EX-13.1 3 c68321a1ex13-1.txt PORTIONS OF THE 2001 ANNUAL REPORT TO STOCKHOLDERS UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- CORPORATE PROFILE Umbrella Bancorp, Inc. ("Umbrella Bancorp" or "the Company") (formerly, Argo Bancorp, Inc.) was incorporated in Delaware in August 1987 for the purpose of acquiring UmbrellaBank, fsb ("UmbrellaBank" or "Savings Bank") (formerly Argo Federal Savings Bank, FSB). The Company is a unitary savings and loan holding company and is registered as such with the Office of Thrift Supervision ("OTS"), Federal Deposit Insurance Corporation ("FDIC"), and the Securities and Exchange Commission ("SEC"). On April 18, 2001, the Company repurchased 365,796 shares of common stock from The Deltec Banking Corporation Ltd. ("Deltec"), in accordance with the terms of a stock purchase agreement (the "Purchase Agreement") and a stockholder agreement ("Stockholder Agreement") executed by the Company and Deltec on December 31, 1996. An additional 135,428 shares were purchased from Deltec at the same price per share by officers and directors of the Registrant. After completion of the transaction, 1,657,313 common shares of the Registrant were issued and outstanding. The Company's subsidiary, Argo Capital Trust Co. ("Argo Capital Trust"), a statutory business trust formed under the laws of the State of Delaware, has issued $17,250,000 of 11% Capital Securities ("Capital Securities") with a liquidation amount of $10.00 per security. Argo Capital Trust used the gross proceeds from the sale of the Capital Securities to purchase Junior Subordinated Debentures of the Company. The Junior Subordinated Debentures carry an interest rate of 11% paid quarterly in arrears and are scheduled to mature, subject to the Company's right to prepay the debentures under certain circumstances, on November 6, 2028. The Company's wholly owned subsidiary, Argo Redemption Corporation ("ARC"), an Illinois corporation, was chartered to effectuate, from time to time, purchases of the Company's outstanding Capital Securities by tender in the open market or by private agreement. Acquisitions through the over-the-counter dealer market are anticipated to comprise the majority of purchase activity. As of December 31, 2001 and 2000, ARC had acquired 64,717 and 66,293 shares of Argo Capital Trust preferred securities at an average price of $9.85 and $8.61 per share. On July 9, 2000, the Savings Bank established an Internet banking platform, which is accessible via the Internet at http://www.umbrellabank.com and allows consumers to conduct online financial transactions with the Savings Bank, including but not limited to opening account relationships; transferring funds; accessing account information; processing bill payments; and applying for or obtaining loan products, including but not limited to credit cards and residential mortgage secured loans. At December 31, 2001 and 2000, umbrellabank.com deposits totaled $296.3 and $149.3 million and represented 64.7% and 38.4% of consolidated total deposits of $458.1 and $388.5 million. UmbrellaBank has a wholly owned subsidiary, Dolton-Riverdale Savings Service Corp. ("Dolton-Service"). At December 31, 2001, UmbrellaBank had an equity investment in Dolton-Service of $1,530,077. The assets of Dolton-Service include 50,000 shares of the Class A 1. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- common stock of The Synergy Plan, Ltd. ("Synergy"), a professional employer organization, valued at $15.00 per share, 16,666 shares of Synergy Convertible Preferred Stock also valued at $15.00 per share, 11,630 shares of FBA Bancorp, Inc., the parent company of the First Bank of the Americas, S.S.B., a Department of the Treasury Community Development Fund Institution, valued in total at $135,000, 2,500 shares of Commercial Loan Corporation, commercial loan originator, valued at $125,000, and 454,545 shares of Guaranteed Rate, Inc., a residential mortgage loan originator, valued at $250,000. 2. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- SELECTED CONSOLIDATED FINANCIAL DATA The following tables set forth selected consolidated historical financial data for the Company during the periods ended and at the dates indicated. This information should be read in conjunction with the Consolidated Financial Statements of the Company and notes thereto in the 2001 Annual Report to Stockholders, portions of which are incorporated herein by reference.

3. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- SELECTED CONSOLIDATED FINANCIAL DATA (Continued)

---------- (1) Average balances are derived from daily average balances for 2001 and month-end balances for all other years. (2) The formula used to calculate the ratios excludes balances related to the portfolio of discounted loans receivable from both the numerator and the denominator. (3) The formulas used to calculate the ratios exclude the portfolio of discounted loans receivable and loans held for sale. (4) Dividend payout ratio is not presented for 2001 due to net loss in 2001. 4. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Company and its subsidiary include, but are not limited to changes in: interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or securities portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area, the Company's implementation of new technologies, the Company's ability to develop and maintain secure and reliable electronic systems and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission. Further description of the risks and uncertainties to the business are included in detail in Item 1, "Business" of the Company's 2001 Form 10-K. GENERAL Umbrella Bancorp ("the Company") is a unitary savings and loan holding company and is registered as such with the OTS. The Company is an active holding company with assets consisting of investments in UmbrellaBank, fsb ("UmbrellaBank" or the "Savings Bank"), marketable securities, and interest-earning deposits. The Company is a Federal Housing Authority ("FHA") approved originator and servicer, a licensed Illinois mortgage banker, and an approved Federal National Mortgage Association ("Fannie Mae") servicer. UmbrellaBank's primary business is the solicitation of deposits from the general public, and the purchase or origination of loans secured by one-to-four-family residential and commercial real estate, together with investments in a portfolio of mortgage backed securities, trust preferred securities, and municipal bonds. The Savings Bank is a member of the Federal Home Loan Bank ("FHLB") System, and its deposits are insured to the maximum allowable amount by the Federal Deposit Insurance Corporation ("FDIC"). 5. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- The Savings Bank also offers "purchase/repurchase" mortgage loan facilities to a number of third party mortgage banking firms. The Savings Bank purchase/repurchase loans are one-to-four-family secured mortgage loans held for sale by the Savings Bank, with mortgage loans acquired by the Savings Bank generally delivered for sale to third party investors within 30-60 days of closing. During 2001 and 2000, the Savings Bank increased its commercial lending activities. Through its investment in the Commercial Loan Corporation ("CLC"), the Savings Bank invests in commercial loan and commercial real estate loan participations in the Chicago metropolitan area. The Savings Bank has also directly originated or participated in commercial real estate development loans, primarily in the Chicagoland area. The Savings Bank has also acquired interests in charter school lease and loan transactions, which are generally exempt from federal taxation, and diversified its commercial loan portfolio by acquisition of participations in commercial real estate and development loans in the greater Denver, Colorado area. In addition to its lending activities, the Savings Bank also generates interest and fee income from an expanding network of regionally deployed ATMs. Deployment activities have been concentrated primarily in the Midwest and Mid-Atlantic regions of the country, with limited expansion in the southeastern United States and west of the Mississippi. Revenues are derived from interchange and surcharge fees, together with income from related leasing and interest on currency used in operations. At December 31, 2001, the Savings Bank had deployed 2,019 ATMs in 17 states. Since 1999, the Savings Bank has undertaken a number of steps designed to restructure and change the way the Savings Bank conducts banking activities in its marketplace. The most significant of these changes was the establishment, on July 9, 2000, of an Internet banking platform which is accessible via the Internet at http://www.umbrellabank.com and allows consumers to conduct online financial transactions with the Savings Bank, including but not limited to opening account relationships; transferring funds; accessing account information; processing bill payments; and applying for or obtaining loan products, including, but not limited to, credit cards and residential mortgage-secured loans. Prior to the establishment of the Internet platform, the Savings Bank operated as a traditional savings and loan institution from five physical branch locations located in Chicago and suburban Cook County, Illinois. On June 29, 1999, the Savings Bank sold its five operating properties to a nonaffiliated third party for an aggregate contractual purchase price of $5,850,000 and simultaneously entered into a 14-year, 2-month operating lease for each of the properties with the new purchaser. Under the terms of the lease, the Savings Bank paid an initial monthly rental of $48,000 per month, or $576,000 per year, which increases at the rate of 1% each year commencing January 1, 2000. The sale resulted in a profit of $2,400,000 to the Savings Bank. The profit, under accounting principles generally accepted in the United States of America, was deferred and included in income by the Savings Bank over the lease term. As a result of this sale and leaseback transaction, the Savings Bank rents, rather than to owns, the properties from which it transacts business. 6. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- FINANCIAL CONDITION Total assets increased $73.5 million to $536.6 million at December 31, 2001 from $463.1 million at December 31, 2000. Cash and interest-earning deposits decreased by $56.4 million to $37.6 million at December 31, 2001 from $94.0 million at December 31, 2000. The decrease was attributable to the Company maintaining liquidity at December 31, 2000 until deposit inflows could be reinvested in loans and securities. LENDING ACTIVITIES As shown in the following table, loans receivable, net, which includes loans held for sale and discounted loans receivable, increased $28.9 million, or 10.1%, in 2001 to $315.4 million after increasing by $9.0 million, or 3.1%, in 2000. The increase in 2001 was primarily due to purchases and origination of commercial loans, which increased by $68.2 million, which was partially offset by reductions in one-to-four family mortgage loans and commercial real estate. The decrease in one-to-four family mortgage loans resulted from pay-offs due to refinancing. The increase in loans receivable for 2000 was due to the origination and purchase of seasoned fixed rate and adjustable rate loans secured by single-family residences. New originations and purchases of loans contributed $626.9 million, which was partially offset by $36.9 million from the sale of similar assets. These purchases and originations were primarily funded by principal repayments of $560.7 million on loans receivable and mortgage-backed securities, and an increase in deposits of $69.6 million. At December 31, 2001, $195.6 million of total loans outstanding, or 61.27% of its total loan portfolio, consisted of loans secured by first mortgages on one-to-four-family residential properties, $38.7 million, or 12.13% consisted of loans secured by commercial real estate, $75.0 million, or 23.49% consisted of commercial loans either unsecured or secured by non-residential real estate and other assets, and $9.9 million, or 3.10% consisted of other loans. The following table sets forth the composition of Company's loan portfolio, including loans held for sale, in dollar amounts and in percentages of the portfolio at the dates indicated. 7. UMBRELLA BANCORP, INC. --------------------------------------------------------------------------------

---------- (1) Includes loans receivable and discounted loans receivable. (2) Includes loans held for sale of $65.1 million, $38.9 million, $18.9 million, $31.0 million, and $6.5 million at December 31, 2001, 2000, 1999, 1998, and 1997. 8. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- Set forth below is a table showing the Company's loan originations, purchases and sales for the years indicated:

---------- (1) Originations and sales exclude $24.6 million, $15.8 million and $103.0 million for the years ended December 31, 2001, 2000, and 1999 of loans originated and immediately sold directly to third party investors. (2) One-to-four family loan originations include balances on purchase/repurchase lines. 9. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- The following table shows the remaining maturities or period to repricing of the Company's loan portfolio at December 31, 2001. Loans that have adjustable rates are shown as being due in the period during which the interest rates are next subject to change. Prepayments and scheduled principal amortization on mortgage loans totaled $549.4 million, $95.6 million and $75.9 million for the years ended December 31, 2001, 2000, and 1999.

The following table sets forth at December 31, 2001, the dollar amount of all loans due after December 31, 2002, and whether such loans have fixed or adjustable interest rates.

10. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- Problem Assets and Asset Classification. In accordance with Federal regulations, loans and other assets are reviewed by the Company on a regular basis for a determination of need to classify such assets. There are three classifications for assets: Substandard, Doubtful and Loss. An asset is considered "Substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor, or the current realizable value of the collateral pledged. Substandard assets include those characterized by the "distinct possibility" that the Company will sustain "some loss" if the deficiencies noted are not corrected. Assets classified as "Doubtful" have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of "currently existing facts, conditions and values," "highly questionable and improbable." Assets classified as "Loss" are those with weaknesses and characteristics considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. An allowance for losses is established in amounts deemed prudent by management. When an asset is classified as Loss, the Company is required to establish a specific allowance for such losses equal to 100% of the amount of the asset so classified, or to charge-off such amount. The Company's policy is to stop accruing interest for any loan in excess of 90 days delinquent separate from management's analysis as to the future collectibility of interest. At December 31, 2001, UmbrellaBank had $9 million of loans classified as Substandard or Doubtful, with no Loss assets at December 31, 2001. The Company recorded a provision for loan losses of $1,710,000 during 2001, consisting of $1,183,000 recorded by the Savings Bank and $527,000 recorded by Umbrella Bancorp. The Savings Bank's provision included a $1,000,000 provision recorded in the fourth quarter primarily as a result of the Savings Bank's decision to classify mortgage loans securing purchase/repurchase lines of credit facilities with weaknesses attributable to a customer mortgage broker and origination fraud discovered in the fourth quarter. UmbrellaBank provided $902,000 to cover probable incurred losses resulting from certain fraudulent loans that are the subject of litigation. Management has identified the expense credit loss from this customer and these loans were subsequently charged off prior to December 31, 2001. In addition, the Bank provided for reserves of $98,000 in the fourth quarter for growth in the commercial loans portfolio. Finally, Umbrella Bancorp established a reserve of $500,000 for one problem loan. In addition, at December 31, UmbrellaBank had $730,000 of real estate, net of $280,000 of specific reserves, acquired through foreclosure or deed in lieu of foreclosure ("REO"), which was comprised of 27 properties. REO or real estate in judgment is carried at the lower of the fair market value less cost to dispose or the related loan balance at the date of foreclosure. An allowance for loss has been established by a charge to operations or a transfer from the allowance for loan losses where the carrying value of REO exceeds its fair value less cost to dispose. NONACCRUAL AND PAST-DUE LOANS. The following table sets forth information regarding nonaccrual loans and other real estate owned ("REO"). It is the policy of the Savings Bank to cease accruing interest on loans 90 days or more past due. For the years ended December 31 presented below, the amount of interest income that would have been recognized on nonaccrual loans is immaterial to the financial statements. As of the dates shown, UmbrellaBank had no restructured loans. 11. UMBRELLA BANCORP, INC. --------------------------------------------------------------------------------

---------- (1) All nonperforming loan totals exclude discounted loans receivable ninety days or more past due which at December 31, 2001, 2000, 1999, 1998, and 1997 amounted to $901,000, $1.0 million, $1.7 million, $3.0 million, and $6.2 million. All net loan totals exclude discounted loans receivable, which at December 31, 2001, 2000, 1999, 1998, and 1997 amounted to $4.9 million, $7.1 million, $9.1 million, $12.4 million, and $30.6 million. (2) At December 31, 2001, $1.6 million or 17.8% of the $9 million in nonperforming loans represent loans originated by the Savings Bank. The remaining loans represent loans purchased by the Savings Bank, including loans underlying purchase/repurchase lines of credit facilities. (3) Includes $292,000 and $582,000 of REO related to the discounted loans receivable portfolio at December 31, 2001 and 2000. The Company also has investments in trust preferred securities with an amortized cost of $11,064 and a carrying value of $10,835 where, in accordance with regulatory guidelines, such securities have been rated below investment grade by one or more nationally recognized rating agencies, management is monitoring repayment capability. Other than these trust preferred securities, management knows of no other asset that would be required to be presented in the table above if such assets were loans. 12. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- The following table sets forth delinquencies in UmbrellaBank's loan portfolio as of the dates indicated:

---------- (1) Excludes balances related to portfolio of discounted loans receivable. 13. UMBRELLA BANCORP, INC. --------------------------------------------------------------------------------

14. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- ANALYSIS OF ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses balance at December 31, 2001 was $3.0 million or 1.18% of loans excluding loans held for sale. The allowance for loan losses is maintained at a level determined to be adequate by management to absorb probable incurred credit losses. Determination of an appropriate level of allowance for loan losses necessarily involves a high degree of judgment. Primary considerations in this evaluation are prior loan loss experience, the character and mix of the loan portfolio, adverse situations which may affect a borrower's ability to repay, size of the loan portfolio, peer group information, business and economic conditions and management's estimate of probable incurred losses. While management uses all available information, including the monitoring of the economic conditions in the geographic regions in which the loan portfolio is located, future additions to the allowance may be necessary based on estimates that are susceptible to significant revision as a result of changes in economic conditions and other factors. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review UmbrellaBank's allowance for loan losses. Such agencies may require UmbrellaBank to recognize additions to the allowance based on their judgment of information available to them at the time of their examination. At December 31, 2001, the Savings Bank experienced an increase in the percentage of net loans 90 days or more delinquent from 1.59% of total loans receivable and loans held for sale at December 31, 2000 to 2.82% of total loans receivable and loans held for sale at December 31, 2001. The increase was primarily due to classification activities relating to certain single-family residential mortgage loans underlying purchase/repurchase lines of credit, which were discovered to involve various irregularities including broker and originator fraud issues, as well as payment and loan servicing defaults. Also, total purchase/repurchase lines of credit facilities outstanding at December 31, 2001 were $65.1 million, compared to $38.0 million at December 31, 2000 and the commercial multi-family secured real estate and commercial loan balances totaled $113.7 million at December 31, 2001 compared to $65.2 million at December 31, 2000. Based upon these factors, management increased the allowance for loan losses during the fourth quarter of 2001. Approximately $800,000 was established to cover purchase/repurchase lines of credit facilities and $300,000 allocated to cover commercial loan assets, including real estate secured construction loans. In addition, Umbrella Bancorp recorded a $500,000 provision for loan losses in the fourth quarter of 2001 related to loans acquired from the Savings Bank. Based upon management's analysis, the allowance for loan losses at December 31, 2001 is adequate to cover probable incurred loan losses. 15. Allowance for Loan and Lease Loss Allocation

16. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- The following table sets forth information with respect to the Company's allowance for loan losses by loan category for the years and at the dates indicated.

17. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- INVESTMENT ACTIVITIES The Company has been actively trading the marketable equity securities of the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") and Annaly Mortgage common stock. These securities are classified as trading and totaled $6,053,000 and $1,099,000 at December 31, 2001 and 2000, with fair value approximately equal to cost. Securities available-for-sale, which totaled $123.1 million at December 31, 2001, are carried at fair value and include $49.2 million of mortgage-backed securities, $32.2 million of trust preferred securities, $15.2 million of marketable equity securities and collateralized mortgage obligations, $3.0 million of U.S. Agency securities, $18.7 of municipal securities, and $3.3 million of corporate bonds. Securities classified as held-to-maturity were carried at $1,859,000 at December 31, 2001, had a market value of $1,838,000, and consisted of U.S. agency securities and corporate bonds. During 2001, the Company purchased securities totaling $255.8 million. These securities are made up primarily of $56.8 million of mortgage-backed securities and collateralized mortgage obligations, $43.8 million in marketable equity securities, $37.7 million of municipal securities, $80.4 million of trust preferred securities and $37.1 in corporate and agency bonds. Included in mortgage-backed securities and collateralized mortgage obligations (CMOs), are Fannie Mae, Freddie Mac, and Government National Mortgage Association ("GNMA") CMOs managed by Annaly Mortgage Management, Inc. with a carrying value of $30.5 million and an amortized cost of $30.7 million at December 31, 2001. There were no other concentrations by issuer at December 31, 2000. In prior periods, the investment policy of the Savings Bank was to invest funds among various categories of investments and maturities based upon the Savings Bank's asset/liability management policies, liquidity needs and performance objectives, and investment quality and marketability. These investments generally included certificates of deposit, overnight funds, and securities of government sponsored entities and federal agency obligations, and other issues that are rated investment grade. During 2001, the Savings Bank increased its investment securities portfolio, concentrating new investments primarily in government agency collateralized mortgage obligations ("CMOs") and mortgage backed securities ("MBS") principally issued by the Freddie Mac and Fannie Mae, trust preferred securities ("TPS") issued by a diverse group of U.S. banks, savings associations and their related holding companies, as well as a portfolio of municipal securities issued by nationally diversified local governmental units. In addition to investment activities at UmbrellaBank, Umbrella Bancorp maintains a portfolio of marketable securities, generally comprised of TPSs and equity securities consisting of non-control positions in financial institution equities which management believes, after analysis of market pricing, business practices, and earnings potential, were under-valued and represent an opportunity for profit from sales of such securities, together with mutual fund investments whose activities include investments in government securities and tax free 18. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- investments. At December 31, 2001, Umbrella Bancorp had $7.9 million in these securities, which are included in the securities available-for-sale totals above. The following table sets forth the composition of the Company's available-for-sale portfolio in dollar amounts and percentages at the dates indicated.

The following table sets forth the composition of the Company's held-to-maturity securities portfolio in dollar amounts and percentages at December 31, 2001, 2000, and 1999.

19. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- The table below sets forth certain information regarding the amortized cost, weighted average yields and contractual maturities of securities as of December 31, 2001.

---------- (1) Weighted average yield does not include equity securities. (2) Computed on tax equivalent basis for nontaxable securities (34% statutory tax rate). 20. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- PURCHASED MORTGAGE SERVICING RIGHTS The Company's principal investment in purchased mortgage servicing rights ("PMSRs") is through a $3.0 million equity interest in a limited partnership whose business activities are to purchase mortgage servicing rights and a $751,000 investment in subordinated debentures of the partnership. The PMSRs were acquired in prior periods, for a purchase price based on the present value of the expected future stream of cash flows, computed by using a discount rate that management considered to approximately reflect the risk associated with the investment, and using loan prepayment assumptions. Management did not purchase PMSRs with recourse servicing, thus the Company is not subject to the risk of and costs (including foreclosure costs) associated with borrower default on the underlying loans. There are several unaffiliated equity investors in the limited partnership. The purchase of the PMSRs is leveraged, allowing the limited partnership to purchase PMSRs equaling one to three times the equity investment by its partners. The cost of the borrowings, as well as the servicing income and expense and related amortization, is recorded at the limited partnership level. In November 2001, the debt associated with the Company's largest investment in PMSRs was repaid. As a result, in December the Company began to receive cash distributions on a prorata basis from cash flows generated by the PMSRs. The Company anticipates such payments will continue until the assets are sold or are all paid off. Subject to approval by the limited partners, the task of finding and acquiring the PMSRs controlled by the limited partnership, as well as all associated administrative duties, is assigned to Dovenmuehle Mortgage, Inc. ("DMI"), the general partner of the limited partnership. DMI also sub-services the PMSRs in the partnership. Each quarter, financial statements are issued to the limited partnership by DMI, and the pro rata share of the income for each investor is calculated by DMI. The Company records its share of income or loss on the equity method for the partnership investment. The limited partnership is audited annually by an independent auditor and an independent third party valuation of the partnership's PMSRs is performed quarterly. In addition, unaudited financial statements of the limited partnership are distributed quarterly by DMI to each investor. The audited financial statements, the unaudited quarterly financial statements and the quarterly valuations are sent directly to each equity investor. At the end of five years, or at such time as the investors may agree, the PMSRs will be sold and the proceeds divided pro rata among the investors. Due to the volatility of the interest rate environment in 2001 and the effect on prepayment speeds of mortgages underlying the PMSRs held through the limited partnership, the value of PMSR assets owned by the Savings Bank was subject to substantial change. At September 30, 2001, the independent quarterly valuation performed on the PMSRs held by the limited partnership showed an appraised value lower than the current book value. The general partner recorded a valuation allowance. UmbrellaBank's proportionate share of the writedown was $1.1 million, which the Savings Bank recorded based upon information received from DMI. After recording the adjustment, the remaining value of the PMSR assets was transferred by the Savings Bank to Umbrella Bancorp, as part of a $751,000 capital infusion transaction from Umbrella Bancorp to UmbrellaBank. The latest independent appraisal dated December 31, 2001 supported Umbrella Bancorp's carrying value for the PMSRs on that date. The Savings Bank 21. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- continues to carry interest free custodial accounts associated with Umbrella Bancorp's and the Savings Bank's PMSRs, comprised of the borrowers' taxes and insurance escrows and, for a short time period, the float on their principal and interest payments. The custodial balances are maintained in non-interest-bearing accounts and are not affected by changes in interest rates. The custodial balances relating to the PMSRs in the limited partnership owned at December 31, 2001, were $5.0 million. In addition to its investment in the limited partnerships, at December 31, 2001, the Savings Bank had a $337,000 investment in a PMSR portfolio that it owns directly. At December 31, 2001, this directly owned PMSR portfolio consisted of 1,622 mortgage loans having an outstanding principal balance of $21.1 million. SOURCES OF FUNDS AND BORROWINGS Deposits increased $69.6 million, or 17.9%, to $458.1 million at December 31, 2001 after increasing by $86.9 million in 2000. The increase in 2001 came primarily in NOW accounts, which increased $37.1 million, and money market accounts, which increased $74.9 million, and were partially offset by a $38.6 million reduction in certificates of deposit. During 2001, the Company attempted to lower its cost of funds by allowing brokered certificates of deposit to run off while increasing NOW and money market balances. The NOW and money market balances increased primarily due to offering rates that were lower than brokered certificate rates but still exceeded NOW and money market rates offered by traditional "brick and mortar" competitors. The increase in 2000 came despite the sale of three banking centers in November 2000, with aggregate deposits of $113.6 million. The Savings Bank's Internet banking division had deposit balances totaling $296.3 million at December 31, 2001, which was an increase of $147.0 million from $149.3 million at December 31, 2000. Borrowings increased $9.6 million to $28.3 million at December 31, 2001. The increase was primarily to fund the loan and securities growth. At December 31, 2001, the Company had FHLB advances totaling $12.8 million, margin account borrowings totaling $1.7 million, notes payable totaling $8.5 million, federal funds purchased of $2.4 million, and subordinated debentures totaling $3.0 million. Custodial escrow balances for loans serviced increased by $1.1 million to $9.5 million at December 31, 2001. The custodial accounts relate to escrow payments of taxes and insurance and the float on principal and interest payments on loans serviced either for the Savings Bank or on behalf of others by an independent mortgage servicing operation. The custodial accounts related to loans serviced by others are maintained at the Savings Bank in non-interest-bearing accounts. The custodial accounts associated with loans or purchased mortgage servicing rights serviced for the Savings Bank are also maintained in non-interest-bearing accounts. At December 31, 2001 and 2000, $4.3 million and $5.0 million, of all custodial escrow balances pertain to loans sub-serviced on behalf of the Savings Bank for portfolio loans, servicing retained loans, and purchased mortgage servicing rights. Due to the nature of custodial escrow deposits, balances may fluctuate on a day-to-day basis. 22. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- During 1999, the Company's ESOP borrowed $498,000 from the Company and bought an additional 49,136 shares at an average price of $10.13 per share. At December 31, 2001 the ESOP loan balance was $342,000 and 28,052 shares remained unallocated. 23. Deposit Flow. The following table sets forth the composition of and the change in dollar amount of deposit accounts offered by UmbrellaBank between the dates indicated.

24. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- Certificate Accounts. The following table presents the amount of certificate accounts outstanding at December 31, 2001, and the periods to maturity or repricing.

At December 31, 2001, the Company had outstanding $80.8 million of certificate of deposit accounts in amounts of $100,000 or more maturing or repricing as follows:

The Company had pledged securities with principal balances totaling approximately $2.4 million and $345,000 at December 31, 2001 and 2000, as collateral to secure certain public deposits. In addition to securities pledged at December 31, 2001 and 2000, the Savings Bank also had letters of credit totaling $14.2 million as collateral to secure several State of Illinois certificates. The total State of Illinois certificates secured by letters of credit and securities totaled approximately $14 million and $13.1 million at December 31, 2001 and 2000. Deposit Activity. The following table sets forth the deposit activities of the Savings Bank for the years indicated.

25. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- Although savings deposits are the primary source of funds for UmbrellaBank's lending and investment activities and for its general business purposes, the Savings Bank can also borrow funds from the FHLB. As an FHLB member, UmbrellaBank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of such stock and certain of its home mortgages and other assets (principally, securities that are obligations of, or guaranteed by, the United States Government or its agencies) provided certain standards related to creditworthiness have been met. At December 31, 2001, UmbrellaBank had $12.8 million of fixed rate advances from the FHLB with interest rates ranging from 6.13% to 6.58% and a weighted rate of 6.48%. As an alternative to accessing savings deposits and FHLB advances to fund lending and investment activities, on November 28, 2001, UmbrellaBank issued and sold $3.0 million of subordinated debentures in a pooled security offering which included non-affiliated banks, savings institutions and their related holding companies. The debentures have a maturity date of December 8, 2011, and the coupon interest rate is adjustable and paid semi annually at 375 basis points over the 180 day London Interbank Offered Rate ("LIBOR"), with a cap of 12%. The debentures are subordinated to all other claims against the Savings Bank, are not collateralized by the assets of UmbrellaBank, and can be purchased only by "qualified institutional buyers" as defined by Rule 144A of the Securities Act of 1934. On December 5, 2001 UmbrellaBank filed an application with the OTS seeking inclusion of the proceeds of the sale of the debentures in regulatory "Tier II" (risk-weighted) capital, which application is still pending as of March 25, 2002. At December 31, 2001, $3.0 million of subordinated debentures were outstanding, at a weighted rate of 6.01%. The following table sets forth information regarding borrowings by the Company on a consolidated basis at the end of and during the year indicated. The borrowings at and during the year consisted of FHLB advances, junior subordinated debt issued by the Company, subordinated debentures issued by the Savings Bank, promissory notes and federal funds purchased. The weighted average was computed on a monthly average basis. 26.

RESULTS OF OPERATIONS COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2001 TO THE YEAR ENDED DECEMBER 31, 2000 General: Net loss for the year ended December 31, 2001 was $(637,000) or $(.37) per diluted share. Net income for the year ended December 31, 2000 was $4.3 million, or $2.00 per diluted share, including the after tax gain of $5.7 million, or $2.71 per diluted share, on the sale of the Savings Bank's branch deposits. Interest Income: Interest income increased by $7.0 million, or 23.3%, to $37.1 million for the year ended December 31, 2001 from $30.1 million for last year. The improvement in interest income was primarily the result of a $94.5 million increase in average interest-earning assets to $460.1 million and a 21 basis point increase in the yield on interest-earning assets to 8.43% for the year ended December 31, 2001 from 8.22% for 2000. As seen in the following table, and as discussed previously, average balance growth was achieved in all categories of interest earning assets. 27. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- In addition to interest earned on loans and commitments for making loans, the Savings Bank earns fees in connection with originating loans. Contractual fees are received from purchase/repurchase line of credit activity and interest is charged on outstanding balances. Net deferred fees or costs are amortized as yield adjustments over the life of the related loans using the interest method, adjusted for estimated prepayment based on the Savings Bank's historical prepayment experience. Interest Expense: Interest expense increased by $6.6 million, or 29.3%, to $29.4 million in 2001 from $22.8 million in 2000, as a result of a $117.8 million increase in average interest-bearing liabilities, which was partially offset by a 5 basis point decrease in the average cost of interest-bearing liabilities to 5.83% for the year ended 2001 from 5.88% for 2000. As seen in the next table, the majority of the interest-bearing liability growth occurred in deposits, particularly NOW and money market accounts, which were discussed previously. Net Interest Income: Net interest income increased by $340,000 to $7.7 million for the twelve months ended December 31, 2001 from $7.3 million for last year. The increase in net interest income was the result of a 4 basis point increase in the net interest margin to 2.04% for the year ended December 31, 2001 from 2.00% in 2000. The interest rate spread increased by 24 basis points to 2.59% in 2001 from 2.35% in 2000. 28. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- The following table sets forth certain information relating to Umbrella Bancorp's consolidated average balance sheets and reflects the average yield on assets and average cost of liabilities for the continuing operations for the years indicated. Such yields and costs are derived by dividing income or expense by the average of assets or liabilities, respectively, for the periods presented. Average balances are derived from daily averages for 2001 and from month-end balances for 2000 and 1999. Management believes that the use of month-end balances for 2000 and 1999 instead of daily average balances has not caused a material difference in the information presented.

---------- (1) Loans receivable include loans held for sale, portfolio loans receivable , and discount loans receivable. (2) Included in the balances are PMSRs of approximately $4.1 million, $4.6 million, and $5.0 million in 2001, 2000, and 1999, respectively. (3) Interest rate spread represents the difference between the average yield on total interest-earning assets and the average cost of total interest-earning liabilities. (4) Net interest margin represents net interest income divided by average interest-earning assets. (5) Tax exempt income is reflected on a fully tax equivalent basis utilizing a 34% rate. 29. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- The table below sets forth certain information regarding changes in interest income and interest expense of the Company for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) changes in volume (change in volume multiplied by prior rate); (2) changes in rates (change in rate multiplied by prior volume); and (3) net changes in rate-volume. The change attributable to the combined impact of volume and rate has been allocated proportionately to the change due to volume and the change due to rate. Tax exempt income is reflected on a fully tax equivalent basis utilizing a 34% rate.

Provision for Loan Losses: The Company recorded provision for loan losses of $1.7 million for the year ended December 31, 2001 compared to $1.2 million for 2000, resulting in total allowances for loan losses of $3.0 million, or 1.18%, of total loans receivables and 33.16% of total nonperforming loans at December 31, 2001. The allowance for loan losses balance at December 31, 2000 was $2.4 million, or .98% of loans receivable, excluding discounted loans receivable. Factors considered by management in calculating a required allowance for loan losses, and factors considered in providing for loan losses in 2001, are discussed previously in the section titled "Analysis of Allowance for Loan Losses." Noninterest Income: Noninterest income decreased by $6.7 million to $3.4 million for the year ended December 31, 2001 compared to $10.1 million in 2000. This decrease was primarily the result of the $7.9 million pretax gain on the sale of deposits from three of the Savings Bank's branches in 2000. The purchaser of the branches also assumed the lease contracts on those buildings, which resulted in an additional gain of $591,000 during 2000 from the previously deferred profit on the 1999 sale of two of those branch buildings. 2001 was also negatively impacted by a $(899,000) loss on an investment in a limited partnership due to writing down the value of mortgage servicing rights within the partnership. These decreases were partially 30. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- offset by gains on sales of securities, which increased from net losses of $(111,000) in 2000 to net gains of $1.4 million in 2001 and trading account gains, which increased to $1.2 million in 2001 from $214,000 in 2000. There were no other components of noninterest income that changed substantially between 2000 and 2001. Noninterest Expense: Noninterest expense increased by $1.8 million to $12.4 million in 2001 from $10.6 million in 2000. The increase is primarily due to a $453,000 increase in professional fees, which increased due to outsourcing of internal audit and loan review services and legal fees associated with the fraudulent loan activity previously discussed, a $328,000 increase in data processing due to costs of converting to a new data processing system and an increase in Internet banking customers, and a $945,000 increase in outsourced servicing due to increased consumer loan and deposit volumes managed by outsourced deposit operations, credit card operations, and call center servicing facilities. Income Tax Expense (Benefit): The Company recorded a tax benefit of $2.4 million for 2001 compared to tax expense of $1.2 million for 2000. The 2001 tax benefit resulted from increased investments in tax-exempt loans and securities, the continued utilization of tax credits and due to a net operating loss in 2001. The 2000 tax expense was attributable to taxes on the deposit sale, partially offset by $360,000 of low-income housing tax credits. 31. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2000 TO THE YEAR ENDED DECEMBER 31, 1999 General: Net income for the year ended December 31, 2000 was $4.3 million, or $2.00 per diluted share, including the after-tax gain of $5.7 million, or $2.71 per diluted share, on the sale of three of the Savings Bank's branch deposits. Net income for the year ended December 31, 1999 was $2.6 million, or $1.25 per diluted share, including the after tax gain of $1.9 million, or $.94 per diluted share, on the sale of On-Line Financial Services, Inc. Income from continuing operations totaled $514,000, or $.25 per diluted share, for the twelve months ended December 31, 1999. Interest Income: Interest income increased by $6.2 million, or 25.9%, to $30.1 million for the year ended December 31, 2000 from $23.9 million for 1999. The improvement in interest income was the result of a $54.3 million increase in average interest-earning assets to $365.7 million and a 55 basis point increase in the yield on interest-earning assets to 8.22% for the year ended December 31, 2000 from 7.67% for 1999. Interest Expense: Interest expense increased by $6.8 million, or 42.1%, to $22.8 million in 2000 from $16.0 million in 1999 as a result of a $75.1 million increase in average interest-bearing liabilities and a 75 basis point increase in the average cost of interest-bearing liabilities to 5.88% for the year ended 2000 from 5.13% for 1999. Net Interest Income: Net interest income declined by $561,000 to $7.3 million for the year ended December 31, 2000 from $7.9 million for 1999. The decrease in net interest income was the result of a 53 basis point decline in the net interest margin to 2.00% for the year ended December 31, 2000 from 2.53% in 1999. The interest rate spread decreased by 19 basis points to 2.35% in 2000 from 2.54% in 1999. Provision for Loan Losses: The Savings Bank recorded provision for loan losses of $1.2 million for the year ended December 31, 2000 compared to $965,000 for 1999, resulting in total allowances for loan losses of $2.4 million, or .87% of total loans receivables and 54.98% of total nonperforming loans at December 31, 2000. The allowance for loan losses balance at December 31, 1999 was $1.6 million, or .58% of loans receivable. The allowance was increased due to purchases in the fourth quarter of commercial and commercial real estate loans and direct financing leases, which are considered of higher risk than the Bank's traditional loan products primarily secured by residential real estate. The allowance was also increased to bring the ratio of the allowance to gross loans closer to that of peer financial institutions, as recommended by the Savings Bank's regulators. The commercial real estate and commercial loan balances totaled $64.8 million at December 31, 2000 compared to $16.3 million at December 31, 1999. Noninterest Income: Noninterest income increased by $7.8 million to $10.1 million for the year ended December 31, 2000 compared to $2.3 million in 1999. This increase was primarily the result of the $7.9 million pretax gain on the sale of deposits from three of the Savings Bank's branches. The purchaser of the branches also assumed the lease contracts on those buildings, which resulted in an additional gain of $591,000 recorded from the previously deferred profit 32. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- on the 1999 sale of two of those branch buildings. These gains were partially offset by an addition of $300,000 to the Valuation allowance for PMSRs. The sale of foreclosed real estate resulted in net losses of $18,000 for the year ended December 31, 2000, an improvement of $515,000 from net losses of $533,000 recorded in 1999. Profits on the sale of trading account securities increased by $95,000 to $214,000 in 2000 from $119,000 in 1999. Fee income and service charges increased by $375,000 to $1.0 million for the year ended December 31, 2000 from $638,000 for 1999. The increase in fees and service charges was primarily the result of the Savings Bank's deployment of 776 ATMs in a 17 state area. In addition, loan servicing income declined to $109,000 for the year ended December 31, 2000 from $1.4 million for 1999. The decline in loan servicing income was a result of management's decision to restructure the mortgage-banking operations of Margo Financial Services, LLC ("Margo") and a management services agreement dated June 1, 1999 between the Savings Bank and E-Conduit, which limited the Savings Bank's revenue to a six basis point per transaction license fee. Noninterest Expense: Noninterest expense increased by $1.5 million to $10.6 million in 2000 from $9.1 million in 1999. The increase is primarily the result of the start-up expenses related to the Savings Bank's Internet banking platform, which incurred operating expenses totaling $2.1 million. Partially offsetting the increase were reduced expenses related to Margo totaling $879,000. This decline was the result of the Margo restructuring and the management services agreement with E-Conduit. Income Tax Expense: The Company recorded a tax provision of $1.2 million for 2000 compared to a tax benefit of $336,000 for 1999. The 2000 tax expense was primarily due to taxes on the deposit sale, partially offset by $360,000 of low-income housing tax credits. The 1999 tax benefit resulted primarily from lower pretax income and low-income housing tax credits totaling $300,000. Discontinued Operation: On March 31, 1999 the Company sold its wholly owned subsidiary, On-Line Financial Services, Inc. of Oak Brook, Illinois ("On-Line"), to GFS Holdings, Co. of Palm Beach Gardens, Florida ("Purchaser"). The Company recorded a gain, net of taxes, of $1,928,000 in 1999. Income from discontinued operations, net of taxes, totaled $135,000 during 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds are deposits; proceeds from principal and interest payments on the loan and mortgage-backed securities portfolios; custodial deposit accounts related to loans serviced for others; maturing investments; borrowed money; FHLB advances; and loan sales. The most liquid assets are cash and short-term investments. The levels of these assets are dependent on operating, financing, and investing activities during any given period. Cash and interest-earning deposits totaled $37.6 million at December 31, 2001. The Company has adequate alternative funding sources if short-term liquidity needs arise. The primary investing activity at the Company is the origination and purchase of mortgage loans. During the years ended December 31, 2001 and 2000, the Company originated and 33. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- purchased $626.9 million and $397.0 million of loans receivable. Purchases of securities available-for-sale and held-to-maturity totaled $255.8 million and $2.2 million for 2001 and 2000. These investing activities were primarily funded by principal repayments on loans and mortgage-backed securities of $564.4 million and $77.1 million for 2001 and 2000 and a net increase in deposits of $69.6 million and $86.9 million for 2001 and 2000. The 2000 deposit increase is net of $113.6 million of deposits sold in 2000. In addition to these sources of funding, the Company also utilizes advances and overnight borrowings from the FHLB and purchases federal funds from other financial institutions. During 2001, the Company repaid a $72,600 FHLB advance at maturity. At December 31, 2001 and 2000, FHLB advances totaled $12.8 million. The borrowings from the FHLB include a $10.0 million advance, which matures in November 2006, and a $2.8 million advance, which matures in April 2003. The Savings Bank also issued $3 million of subordinated debt during 2001. The Company used margin accounts to purchase securities in both 2001 and 2000. At December 31, 2001, there was $1.7 million in margin balances outstanding compared to $5.9 million at December 31, 2000. The Savings Bank is required to maintain minimum levels of liquid assets as defined by Office of Thrift Supervision ("OTS") regulation. At December 31, 2001, the Savings Bank's liquid assets represented 9.95% of its liquidity base as compared to the required level of 4%. The level of liquidity maintained is believed by management to be adequate to meet the requirements of normal operations, potential deposit outflows, and current loan demand. Cash flow projections are updated regularly to ensure necessary liquidity. Liquidity management for the Savings Bank is both a daily and long-term function of the Savings Bank's management. The Savings Bank's management meets on a daily basis and monitors interest rates, current and projected commitments to purchase loans and the likelihood of funding such commitments, and projected cash flows. Excess funds are generally invested in short-term investments. At December 31, 2001, the Savings Bank's capital exceeded all capital requirements of the OTS. The Savings Bank's Tier I capital to adjusted assets, Tier I capital to risk-weighted assets, and risk-based capital ratios were 5.82%, 9.95%, and 10.77%, respectively. The Savings Bank is considered "well capitalized" under OTS prompt corrective action regulations. However, UmbrellaBank is restricted from increasing assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities during the quarter without prior written approval of the OTS. At December 31, 2001 and 2000, the Savings Bank had outstanding loan commitments and unused lines of credit of $36.0 million and $7.5 million, respectively. The Savings Bank also had Community Reinvestment Act investment commitments outstanding of $2.4 million. These commitments include $856,000 to be funded over eight years for the investment in the Chicago Equity Fund, $289,000 to be funded over six years for investment in the Community Investment Corporation, $1.0 million to be funded for investment in the Greater West Side Loan Fund, and $305,000 to be funded over fourteen years for investment in the Kedzie Limited Partnership. 34. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- ACCOUNTING DEVELOPMENTS The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" in June 2001. SFAS No. 141 requires all business combinations within its scope to be accounted for using the purchase method, rather than the pooling-of-interest method. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001. The adoption of SFAS No. 141 will only impact the Company's financial statements if it enters into a business combination. The FASB also issued SFAS No. 142, Goodwill and Other Intangible Assets," which addresses the accounting for such assets arising from prior and future business combinations, in June 2001. Upon the adoption of SFAS No. 142, goodwill arising from business combinations will no longer be amortized, but rather will be assessed regularly for impairment, with any such impairment recognized as a reduction of earnings in the period identified. Other identified intangible assets, such as core deposit intangible assets, will continue to be amortized over their estimated useful lives. The Company is required to adopt SFAS No. 142 on January 1, 2002. The adoption of SFAS No. 142 will not have an impact on the Company's financial statements at that date as the Company had no recorded goodwill at December 31, 2001. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As part of its normal operations, the Savings Bank is subject to interest-rate risk on the interest-sensitive assets it invests in and the interest-sensitive liabilities it borrows. The Investment Committee, which includes members of senior management and directors, monitors and determines the strategy of managing the rate and sensitivity repricing characteristics of the individual asset and liability portfolios the Savings Bank maintains. The overall goal is to manage this interest rate risk to most efficiently utilize the Savings Bank's capital, as well as to maintain an acceptable level of change to its net portfolio value ("NPV") and net interest income. The Savings Bank's strategy is to minimize the impact of sudden and sustained changes in interest rates on NPV and its net interest margin. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine the Savings Bank's change in NPV in the event of hypothetical changes in interest rates, as well as interest rate sensitivity gap analysis, which monitors the repricing characteristics of the Savings Bank's interest-earning assets and interest-bearing liabilities. The Board of Directors has 35. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- established limits to changes in NPV and net interest income across a range of hypothetical interest rate changes. If estimated changes to NPV and net interest income are not within these limits, the Board may direct management to adjust its asset/liability mix to bring its interest rate risk within Board limits. In an effort to reduce its interest rate risk, the Savings Bank has focused on strategies limiting the average maturity of its assets by emphasizing the origination of adjustable-rate mortgage loans. The Savings Bank, from time to time, also invests in long-term, fixed-rate mortgages provided it is compensated with an acceptable spread. Interest rate sensitivity analysis is used to measure the Savings Bank's interest rate risk by calculating the estimated change in the NPV of its cash flows from interest sensitive assets and liabilities, as well as certain off-balance-sheet items, in the event of a series of sudden and sustained changes in interest rates ranging from 100 to 300 basis points. Management assumes that a 200 basis point movement up or down is considered reasonable and plausible for purposes of managing its interest-rate risk on a day-to-day basis. NPV is the market value of portfolio equity and is computed as the difference between the market value of assets and the market value of liabilities, adjusted for the value of off-balance-sheet items. The following table presents the Savings Bank's projected change in NPV for the various rate shocks as of December 31, 2001 and 2000:

The Savings Bank is more sensitive to a sudden rise in interest rates at December 31, 2001 as compared to December 31, 2000. A decline in interest rates would have less of an impact in 2001 compared to 2000 as the Federal Reserve decreased interest rates eleven times during 2001. 36. UMBRELLA BANCORP, INC. -------------------------------------------------------------------------------- Due to the level of interest rates at December 31, 2001, the Company is not able to model an additional 200 or 300 basis point decrease in rates. The NPV is calculated by the Savings Bank using guidelines established by the OTS related to interest rates, loan prepayment rates, deposit decay rates, and market values of certain assets under the various interest rate scenarios. These assumptions should not be relied upon as indicative of actual results due to the inherent shortcomings of the NPV analysis. These shortcomings include: (i) the possibility that actual market conditions could vary from the assumptions used in the computation of NPV; (ii) certain assets, including adjustable-rate loans, have features which affect the potential repricing of such instruments, which may vary from the assumptions used; and (iii) the likelihood that as interest rates are changing, the Investment Committee would likely be changing strategies to limit the indicated changes in NPV as part of its management process. The Savings Bank does not use derivative instruments to control interest rate risk. In addition, interest rate risk is the most significant market risk affecting the Savings Bank. Other types of market risk, such as foreign currency exchange risk and commodity price risk, do not arise in the normal course of the Company's business activities and operations. 37. UMBRELLA BANCORP, INC. Shareholder Information -------------------------------------------------------------------------------- DIRECTORS AND OFFICERS UMBRELLA BANCORP, INC. John G. Yedinak Sergio Martinucci President and Chief Executive Officer Senior Vice President, Coldwell Banker Chairman of the Board Residential Realtors Vice President and Director Frances M. Pitts Donald G. Wittmer Executive Vice President, President and Owner, Wittmer Financial Secretary and Director Services, Ltd. Director Colleen A. Kitch Arthur E. Byrnes Executive Vice President Chairman, Deltec Asset Management Corporation, LLC Director Dennis G. Carroll Detective, City of Chicago Police Department

UMBRELLABANK, FSB John G. Yedinak Sergio Martinucci President, Chief Executive Officer Senior Vice President, Coldwell Banker and Director Residential Realtors Chairman of the Board Frances M. Pitts Donald G. Wittmer Executive Vice President, President and Owner, Wittmer Financial General Counsel and Secretary Services, Ltd. Director Director Colleen A. Kitch Arthur E. Byrnes President Chairman, Deltec Asset Management Corporation, LLC Director Rebecca L. Leon Dennis G. Carroll Vice President, Retail Operations Detective, City of Chicago Police Dept. Director Director Marie C. Goudie George P. Yedinak Assistant Vice President and Controller Vice President and Chief Information Officer Teena D. Juergens Vice President

78. UMBRELLA BANCORP, INC. STOCKHOLDER REFERENCE -------------------------------------------------------------------------------- Corporate Headquarters Independent Auditors Umbrella Bancorp, Inc. Crowe, Chizek and Company LLP 5818 S. Archer Road One Mid America Plaza Summit, Illinois 60501 Oak Brook, Illinois 60522 (708) 458-2002 Chicago Counsel Transfer Agent and Registrar Kemp & Grzelakowski, Ltd. LaSalle Bank, N.A. 1900 Spring Road Trust and Asset Management Division Suite 500 135 South LaSalle Street Oak Brook, Illinois 60523-14495 Chicago, Illinois 60603 (312) 904-2584 Market Makers Annual Report on Form 10-K RBC Dain Rauscher Copies of Umbrella Bancorp, Inc.'s 2001 1 South Wacker Drive Annual Report on Form 10-K Suite 1900 filed without exhibits with the Securities Chicago, Illinois 60606 and Exchange Commission are available (888) 655-4135 without charge to stockholders, upon written request to: Keefe Bruyette and Woods, Inc. Frances M. Pitts, Corporate Secretary 787 7th Avenue, 4th Floor Umbrella Bancorp, Inc. New York, New York 10019 5818 S. Archer Road (800 221-3246 Summit, Illinois 60501 Ryan Beck and Company, LLC Annual Meeting 220 South Orange Avenue The annual meeting of stockholders will Livingston, New Jersey 07039 be held at 2:00 p.m. on April 30, 2002 at (800) 342-2325 5818 S. Archer Road Summit, Illinois 60501 Investor Information Stockholders, investors, and analysts Stockholders are encouraged to attend. interested in additional information may contact: Internet Banking Channel John G. Yedinak, President and CEO, www.umbrellabank.com at the Corporate Headquarters OFFICE LOCATIONS Home Office Branch Office 2154 W. Madison Street 14076 Lincoln Avenue Chicago, Illinois 60612 Dolton, Illinois 60419 (312) 563-5500 (708) 849-3770

39. UMBRELLA BANCORP, INC. Shareholders Information -------------------------------------------------------------------------------- STOCK PRICE INFORMATION Umbrella Bancorp Inc.'s common stock is traded on the NASDAQ Over the Counter Market under the symbol UMBR. The table shows the reported high and low sale prices of common stock and the dividends per share during the periods indicated.

80. REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Umbrella Bancorp, Inc. Summit, Illinois We have audited the accompanying consolidated statements of financial condition of Umbrella Bancorp, Inc. (formerly Argo Bancorp, Inc.) and Subsidiaries (the Company) as of December 31, 2001 and 2000 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Umbrella Bancorp, Inc. and Subsidiaries as of December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Crowe, Chizek and Company LLP Oak Brook, Illinois March 26, 2002 1. UMBRELLA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 2001 and 2000 (Dollars in thousands) --------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements. 39. UMBRELLA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 2001, 2000, and 1999 (Dollars in thousands, except per share data) --------------------------------------------------------------------------------

(Continued) -------------------------------------------------------------------------------- 40. UMBRELLA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 2001, 2000, and 1999 (Dollars in thousands, except per share data) --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 41. UMBRELLA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended December 31, 2001, 2000, and 1999 (Dollars in thousands, except per share data) --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 42. UMBRELLA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2001, 2000, and 1999 (Dollars in thousands) --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- (Continued) 43. UMBRELLA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2001, 2000, and 1999 (Dollars in thousands) --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 44. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations and Principles of Consolidation: The consolidated financial statements include Umbrella Bancorp, Inc. (formerly Argo Bancorp, Inc.) ("the Company") and its wholly owned subsidiaries, UmbrellaBank, FSB (formerly Argo Federal Savings Bank, FSB) (the "Savings Bank" or "UmbrellaBank") and Argo Redemption Corporation ("Argo Redemption"); and the Savings Bank's wholly owned subsidiary, Dolton-Riverdale Service Corporation ("Dolton Service"). Intercompany transactions and balances are eliminated in consolidation. During 1999 the Company simplified its organizational structure by merging Argo Mortgage Corporation, a wholly owned subsidiary of the Savings Bank, into the Savings Bank and merging Empire/Argo Mortgage LLC, a consolidated joint venture of Umbrella Bancorp, into Umbrella Bancorp. The mergers qualified as tax-free reorganizations and were accounted for as internal reorganizations. Accordingly, the notes to the consolidated financial statements have been restated to reflect the internal reorganization as if they had occurred on January 1, 1999. Finally, as discussed in a separate note, during 1999, the Company sold its wholly owned subsidiary, On-Line Financial Services, Inc. ("On-Line"). The Company, through its subsidiaries, provides a full range of financial services through its branch locations in Cook County, Illinois and its Internet website. The Savings Bank's primary business is the solicitation of deposits from the general public and the purchase or origination of loans secured by one-to-four-family residential real estate. In addition, the Savings Bank sells mortgage loans on a service-released basis into the secondary market, has an ATM network, and has investments in a partnership which owns purchased mortgage servicing rights. During July 2000, the Savings Bank established an Internet banking platform, which is accessible via the Internet at http://www.umbrellabank.com and allows consumers to conduct online financial transactions, including but not limited to opening account relationships, transferring funds, accessing account information, processing bill payments, and applying for or obtaining loan products, including but not limited to credit cards and residential mortgage secured loans. The Savings Bank expensed $626,000 during the year ended December 31, 2000 related to organizational expenses of umbrellabank.com, which are classified with other expense in the consolidated statements of operations. Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments, amortization period of debt issuance costs, and valuation of the limited partnership investment are particularly subject to change. -------------------------------------------------------------------------------- (Continued) 45. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Securities: Securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses, net of taxes, reported in other comprehensive income. Trading securities are carried at fair value, with changes in unrealized holding gains and losses included in income. Other securities such as Federal Home Loan Bank stock and investment in GFS preferred stock are carried at cost. Interest income includes amortization of purchase premium or discount. Gains and losses on sales are based on the amortized cost of the security sold. Securities are written down to fair value when a decline in fair value is not temporary. Mortgage-backed securities represent participating interests in pools of long-term first mortgage loans originated and serviced by the issuers of the securities. Loans: Loans are reported at the principal balance outstanding, net of unearned discounts, deferred loan fees and costs, and an allowance for loan losses. Loans held for sale are reported at the lower of cost or market, on an aggregate basis. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Interest income is not reported when full loan repayment is in doubt, typically when the loan is impaired or payments are past due over 90 days. Payments received on such loans are reported as principal reductions. Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the allowance balance required using past loan loss experience, known and inherent risks in the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. A loan is impaired when full payment under the loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as residential mortgage, consumer, and credit card loans and on an individual loan basis for other loans. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. -------------------------------------------------------------------------------- (Continued) 46. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- Mortgage Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. -------------------------------------------------------------------------------- (Continued) 47. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreclosed Real Estate: Foreclosed real estate acquired through or instead of loan foreclosure is initially recorded at fair value when acquired, establishing a new cost basis. If fair value declines, a valuation allowance is recorded through expense. Costs after acquisition are expensed. Premises and Equipment: Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed over the assets' useful lives on a straight-line basis. Investment in Limited Partnership: The investment in limited partnership is carried at the lower of fair value or the equity investment. The cost of acquiring the rights to service mortgage loans is capitalized at the partnership level as are other loan servicing costs. An independent valuation is performed at least annually by the partnership. Servicing Rights: The Company does not service loans sold. Purchased servicing rights are recognized as assets and expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to interest rates and then, secondarily, as to geographic and prepayment characteristics. Any impairment of a grouping is reported as a valuation allowance. Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Cash and Cash Equivalents: Cash and interest-earning deposits with banks with original maturities less than 90 days are considered to be cash and cash equivalents. The Company reports net cash flows for customer loan and deposit activity. Earnings (Loss) Per Share: Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares, adjusted for the dilutive effects of outstanding stock options and the management retention plan, to the extent they are dilutive, options and other potentially dilutive securities are excluded if they are anti-dilutive. Comprehensive Income (loss): Comprehensive income (Loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale, net of tax, which are also recognized as a separate component of equity. -------------------------------------------------------------------------------- (Continued) 11. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Industry Segments: While the Company's chief decision-makers monitor the revenue streams of various Company products and services, the identifiable segments are not material and operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company's financial service operations are considered by management to be aggregated in one reportable operating segment. Prior to 2001, internal financial information was primarily reported and aggregated into two lines of business: banking and discount loan operations. Fair Values of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate Note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements. New Accounting Pronouncements: Beginning January 1, 2001, a new accounting standard required all derivatives to be recorded at fair value. Unless designated as hedges, changes in these fair values are recorded in the income statement. Fair value changes involving hedges are generally recorded by offsetting gains and losses on the hedge and on the hedged item, even if the fair value of the hedged item is not otherwise recorded. This did not have a material effect as the Company had no derivative holdings at December 31, 2001. The Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets," in July 2001. The statement no longer allows for the amortization of goodwill and requires that the carrying value of goodwill be written down when it is deemed to be impaired. The Company had no recorded goodwill at December 31, 2001. On-Line Significant Accounting Policies: Significant accounting policies of On-Line prior to its sale were: - The cost of software licensing rights acquired and other product conversion costs were capitalized and amortized to expense on a straight-line basis over periods of 5 to 7 years. - Certain equipment was leased under capital lease agreements. The cost of these assets was amortized on the straight-line basis. -------------------------------------------------------------------------------- (Continued) 12. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- Reclassification: Certain reclassifications have been made to the 1999 and 2000 information to make it comparable with the 2001 presentation. -------------------------------------------------------------------------------- (Continued) 13. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 2 - SALE OF ON-LINE FINANCIAL SERVICES, INC. On March 31, 1999, the Company sold On-Line for cash proceeds of $6,700,000 and $4,600,000 in Series B preferred stock of GFS Holdings Co. After adjusting for sale expenses of $298,000 and recording an accrual for contingent payments to former On-Line shareholders of $546,000, the sale resulted in a pretax gain of $2,922,000 which, net of $994,000 of income taxes, produced a gain on sale of discontinued operations of $1,928,000. Results from the data processing segment are shown as discontinued operations. Components of amounts reflected in the December 31, 1999 (through the date of sale) consolidated statement of operations are presented in the following table: (In thousands) Revenues $ 4,247 Costs and expenses 4,029 --------- Operating income 218 Income tax expense 83 --------- Income from discontinued operations $ 135 =========

As part of the acquisition of On-Line by Argo Bancorp in 1995, a structured schedule of contingent payments was established based on a percentage of future net revenues of On-Line over the next seven years ending October 31, 2002. As a condition of the acquisition, Umbrella Bancorp, Inc. retained this liability to the former stockholders of On-Line. At December 31, 2001, the Company estimated the liability for future contingent payments to be $116,000. The actual amount to be paid will be impacted by future revenue streams. -------------------------------------------------------------------------------- (Continued) 14. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 3 - SECURITIES Securities available-for-sale are summarized as follows:

Securities held-to-maturity are summarized as follows:

-------------------------------------------------------------------------------- (Continued) 15. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 3 - SECURITIES (Continued)

Included in mortgage-backed securities and collateralized mortgage obligations (CMOs), are Fannie Mae, Freddie Mac, Government National Mortgage Association ("GNMA") CMOs managed by Annaly Mortgage Management, Inc. with a carrying value of $30.5 million and amortized cost of $30.7 million at December 31, 2001. There were no concentrations by issuer at December 31, 2000. Trust preferred securities include issues of a diverse group of banks, savings institutions and their related holding companies located throughout the United States. There are no investments with balances greater than $3.3 million by a single issuer at December 31, 2001. Marketable equity securities include investments in common stocks of various financial institutions and mutual funds. The amortized cost and fair value of securities, by contractual maturity, at December 31, 2001 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

-------------------------------------------------------------------------------- (Continued) 16. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 3 - SECURITIES (Continued) Proceeds from sales of securities available-for-sale and the realized gross gains and losses are as follows:

At December 31, 2001 and 2000, trading account securities primarily consist of marketable equity securities which are carried at fair value. At December 31, 2001 and 2000, the market value of these securities is approximately equal to cost. At December 31, 2001 and 2000, securities with carrying values of $3.5 million were pledged to secure short-term borrowings and Federal Home Loan Bank advances. NOTE 4 - LOANS RECEIVABLE Loans receivable and loans held for sale, net, are summarized as follows. Other commercial loans includes those secured by non-residential real estate and other assets.

-------------------------------------------------------------------------------- (Continued) 17. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 4 - LOANS RECEIVABLE (Continued) Included in first mortgage loans are loans held for sale totaling approximately $65.1 million and $38.9 million at December 31, 2001 and 2000, which represent loans originated by the Savings Bank for unaffiliated entities. The loans are originated with commitments to sell and are usually sold within 30-60 days of funding, with a maximum holding period of 120 days. Impaired loans totaled $529,000 at December 31, 2001, which were fully allocated in the allowance for loan losses. Average impaired loans were $1,427,000 in 2001. There were no impaired loans at or for the years ended December 31, 2000 or 1999. The following is a summary of the changes in the allowance for loan losses:

At December 31, 2001, the Savings Bank experienced an increase in the percentage of net loans 90 days or more delinquent. The increase was primarily due to classification activities relating to certain single-family residential mortgage loans underlying purchase/repurchase lines of credit facilities, which were discovered to involve various irregularities including broker and originator fraud issues, as well as payment and loan servicing defaults. The commercial real estate and commercial loan balances totaled $113.7 million at December 31, 2001 compared to $65.2 million at December 31, 2000. Based upon these factors, management increased the allowance for loan losses during the fourth quarter of 2001. Loans receivable on nonaccrual are as follows:

-------------------------------------------------------------------------------- (Continued) 18. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 4 - LOANS RECEIVABLE (Continued) First mortgage loans at December 31, 2001 and 2000 include $130.1 million and $138.6 million in out-of-area purchased participation and whole loans, which are secured by single-family homes, with approximately 11.15% in Texas, 7.75% in Arizona, 6.36% in Florida, 6.01% in California, 5.77% in Georgia, and 62.96% spread throughout the remainder of the country at December 31, 2001. There is no geographic concentration of nonperforming loans. NOTE 5 - PREMISES AND EQUIPMENT Premises and equipment, net, are summarized as follows:

Included in occupancy and equipment expense is depreciation expense of office properties and equipment of approximately $1,301,000, $1,796,000, and $1,100,000 for the years ended December 31, 2001, 2000, and 1999. Depreciation expense for ATMs is net of leasing reimbursements totaling $1.1 million, $592,000 and 387,000 for 2001, 2000, and 1999. Included in software is approximately $1,002,000 of costs for software licensing rights acquired and other system related conversion costs amortized to expense on a straight-line basis over periods of 5 to 7 years. Also included is approximately $858,000 of capitalized internal software development costs primarily related to the Savings Bank's Internet platform, amortized over periods of 1 to 3 years. During April 2001, the Savings Bank purchased an office building in downtown Chicago for $4.5 million, $1.5 million, and $3 million allocated to land and office buildings, respectively, for which it receives rental income and is considering opening a branch office location. Occupancy and equipment expense was reduced by approximately $420,000 of related rental income from this building. During August 2001, the Savings Bank purchased approximately 850 ATMs for $7.75 million and another 12 ATMs during December 2001 for $114,000; such ATMs were deployed in gas station/convenience stores throughout the Midwest. During 1999, the Company sold five banking facilities to an unrelated third party for $5,850,000. The gain of $2,400,000 was deferred as the Company leased these facilities from the purchaser. -------------------------------------------------------------------------------- (Continued) 19. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- During 2000, deposits totaling $113,585,000 for two of these locations and a third location which was leased by the Company were sold to a party unrelated to the 1999 transaction, and all three -------------------------------------------------------------------------------- (Continued) 20. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 5 - PREMISES AND EQUIPMENT (Continued) leases were assumed by that entity. The Company recognized a gain of $7,974,000 on the deposit sale, net of expenses of $1,216,000. In addition, during 2000, the Company recognized a portion of the deferred gain for the two branch facilities sold. Activity in the deferred gain account was as follows for the years ended December 31, 2001, 2000 and 1999 (in thousands):

The three remaining facilities at December 31, 2001 are being leased back over a period of 170 months. The leases contain renewal options for three additional periods, the first for ten years and the final two for five years each. The Company leases office space under its noncancelable operating leases. The Company also leases space for a data processing center and to manage its Internet operations. These leases renew on an annual basis. Rent expense for the years ended December 31, 2001, 2000, and 1999 totaled $679,000, $668,000, and $457,000. The lease expense for 2000 included $304,000 related to the three branch facilities that were sold. The estimated minimum rental payments under the terms of the leases at December 31, 2001 are as follows:

-------------------------------------------------------------------------------- (Continued) 21. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 6 - LOAN SERVICING, PURCHASED MORTGAGE SERVICING RIGHTS, AND INVESTMENT IN LIMITED PARTNERSHIP The cost of acquiring servicing rights from third parties to service mortgage loans is capitalized and amortized in proportion to and over the period of the estimated net servicing income. On December 31, 2001 and 2000, the Savings Bank held $337,000 and $397,000 in purchased mortgage servicing rights (PMSRs) with underlying principal balances of approximately $21.1 million and $29.3 million. During 1999, the Company bought $11.1 million of servicing rights with underlying principal balances of approximately $823 million. At June 30, 1999, these servicing rights were called at the Company's original purchase price. There was no gain or loss recorded. Servicing income related to these loans approximated $619,000. The balance of investment in limited partnership of $3.7 million and $4.4 million at December 31, 2001 and 2000 represents the Savings Bank's investment in various divisions of a single limited partnership. The investment at December 31, 2001 and 2000 includes a $3.0 million and a $3.1 million equity interest in a limited partnership whose business activities are to purchase mortgage servicing rights, and a $751,000 and a $1.3 million investment in subordinated debentures of the partnership. The debentures have an interest rate of 30%. During 2001 and 2000, the Company recorded $1.1 million and $300,000 as a reserve against its interest in the limited partnership due to the impact of the loan prepayment speeds on the value of PMSRs. In 1999, the Company reinvested the equity in one division into another previously owned division. The single business activity of this limited partnership is the purchase of current mortgage servicing rights. There are several equity investors in each division of the partnership. The purchase of the servicing rights is leveraged, allowing the partnership to purchase additional servicing rights. At the end of five years, or at such time as the investors agree, the servicing rights will be sold and the proceeds divided pro rata among the investors. As with typical investments in PMSRs, the collateral underlying the equity investment is the servicing rights. All purchases of servicing rights must be approved by all equity investors. The administration and servicing of the purchased portfolios in each division is performed by the general partner. -------------------------------------------------------------------------------- (Continued) 22. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 7 - DEPOSITS Deposits at December 31 are summarized as follows (dollars in thousands):

Contractual maturities of certificate accounts at December 31, 2001 are as follows (in thousands): Under 12 months $176,591 12 months to 36 months 56,223 Over 36 months 28,123 -------- $260,937 ========

At December 31, 2001 and 2000, the Company had $104.6 million and $151.8 million of brokered deposits. The Savings Bank has pledged investment securities of approximately $2.4 million and $345,000 at December 31, 2001 and 2000 as collateral to secure certain public deposits. In addition to securities at December 31, 2001 and 2000, the Savings Bank also had letters of credit totaling $14.2 million and $14.3 million as collateral to secure several State of Illinois certificates. The total State of Illinois certificates secured by letters of credit totaled approximately $14.0 and $13.1 million at December 31, 2001 and 2000. The aggregate amount of certificate of deposit accounts with a balance greater than $100,000 was $80.8 million and $81.9 million at December 31, 2001 and 2000. Interest expense on deposit accounts is summarized as follows:

-------------------------------------------------------------------------------- (Continued) 23. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 8 - BORROWINGS Borrowed money at December 31 is summarized as follows:

The Company has issued 11% junior subordinated debentures aggregating $17,784,000 to Argo Capital Trust Company (Trust). The Trust issued 11% capital securities with an aggregate liquidation amount of $17,250,000 ($10 per capital security) to third-party investors. The capital securities and cash are the sole assets of the Trust. The junior subordinated debentures are includable as Tier I capital for regulatory capital purposes. The junior subordinated debentures and the capital securities pay dividends and distributions, respectively, on a quarterly basis, which are included in interest expense. The Trust is a statutory business trust formed under the laws of the State of Delaware and its common stock is wholly owned by the Company. The junior subordinated debentures will mature on November 6, 2028, at which time the capital securities must be redeemed. The junior subordinated debentures and capital securities can be redeemed contemporaneously, in whole or in part, beginning November 6, 2003 at a redemption price of $10 per capital security. The Company has provided a full and unconditional guarantee of the obligations of the Trust under the capital securities in the event of the occurrence of an Event of Default, as defined. Debt issuance costs totaling $1,913,000 were capitalized related to the debenture offering and are being amortized over the 30-year life of the junior subordinated debentures. -------------------------------------------------------------------------------- (Continued) 24. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 8 BORROWINGS (Continued) In 2000, Argo Redemption was formed for the purpose of repurchasing a portion of the 11% capital securities. Argo Redemption held 64,717 and 66,293 shares of the 11% capital securities at cost basis of $637,607 and $570,557 at December 31, 2001 and 2000. During 2001, Argo Redemption reissued 65,400 shares for $655,000 and repurchased an additional 63,824 at a cost basis of $639,000. Gains of $103,000 and $92,000, are included with other income in the consolidated statement of operations for the years ended December 31, 2001 and 2000. The 11% capital securities can be resold. The required aggregate principal balance of first mortgage loans securing advances is determined by the Federal Home Loan Bank (FHLB). At December 31, 2001 and 2000, approximately $40 million and $65 million of specifically identified loans were pledged and delivered to the FHLB. All stock in the Federal Home Loan Bank of Chicago is also pledged as collateral for these advances. Additionally, at December 31, 2000, there were also four securities having a carrying value of $1,500,000 pledged to secure the advances. There were no securities pledged against advances at December 31, 2001. The Savings Bank has an open line of credit with the FHLB for up to $50 million that bears interest at a rate that adjusts daily. The margin account loans are from third-party securities brokers and were secured at December 31, 2001 by securities which are held by the broker and have a market value of $3.3 million. In March of 2001, the Company borrowed $5.0 million to fund the repurchase of shares of common stock. The note is secured by all common stock of the Savings Bank. Interest on the note is payable quarterly. In December of 2001, the Company borrowed an additional $3.5 million. The note is secured by certain securities with carrying values of $3.5 million at December 31, 2001. Interest on the note is payable monthly. In November of 2001, the Savings Bank issued $3.0 million of subordinated debt in a private placement transaction to increase working capital. As of December 31, 2001, the Savings Bank's application to classify the issuance in Tier II capital was still pending. Debt issuance costs totaling $120,000 were capitalized related to the debenture offering and are being amortized over the 10 year life of the issuance. -------------------------------------------------------------------------------- (Continued) 25. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 9 - INCOME TAXES - CONTINUING OPERATIONS Income tax expense (benefit) from continuing operations consists of the following:

The tax effects of existing temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2001 and 2000 are summarized as follows:

-------------------------------------------------------------------------------- (Continued) 26. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 9 - INCOME TAXES - CONTINUING OPERATIONS (Continued) The effective income tax rate differs from the statutory federal tax rate of 34%. The major reasons for this difference related to income (loss) from continuing operations for the years ended December 31 follow:

At December 31, 2001, Umbrella Bancorp has low income housing and alternative minimum tax credit carryforwards in the amount of $465,000 expiring through 2020. NOTE 10 - EMPLOYEE BENEFIT PLANS 401(k) PLAN AND TRUST The Argo Federal Savings 401(k) plan is an ERISA-qualified plan covering all employees of the Savings Bank who have completed at least 1,000 hours of service within a 12 consecutive month period and are age 21 or older. Participants may make contributions to the plan from 1% to 12% of their earnings, subject to Internal Revenue Service (IRS) limitations. Discretionary matching contributions of 50% of each participant's contribution up to 12% may be made by the Savings Bank each plan year. The Savings Bank made contributions of $65,000, $60,000, and $76,000 to the plan for the years ended December 31, 2001, 2000, and 1999. The plan also provides benefits in the event of death, disability, or other termination of employment. EMPLOYEE STOCK OWNERSHIP PLAN The Savings Bank maintains an ERISA qualified employee stock ownership plan (ESOP) for eligible employees. During 1999, the ESOP borrowed funds from the Company in the amount of $498,000 in order to purchase 49,136 shares at an average price of $10.13 per share. In addition, during 2000 and 1999, the ESOP used available cash in the plan to purchase an -------------------------------------------------------------------------------- (Continued) 27. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 10 - EMPLOYEE BENEFIT PLANS (Continued) additional 1,880 and 2,500 shares respectively. Consolidated stockholders' equity was reduced by the unpaid balance of the ESOP loan at December 31, 2001 and 2000. Contributions of $81,000, $95,000, and $72,000 were accrued or made to the ESOP to fund principal and interest payments for the years ended December 31, 2001, 2000, and 1999. Selected ESOP information at December 31, 2001, 2000, and 1999 follows:

Umbrella Bancorp considers outstanding only those shares of the ESOP that are allocated and committed to be released when calculating both basic and diluted earnings per share. The Savings Bank records the difference between the fair value of the shares committed to be released and the cost of those shares to the ESOP as a charge to additional paid-in capital with the corresponding increase or decrease to compensation expense. MANAGEMENT RECOGNITION PLAN The Company's Management Recognition Plan ("MRP") provides for issue of shares to officers and employees of the Company. Compensation expense is recognized over the vesting period of the shares for the difference between exercise price and the market value at issue date. Total shares issuable under the plan are 25,492 at December 31, 2001 and 2000. Unearned compensation is reported as a reduction of stockholder's equity until earned. STOCK OPTION PLANS Umbrella Bancorp's Board of Directors adopted the 1991 Stock Option and Incentive Plan (the 1991 Stock Option Plan), under which up to 429,800 shares of Umbrella Bancorp's common stock were reserved for issuance by Umbrella Bancorp upon exercise of incentive stock options to be granted to full-time employees of Umbrella Bancorp and its subsidiaries from time to time. All 429,800 options were awarded during 1993. -------------------------------------------------------------------------------- (Continued) 28. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 10 - EMPLOYEE BENEFIT PLANS (Continued) Umbrella Bancorp's Board of Directors adopted the Non-Qualified Stock Option Plan for Non-Employee Directors (Non-Qualified Stock Option Plan) in 1991, under which up to 429,800 shares of Umbrella Bancorp's common stock were reserved for issuance by Umbrella Bancorp upon exercise of nonincentive stock options to be granted to nonemployee directors of the Savings Bank from time to time. At December 31, 1997, the Board of Directors approved a resolution to discontinue any further grants under this plan. Umbrella Bancorp's Board of Directors adopted the 1998 Incentive Stock Option Plan for Employees, under which up to 400,000 shares of Umbrella Bancorp's common stock were reserved for issuance by Umbrella Bancorp upon exercise of stock options to be granted to employees from time to time. The Company applies ABP Opinion No. 25 in accounting for the stock option plans and, accordingly, compensation cost based on the fair value at grant date has not been recognized for its stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income (loss) from continuing operations would have been reduced to the pro forma amounts indicated below:

There were no options granted in 2001. For options granted during 2000 and 1999, the weighted average fair values at grant date are as follows:

-------------------------------------------------------------------------------- (Continued) 29. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 10 - EMPLOYEE BENEFIT PLANS (Continued) The fair value of options granted during 2000 and 1999 is estimated using the following weighted average information:

The activity in the stock option plans for 2001, 2000, and 1999 is summarized as follows:

-------------------------------------------------------------------------------- (Continued) 30. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 10 - EMPLOYEE BENEFIT PLANS (Continued) Options exercisable at year end are as follows:

At year-end 2001, options outstanding were as follows:

NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK The Company is a party to financial instruments with off-balance-sheet risk in the normal course of its business to meet the financing needs of its customers and to reduce its own exposure to fluctuations of interest rates. These financial instruments represent commitments to originate and sell first mortgage loans and letters of credit and involve credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. There were no commitments to originate mortgage loans at December 31, 2001 and such commitments were $1.0 million at December 31, 2000. These commitments represent amounts which the Savings Bank plans to fund in its normal commitment period. the Company evaluates each customer's creditworthiness on a case-by-case basis. -------------------------------------------------------------------------------- (Continued) 31. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- Unused lines and letters of credit amounted to approximately $36 million and $7.5 million as of December 31, 2001 and 2000. -------------------------------------------------------------------------------- (Continued) 32. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (Continued) The Savings Bank has Community Reinvestment Act (CRA) investment commitments outstanding of $2.4 million. These commitments include $1.0 million to be funded for investment in the Greater West Side Loan Fund, $856,000 to be funded over eight years for investment in the Chicago Equity Fund, $289,000 to be funded over six years for investment in the Community Investment Corporation, and $305,000 to be funded over fourteen years for investment in the Kedzie Limited Partnership. NOTE 12 - CAPITAL MATTERS The Company has issued 592,681 shares of goodwill preferred stock. The goodwill preferred stock entitles the holders thereof to 75% of any settlement damages awarded upon a final judgment to the Savings Bank, net of expenses and certain other items, as a result of the Savings Bank's lawsuit against the United States seeking damages for breach of contract related to the elimination and exclusion of supervisory goodwill in the computation of the Savings Bank's regulatory capital in connection with the Company's acquisition of the Savings Bank ("Goodwill Litigation"). At the time of the final judgment and award of damages, if any, the goodwill preferred stock will either be (1) redeemed by the Company for cash or (2) become convertible into common stock. The Company will be entitled to retain the remaining 25% of any damages awarded to the Savings Bank, net of expenses and certain other items, in the Goodwill Litigation. Information regarding Class A common stock at December 31, 2001 and 2000 follows:

Information regarding preferred stock at December 31, 2001 and 2000 follows: ~~Par value per share $ .01 Authorized shares 1,000,000 Shares issued 592,681~~

The Savings Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Savings Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Savings -------------------------------------------------------------------------------- (Continued) 33. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 12 - CAPITAL MATTERS (Continued) Bank must meet specific capital guidelines that involve quantitative measures of Savings Bank assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Savings Bank capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Savings Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined) and Tier I capital (as defined) to assets (as defined). Management believes, as of December 31, 2001 and 2000, that the Savings Bank meets all capital adequacy requirements to which it is subject. As of December 31, 2001, the most recent notification from the Office of the Thrift Supervision ("OTS") categorized the Savings Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Savings Bank must maintain minimum total risk-based, Tier I risk-based, Tier I leverage, and tangible capital ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the institution's category. However, UmbrellaBank is restricted from increasing assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities during the quarter without prior written approval of the OTS and is required to divest of $27 million of trust preferred securities, which was accomplished by March 21, 2002. The sale of these securities did not result in significant gain or loss. The Company's and Savings Bank's actual capital amounts (in thousands) and ratios are as follows as of December 31, 2001 and 2000:

-------------------------------------------------------------------------------- (Continued) 34. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 12 - CAPITAL MATTERS (Continued)

NOTE 13 - SEGMENT FINANCIAL INFORMATION During 2001, the Company discontinued monitoring discounted loans as a reporting segment as no discounted loans have been acquired since 1998. Prior to 2001, the operating segments were determined by the products and services offered, primarily distinguished between banking and discount loan operations. As discussed in Note 1, the Company simplified its organizational structure in 1999. As a result, mortgage banking operations were discontinued and therefore are not disclosed as a separate operating segment in 2001 and 2000. Loans, investments, and deposits provide the revenues in the banking operation; fee income provided the primary revenue for mortgage banking interest income; and discount accretion provides the primary revenue for discount loan workout. All operations are domestic. The accounting policies used for the operating segments are the same as those described in the summary of significant accounting policies. Income taxes are allocated to the banking segment. No indirect expenses are allocated. -------------------------------------------------------------------------------- (Continued) 35. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 13 - SEGMENT FINANCIAL INFORMATION (Continued) Information reported internally for performance assessment follows. The column for other information primarily includes activity between segments which is being eliminated.

-------------------------------------------------------------------------------- (Continued) 36. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 14 - PARENT COMPANY FINANCIAL INFORMATION Condensed statements of financial condition, operations, and cash flows of Umbrella Bancorp, Inc. follow: CONDENSED STATEMENTS OF FINANCIAL CONDITION

-------------------------------------------------------------------------------- (Continued) 37. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 14 - PARENT COMPANY FINANCIAL INFORMATION (Continued) CONDENSED STATEMENTS OF OPERATIONS

-------------------------------------------------------------------------------- (Continued) 38. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 14 - PARENT COMPANY FINANCIAL INFORMATION (Continued) CONDENSED STATEMENTS OF CASH FLOWS

-------------------------------------------------------------------------------- (Continued) 39. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 14 - PARENT COMPANY FINANCIAL INFORMATION (Continued) STATEMENTS OF CASH FLOWS

-------------------------------------------------------------------------------- (Continued) 40. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of Umbrella Bancorp's financial instruments as of December 31, 2001 and 2000 are set forth in the following table, followed by the methods and assumptions used.

The following methods and assumptions are used by Umbrella Bancorp in estimating the fair value amounts for its financial instruments. (a) CASH AND INTEREST-BEARING DEPOSITS The carrying value of cash and interest-bearing deposits approximates fair value due to the short period of time between origination of the instruments and their expected realization. -------------------------------------------------------------------------------- (Continued) 41. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) (b) SECURITIES AVAILABLE-FOR-SALE, SECURITIES HELD-TO-MATURITY, TRADING SECURITIES, FHLB OF CHICAGO STOCK, AND INVESTMENT IN GFS PREFERRED STOCK. The fair value of securities available-for-sale and held-to-maturity and trading securities was estimated using quoted market prices. The fair value of FHLB stock is based on its redemption value. The fair value of the GFS preferred stock is its carrying value based upon the market interest rate. (c) LOANS RECEIVABLE AND ACCRUED INTEREST RECEIVABLE The fair value of loans receivable is based on values obtained in the secondary market. The loan portfolio is segmented into fixed and adjustable interest rate categories. For fixed rate loans, fair value is estimated based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. For adjustable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The carrying amount of accrued interest receivable approximates its fair value due to the relatively short period of time between accrual and expected realization. (d) DEPOSITS, ESCROWS, AND INTEREST PAYABLE The fair value of deposits with no stated maturity, such as statement savings, NOW, and money market accounts, and escrows is disclosed as the amount payable on demand. The fair value of fixed-maturity deposits is the present value of the contractual cash flows discounted using interest rates currently being offered for deposits with similar remaining terms to maturity. The carrying amount of interest payable approximates its fair value due to the relatively short period of time between accrual and expected realization. (e) BORROWED FUNDS AND JUNIOR SUBORDINATED DEBT The fair value of junior subordinated debt was estimated using quoted market prices. The fair value of borrowed funds is the present value of the contractual cash flows, discounted by the current rate offered for similar remaining maturities. -------------------------------------------------------------------------------- (Continued) 42. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 16 - EARNINGS PER SHARE The following table sets forth the components of basic and diluted earnings (loss) per share from continuing operations. Basic and dilutive loss per share are the same for 2001 as diluted loss per share would be anti-dilutive.

NOTE 17 - OTHER COMPREHENSIVE INCOME (LOSS) Other comprehensive income components and related taxes were as follows:

-------------------------------------------------------------------------------- (Continued) 43. UMBRELLA BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000, and 1999 -------------------------------------------------------------------------------- NOTE 18 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(a) During the fourth quarter of 2001, the allowance for loan losses was increased as a result of the Savings Bank's decision to classify mortgage loans securing purchase/repurchase lines of credit facilities with weaknesses attributable to mortgage broker and origination deficiencies, as well as purchases and originations of commercial and commercial real estate loans and direct financing leases, which are considered of higher risk than the Savings Bank's traditional loan products primarily secured by residential real estate. (b) During the fourth quarter of 2000, the Company recognized significant gains due to the sale of deposits and the acquiror assumed selected leased facilities. The allowance was increased due to purchases in the fourth quarter of commercial and commercial real estate loans and direct financing leases, which are considered of higher risk than the Savings Bank's traditional loan products primarily secured by residential real estate. The allowance was also increased to be comparable to peer financial institutions, as recommended by the Savings Bank's regulators. -------------------------------------------------------------------------------- 77.

UMBRELLA BANCORP INC 10-K/A