SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

(Mark One)

|X|     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the quarterly period ended December 31, 1998
                                       ----------------- 

                                              OR

|_|     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the transition period from __________ to __________.

                           Commission File No. 0-24621


                            Farnsworth Bancorp, Inc.
        ----------------------------------------------------------------
        (Exact name of Small Business Issuer as Specified in Its Charter)


       New Jersey                                             22-3591051      
--------------------------------                       -------------------------
(State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                            Identification No.)

              789 Farnsworth Avenue, Bordentown, New Jersey 08505
              ---------------------------------------------------
                    (Address of Principal Executive Offices)


                                 (609) 298-0723
--------------------------------------------------------------------------------
                 Issuer's Telephone Number, Including Area Code

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                                    YES X    NO
                                       ---     --- 

  Number of shares of Common Stock outstanding as of February 10, 1999: 379,858

Transitional Small Business Disclosure Format (check one)

                                    YES      NO X
                                        ---    ---   

<PAGE>

                            FARNSWORTH BANCORP, INC.

                                    Contents
                                    --------

<TABLE>
<CAPTION>

                                                                                Page(s)
                                                                                -------
<S>                                                                               <C>
PART I - FINANCIAL INFORMATION

     Item 1.  Financial Statements...................................................3

          Consolidated Statements of Financial Condition at December 31, 1998
          (unaudited) and September 30, 1998.........................................3

          Consolidated Statements of Income and Comprehensive Income for the
          three months ended December 31, 1998 and December 31, 1997 (unaudited).....4

          Consolidated Statements of Cash Flows for the three months ended
          December 31, 1998 and December 31, 1997 (unaudited)........................5

     Item 2.  Management's Discussion and Analysis of Financial Condition and
                Results of Operations................................................8


PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings.....................................................12

     Item 2.  Changes in Securities and Use of Proceeds.............................12

     Item 3.  Defaults upon Senior Securities.......................................12

     Item 4.  Submission of Matters to a Vote of Security Holders...................12

     Item 5.  Other Information.....................................................12

     Item 6.  Exhibits and Reports on Form 8-K......................................12

     Signatures.....................................................................13

</TABLE>

                                      - 2 -

<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                            FARNSWORTH BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                            At                       At
                                                       December 31,             September 30,
                                                           1998                     1998
                                                      -------------             -------------
<S>                                                  <C>                       <C>         
ASSETS
Cash and due from banks                               $  1,853,448              $  3,928,077
Securities available for sale                            4,666,523                   134,187
Securities held to maturity:                                            
  Mortgage-backed                                        1,634,441                 1,890,642
  Other                                                  2,762,113                 2,761,367
Loans receivable, net                                   32,156,259                31,041,552
Accrued interest receivable                                288,573                   227,318
Federal Home Loan Bank of New York                                      
  stock at cost substantially restricted                   261,300                   261,300
Premises and equipment                                   1,511,568                 1,468,846
Others assets                                               37,494                    60,458
                                                       -----------               -----------
  Total assets                                        $ 45,171,719              $ 41,773,747
                                                        ==========                ==========
                                                                        
LIABILITIES AND STOCKHOLDERS' EQUITY                                    
Deposits                                              $ 38,195,919              $ 35,777,855
Borrowings from FHLB                                     1,000,000      
Advances by borrowers for taxes and insurance              189,710                   214,884
Accrued and deferred income taxes                          119,963                   183,698
Accrued interest payable                                    54,889                    38,692
Accounts payable and other accrued expenses                 94,278                   115,890
                                                       -----------               -----------
  Total liabilities                                     39,654,759                36,331,019
                                                       -----------               -----------
                                                                        
Preferred stock $.10 par value, 1,000,000 shares                        
  authorized; none issued and outstanding                               
Common stock $.10 par value, 5,000,000 shares                           
  authorized; 379,858 shares issued and                                 
  outstanding (1998)                                        37,985                    37,985
Additional paid in capital                               3,396,262                 3,396,262
Retained earnings (substantially restricted)             2,280,428                 2,227,363
Unreleased common stock and related additional                          
  paid in capital acquired by employee stock                            
  ownership plan (ESOP)                                   (303,880)                 (303,880)
Net unrealized appreciation on available for sale                       
  securities net of income taxes                           106,165                    84,998
                                                       -----------                ----------
  Total stockholders' equity                             5,516,960                 5,442,728
                                                       -----------                ----------
  Total liabilities and stockholders' equity          $ 45,171,719              $ 41,773,747
                                                        ==========                ==========
                                                                     
</TABLE>


The accompanying notes to unaudited  consolidated  interim financial  statements
are an integral part of these statements.

                                      - 3 -

<PAGE>

                     FARNSWORTH BANCORP, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                            AND COMPREHENSIVE INCOME
              FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                   (UNAUDITED)


                                                    1998                 1997
                                                 ----------           ----------
Interest income:                              
  Loans receivable                               $  617,263           $  534,597
  Securities                                         96,408               93,508
  Federal funds sold                                 26,695               24,372
                                                   --------             --------
    Total interest income                           740,366              652,477
                                                
Interest expense:                               
  Deposits                                          350,620              347,185
Federal Home Loan Bank advances                       5,241                  500
                                                   --------             --------
  Total interest expense                            355,861              347,685
                                                   --------             --------
Net interest income                                 384,505              304,792
                                                
Provision for loan losses                             5,000                2,000
                                                   --------             --------
                                                
  Net interest income after provision           
    for loan losses                                 379,505              302,792
                                                   --------             --------
                                                
Noninterest income:                             
  Fees and other service charges                     61,380               44,013
  Collection on deficiency judgment                                       54,024
                                                   --------             --------
    Total noninterest income                         61,380               98,037
                                                
Noninterest expense:                            
  Compensation and benefits                         162,322              135,745
  Occupancy and equipment                            63,131               61,567
  Federal insurance premiums and assessments          5,318                5,455
  Other                                             121,941               78,126
                                                   --------             --------
    Total noninterest expense                       352,712              280,893
                                                
Income before provision for income taxes             88,623              119,936
Provision for income taxes                           35,560               24,532
                                                   --------             --------
    Net income                                    $  53,063            $  95,404
                                                   ========             ========
                                             
Other Comprehensive Income:               
  Unrealized Gain on Securities Available
  for Sale, Net of Taxes                             21,167                    0
                                                   --------             --------

Comprehensive Income                              $  74,230            $  95,404
                                                   ========             ========

Net income per common share:  Basic               $    0.15            $     .27


Shares used in computing basic income per share     349,470              349,470


The accompanying notes to unaudited  consolidated  interim financial  statements
are an integral part of these statements.

                                      - 4 -

<PAGE>


                     FARNSWORTH BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       1998             1997
                                                                    ----------       ----------
<S>                                                               <C>              <C>        
Cash flows from operating activities:                             
  Net income                                                       $    53,063      $    95,404
                                                                    ----------       ----------
  Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation                                                          16,331           13,764
  Provision for loan losses                                              5,000            2,000
  Increase in accrued interest receivable                              (61,255)          (9,116)
  Decrease (increase) in other assets                                   22,964          (23,656)
  Decrease in advances from borrowers                                  (25,174)         (17,740)
  Increase (decrease) in accrued income taxes and
  deferred income taxes                                                (74,904)          24,531
  Increase in accrued interest payable                                  16,197           21,337
  Decrease in accounts payable and other accrued liabilities           (21,612)            (783)
                                                                    ----------       ----------
    Total adjustments                                                 (122,453)          10,337
                                                                    ----------       ----------
    Net cash provided by (used for) operating                          (69,390)         105,741
    activities                                                      ----------       ----------
Cash flows from investing activities:
  Net increase in loans receivable                                  (1,119,707)        (297,472)
  Redemption of securities, held to maturity                           255,455          224,599
  Purchase of securities, available for sale                        (4,500,000)              --
  Purchase of premises and equipment                                   (59,051)         (31,708)
                                                                    ----------       ----------
    Net cash used in investing activities                           (5,423,303)        (104,581)
                                                                    ----------       ----------
Cash flows from financing activities:
  Net increase (decrease) in Deposits                                2,418,064         (622,759)
  Federal Home Loan Bank Borrowings                                  1,000,000               --
                                                                    ----------       ----------
    Net cash provided by (used in) financing                         3,418,064         (622,759)
    activities                                                      ----------       ----------
Net decrease in cash and due from banks                             (2,074,629)        (621,599)
                                                                    ----------       ----------
Cash and due from banks at beginning of period                       3,928,077        2,364,541
                                                                    ==========       ==========
Cash and due from banks at end of period                           $ 1,853,448      $ 1,742,942
                                                                    ==========       ==========
Supplemental disclosure:
  Cash paid during the period for:
    Interest                                                       $   301,884      $   275,060
                                                                    ==========       ==========
    Income taxes                                                   $   110,200      $         0
                                                                    ==========       ==========
Unrealized gain on securities, available for sale, net of          $    21,167      $         0
deferred income taxes                                               ==========       ==========

</TABLE>


The accompanying notes to unaudited  consolidated  interim financial  statements
are an integral part of these statements.

                                      - 5 -

<PAGE>

                     FARNSWORTH BANCORP, INC. AND SUBSIDIARY
          NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS


NOTE 1.  Presentation of Financial Information
         -------------------------------------

         The accompanying  unaudited  consolidated  interim financial statements
include  the  accounts of  Farnsworth  Bancorp,  Inc.  (the  "Company")  and its
subsidiary  Peoples  Savings  Bank  (the  "Bank").  The  accompanying  unaudited
consolidated  interim financial statements have been prepared in accordance with
the  instructions  to Form 10-QSB.  Accordingly,  they do not include all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements.  The accounting and reporting policies of the
Company  conform in all  material  respects  to  generally  accepted  accounting
principles and to general  practice within the savings bank industry.  It is the
opinion of  management  that the  accompanying  unaudited  consolidated  interim
financial  statements reflect all adjustments which are considered  necessary to
report fairly the financial  position as of December 31, 1998, the  Consolidated
Statements  of  Income  and  Comprehensive  Income  for the three  months  ended
December 31, 1998 and 1997,  and the  Consolidated  Statements of Cash flows for
the three months ended December 31, 1998 and 1997. The results of operations for
the three months ended  December 31, 1998,  are not  necessarily  indicative  of
results  that may be expected for the entire year ending  September  30, 1999 or
for any other period. The accompanying  unaudited consolidated interim financial
statements  should be read in conjunction with the Company's  September 30, 1998
consolidated  financial  statements  including  the  notes  thereto,  which  are
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1998.

In preparing the financial statements,  management is required to make estimates
and assumptions that affect the reported amount of assets and  liabilities,  the
disclosure of contingent  assets and liabilities  and the reported  revenues and
expenses.  Actual results could differ  significantly  from those estimates.  In
addition,  various regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses and foreclosed
real estate.  Such  agencies may require the Bank to recognize  additions to the
allowance  for loan losses or additional  writedowns  on foreclosed  real estate
based on their  judgments  about  information  available  to them at the time of
their examination.

Cash Equivalents
----------------

For the purpose of  presentation in the  Consolidated  Statements of Cash Flows,
cash  and  cash  equivalents  are  defined  as  those  amounts  included  in the
balance-sheet  caption  "cash and due from  banks."  The Company  considers  all
highly liquid investments with original  maturities of three months or less when
purchased as cash equivalents.

Nature of Operations
--------------------

The  Company is a  non-operating  savings  and loan  holding  company.  The Bank
operates  two  branches  in  Burlington  County,  New  Jersey.  The Bank  offers
customary  banking  services,  including  accepting  checking,  savings and time
deposits  and the making of  commercial,  real  estate and  consumer  loans,  to
customers  who  are  predominantly   small  and  middle-market   businesses  and
middle-income individuals.


                                      - 6 -


<PAGE>

2.       Net Income Per Common Share
         ---------------------------

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement No. 128, "Earnings Per Share".  Statement No. 128 is effective for the
years  ended after  December  15, 1997 and  requires  that prior  period data be
restated. Per share amounts are reported in accordance with Statement No. 128.

         Basic net income per common share is  calculated by dividing net income
by  the  number  of  shares  of  common  stock  outstanding,  adjusted  for  the
unallocated  portion of shares held by the Company's  Employee  Stock  Ownership
Plan  ("ESOP").  Diluted net income per share is  calculated  by  adjusting  the
number of shares of common  stock  outstanding  to  include  the effect of stock
options,  stock-based  compensation  grants and other  securities,  if dilutive,
generally,  using the  treasury  stock  method.  The Company has no  potentially
dilutive securities.

         Per share  amounts for the  quarters  ended  December 31, 1998 and 1997
have been calculated  based on the net income for the entire year and assume the
common stock issued has been outstanding since October 1, 1996.

<TABLE>
<CAPTION>

                                                   For the three months ended December 31,
                                    -------------------------------------------------------------------
                                                  1998                               1997(1)
                                    ---------------------------------    ------------------------------
                                                Weighted      Per-                  Weighted    Per-
                                                 Average      Share                  Average    Share
                                     Income      Shares       Amount     Income      Shares     Amount
                                     ------      ------       ------     ------      ------     ------
                                                             
<S>                                 <C>        <C>          <C>         <C>         <C>         <C>  
Basic EPS
Net income available to
Common Shareholders                  $53,063     349,470      $0.15      $95,404     349,470     $.27
                                      ======     =======       ====       ======     =======      ===
</TABLE>

There were no dilutive effects as of December 31, 1998 or 1997.
--------------------
(1)      1997 shown for comparison only.


NOTE 3.  Recent Accounting Pronouncements
         --------------------------------

         In June 1997, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards No. 130,  Reporting  Comprehensive
Income and its  components  in financial  statements.  Statement 130 states that
comprehensive  income  includes  reported net income of a company,  adjusted for
items that are currently  accounted for as direct entries to equity, such as the
net unrealized gain or loss on securities  available for sale,  foreign currency
items, and minimum pension  liability  adjustments.  This statement is effective
for both interim and annual  periods  beginning  after  December  15,  1997.  As
required, the Company adopted Statement 130 in the first quarter of fiscal 1999,
and reported comprehensive income in accordance with the new statement.

                                      - 7 -

<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations


Financial Condition

         Total  assets  increased  $3.4  million  or 8.1% to  $45.2  million  at
December  31, 1998 from $41.8  million at September  30, 1998.  The increase was
primarily   attributable  to  a  $1.1  million  increase  in  the  Bank's  loans
receivable,  net, and a $4.5 million increase in securities  available for sale,
partially offset by a decrease in cash and equivalents of $2.1 million,  as well
as a decrease  in  mortgage-backed  securities  of  $256,000.  The Bank's  total
liabilities  increased  $3.3 million or 9.2%,  to $39.6  million at December 31,
1998 from $36.3  million at  September  30, 1998.  The  increase  was  primarily
attributable  to a  $2.4  million  increase  in  deposits  and  an  increase  in
borrowings from the FHLB of $1.0 million.

         Stockholders'  equity  increased  $74,000  to $5.5  million or 12.2% of
total assets at December 31, 1998, as compared to $5.4 million or 13.0% of total
assets at September 30, 1998. The increase in stockholders' equity are primarily
attributable to net income.

Results of Operations

         Net  Income.  The Bank's net income  decreased  $42,000 for the quarter
ended  December 31, 1998, to $53,000 from $95,000 for the quarter ended December
31, 1997.  The Bank recorded a $54,000  collection  of a deficiency  judgment in
1997, as compared to no such  collection in 1998. The decrease in net income was
partially  offset by an increase in the Bank's net  interest  income of $80,000,
partially  offset by an  increase  in  noninterest  expense  of  $72,000  and an
increase in income taxes of $11,000.

         Net  Interest  Income.  Net  interest  income  is the most  significant
component  of the Bank's  income from  operations.  Net  interest  income is the
difference  between interest the Bank received on its  interest-earning  assets,
primarily loans,  investment and  mortgage-backed  securities,  and interest the
Bank  pays  on  its   interest-bearing   liabilities,   primarily  deposits  and
borrowings.  Net  interest  income  depends on the volume of and rates earned on
interest-earning  assets and the  volume of and rates  paid on  interest-bearing
liabilities.

         Net interest income after provision for loan losses increased  $77,000,
or 25.3%,  to $379,000 for the quarter  ended  December 31, 1998, as compared to
the quarter  ended  December 31, 1997.  The  increase was  primarily  due to the
growth in interest-earning assets to $43.1 million in 1998 from $39.8 million in
1997.

         Provision for Loan Losses. Provision for loan losses was $5,000 for the
quarter  ended  December 31, 1998,  as compared to $2,000 for the quarter  ended
December 31, 1997.

         Management believes the allowance for loan losses is at a level that is
adequate to provide for  estimated  losses.  However,  there can be no assurance
that further  additions  will not be made to the  allowance and that such losses
will not exceed the estimated amount.

         Noninterest Income.  Noninterest income decreased $36,000 or 36.9% from
$98,000 for the quarter  ended  December 31, 1997 to $62,000 for the same period
in  1998.  This  decrease  in  the  Bank's  noninterest  income  was  due to the
collection  of a $54,000  deficiency  judgment  in 1997 offset by an increase in
fees and other service charges of $18,000.  The deficiency  judgment  related to
lost income

                                      - 8 -

<PAGE>

and other costs  pertaining  to a one- to  four-family  property  which had been
foreclosed on and which was subsequently sold.

         Noninterest  Expense.  Noninterest  expense  increased $72,000 or 25.6%
from $281,000 for the quarter  ended  December 31, 1997 to $353,000 for the same
period in 1998.  The  increase  in the Bank's  noninterest  expense was due to a
$44,000 increase in other noninterest  expense and an increase of $26,000 in the
Bank's compensation and benefits. The category of non-interest expense described
as "Other" is  comprised  of expenses  related to  advertising,  fees charged by
banks, loan processing fees, NOW expenses, costs related to supplies and various
professional fees.

         Income Tax Expense.  Income tax expense  increased $11,000 from $25,000
in 1997 to  $35,000  in 1998.  This  increase  in income  tax  expense is due to
permanent differences.

Liquidity and Capital Resources

         The Bank is  required to maintain  minimum  levels of liquid  assets as
defined by OTS  regulations.  This  requirement,  which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of the Bank's deposits and short-term  borrowings.  The required ratio currently
is 5.0% and the Bank's  regulatory  liquidity ratio average was 14.31% and 11.6%
at December 31, 1998 and 1997, respectively.

         The Bank's  primary  sources of funds are deposits,  repayment of loans
and  mortgage-backed   securities,   maturities  of  investment  securities  and
interest-bearing  deposits with other banks, advances from the FHLB of New York,
and funds  provided from  operations.  While  scheduled  repayments of loans and
mortgage-backed   securities  and   maturities  of  investment   securities  are
predictable  sources of funds,  deposit flows,  and loan prepayments are greatly
influenced  by the general  level of interest  rates,  economic  conditions  and
competition.  The Bank uses its liquidity resources principally to fund existing
and future loan commitments, maturing certificates of deposit and demand deposit
withdrawals,  to invest in other interest-earning assets, to maintain liquidity,
and meet operating expenses.

         Net cash used by the Bank's  operating  activities (the cash effects of
transactions  that  enter  into the Bank's  determination  of net  income  e.g.,
non-cash items,  amortization and  depreciation,  provision for loan losses) for
the quarter  ended  December  31, 1998 was $69,000,  a decrease of $175,000,  as
compared to the same period in 1997. The decrease in 1998 was primarily due to a
$42,000 decrease in the Bank's net income, an increase in the accrued income tax
and deferred income taxes of $99,000, and an increase in non-deposit liabilities
of $21,000.

         Net  cash  used  by  the  Bank's  investing   activities   (i.e.,  cash
disbursements,  primarily for the purchase of the Bank's  investment  securities
and mortgage-backed securities portfolios and the Bank's loan portfolio) for the
quarter ended  December 31, 1998,  totalled  $5.4  million,  an increase of $5.3
million.  The decrease in cash was  primarily  attributable  to funding net loan
growth  of $1.1  million  in 1998 as  compared  to  $300,000  in 1997 as well as
investment purchases of $4.5 million in 1998. The decrease in cash was partially
offset by  redemption  of securities of $255,000 in 1998 as compared to $225,000
in 1997.

         Net cash  provided  in the  Bank's  financing  activities  (i.e.,  cash
receipts  primarily  from net  increases in deposits  and net  increases in FHLB
advances) for the quarter ended December 31, 1998,

                                      - 9 -

<PAGE>

totalled  $3.4  million,  an increase of $4.0 million as compared to the quarter
ended December 31, 1997.

         Office of Thrift Supervision ("OTS") capital regulations  applicable to
the Bank require  savings  institutions  to meet three  capital  standards:  (1)
tangible  capital equal to 1.5% of total adjusted  assets,  (2) a leverage ratio
(core  capital)  equal  to at  least  3% of  total  adjusted  assets,  and (3) a
risk-based capital requirement equal to 8.0% of total  risk-weighted  assets. In
addition,  the OTS prompt corrective  action regulation  provides that a savings
institution  that  has a  leverage  capital  ratio  of  less  than  4%  (3%  for
institutions  receiving  the highest  examination  rating)  will be deemed to be
"undercapitalized"  and may be subject to certain restrictions.  The Bank was in
compliance with these requirements at December 31, 1998, with tangible, core and
risk based capital ratios of 10.19%, 10.19% and 21.80%, respectively.

Year 2000 Issues

         The  approaching  millennium is causing  organizations  of all types to
review their computer  systems for the ability to properly  accommodate the year
2000.  When  computer  systems  were first  developed,  two digits  were used to
designate the year in date calculations and "19" was assumed for the century. As
a result,  there is  significant  concern about the integrity of date  sensitive
calculations  when the calendar  rolls over to January 1, 2000.  An older system
could interpret  01/01/00 as January 1, 1900 potentially  causing major problems
calculating interest, payment, delinquency or maturity dates.

         The following  discussion of the  implications of the Year 2000 problem
for the Bank contains  numerous  forward-looking  statements based on inherently
uncertain  information.  The cost of the  project and the date on which the Bank
plans to complete the internal Year 2000 modifications are based on management's
best estimates,  which were derived  utilizing a number of assumptions of future
events including the continued  availability of internal and external resources,
third party modifications and other factors.  However, there can be no assurance
that these estimates will be achieved and actual results could differ. Moreover,
although management believes it will be able to make the necessary modifications
in advance,  there can be no guarantee  that failure to modify the systems would
not have a material adverse affect on the Bank.

         In  addition,  the Bank  places a high  degree of  reliance on computer
systems of third parties, such as customers,  suppliers, and other financial and
governmental institutions. Although the Bank is assessing the readiness of these
third parties and preparing  contingency  plans,  there can be no assurance that
the  failure  of these  third  parties  to modify  their  systems  in advance of
December 31, 1999 would not have a material adverse affect on the Company.

         The Bank's  internal Year 2000 Working  Committee,  comprised of senior
management was formed to address the potential risk that Year 2000 poses for the
Bank.  This  committee  reports to the board of  directors.  In June  1997,  the
committee  compiled a written  Year 2000  Action  Plan to promote  awareness  of
pertinent  issues  and to  provide  for  evaluation  and  testing  of the Bank's
electronic systems, programs and processes.

         Accurate data  processing is essential to the Bank's  operations  and a
lack of  accurate  processing  by the Bank's  vendor or by the Bank could have a
significant  adverse  impact on the Bank's  financial  condition  and results of
operations. The Bank has been advised by its data processing service bureau that
their  computer  services will  function  properly on and after January 1, 2000.
Additional  testing of the system was conducted in August 1998. If by the end of
this year, the Bank's  primary data  processing  service bureau has  encountered
unforseen problems and, as a result, will not be year 2000 compliant

                                     - 10 -

<PAGE>

within the necessary  timeframe,  the Bank will seek a secondary data processing
service provider to complete the task. If the Bank is unable to do this, it will
identify those steps  necessary to minimize the negative  impact this could have
on us. The Bank has upgraded its teller  equipment to be year 2000  compliant as
of October 27, 1998.

         In October  1998,  the Bank  purchased  new  equipment and upgraded Y2K
compliant  software from NCR, for the teller stations and operations.  All other
PCs are being tested and if necessary  will be replaced by the end of the second
quarter of 1999.

                                     - 11 -

<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------

         The  Registrant is not engaged in any legal  proceedings at the present
         time.  From  time to time,  the  Bank is a party  to legal  proceedings
         within the normal  course of business  wherein it enforces its security
         interests in loans made by it, and other similar matters.

Item 2.  Changes in Securities and Use of Proceeds
         ----------------------------------------- 

         Not applicable.

Item 3.  Defaults Upon Senior Securities
         ------------------------------- 

         Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

         Not applicable.

Item 5.  Other Information
         -----------------

         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

         (a)      None.

         (b)      The  Registrant  filed a  Current  Report  on Form  8-K  dated
                  October  20,  1998 to  report  a  change  in the  Registrant's
                  certifying accountant under Item 4.


                                     - 12 -

<PAGE>

                                   SIGNATURES


         In accordance with the  requirements of the Securities  Exchange Act of
1934,  as  amended,  the  registrant  has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                    FARNSWORTH BANCORP, INC.



Date: February 11, 1999         By: /s/Gary N. Pelehaty    
                                    --------------------------------------------
                                    Gary N. Pelehaty
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)
                                    (Duly Authorized Officer)



Date: February 11, 1999         By: /s/Charles Alessi  
                                    --------------------------------------------
                                    Charles Alessi
                                    Vice President, Secretary and Treasurer
                                    (Principal Financial and Accounting Officer)


                                     - 13 -