $ (23,394) =========== =========== ~~Interest income recognized during impairment $ 449 $ 230~~ =========== =========== ~~Interest~~FINANCIAL ~~income~~DATA: ~~recognized~~Segment onassets a$ ~~cash~~881,921 ~~basis~~$ ~~during~~383,952 ~~the~~$ ~~period~~230,965 $ ~~449~~1,496,838 $Depreciation ~~230~~and ~~=======~~amortization ~~=======~~5,568 5,729 795 12,092 Expenditures for additions to premises and equipment 365 1,203 -- 1,568

~~JUNE~~AS OF OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~DECEMBER~~2001 ~~31,~~----------------------------------------------------------------------------- ~~2002~~RETAIL ~~2001~~AND COMMERCIAL MORTGAGE PARENT BANKING BANKING AND OTHER TOTAL ----------- ----------- ----------- ~~Mortgage~~----------- ~~loan~~OPERATING ~~portfolios~~RESULTS: ~~serviced~~Net ~~for:~~interest ~~Freddie~~income ~~Mac~~$ 13,064 $ 14,546 $ (1,~~512,755~~945) $ 25,665 Provision for losses on loans 4,942 408 -- 5,350 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 8,122 14,138 (1.945) 20,~~292~~315 Noninterest income 5,~~009~~688 ~~Fannie~~5,070 ~~Mae~~607 ~~532~~11,~~746~~365 ~~617~~Direct noninterest expense 15,~~305~~226 ~~Other~~6,505 ~~249~~1,~~402~~489 ~~294~~23,~~559~~220 Allocation of overhead 8,134 3,475 -- 11,609 ----------- ----------- ~~Total~~----------- ~~loans~~----------- ~~serviced~~Net ~~for~~(loss) ~~others~~income before income taxes $2 (9,~~294~~550) $ 9,~~903~~228 $ (2,~~203~~827) $ (3,~~873~~149) =========== =========== =========== =========== FINANCIAL DATA: Segment assets $ 1,051,917 $ 349,482 $ 176,803 $ 1,578,222 Depreciation and amortization 3,157 4,279 857 8,293 Expenditures for additions to premises and equipment 6,409 718 7,119

The financial information provided for each major operating segment has been derived from the internal profitability system used to monitor and manage financial performance and allocate resources. The measurement of performance for the operating segments is based on the organizational structure of the Company and is not necessarily comparable with similar information for any other financial institution. The information presented is also not indicative of the segments' financial condition and results of operations if they were independent entities. The Company evaluates segment performance based on contribution to income before income taxes. Certain indirect expenses have been allocated based on various criteria considered by management to best reflect benefits derived. The 16 accounting policies of the segments are the same as those described in the summary of significant accounting policies. Indirect expense allocations and accounting policies have been consistently applied for the periods presented. There are no differences between segment profits and assets and the consolidated profits and assets of the Company. 10. RIGHTS AND COMMON STOCK OFFERINGS On March 22, 2002, the Company closed its offering to current shareholders of non-transferable rights to purchase shares of Company common stock and also a concurrent offering of shares of common stock in a public offering. The purpose of these offerings was to raise funds to increase the equity capital of the Bank as required under the July 26, 2001 supervisory agreements signed with the OTS and ODFI, and to make the December 2001 principal payment on the commercial bank note. These offerings generated gross proceeds of $22.0 million, substantially exceeding the $13.0 million minimum established for the offerings. As a result of the offerings, the Bank's regulatory capital ratios are now in excess of the "well-capitalized" capital requirements as of September 30, 2002. 11. PREMISES AND EQUIPMENT HELD FOR SALE At September 30, 2002 premises and equipment held for sale included certain parcels of land and buildings and all works of art owned by the Company. During June 2002, the Company reclassified these properties as held for sale. Previously, the Company had planned to sell other properties whose fair value met or exceeded carrying value. However, after reevaluating the strategic options available to the Company and the Supervisory Directive, management decided to revise its plan to sell properties and, therefore, moved certain additional properties into held for sale and removed other properties from held for sale. In conjunction with the reclassification of these properties, the Company determined that the carrying value of certain properties was less than the estimated net proceeds expected from the sale of these properties. Accordingly, the Company recognized an $8.8 million loss on the valuation impairment of these properties. The fair value of these properties was estimated based on either a present value analysis of the current and expected revenues and expenses based on the properties being considered as income producing or third party purchase offers. In September 2002, management ordered an independent appraisal. As a result, the Company revised the carrying value of the property downward by an additional $803 thousand. Any future valuation of these assets may result in additional adjustment in their carrying values. No valuation allowance has been recorded on the art held for sale based on an appraisal, which indicates the art's fair value exceeds its current carrying value. 12. MANAGEMENT'S PLANS During the periods presented in 2002 and 2001, the Company recorded net losses. Despite large losses, management believes that based on these charges, the Company is becoming better positioned to return to profitability in the future. Additionally, the Company has entered into a definitive merger agreement. Refer to Note 15 for further details.. These recent results were in large part the result of: a decline in the Company's net interest margin, which was caused by declines in market interest rates to historically low levels when the Company's assets were repricing more quickly than funding sources; higher overhead levels as a result of previous growth initiatives; an increase in the amortization of servicing rights and impairment charges of servicing rights due to a decline in the value of these rights as a direct result of declines in long-term interest rates to historical lows; management's increases in the provisions for loan losses related to specific allocations for certain commercial business and commercial real estate loans, and an overall increase in the allocation for these loan categories based on increases in problem credits identified within these portfolios; and an impairment charge related to the Company's classifying commercial real estate as held for sale. Management believes that it is taking the necessary actions to increase the Company's net interest margin primarily by reducing its funding costs. Historically, the Company has depended more than its competitors on brokered deposits and out of state certificates of deposit as a source of funds. These funds typically have a higher cost than local market deposits. During the nine months ended September 30, 2002, management reduced brokered deposits by $48.6 million from the level at December 31, 2001. In addition, management has decreased the Company's borrowings by $32.5 17 million at September 30, 2002 from the amount at December 31, 2001, which borrowings have also been a higher cost source of funds than deposit accounts. Finally, a significant amount of the Company's longer term, higher cost funding continues to mature and reprice in the current lower interest rate environment. Management also is taking steps to increase interest income by converting non-earning assets to earning assets. Management's decision to increase the amount of commercial real estate held for sale and the impairment charge related to this decision was a direct result of management's plan to decrease fixed assets. Management also has taken actions to decrease the non-interest expenses of the Company. The Company has engaged a consulting firm, which is assisting in identifying opportunities for efficiencies. The Company's actions taken to date pursuant to this effort have reduced salaries and related personnel costs and occupancy costs in 2002 compared to the same periods in 2001. Management believes that it has made progress in identifying the losses in the loan portfolio and taking appropriate action to improve future credit quality. These actions include expanding the scope of the loan review function and revising the credit underwriting standards of the Company. Addressing problem credits is a high priority for management. Management feels it has appropriately provided for the risk in the portfolio and, based on its current knowledge, does not anticipate future increases in the allowance of the magnitude recorded during the second quarter of 2002. To date, the Company continues to meet its credit obligations. In addition, the Bank met the capital requirements to be considered "well capitalized" and the levels required by the Supervisory Agreement. 13. RESTATEMENT Subsequent to the issuance of the June 30, 2002 financial statements, management determined that the prepayment speed assumptions used in valuing mortgage servicing rights at June 30 were not correct. The Company revised the assumptions and engaged an independent firm to value the servicing rights. Based on the effect of the corrected assumptions and the independent appraisal, the Company determined that mortgage servicing rights at June 30, 2002 were overstated by $4.9 million. As a result, net income was overstated by $3.4 million (after tax) and the Company has accordingly restated its financial statements for the three months ended June 30, 2002. There is no material effect on earlier periods. 14. RETENTION PAY AGREEMENTS On September 24, 2002, the Company entered into a Retention Pay Plan in order to induce certain key employees to remain in the employ of the Company and to provide further incentive to maintain the Company's ongoing operations in the event of a change of control. These key employees will be eligible to receive benefits under this plan if, within one year following a change in control: employment is involuntarily terminated other than for certain defined cases; the employee resigns after being notified that his/her salary will be reduced by more than 10% of the salary in effect at the time of the change of control, or the employee resigns because his/her responsibilities or job position are substantially reduced from that in effect at the time of the change in control. If these events occur, these employees will be entitled to a fixed dollar amount specifically stated in the plan. There is no expected expense to the Company, as the acquiring company in the change of control would bear the cost of this plan. Refer to Exhibit 10.7 for further details. 15. SUBSEQUENT EVENTS On October 23, 2002, the Company and Sky Financial Group, Inc. ("Sky Financial") executed a definitive agreement for Sky Financial to acquire all the stock of the Company and merge the Company into Sky Financial. Pursuant to the definitive agreement, stockholders of the Company will be entitled to elect to receive, in exchange for each share of the Company's common stock held, either $4.70 in cash or .2554 shares of Sky Financial, or a combination thereof. The election process, however, is subject to certain allocation mechanisms that are reflected in the definitive 18 agreement, which provides that no more than 70% and no less than 55% of the Company's shares will be exchanged for Sky Financial common stock. The deal provides for the merger of the Company into Sky Financial, and the subsequent merger of the Bank into Sky Bank, Sky Financial's commercial banking affiliate. Pending the approval by shareholders of the Company and various regulatory agencies, the acquisition is expected to close at the beginning of the second quarter 2003. For information surrounding the acquisition, refer to the Form 8-K filed by the Company with the Securities and Exchange Commission on October 24, 2002. Concurrent with the above merger agreement, the Company and its control shareholder, reached an agreement, whereby the control shareholder, on or before March 15, 2003, shall purchase all of the artwork collection from the Company at a price equal to the greater of the book value or appraised value of each item of artwork that has not been sold previously, by the Company. The Company is in the process of selling some of the artwork in accordance with the Supervisory Directive dated July 8, 2002, and intends to sell all of the artwork as soon as practicable. During, the fourth quarter of 2002, the Company has offered at auction certain pieces of artwork aggregating $2.1 million. Furthermore, the control shareholder entered into an agreement with the Company and an escrow agent to establish an escrow fund to provide for reimbursement of unauthorized payments to the Bank pursuant to the Supervisory Directive. The escrow fund presently totals $4.8 million, and shall be disbursed only upon joint written instructions from the Company and the control shareholder. Notwithstanding the foregoing, if the escrow agent has not received written instructions from the Company and control shareholder on or before December 12, 2002, $2.4 million of the escrow fund shall be disbursed to the Company and the remaining balance in accordance with the written instructions of the control shareholder. Refer to Exhibit 10.6 for further details. Additionally, the control shareholder entered into an agreement with Sky Financial to vote his control shares in favor of the merger and merger agreement and against any proposal for any recapitalization, merger, sale of assets or other business combination between the Company and any person or entity other than Sky Financial. Refer to Exhibit 10.8 for further details. The results of these two agreements may increase the merger consideration by the amounts received by the Company. In addition, the merger consideration will be adjusted downward if the aggregate book value of certain assets, calculated in accordance with GAAP, on the month-end date immediately preceding the closing date of the merger of the Company into Sky Financial has declined by more than $4.0 million compared to the aggregate book value of such assets, calculated in accordance with GAAP, as of September 30, 2002 (less specific valuation or impairment allowances). The book value of these assets at September 30, 2002 was $46.0 million. The assets (at net book value) that affect the merger consideration are as follows: mortgage loan servicing rights totaling $13.8 million; an $11.9 million commercial loan relationship; a $13.9 million municipal bond; and a $6.3 million portion of a securitized loan portfolio. Any adjustment to the merger consideration related to these assets is to be calculated as described in the merger agreement. 19 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors and Shareholders Metropolitan Financial Corp. Highland Hills, Ohio We have reviewed the consolidated statement of financial condition of Metropolitan Financial Corp. as of September 30, 2002, the related consolidated statements of operations and statement of changes in shareholders' equity for the quarter and year-to-date periods ended September 30, 2002 and 2001, and the consolidated statements of cash flows for the year-to-date periods ended September 30, 2002 and 2001. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the AICPA. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. Crowe, Chizek and Company LLP Cleveland, Ohio November 7, 2002 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SELECTED FINANCIAL DATA THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Net income (loss) (in thousands) $ (920) $ 538 $ (15,249) $ (1,963) Basic and diluted earnings (loss) per share $ (0.06) $ 0.07 $ (1.12) $ (0.24) Return on average assets (0.24)% 0.13% (1.33)% (0.16)% Return on average equity (6.85)% 4.65% (36.22)% (5.50)% Noninterest expense to average assets 3.01% 2.74% 3.90% 2.79% Efficiency ratio 119.46% 86.43% 164.98% 97.84% Net interest margin 2.48% 2.18% 2.21% 2.22%

~~SIX~~SEPTEMBER ~~MONTHS~~30, ~~ENDED~~DECEMBER ~~JUNE~~31, SEPTEMBER 30, 2002 2001 2001 -------------- --------------- ~~2002 2001~~ ---- ---------- ~~Balance~~Total atassets ~~the~~(in ~~beginning~~thousands) of$ ~~the~~1,496,838 ~~period~~ $221,~~951~~608,420 $201,~~597~~578,222 ~~Acquired~~Shareholders' orequity ~~originated~~(in 5thousands) 50,~~335~~342 545,~~443~~517 ~~Recovery~~45,864 ofShareholders' ~~impairment~~equity ~~155~~to -total ~~Amortization~~assets (53.36% 2.83% 2.76% Shares outstanding 16,~~108)~~149,532 (38,~~566)~~128,663 ~~-------~~8,120,677 ~~-------~~Book ~~Balance~~value atper ~~the~~share ~~end~~$ 3.12 $ 5.60 $ 5.65 Tangible book value per share $ 2.95 $ 5.29 $ 5.33 Closing share price of ~~the~~common ~~period~~stock $~~23,333~~ 3.00 $~~22,474~~ ~~=======~~3.05 ~~=======~~$ 2.80 Nonperforming assets to total assets (1) 2.26% 2.09% 1.90% Allowance for losses on loans to total loans (1) 1.61% 1.49% 1.46% Net charge-offs to average loans (2) 0.70% 0.26% 0.22%

(1) Ratios are based on period end balances. (2) Annualized for comparative purposes. 21 OVERVIEW The Company's results of operations are dependent on a variety of factors, including the general interest rate environment, competitive conditions in the financial services industry, governmental policies and regulations and conditions in the markets for financial assets. Like most financial institutions, the primary contributor to the Company's income is net interest income, which is the difference between the interest that is earned on interest-earning assets, such as loans and securities, and the interest paid on interest-bearing liabilities, such as deposits and borrowings. The Company's operations are also affected by noninterest income, such as loan servicing fees, servicing charges on deposit accounts, and gains or losses on the sales of loans and securities. The Company's principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, and general and administrative expenses. RESULTS OF OPERATIONS Net Income. The Company reported a net loss of $920 thousand for the third quarter of 2002, or $0.06 per share. This is a decrease of $1.5 million from net income of $538 thousand, or $0.07 per share, for the third quarter of 2001. The net loss for the nine months ended September 30, 2002 was $15.2 million, or $1.12 per share, an increase of $13.2 million from the net loss of $2.0 million, or $0.24 per share, for the nine months ended September 30, 2001. The primary reasons for the increase in the net loss for both the three- and nine-month periods ended September 30, 2002 are a permanent impairment charge of $9.6 million taken against the Company's premises and equipment and net losses from loan servicing of $5.0 million and $11.3 million for the three and nine months ended September 30, 2002, respectively, due to increased amortization and continued impairment of loan servicing rights in a declining interest rate environment. The increases related to these items in third quarter of 2002 were partially offset by an increase in net interest income and a reduction in the loan loss provision. Increases in expenses in both periods were partially offset by an increased tax benefit generated from the operating loss. Net interest income increased to $8.5 million for the three months ended September 30, 2002 from $8.2 million for the same period in 2001. Net interest income for the nine months ended September 30, 2002 decreased $2.4 million to $23.3 million from $25.7 million for the same period in 2001. Noninterest income decreased in the three and nine months ended September 30 2002 to $963 thousand and $3.8 million, respectively, from $4.6 million and $11.4 million, respectively, from the same periods in 2001. Noninterest expense increased to $11.4 million and $44.9 million for the three and nine months ended September 30, 2002, respectively, from the same periods in 2001. Interest Income. Total interest income for the quarter ended September 30, 2002 was $23.1 million, a decrease of 17.8%, from the third quarter of 2001. Total interest income for the first nine months of 2002 decreased 22.1% from the same period in 2001 to $70.0 million. There are two primary reasons for the decline in interest income over 2001. First, yields on interest-earning assets declined to 6.71% and 6.62% in the three-and nine-month periods ended September 30, 2002, respectively, from 7.52% and 7.79% for the same periods in 2001. Secondly, average-earning assets declined in 2002 from 2001. Average earning assets for the third quarter of 2002 decreased 8.1% to $1.380 billion from $1.502 billion in the third quarter of 2001. Average earning assets for the nine months ended September 30, 2002 decreased 8.6% to $1.410 billion from $1.542 billion for the same period in 2001. The decrease in average earning assets contributed $2.0 million and $11.0 million of the decrease in interest income for the three and nine months ended September 30, 2002, respectively. The decline in the yield on earning assets for the three months ended September 30, 2002 compared to the same period in the prior year was primarily due to declines in the level of short term interest rates from 2001 to 2002. As interest rates have continued to level off, the decline in yields has gradually narrowed. The decline in yield contributed $3.0 million and $8.9 million of the decrease in interest income for the three and nine months ended September 30, 2002, respectively Interest Expense. Total interest expense decreased 26.9% to $14.6 million, and 27.3% to $46.7 million, for the three- and nine-month periods ended September 30, 2002, respectively, from $20.0 million and $64.2 million for the same periods in 2001. Interest expense for the three and nine months ending September 30, 2002 decreased generally due to a lower 22 average balance of interest-bearing liabilities outstanding and a lower cost of funds compared to the prior year quarter. The average balance of interest-bearing deposits decreased $111.3 million and $93.2 million, or 10.6 % and 8.8 %, for the three- and nine-month periods ended September 30, 2002, respectively, as compared to the same periods in 2001. This decrease includes a significant decrease in out of state and brokered certificates of deposit, which generally carry a higher interest rate than local deposits of the Bank. Average borrowings decreased $24.8 million and $58.8 million, or 7.1% and 15.2%, for the three- and nine-month periods ended September 30, 2002, respectively, as compared to the same periods in 2001. The decrease in average interest-bearing liabilities contributed $1.8 million and $6.3 million to the decrease in interest expense for the three and nine months ended September 30, 2002, respectively. The Company's cost of funds decreased to 4.45% and 4.68% for the three and nine months ending September 30, 2002, respectively, as compared to 5.52% and 5.81% for the same periods in 2001. The lower cost of funds contributed $3.6 million and $11.6 million to the decrease in interest expense for the three and nine months ended September 30, 2002, respectively. Average Balances and Yields. The following tables present the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Net interest margin is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans are considered in average loan balances. The average balances of mortgage-backed securities and other securities are presented at historical cost.

~~SIX~~THREE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, ------------------------------------------------------------------------------ 2002 2001 ----------------------------------- ----------------------------------- ~~Balance~~AVERAGE atAVERAGE ~~the~~BALANCE ~~beginning~~INTEREST ofRATE ~~the~~BALANCE ~~period~~INTEREST RATE ------- -------- ---- ------- -------- ---- Interest-earning assets: Loans receivable $1,091,701 ~~(863)~~$19,367 ~~N/A~~7.10% ~~Write~~$1,209,578 $23,604 7.81% Mortgage-~~offs~~backed ofsecurities ~~impaired~~169,999 ~~rights~~2,454 5.77% 191,381 3,195 6.68% Other 118,137 1,323 4.48% 100,645 1,350 5.49% Total interest-earning ~~N/A~~assets ~~Recovery~~1,379,837 of23,144 ~~impairment~~6.71% ~~155~~1,501,604 ~~N/A~~28,149 7.52% Noninterest-earning assets 118,604 112,778 ---------- ---------- ~~Balance~~Total atassets ~~the~~$1,498,441 ~~end~~$1,614,382 of========== ~~the~~========== ~~period~~Interest-bearing liabilities: Deposits $934,441 8,637 3.67% $1,045,759 13,387 5.08% Borrowings 323,206 4,933 6.06% 348,014 5,609 6.39% Junior Subordinated Debentures 43,750 1,032 9.44% 43,750 998 9.13% ---------- ------- ---------- ------ Total interest-bearing liabilities 1,301,397 14,602 4.45% 1,437,523 19,994 5.52% ------- ------ Noninterest-bearing liabilities 143,797 130,513 Shareholders' equity 53,247 46,346 ---------- --------- Total liabilities and shareholders' equity $1,498,441 $1,614,382 ========== ========== Net interest income before capitalized interest 8,542 8,155 ------ ------ Interest rate spread 2.26% 2.00% Net interest margin 2.48% 2.18% Interest expense capitalized (~~708~~1) ~~N/A~~-- 18 ------ ------ Net interest income $8,542 $8,173 ====== ====== Average interest-earning assets to average interest-bearing liabilities 106.03% 104.46%

(1)Capitalized construction interest in 2001. 23

~~JUNE~~NINE ~~30,~~MONTHS ~~2002~~ENDED ~~DECEMBER~~SEPTEMBER 3130, ------------------------------------------------------------------------------------ 2002 2001 -------------------------------------- ----------------------------------------- ~~AMOUNT~~AVERAGE ~~PERCENT~~AVERAGE ~~AMOUNT~~BALANCE ~~PERCENT~~INTEREST RATE BALANCE INTEREST RATE ------- -------- ---- ------- -------- ~~Noninterest~~-~~bearing~~---- ~~checking~~Interest-earning ~~accounts~~assets: Loans receivable $1,082,470 ~~123~~$ 58,~~377~~420 117.20% $ ~~146~~1,~~055~~256,129 13$ 75,944 8.06% Mortgage-backed securities 163,673 7,426 6.05% 196,951 9,970 6.75% Other 164,110 4,163 3.38% 89,095 3,940 6.21% ---------- ---------- ------------ --------- Total interest-earning assets 1,410,253 70,009 6.62% 1,542,175 89,854 7.79% ---------- --------- Noninterest-earning assets 125,642 119,877 ---------- ------------ Total assets $1,535,895 $ 1,662,052 ============ Interest-bearing ~~checking~~liabilities: ~~accounts~~Deposits ~~206~~$ 962,~~305~~747 ~~19 198~~28,~~414~~137 173.91% ~~Passbook~~$ ~~savings~~1,055,952 ~~and~~43,187 ~~statement~~5.47% ~~savings~~Borrowings 90327,~~876~~689 915,424 826.29% 386,~~619~~500 718,364 ~~Certificates~~6.35% ofJunior ~~deposit~~Subordinated ~~652~~Debentures 43,~~498~~750 613,110 ~~715~~9.48% 43,~~306~~750 632,995 9.13% ---------- ---------- ------------ --------- Total interest-bearing ~~deposits~~liabilities ~~949~~1,~~679~~334,186 8946,671 ~~996~~4.68% 1,~~339~~486,202 8764,546 5.81% ---------- --------- Noninterest-bearing liabilities 145,424 128,296 Shareholders' equity 56,285 47,554 ---------- ------------ Total liabilities and shareholders' equity $1,~~073~~535,~~056~~895 ~~100%~~ $1,~~142~~662,~~394~~052 ~~100%~~ ========== ============ Net interest income before capitalized interest 23,338 25,308 ---------- --------- Interest rate spread 1.94% 1.98% Net interest margin 2.21% 2.22% Interest expense capitalized (1) -- 357 ---------- --------- Net interest income $ 23,338 $ 25,665 ========== ========= Average interest-earning assets to average interest-bearing liabilities 105.70% 103.77%

(1)Capitalized construction interest in 2001. Rate and Volume Variances. Net interest income is affected by changes in the level of interest-earning assets and interest-bearing liabilities and changes in yields earned on assets and rates paid on liabilities. The following table sets forth, for the periods indicated, a summary of the changes in interest earned and interest paid resulting from changes in average asset and liability balances and changes in average rates. Changes attributable to the combined impact of volume and rate have been allocated proportionately to change due to volume and change due to rate.

~~YEAR~~THREE ~~WEIGHTED~~MONTHS ~~AVERAGE~~ ENDED ~~AMOUNT~~SEPTEMBER ~~INTEREST~~30, 2002 VS. 2001 INCREASE (DECREASE) ------------------------------------- CHANGE CHANGE TOTAL DUE TO DUE TO CHANGE VOLUME RATE ------ ------ ---- (IN THOUSANDS) INTEREST INCOME ON: Loans receivable $(4,237) $(2,192) $(2,045) Mortgage-backed securities (741) (335) (406) Other (27) 482 (509) ------- ------- ~~2002~~------- Total interest income (5,005) $~~270~~(2,~~861~~045) ~~3.55%~~$(2,960) ~~2003~~------- ~~267,295~~======= ~~3.78~~======= ~~2004~~INTEREST ~~55,720~~EXPENSE ON: Deposits $(4~~.55~~,750) ~~2005~~$(1,425) 11$(3,~~466~~325) ~~5.45~~Borrowings ~~2006~~(676) ~~26,389~~(400) ~~5.30~~(276) ~~Thereafter~~Junior ~~20,767~~Subordinated ~~5.07~~Debentures 34 -- 34 ------- ------- ------- Total interest expense (5,392) $~~652~~(1,~~498~~825) $(3~~.85%~~,567) ======= ======= Increase in net interest income $ 387 =======

~~JUNE~~NINE MONTHS ENDED SEPTEMBER 30, 2002 ~~DECEMBER~~VS. ~~31,~~ 2001 INCREASE (DECREASE) --------------------- ------------------~~---~~ ~~AMOUNT~~CHANGE ~~RATE~~CHANGE ~~AMOUNT~~TOTAL DUE TO DUE TO CHANGE VOLUME RATE ------ -- ----- ---~~---~~ -------- ~~Federal~~(IN ~~Home~~THOUSANDS) ~~Loan~~INTEREST ~~Bank~~INCOME ~~Advances~~ON: Loans receivable $~~266~~(17,~~350~~524) ~~5.2%~~$ (9,865) $~~278~~ (7,~~912~~659) 6.Mortgage-backed securities (2%,544) ~~Reverse~~(1,577) ~~repurchase~~(967) ~~agreements~~Other ~~41,000~~223 ~~5.9~~486 ~~41,000~~(263) ~~5.9~~-------- ~~Commercial~~-------- ~~bank~~-------- ~~note~~Total ~~maturing~~interest ~~December~~income 31(19,845) ~~2002 5~~$(10,~~000~~956) ~~4.8~~$ 5(8,~~000~~889) ~~4.8~~-------- ~~Loan~~======== ~~from~~======== ~~majority~~INTEREST ~~stockholder~~EXPENSE -ON: -Deposits 2$(15,~~000~~050) ~~0.0~~$ ~~Subordinated~~(3,555) ~~debt~~$(11,495) ~~maturing~~Borrowings ~~January~~(2,940) 1(2,770) ~~2005~~(170) ~~13,960~~Junior ~~9.6~~Subordinated ~~13,985~~Debentures ~~9.6~~115 -- 115 -------- -------- -------- Total interest expense (17,875) $~~326~~ (6,~~310~~325) $~~340~~(11,~~897~~550) ======== ======== Decrease in net interest income $ (1,970) ========

Provision for Loan Losses. The provision for loan losses decreased to a negative provision of $565 thousand and increased to $5.7 million for the three- and nine-month periods ended September 30, 2002, respectively, as compared to $1.2 million and $5.3 million for the same periods in 2001. Management decreased the provision for loan losses in the third quarter primarily due to the decrease of $3.5 million in nonperforming loans from June 30, 2002, a commercial real estate loan that was charged off for less than was reserved, and a decrease in doubtful loans of $3.2 million in the commercial real estate and corporate commercial portfolios. As a result, the allowance for losses on loans at September 30, 2002 was $17.4 million, or 1.61%, of total loans, as compared to $17.3 million, or 1.49%, of total loans, at December 31, 2001. Noninterest Income. Total noninterest income decreased 79.2% to $963 thousand for the third quarter of 2002, as compared to $4.6 million for the same period in 2001. Noninterest income for the nine months ended September 30, 2002, decreased 66.2% to $3.8 million from $11.4 million in the same period in 2001. Gain on sale of loans was $1.9 million and $4.8 million for the three- and nine-month periods ended September 30, 2002, respectively, as compared to $3.1 million and $5.5 million during the same periods in 2001. The primary reason for the decrease in the gains on sale of loans is that the Company has chosen to no longer sell its commercial real estate and multifamily loans in the secondary market since the first quarter of 2002. The decision to keep these loans in the Company's portfolio was based on the Company's improved capital position after its stock offerings during the first quarter. Additionally, in the current interest rate environment, the loan servicing portion of the gain on sale of loans has decreased significantly due to increased prepayment speeds and the shorter expected average life of the portfolio. The proceeds from sales of residential loans held for sale in the first nine months of 2002 were $647.8 million as compared to $235.1 million in the same period in 2001. Proceeds from the sale of multifamily and commercial real estate loans were $6.5 million for the first nine months of 2002 as compared to $86.0 million for the same period in 2001. There were losses from net loan servicing of $5.0 million in the three-month period ended September 30, 2002 as compared to losses of $683 thousand for the same period in 2001. For the nine-month period ended September 30, 2002, losses on net loan servicing were $11.3 million as compared to losses of $1.5 million for the same time period in 2001. The primary reason for the higher losses was the increased amortization and impairment of servicing rights due to an increase in loan prepayments in 2002 compared to the same period in 2001. The portfolio of loans serviced for others increased to $2.3 billion at September 30, 2002 from $2.2 billion at December 31, 2001. Service charges on deposit accounts increased 92.2% and 62.9% to $959 thousand and $2.3 million in the three- and nine-month periods ended September 30, 2002 compared to $499 thousand and $1.4 million for the same periods in 2001. The primary reason for the significant increase is due to new fee-generating programs that the Company implemented during 2002. 25 The Company had $946 thousand and $2.6 million in gains on the sale of securities in the three- and nine-month periods ended September 30, 2002, respectively, as compared to $84 thousand and $1.6 million for the same periods in 2001. In both periods substantially all of the gains were the result of securitizing one-to-four family loans and simultaneously selling those securities. In the third quarter of 2002, these gains from securitizing one-to-four family loans were partially offset by losses from selling the Company's FHLMC Preferred Stock. Other operating income increased to $2.2 million in the three-month period ended September 30, 2002 compared to $1.6 million for the same period in the previous year. For the nine months ended September 30, 2002 other operating income increased to $5.5 million as compared to $4.3 million for the same period in the prior year. Included in other operating income is a one-time gain of $203 thousand recorded on the sale of our credit card portfolio. Noninterest Expense. Total noninterest expense increased to $11.4 million in the three-month period ended September 30, 2002 as compared to $11.1 million for the same period in 2001. For the first nine months of 2002 total noninterest expense was $44.9 million as compared to $34.8 million in 2001. A significant portion of the increase is due to an impairment charge of $9.6 million taken against premises and equipment. Personnel related expenses decreased $470 thousand and $1.1 million in the three- and nine-month periods ended September 30, 2002, respectively, as compared to the same periods in 2001. The Company announced an efficiency program during the second quarter of 2002 that has reduced total employees and the Company's personnel related expenses. Occupancy costs decreased $556 thousand and $1.0 million in the three- and nine-month periods ended September 30, 2002, respectively, over the same periods in 2001. The primary reason that occupancy costs have decreased is that the Company is holding a significant amount of premises and equipment for sale. This has caused a significant decrease in depreciation expense, since premises and equipment held for sale is not depreciated. Since no new offices have been opened in 2002, the Company's occupancy costs have stabilized over the last 12 months. The Company is not planning to open any new facilities in the near future, which will allow occupancy costs to remain stable. Data processing expense decreased $11 thousand and $4 thousand in the three- and nine-month periods ended September 30, 2002, respectively, as compared to the same periods in 2001. Data processing costs have stabilized in 2002 after seeing significant growth in 2001 due to the Bank's systems conversion in September 2000. Data processing costs should remain stable in the foreseeable future. Marketing expense decreased $11 thousand and $114 thousand in the three- and nine-month periods ended September 30, 2002, respectively, compared to the same periods in the prior year. Marketing costs in 2002 are limited to more routine activities as compared to prior years. State franchise taxes increased $60 thousand and decreased $383 thousand in the three- and nine-month periods ended September 30, 2002, respectively, as compared to the same periods in 2001. The primary reason for the decrease in the nine-month period was a refund from the State of Ohio that was received in May of 2002 and a refinement of the allocation of taxes among the various states where the Bank conducts business. At September 30, 2002, premises and equipment held for sale included certain parcels of land and buildings and all works of art owned by the Company. During June 2002, the Company reclassified these properties as held for sale. Previously, the Company had planned to sell other properties whose fair value met or exceeded carrying value. However, after reevaluating the strategic options available to the Company and the Supervisory Directive, management decided to revise its plan to sell properties and, therefore, moved certain additional properties into held for sale and removed other properties from held for sale. In conjunction with the reclassification of these properties, the Company determined that the carrying value of certain properties was less than the estimated net proceeds expected from the sale of these properties. Accordingly, the Company recognized an $8.8 million loss on the valuation impairment of these properties in the second quarter. The fair value of these properties was estimated based on either a present value analysis of the current and expected revenues and expenses based on the properties being considered as income producing or on third party purchase offers for the properties. Management obtained an appraisal in the third quarter to determine the fair values of these properties. As a result of this appraisal, the Company lowered their carrying values by an additional $803 26 thousand. Any future valuation of these assets may result in additional adjustment to their carrying values. No valuation allowance has been recorded on the art held for sale based on an appraisal, which indicates the art's fair value exceeds its current carrying value. Other operating expenses, which include miscellaneous general and administrative costs such as loan servicing, loan processing costs, business development, check processing, ATM expenses, and expenses pertaining to real estate owned and professional expenses, increased $758 thousand and $3.5 million for the three- and nine-month periods ended September 30, 2002, respectively, as compared to the same period in 2001. These increases were generally the result of increases in expenses pertaining to real estate owned and legal expense. On June 6, 2002, the Company announced that it was undergoing a restructuring plan that would be concluded by year-end. The Company currently projects annualized cost savings of $3.0 million as a result of improved process efficiencies and personnel reductions. The Company originally expected to incur costs in connection with the restructuring, primarily personnel related, of $0.5 million to $1.0 million, to be taken in the third quarter of 2002. Since most of the personnel reductions were the result of attrition, the Company now expects restructuring costs not to exceed $100 thousand. Provision for Income Taxes. The Company's income tax benefit increased $428 thousand and $7.0 million for the three and nine months ended September 30, 2002, respectively, as compared to the prior year period. The primary reason for the increase in the benefit was due to the fact that the Company had a larger pre-tax loss during the three- and nine-month periods ended September 30, 2002 as compared to the same periods in the prior year. ASSET QUALITY The Company undertakes detailed reviews of the loan portfolio regularly to identify potential problem loans or trends and to provide for adequate estimates of probable losses. In performing these reviews, management considers, among other things, current economic conditions, portfolio characteristics, delinquency trends, and historical loss experiences. The Company normally consider loans to be nonperforming when payments are 90 days or more past due or when the loan review analysis indicates that repossession of the collateral may be necessary to satisfy the loan. In addition, a loan is considered impaired when, in management's opinion, it is probable that the borrower will be unable to meet the contractual terms of the loan. When loans are classified as nonperforming, the Company assesses the collectibility of the unpaid interest. Interest determined to be uncollectible is reversed from interest income. Future interest income is recorded only if the loan principal and interest due is considered collectible and is less than the estimated fair value of the underlying collateral. The following table provides information concerning the Company's nonperforming assets and the allowance for losses on loans as of the dates indicated. All loans classified by management as impaired were also classified as nonperforming. 27

~~WEIGHTED~~SEPTEMBER ~~AVERAGE~~30, ~~YEAR~~DECEMBER ~~ENDED~~31, ~~AMOUNT~~2002 ~~INTEREST~~2001 ~~RATE~~ ---------- ---------- Nonaccrual loans $ 27,498 $ 30,602 Loans past due greater than 90 days or impaired, still accruing 578 85 ---------- ---------- ~~2002~~Total $nonperforming ~~55,369~~loans ~~4.45% 2003 69~~28,~~257~~076 ~~5.81 2004 69~~30,~~605~~687 ~~6.15~~Real ~~2005~~estate ~~98,112~~owned 5~~.01 2006 4~~,~~292~~713 ~~6.61 Thereafter 29~~2,~~675~~791 ~~6.40~~---------- ---------- Total nonperforming assets $~~326~~ 33,~~310~~789 ~~5.48%~~$ 33,478 ========== ========== Allowance for losses on loans $ 17,387 $ 17,250 ========== ========== Nonperforming loans to total loans 2.59% 2.68% Nonperforming assets to total assets 2.26% 2.09% Net charge-offs to average loans(1) 0.70% 0.26% Provision for loan losses to average loans(1) 0.72% 0.53% Allowance for losses on loans to total nonperforming loans at end of period 61.93% 56.21% Allowance for losses on loans to total loans at end of period 1.61% 1.49%

(1) Annualized for comparative purposes. Nonperforming loans at September 30, 2002 decreased $2.6 million to $28.1 million as compared to $30.7 million at December 31, 2001. Real estate owned increased $2.9 million over the same period. These changes were primarily due to a transfer of $4.2 million of loans to real estate owned during the first and third quarters of 2002. This was partially offset by sales of other real estate owned of $1.3 million. On March 26, 2001, based on financial projections provided by the borrowers on March 12, 2001, $14.7 million of business loans to several entities affiliated with each other were placed on nonaccrual status and were calculated to be impaired in the amount of $3.5 million. These loans are business loans secured by junior liens on several nursing homes and assisted living centers. The borrowers did not make any payments on these loans during the first quarter of 2001. The estimate of the impairment was the result of comparing the book value of the loans to the present value of cash flows expected to be received based on the most likely workout scenario. In May 2001, the borrowers began making interest payments on these loans. These loans were brought current as of September 30, 2002 through payments by the borrowers and a reduction in the rates charged on these loans. However, due to the continuing weakness of the borrowers, these loans are still considered impaired and nonperforming at September 30, 2002. Management determined the amount of the impairment of these loans to be $3.2 million as of September 30, 2002. Management will charge off these balances if it becomes clear that the borrowers have exhausted all possible efforts to improve the value of the underlying collateral through enhancement of the businesses' operating performance or the possibility of the borrowers obtaining alternate sources of financing. The provision for loan losses decreased in the three months ended September 30, 2002. Management decreased the provision for loan losses in the third quarter primarily due to the decrease of $3.5 million in nonperforming loans from June 30, 2002, a commercial real estate loan that was charged off for less than was reserved, and a decrease in doubtful loans of $3.2 million in the commercial real estate and corporate commercial portfolios. In addition to the nonperforming assets included in the table above, the Company identifies potential problem loans, which are still performing but have a weakness which causes it to classify those loans as substandard for regulatory purposes. There were $0.5 million of loans in this category at September 30, 2002, compared to $1.3 million of such loans at December 31, 2001. 28 FINANCIAL CONDITION Total assets were $1.497 billion at September 30, 2002 as compared to $1.608 billion at December 31, 2001, a decrease of $111 million. The decrease in assets was concentrated in loans, premises and equipment and mortgage loan servicing rights. Under the Supervisory Agreement, the Company has committed that quarter end assets for the Bank will not exceed $1.702 billion during the term of the agreement. Securities available for sale increased $9.5 million to $103.8 million at September 30, 2002 as compared to $94.3 million at December 31, 2001. The primary reasons for the increase were the transfer of $13.8 million in tax-exempt bonds to available for sale from held to maturity and the purchase of $146.4 million of U.S. agency notes and bills which was partially offset by $142.3 million of maturities of U.S. agency notes and bills and the sale of $4.4 million of FHLMC Preferred Stock. Loans receivable, net increased $63.9 million, or 6.7%, to $1.011 billion at September 30, 2002 from $974.5 million at December 31, 2001. This increase was due to transfers of commercial and multi-family loans of $81.5 million from held for sale to loans receivable. This was partially offset by decreases due to loan sales and repayments in the first nine months of 2002. Loans held for sale decreased $98.4 million to $70.9 million at September 30, 2002 from $169.3 million at December 31, 2001. The primary reasons for the decrease in this category are the loans sales that have occurred in the first nine months of 2002 and the decision to transfer all multi-family and commercial real estate loans from the loans held for sale category back into the loan portfolio, due to an improvement in the Bank's capital position. Federal Home Loan Bank stock decreased $4.5 million to $12.4 million at September 30, 2002 as compared to the December 31, 2001 balance. The reason for the decrease was the redemption of $5.1 million of Federal Home Loan Bank stock, which was partially offset by the payment of stock dividends to the Bank from the Federal Home Loan Bank. Loan servicing rights, net, decreased $9.1 million to $13.9 million at September 30, 2002, as compared to $23.0 million at December 31, 2001. The primary reason for the decrease was the continuing decrease in interest rates through September 2002. The decreasing rates have increased the impairment of the value of the servicing rights to $6.2 million as well as accelerated the amortization of the servicing rights to $9.7 million in the first nine months of 2002. These decreases to the servicing rights more than offset the $6.8 million of servicing rights that were originated or acquired during the first nine months of 2002. Real estate owned increased $2.9 million, or 104.7%, to $5.7 million at September 30, 2002. The primary reason for the increase was the $4.2 million transfer into real estate owned of two properties in the first quarter of 2002 and a third property in the third quarter. This was partially offset by $837 thousand in additional provision taken in the first nine months and $1.3 million in sales of other real estate owned. Total deposits were $1.059 billion at September 30, 2002, a decrease of $83.5 million from the balance of $1.142 billion at December 31, 2001. The decrease resulted principally from decreased certificates of deposit balances of $87.2 million, including a decrease of $48.6 million in out of state and brokered certificates of deposit, and non-interest bearing checking accounts of $6.8 million, which were partially offset by an increase of $10.5 million in interest-bearing checking and savings accounts. During 2001 and continuing through the first quarter of 2002, the Bank increased the proportion of certificates of deposit due to mature more than one year in the future in order to reduce interest rate risk. Borrowings decreased $32.5 million, or 9.5%, from December 31, 2001 to September 30, 2002. The decrease was the result of the paydown of Federal Home Loan Bank advances and the $2.0 million repayment of the loan to the Company's majority shareholder. 29 LIQUIDITY AND CAPITAL RESOURCES Liquidity. The term "liquidity" refers to the ability to generate adequate amounts of cash for funding loan originations, loan purchases, deposit withdrawals, maturities of borrowings, and operating expenses. The Bank's primary sources of internally generated funds are principal repayments and payoffs of loans, cash flows from operations, and proceeds from sales of assets. External sources of funds include increases in deposits and borrowings, and public or private securities offerings by the Company. The Company's primary sources of funds currently are dividends from the Bank, which are subject to restrictions imposed by federal bank regulatory agencies, and debt and equity offerings. The Company's primary use of funds is for interest payments on its existing debt. At September 30, 2002, the Company, excluding the Bank, had cash and readily convertible investments of $3.6 million. This includes $672 thousand the Company holds in liquid assets as a requirement of the subordinated notes due January 1, 2005. The Company refinanced its commercial bank note payable with a line of credit in September 2002. The maturity date for the new line of credit is December 31, 2003. The Bank's liquidity ratio (average daily balance of liquid assets to average daily balance of net withdrawable accounts and short-term borrowings) for the quarter ending September 30, 2002 was 5.3%. Historically, the Company has maintained its liquidity close to 4.0% since the yield available on qualifying investments is lower than alternative uses of funds and is generally not at an attractive spread over incremental cost of funds. At September 30, 2002, the Bank had approximately $20.5 million in cash and $900 thousand in U.S. Treasury securities, which were available for sale or to pledge to meet liquidity needs. While principal repayments and Federal Home Loan Bank advances have been fairly stable sources of funds, deposit flows and loan prepayments are greatly influenced by prevailing interest rates, economic conditions, and competition. The Company regularly reviews cash flows needed to fund its operations and adjusts loan and deposit rates as needed to balance cash available with cash needs. We had access to wholesale borrowings based on the availability of eligible collateral. The Federal Home Loan Bank makes funds available for housing finance based upon the blanket or specific pledge of certain one- to four-family and multifamily loans and various types of investment and mortgage-backed securities. The Bank had borrowing capacity at the Federal Home Loan Bank under its blanket pledge agreement of approximately $17.4 million at September 30, 2002. At September 30, 2002, $256.9 million, or 24.3%, of the Company's deposits were in the form of certificates of deposit of $100,000 and over. The Company has also accepted out-of-state time deposits from individuals and entities, predominantly credit unions. These deposits typically have balances of $90,000 to $100,000 and have a term of one year or more. At September 30, 2002, approximately $8.6 million, or 0.8%, of deposits were held by these individuals and entities. Of these out-of-state time deposits, $1.9 million were also included in the $100,000 and over time deposits discussed above. During 2001, the Bank received regulatory approval and began accepting brokered deposits. At September 30, 2002, brokered deposits totaled $70.6 million. The total of all certificates of deposits from brokers, out-of-state sources, and other certificates of deposit of $100,000 and over was $263.6 million at September 30, 2002, or 24.9%, of total deposits. The Supervisory Agreement requires that the Bank reduce its reliance on volatile funding sources, including but not limited to, brokered and out-of-state deposits. Brokered and out-of-state deposits have decreased from $127.8 million at December 31, 2001 to $79.20 million at September 30, 2002. The Supervisory Agreement does not call for a specific amount of reduction or a specific time frame in which to make the reduction. Since many of these depositors are not located near the Bank's retail sales offices and do not have other accounts, these deposits tend to be less stable and are less likely to renew if the Company's rates are not competitive with national rates. The Company's dependence on these wholesale types of deposits creates the risk that the Company might experience a liquidity shortage if it stopped issuing or renewing these types of certificates of deposit or that it would have to pay high rates to renew or replace these funds which would negatively impact profitability. In order to minimize these risks, the Company monitors the maturity of these types of funds so their maturities are staggered. The Company also deals with several brokers and 30 compares rates among them to help ensure the Company is paying competitive rates. However, based on the Federal Home Loan Bank collateral requirements, the Bank may have to use brokered or out-of-state certificates of deposit for liquidity purposes. If a liquidity shortage occurs despite all of these steps, the Company has the ability to generate additional liquidity beyond the cash and securities mentioned above by stopping the issuance of commitments to make new loans and selling some or all of the $70.9 million of loans the Company owns that are classified as held for sale at September 30, 2002. Such a liquidation of loans held for sale could have a negative impact on net interest income. The financial market makes funds available through reverse repurchase agreements by accepting various investment and mortgage-backed securities as collateral. The Bank had borrowings through reverse repurchase agreements of $49.5 million at September 30, 2002. Capital. The OTS imposes capital requirements on savings associations. Savings associations are required to meet three minimum capital standards: (i) a core requirement, (ii) a tangible capital requirement, and (iii) a risk-based capital requirement. Such standards must be no less stringent than those applicable to national banks. In addition, the OTS is authorized to impose capital requirements in excess of these standards on individual associations on a case-by-case basis. The Bank's regulatory capital ratios at September 30, 2002 were in excess of the "well capitalized" capital requirements. The following table summarizes the Bank's position against the "well capitalized" requirements:

ASWELL OFCAPITALIZED ~~OR FOR THE SIX MONTHS ENDED JUNE 30, 2002~~ ------------------------- PERCENT OF AMOUNT ASSETS ------ ------~~-------------------~~ ~~RETAIL~~Tangible ~~AND~~Capital: ~~COMMERCIAL~~Actual ~~MORTGAGE~~$ ~~PARENT~~104,548 ~~BANKING~~7.01% ~~BANKING~~Requirement ~~AND~~29,818 ~~OTHER~~2.00 ~~TOTAL~~ ----------- ----~~-----~~ ~~---------~~Excess ~~------- OPERATING RESULTS: Net interest income $ 11,509 $ 7,134 $~~ (~~3,847~~Deficiency) $ 1474,~~796~~730 ~~Provision~~5.01% ~~for~~========== ~~losses~~==== onCore ~~loans~~Capital: 5Actual $ 104,~~631~~548 ~~654~~7.01% -Requirement 674,~~285~~544 ~~--------~~5.00 -------- ---~~-----~~ ----~~------~~ ~~Net~~Excess ~~interest income after provision for loan losses 5,878 6,480~~ (~~3,847~~Deficiency) 8$ 30,~~511~~004 ~~Noninterest income~~ 2~~,807~~.01% ~~3,767~~========== ~~1,175~~==== ~~7,749~~Risk-based ~~Direct~~Capital: ~~noninterest~~Actual ~~expense~~$ 10115,~~012~~787 ~~5,094~~10.05% ~~1,395~~Requirement 16115,~~501~~225 ~~Allocation~~10.00 ~~of overhead 11,267 5,732 16,999~~ -------- ---~~-----~~ -----~~---~~ ~~----------~~Excess ~~Net income~~ (~~loss~~Deficiency) ~~before income taxes~~ $ ~~(12,594)~~562 $0.05% ~~(579) $ (4,067) $ (17,240)~~ ======== ==~~======~~ ======== ========== FINANCIAL DATA: Segment assets $ 863,072 $360,007 $296,197 $1,519,276 Depreciation and amortization 3,204 3,028 713 6,945 Expenditures for additions to premises and equipment 861 259 1,120

FORWARD LOOKING STATEMENTS Certain statements contained in this report that are not historical facts are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, that are subject to assumptions, risks and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "anticipate," "likely," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may." Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: - changes in interest rates; - continued weakening in the economy and other factors that would materially impact credit quality trends, real estate lending and the ability of the Bank to generate loans; - business and other factors affecting the economic outlook of individual borrowers of the Bank and their ability to repay loans as agreed; 31 - the ability of the Company and the Bank to timely meet their obligations under their respective supervisory agreements; - the status of the relevant markets in which the Company and the Bank may sell various assets; - increase in the dollar amount of nonperforming loans held by the Bank; - increased competition, which raises rates paid on demand and time deposits offered by the Bank; - adverse developments of a material nature in collection and other lawsuits involving the Bank; - delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; - changes in law imposing new legal obligations or restrictions or unfavorable resolution of litigation; - the ability of the Bank to continue to use the Federal Home Loan Bank as a source of liquidity; and - changes in accounting, tax, or regulatory practices or requirements. Management decisions are subjective in many respects and susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause the Company to alter business strategy or capital expenditure plans that may, in turn, affect the results of operations. In light of the significant uncertainties inherent in the forward-looking information included in this prospectus, you should not regard the inclusion of such information as the Company's representation that it will achieve any strategy, objectives or other plans. The forward-looking statements contained in this prospectus speak only as of the date of this prospectus as stated on the front cover, and the Company has no obligation to update publicly or revise any of these forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company, like other financial institutions, is subject to market risk. Market risk is the risk that a company can suffer economic loss due to changes in the market values of various types of assets or liabilities. As a financial institution, a profit is made by accepting and managing various types of risks. The most significant of these risks are credit risk and interest rate risk. The principal market risk for the Company is interest rate risk. Interest rate risk is the risk that changes in market interest rates will cause significant changes in net interest income because interest-earning assets and interest-bearing liabilities mature at different intervals and reprice at different times. The OTS currently looks to the Thrift Bulletin 13a, issued December 1, 1998, to evaluate interest rate risk at institutions they supervise. The OTS categorizes interest rate risk as minimal, moderate, significant, or high based on a combination of the projected Net Portfolio Value ("NPV") after a 200 basis point change in interest rates and the size of that change in NPV due to a 200 basis point change in interest rates. The Company manages interest rate risk in a number of ways. Some of the tools used to monitor and quantify interest rate risk include: - annual budgeting process; - quarterly forecasting process; - monthly review of listing of liability rates and maturities by month; - monthly shock report of effect of sudden interest rate changes on net interest income; 32 - monthly shock report of effect of sudden interest rate changes on net value of portfolio equity; - monthly analysis of rate and volume changes in historic net interest income; - semi-monthly forecast of balance sheet activity. - weekly review of certificate of deposit offering rates and maturities by day; and The Bank has established an asset and liability committee to monitor interest rate risk. This committee has representation from finance, lending and deposit operations. This committee meets at least twice a month, reviews the current interest rate risk position, and determines both long- and short-term strategies. The activities of this committee are reported to the Board of Directors of the Bank. Between meetings the members of this committee are involved in setting rates on deposits, setting rates on loans and serving on loan committees where they work on implementing the established strategies. One of the ways the Bank monitors interest rate risk quantitatively is to measure the potential change in net interest income based on various immediate changes in market interest rates. The following table shows the change in net interest income for immediate sustained parallel shifts of 1% and 2% in market interest rates for year-end 2001 and the most recent quarter. The results for a downward parallel shift of 2% at September 30, 2002 and December 31, 2001 are not meaningful because some rates such as the Federal Funds Rate are already less than 2%

ASEXPECTED OFCHANGE ORIN ~~FOR~~NET ~~THE~~INTEREST ~~SIX~~INCOME ~~MONTHS~~CHANGE ~~ENDED~~IN ~~JUNE~~INTEREST RATE SEPTEMBER 30, ~~2001~~2002 ~~--------------------------------------------------------~~DECEMBER ~~RETAIL~~31, ~~AND~~2001 ~~COMMERCIAL MORTGAGE PARENT BANKING BANKING AND OTHER TOTAL~~ ----------- --------- ---~~------~~ ------- ~~OPERATING RESULTS: Net interest income $ 8,502 $ 9,556 $ (565) $ 17,493 Provision for losses on loans 3,893 307~~ - ~~4,200~~ ---------- -------- -------- -~~---------~~ ~~Net interest income after provision for loan losses 4,609 9,249 (565) 13,293 Noninterest income 3,814~~ +2~~,942~~% ~~(25)~~ +6~~,731~~% ~~Direct noninterest expense 10,126 4,266 983 15,375 Allocation of overhead 5,907 2,489 8,396 ---------- -------- -------- ---------- Net (loss) income before income taxes $ (~~+7~~,610)~~% ~~$ 5,436 $ (~~+1~~,573)~~% $+3% (+3~~,747)~~% ~~========== ======== ======== ========== FINANCIAL DATA: Segment assets $~~-1~~,071,260~~% ~~$441,586~~+3% ~~$178,401 $~~-1~~,691,247~~% ~~Depreciation and amortization 1,908~~ -2~~,771~~% ~~474~~N/A ~~5,153 Expenditures for additions to premises and equipment 6,039 640 6,679~~N/A

The change in net interest income from a change in market rates is a short-term measure of interest rate risk. The results above indicate that at December 31, 2001 the Company had exposure to falling rates but would benefit from rising rates. The expected change in net interest income at September 30, 2002 was impacted by a shift in the balance sheet towards short-term liabilities. During the quarter, short-term interest-earning assets decreased in dollar amount to a greater extent than short-term interest-bearing liabilities. The net result was a reduction of the benefit in a 200 basis point rising rate scenario, while at 100 basis points, the benefit remained unchanged. The Company now has a benefit in a falling rate scenario. Another quantitative measure of interest rate risk is the change in the market value of all financial assets and liabilities based on various immediate sustained shifts in market interest rates. This concept is also known as NPV and is the methodology used by the OTS in measuring interest rate risk. The following table shows the change in net portfolio value for immediate sustained parallel shifts of 1% and 2% in market interest rates for year-end 2001 and the most recent quarter. The results for a downward parallel shift of 2% at September 30, 2002 and December 31, 2001 are not meaningful because some rates such as the Federal Funds Rate are already less than 2%

~~THREE~~EXPECTED ~~MONTHS~~CHANGE ~~ENDED~~IN ~~JUNE~~NET ~~30,~~PORTFOLIO ~~SIX~~VALUE ~~MONTHS ENDED JUNE 30,~~ ------------------------------- ------- CHANGE IN INTEREST RATE SEPTEMBER 30, 2002 DECEMBER 31, 2001 ----------------------- ~~2002 2001 2002 2001~~ ---- ---- ---------- ----------------- ~~Net income (loss) (in thousands) $(11,139) $(~~+2~~,078)~~% ~~$(10,978) $(2,501) Basic and diluted earnings (loss) per share $(0.69) $(0.26) $(0.89) $(0.31) Return on average assets (2.90)~~-6% ~~(0.49)~~-16% (+1~~.42)~~% ~~(0.30)~~-3% ~~Return on average equity (66.93)~~-8% ~~(17.52)~~-1% ~~(38.21)~~+6% ~~(10.40)~~+0% ~~Noninterest expense to average assets 5.69%~~ -2~~.96~~% ~~4.34%~~N/A ~~2.82% Efficiency ratio 206.18% 107.95% 148.57% 104.24% Net interest margin 2.12% 2.14% 2.08% 2.24%~~N/A

33 The change in net portfolio value is a long-term measure of interest rate risk. It assumes that no significant changes in assets or liabilities held would take place if there were a sudden change in interest rates. Because interest rate risk is monitored regularly and the Company actively manages that risk, these projections serve as a worst-case scenario assuming no reaction to changing rates. The results above indicate that exposure to rising and falling rates as measured by post-shock NPV has decreased. Under Thrift Bulletin 13a, the Company falls in the minimal interest rate risk category as of September 30, 2002, based upon current sensitivity to interest rate changes and the current level of regulatory capital. The Company's strategies to limit interest rate risk from rising interest rates are as follows: - originate one- to four-family loans primarily for sale; - originate the majority of business loans to float with prime rates; - increase core deposits, which have low interest rate sensitivity; - borrow funds with maturities greater than a year; - borrow funds with maturities matched to new long-term assets acquired; - consider the use of derivatives to reduce interest rate risk when economically practical. The Company also follows strategies that increase interest rate risk in limited ways including: - originating and purchasing fixed rate multifamily and commercial real estate loans limited to five year maturities or five year terms to repricing; and - originating and purchasing fixed rate consumer loans with terms from two to fifteen years. The Company is also aware that any method of measuring interest rate risk, including the two used above, has certain shortcomings. For example, certain assets and liabilities may have similar maturities or repricing dates but their repricing rates may not follow the general trend in market interest rates. Also, as a result of competition, the interest rates on certain assets and liabilities may fluctuate in advance of changes in market interest rates while rates on other assets and liabilities may lag market rates. In addition, any projection of a change in market rates requires that prepayment rates on loans and early withdrawal of certificates of deposits be projected and those projections may be inaccurate. The Company focuses on the change in net interest income and the change in net portfolio value as a result of immediate and sustained parallel shifts in interest rates as a balanced approach to monitoring interest rate risk when used with budgeting and the other tools noted above. At the present time the Company does not hold any trading positions, foreign currency positions, or commodity positions. Equity investments are approximately 1.0% of assets and 80.0% of that amount is held in Federal Home Loan Bank stock which can be sold to the Federal Home Loan Bank of Cincinnati at par. Therefore, the Company does not consider any of these areas to be a source of significant market risk. ITEM 4. CONTROLS AND PROCEDURES Within the 90-day period prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of Metropolitan Financial Corp.'s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed by Metropolitan Financial Corp. in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the 34 date of their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in the Company's internal controls or in other factors that could significantly affect its internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II. OTHER INFORMATION Items 1, 2, 3, 4, and 5 are not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit Number Description ------ ----------- 2.1 Agreement and Plan of Merger dated October 23, 2002, by and between the Company and Sky Financial Group, Inc. (filed as Exhibit 2.1 to the Company's Form 8-K filed on October 24, 2002 and incorporated herein by reference). 10.1 Second Addendum to Ninth Amendment to the Restated Loan Agreement by and between The Huntington National Bank, Robert M. Kaye as guarantor and the Company dated as of January 7, 2002 (filed as Exhibit 10.9 to the Company's Form 10-K filed on March 26, 2002 and incorporated herein by reference). Related loan paid in full. 10.2 Third Addendum to Ninth Amendment to the Restated Loan Agreement by and between The Huntington National Bank, Robert M. Kaye as guarantor and the Company dated as of July 22, 2002 (filed as Exhibit 10.2 to the Company's Form 10-Q filed on August 15, 2002 and incorporated herein by reference). Related loan paid in full. 10.3 Employment Agreement by and between the Company and Marcus Faust, Executive Vice President and Chief Financial Officer dated as of June 5, 2002 (filed as Exhibit 10.3 to the Company's Form 10-Q/A filed on October 22, 2002 and incorporated herein by reference). 10.4 Loan Agreement by and between Sky Bank and the Company dated September 12, 2002. 10.5 First Amendment to the Loan Agreement by and between Sky Bank, the Company and Robert M. Kaye as guarantor, dated September 20, 2002. 10.6 Escrow Agreement by and between the Company and Robert M. Kaye dated October 23, 2002. 10.7 Retention Pay Plan Agreement by and between the Company and certain key employees dated September 24, 2002. 10.8 Voting Agreement by and between Sky Financial and Robert M. Kaye, as Control Shareholder dated October 23, 2002. 99.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.3 Certification of Chief Executive Officer Regarding Disclosure Controls and Procedures 99.4 Certification of Chief Financial Officer Regarding Disclosure Controls and Procedures 35 b. Reports on Form 8-K. - On July 26, 2002, the Company filed an Item 5 on Form 8-K announcing its second quarter and June 30, 2002 year-to-date results, as well as changes in senior management and that the Company was under a Supervisory Directive from the OTS. On September 24, 2002, the Company filed an Item 5 on Form 8-K announcing that the Company had discovered an error in calculating its mortgage loan servicing rights value. The Company also indicated that it would have to restate prior period financial statements. 36 METROPOLITAN FINANCIAL CORP. SIGNATURE 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. METROPOLITAN FINANCIAL CORP. By: /s/Kenneth T. Koehler ------------------------------- Kenneth T. Koehler, President & Chief Operating Officer (on behalf of the Registrant) By: /s/Marcus Faust -------------------------------- Marcus Faust, Executive Vice President & Chief Financial Officer By: /s/Timothy W. Esson -------------------------------- Timothy W. Esson, Vice President-Finance for the Bank (as Principal Accounting Officer) Date: November 14, 2002 37

JUNE 30, DECEMBER 31, JUNE 30, 2002 2001 2001 ---------- ----------- ---------- Total assets (in thousands) $1,519,276 $1,608,420 $1,691,247 Shareholders' equity (in thousands) 54,343 45,517 46,829 Shareholders' equity to total assets 3.58% 2.83% 2.77% Shares outstanding 16,142,987 8,128,663 8,112,996 Book value per share $3.37 $5.60 $5.77 Tangible book value per share $3.20 $5.29 $5.45 Closing share price of common stock $3.59 $3.05 $3.80 Nonperforming assets to total assets (1) 2.42% 2.09% 2.11% Allowance for losses on loans to total loans (1) 1.97% 1.49% 1.39% Net charge-offs to average loans (2) 0.54% 0.26% 0.18%

THREE MONTHS ENDED JUNE 30, --------------------------------------------------------------------------------- 2002 2001 ------------------------------------- ---------------------------------------- AVERAGE AVERAGE BALANCE INTEREST RATE BALANCE INTEREST RATE ---------- -------- ----- ---------- -------- ------ Interest-earning assets: Loans receivable $1,050,633 $19,072 7.26% $1,277,603 $25,342 7.93% Mortgage-backed securities 158,396 2,460 6.21% 204,307 3,414 6.68% Other 198,292 1,565 3.31% 86,002 1,314 6.26% ---------- ------- ---------- ------- Total interest-earning assets 1,407,321 23,097 6.59% 1,567,912 30,070 7.68% ------- ------- Noninterest-bearing assets 134,366 127,689 ---------- ---------- Total assets $1,541,687 $1,695,601 ========== ========== Interest-bearing liabilities: Deposits $967,513 9,399 3.90% $1,076,052 14,670 5.47% Borrowings 320,459 5,194 6.50% 388,922 6,108 6.30% Junior Subordinated Debentures 43,750 1,039 9.50% 43,750 999 9.13% ---------- ------- ---------- ------- Total interest-bearing liabilities 1,331,722 15,632 4.71% 1,508,724 21,777 5.79% ------- ------- Noninterest-bearing liabilities 143,216 139,431 Shareholders' equity 66,749 47,446 ---------- ---------- Total liabilities and shareholders' equity $1,541,687 $1,695,601 ========== ========== Net interest income before capitalized interest 7,465 8,293 ------- ------- Interest rate spread 1.88% 1.89% Net interest margin 2.12% 2.14% Interest expense capitalized (1) - 111 ------- ------- Net interest income $ 7,465 $ 8,404 ======= ======= Average interest-earning assets to average interest-bearing liabilities 105.68% 103.92%

SIX MONTHS ENDED JUNE 30, --------------------------------------------------------------------------------- 2002 2001 ------------------------------------- ---------------------------------------- AVERAGE AVERAGE BALANCE INTEREST RATE BALANCE INTEREST RATE ---------- -------- ----- ---------- -------- ------ Interest-earning assets: Loans receivable $1,077,778 $39,053 7.25% $1,279,791 $52,340 8.18% Mortgage-backed securities 160,458 4,972 6.20% 199,782 6,775 6.78% Other 187,477 2,840 3.34% 83,224 2,590 6.54% ---------- ------- ---------- ------- Total interest-earning assets 1,425,713 46,865 6.62% 1,562,797 61,705 7.91% ------- ------- Noninterest-bearing assets 129,345 123,485 ---------- ---------- Total assets $1,555,058 $1,686,282 ========== ========== Interest-bearing liabilities: Deposits $ 977,135 19,500 4.02% $1,061,133 29,800 5.66% Borrowings 329,968 10,491 6.41% 406,061 12,754 6.33% Junior Subordinated Debentures 43,750 2,078 9.50% 43,750 1,997 9.13% ---------- ------- ---------- ------- Total interest-bearing liabilities 1,350,853 32,069 4.78% 1,510,944 44,551 5.94% ------- ------- Noninterest-bearing liabilities 146,261 127,221 Shareholders' equity 57,944 48,117 ---------- ---------- Total liabilities and shareholders' equity $1,555,058 $1,686,282 ========== ========== Net interest income before capitalized interest 14,796 17,154 ------- ------- Interest rate spread 1.84% 1.97% Net interest margin 2.08% 2.24% Interest expense capitalized(1) - 339 ------- ------- Net interest income $14,796 $17,493 ======= ======= Average interest-earning assets to average interest-bearing liabilities 105.54% 103.43%

THREE MONTHS ENDED JUNE 30, 2002 VS. 2001 INCREASE (DECREASE) --------------------------------------------------- CHANGE CHANGE TOTAL DUE TO DUE TO CHANGE VOLUME RATE --------- -------- ------- (IN THOUSANDS) INTEREST INCOME ON: Loans receivable $(6,270) $(4,244) $(2,026) Mortgage-backed securities (954) (726) (228) Other 251 393 (142) ------- ------- ------- Total interest income (6,973) $(4,577) $(2,396) ------- ------- ------- INTEREST EXPENSE ON: Deposits $(5,271) $(1,480) $(3,791) Borrowings (914) (1,075) 161 Junior Subordinated Debentures 40 - 40 ------- ------- ------- Total interest expense (6,145) $(2,555) $(3,590) ======= ======= Decrease in net interest income $(828) =======

SIX MONTHS ENDED JUNE 30, 2002 VS. 2001 INCREASE (DECREASE) --------------------------------------------------- CHANGE CHANGE TOTAL DUE TO DUE TO CHANGE VOLUME RATE --------- -------- ------- (IN THOUSANDS) INTEREST INCOME ON: Loans receivable $(13,287) $(7,715) $(5,572) Mortgage-backed securities (1,803) (1,254) (549) Other 250 410 (160) -------- ------- ------- Total interest income (14,840) $(8,559) $(6,281) -------- ------- ------- INTEREST EXPENSE ON: Deposits $(10,300) $(2,212) $(8,088) Borrowings (2,263) (2,421) 158 Junior Subordinated Debentures 81 - 81 -------- ------- ------- Total interest expense (12,482) $(4,633) $(7,849) ======= ======= Decrease in net interest income $ (2,358) ========

JUNE 30, DECEMBER 31, 2002 2001 -------- ----------- Nonaccrual loans $31,396 $30,602 Loans past due greater than 90 days or impaired, still accruing 191 85 ------- ------- Total nonperforming loans 31,587 30,687 Real estate owned 5,128 2,791 ------- ------- Total nonperforming assets $36,715 $33,478 ======= ======= Allowance for losses on loans $20,678 $17,250 ======= ======= Nonperforming loans to total loans 3.02% 2.68% Nonperforming assets to total assets 2.42% 2.09% Net charge-offs to average loans(1) 0.54% 0.26% Provision for loan losses to average loans(1) 1.18% 0.53% Allowance for losses on loans to total nonperforming loans at end of period 65.46% 56.21% Allowance for losses on loans to total loans at end of period 1.97% 1.49%

WELL CAPITALIZED -------------------------- PERCENT OF AMOUNT ASSETS ----------- ---------- Tangible Capital: Actual $ 106,153 7.01% Requirement 30,300 2.00 ----------- ----- Excess (Deficiency) $ 75,853 5.01% =========== ===== Core Capital: Actual $ 106,153 7.01% Requirement 75,751 5.00 ----------- ----- Excess (Deficiency) $ 30,402 2.01% =========== ===== Risk-based Capital: Actual $ 120,103 10.38% Requirement 115,744 10.00 ----------- ----- Excess (Deficiency) $ 4,359 0.38% =========== =====

EXPECTED CHANGE IN NET INTEREST INCOME -------------------------------------- CHANGE IN INTEREST RATE JUNE 30, 2002 DECEMBER 31, 2001 ----------------------- ------------- ----------------- +2% +4% +7% +1% +2% +3% -1% -1% -1% -2% N/A N/A

EXPECTED CHANGE IN NET PORTFOLIO VALUE -------------------------------------- CHANGE IN INTEREST RATE JUNE 30, 2002 DECEMBER 31, 2001 ----------------------- ------------- ----------------- +2% -9% -16% +1% -4% -8% -1% -3% +0% -2% N/A N/A

PROPOSAL #1 FOR AGAINST ----------- --- ------- Election of Directors Malvin E. Bank 7,805,173 191,667 Robert M. Kaye 7,806,559 190,281 David P. Miller 7,806,613 190,227

PROPOSAL #2 FOR AGAINST ABSTAIN --- ------- ------- Ratification of appointment of Crowe, Chizek and Company LLP 7,940,225 14,183 42,482

Exhibit Number Description -------- ----------- 10.1 Second Addendum to Sixth Amendment to the Restated Loan Agreement by and between The Huntington National Bank, Robert M. Kaye as guarantor and the Company dated as of January 7, 2002 (filed as Exhibit 10.9 to the Company's Form 10-K filed on March 26, 2002 and incorporated herein by reference). 10.2 Third Addendum to Sixth Amendment to the Restated Loan Agreement by and between The Huntington National Bank, Robert M. Kaye as guarantor and the Company dated as of July 22, 2002. 99.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b. Reports on Form 8-K. - On June 24, 2002, the Company filed an Item 5 on Form 8-K announcing that Kenneth R. Lehman had been named to the Board of Directors of Metropolitan Financial Corp.

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