NORTH CENTRAL BANCSHARES, INC.
                               825 Central Avenue
                             Fort Dodge, Iowa 50501

March 30, 2001



Via EDGAR
---------

Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549

RE:      North Central Bancshares, Inc.
         Commission File Number 0-27672
         Annual Report on Form 10-K

Ladies and Gentlemen:

Pursuant to Section  13(a) of the  Securities  Exchange Act of 1934, as amended,
and Rule 13a-1  promulgated  thereunder,  enclosed is the Annual  Report on Form
10-K for the year ended  December 31, 2000,  including  exhibits.  In accordance
with Rule 302 of  Regulation  S-T, a copy of the Annual  Report on Form 10-K has
been manually  signed and will be retained for five years.  Upon  request,  such
copy will be furnished to the Commission.

Please direct questions or comments  regarding the enclosures to the undersigned
at 515-576- 7531.

                                   Sincerely,

                                   NORTH CENTRAL BANCSHARES, INC.

                                   By: /s/ John L. Pierschbacher

                                   John L. Pierschbacher

Enclosure
<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

|X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the Fiscal Year Ended December 31, 2000

|_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 For the transition period from          to

                                     0-27672
                            (Commission File Number)

                         NORTH CENTRAL BANCSHARES, INC.
             (Exact Name of Registrant as Specified in its Charter)

            Iowa                                        421449849
(State or Other Jurisdiction of          (I.R.S. Employer Identification Number)
 Incorporation or Organization)

c/o First Federal Savings Bank of Iowa
825 Central Avenue, Fort Dodge, Iowa                      50501
(Address of Principal Executive Offices)                (Zip Code)

                                 (515) 576-7531
               (Registrant's Telephone Number including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                (Title of Class)

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant  was  required  to file  reports)  and (2) has been  subject  to such
requirements for the past 90 days.

YES_X_     NO

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by  reference in Part III of this Form 10-K or any  amendments  to
this Form 10-K. [ X ]

     As of March 19, 2001, there were issued and outstanding 1,892,380 shares of
the  Registrant's  Common Stock. The aggregate value of the voting stock held by
non-affiliates  of the Registrant,  computed by reference to the average bid and
asked prices of the Common Stock as of March 12, 2001 was $35,545,823.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the Proxy Statement for the Registrant's 2001 Annual Meeting of
     Shareholders  are incorporated by reference into Items 10, 11, 12 and 13 of
     Part III hereof.

2.   Portions of the 2000 Annual  Report to  Shareholders  are  incorporated  by
     reference into Items 7, 7A, 8 and 9 of Part II hereof.

                                       -1-
<PAGE>
                                     PART I

         North Central Bancshares, Inc., and First Federal Savings Bank may from
time  to  time  make  written  or  oral   "forward-looking   statements."  These
forward-looking  statements  may be  contained  in this  annual  filing with the
Securities  and  Exchange   Commission   (the  "SEC"),   the  Annual  Report  to
Shareholders,  other  filings with the SEC, and in other  communications  by the
Company and the Bank, which are made in good faith pursuant to the "safe harbor"
provisions of the Private  Securities  Litigation  Reform Act of 1995. The words
"may,""could,"  "should,""would," "believe," "anticipate," "estimate," "expect,"
"intend,"   "plan"  and   similar   expressions   are   intended   to   identify
forward-looking statements.

         Forward-looking  statements  include  statements  with  respect  to the
Company's  beliefs,  plans,  objectives,  goals,  expectations,   anticipations,
estimates  and   intentions,   that  are  subject  to   significant   risks  and
uncertainties.  The following factors, many of which are subject to change based
on  various  other  factors  beyond the  Company's  control,  and other  factors
discussed  in this  Form  10-K,  as  well as  other  factors  identified  in the
Company's filings with the SEC and those presented  elsewhere by management from
time to time,  could cause its financial  performance to differ  materially from
the plans, objectives,  expectations, estimates and intentions expressed in such
forward-looking statements:

    o      the strength  of the  United  States  economy  in  general  and  the
           strength of the local economies in which
           the Company and the Bank conduct operations;
    o      the effects of, and changes  in, trade, monetary and fiscal policies
           and laws, including interest rate policies
           of the Federal Reserve Board;
    o      inflation, interest rate, market and monetary fluctuations;
    o      the  timely  development  of  and  acceptance  of  new  products  and
           services  and  the perceived  overall value  of  these  products  and
           services  by users,  including  the  features,  pricing  and  quality
           compared to competitors' products and services;
    o      the  willingness of  users to substitute  competitors'  products and
           services for the Company's and the Bank's products and services;
    o      the Company's and the Bank's success in gaining regulatory  approval
           of their products and services, when required;
    o      the impact of changes in  financial  services' laws  and  regulations
           (including laws concerning taxes, banking, securities and insurance);
    o      the impact of  changes  in  financial  services' laws and regulations
           (including laws concerning taxes, banking, securities and insurance);
    o      the impact of technological changes;
    o      acquisitions;
    o      changes in consumer spending and saving habits; and
    o      the Company's and the Bank's success at managing the  risks  involved
           in their business.

         This list of  important  factors is not  exclusive.  The Company or the
Bank does not undertake to update any forward-looking statement, whether written
or oral,  that may be made from time to time by or on behalf of the  Company  or
the Bank.

ITEM 1.           BUSINESS

General
         North  Central  Bancshares,  Inc.  (the  "Holding  Company"),  an  Iowa
corporation,  is the holding company for First Federal Savings Bank of Iowa (the
"Bank"), a federally chartered savings bank.  Collectively,  the Holding Company
and the Bank are referred to herein as the  "Company."  The Holding  Company was
organized on December 5, 1995 at the  direction of the Board of Directors of the
Bank for the purpose of acquiring  all of the capital  stock to be issued by the
Bank in connection with the conversion and  reorganization of the Bank and North
Central  Bancshares,  M.H.C.  (the "MHC")  from the mutual to the stock  holding
company  structure  (these  transactions  are  collectively  referred  to as the
"Conversion"). On March 20, 1996, upon completion of the Conversion, the Holding
Company issued an aggregate of 4,011,057  shares of its Common Stock,  par value
$0.01 per share,  of which  1,385,590  shares were issued in exchange for all of
the Bank's  issued and  outstanding  shares,  except for shares owned by the MHC
which were  cancelled,  and 2,625,467  shares of which were sold in Subscription
and  Community  Offerings  at a price of $10.00 per share,  with gross  proceeds
amounting to $26,254,670. At this time, the Holding Company conducts business as

                                       -2-
<PAGE>
a unitary  savings and loan holding  company and the  principal  business of the
Holding Company  consists of the operation of its wholly-owned  subsidiary,  the
Bank.

         The Holding Company's  executive offices are located at the home office
of the Company at 825 Central Avenue,  Fort Dodge,  Iowa. The Holding  Company's
telephone number is (515) 576-7531.

First Federal Savings Bank of Iowa

         The Bank is a  federally  chartered  savings  bank  that  conducts  its
operations  from its main office  located in Fort Dodge,  Iowa and seven  branch
offices  located  in Iowa.  Four of the  Bank's  branches  are  located in north
central and central Iowa, in the cities of Fort Dodge,  Nevada,  Ames and Perry.
On January 30, 1998,  the Bank  completed the  acquisition  of Valley  Financial
Corp., an Iowa corporation, and the holding company for Valley Savings Bank, FSB
(the "Acquisition").  See "Acquisition of Valley Financial Corp." As a result of
the Acquisition,  the Bank also has three branches in southeastern  Iowa, in the
cities of  Burlington  and Mount  Pleasant.  The Bank is the  successor to First
Federal  Savings  and  Loan  Association  of Fort  Dodge,  which  was  chartered
originally  in 1954,  and on May 7, 1987  became a federally  chartered  savings
bank.  The Bank adopted its present  name on February  27,  1998.  The Bank is a
community-oriented savings institution that is primarily engaged in the business
of attracting  deposits from the general public in the Bank's market areas,  and
investing such deposits in one-to-four family residential real estate mortgages,
multifamily  and  commercial  mortgages  and,  to a lesser  extent,  secured and
unsecured  consumer loans,  with emphasis on second  mortgage loans.  The Bank's
deposits  are insured by the FDIC under the SAIF.  The Bank has been a member of
the Federal Home Loan Bank ("FHLB") System since 1954. At December 31, 2000, the
Bank had total assets of $388.5 million,  total deposits of $261.7 million,  and
total shareholders' equity of $34.6 million.

         The Bank's principal executive office is located at 825 Central Avenue,
Fort Dodge, Iowa and its telephone number at that address is (515) 576-7531.

Acquisition of Valley Financial Corp.

         As of the close of business on January 30, 1998, the Bank completed the
Acquisition of Valley  Financial  Corp.,  ("Valley  Financial"),  pursuant to an
Agreement  and Plan of Merger,  dated as of  September  18,  1997,  (the "Merger
Agreement"). The Acquisition resulted in the merger of Valley Financial's wholly
owned subsidiary,  Valley Savings Bank, FSB ("Valley Savings") with and into the
Bank, with the Bank as the resulting financial  institution (the "Bank Merger").
Valley   Savings,   formerly   headquartered   in   Burlington,   Iowa   was   a
federally-chartered  stock  savings  bank with three branch  offices  located in
southeastern Iowa.

         In connection with the  Acquisition,  each share of Valley  Financial's
common  stock,  par value $1.00 per share,  issued and  outstanding  (other than
shares held as treasury  stock of Valley  Financial) was cancelled and converted
automatically  into the right to receive  $525.00 per share in cash  pursuant to
the  terms  and  conditions  of  the  Merger  Agreement.  As  a  result  of  the
Acquisition,  shareholders of Valley  Financial were paid a total of $14,726,250
in cash.  The  source  of funds  for the  Acquisition  consisted  of the  Bank's
accumulation   of  its  cash  flow  from  the  maturity  of  short-term   liquid
investments,   principal  and  interest  on  loans,  sale  of  other  investment
securities,  other cash receipts,  net of operating expenses and other projected
disbursements.

Market Area and Competition

         The Company is an independent  savings and loan holding company serving
its  primary  market  area of  Webster,  Story,  Dallas,  Henry  and Des  Moines
Counties,  which are located in the central and north  central and  southeastern
parts  of the  State  of  Iowa.  The  Company's  market  area is  influenced  by
agriculture as well as retail sales, professional services and public education.
The Company is  headquartered  in Fort Dodge,  the Webster County seat, where it
operates two Company locations.

         The unemployment  rate as of December 2000 for Webster County was 2.5%,
for Story County was 1.8%, for Dallas County was 1.4%, for Henry County was 2.4%
and for Des Moines  County was 2.9%.  These compare to the national rate of 4.0%
and the State of Iowa rate of 2.5%.
                                        -3-
<PAGE>
         Due to the loan demand in the Company's overall market area,  increased
competition,  and the Company's  decision to diversify its loan  portfolio,  the
Company has originated and purchased loans (primarily multifamily and commercial
real estate  loans)  from out of state.  The  Company  intends to continue  such
originations  and  purchases   pursuant  to  its   underwriting   standards  for
Company-originated loans.

         The Company encounters strong  competition both in attracting  deposits
and in originating real estate and other loans. Its most direct  competition for
deposits has historically come from commercial and savings banks,  other savings
associations,  and credit unions in its market area. Competition for loans comes
from such financial  institutions  as well as mortgage  banking  companies.  The
Company expects  continued strong  competition in the foreseeable  future.  Many
such institutions have greater  financial and marketing  resources  available to
them than does the  Company.  The  Company  competes  for  savings  deposits  by
offering  depositors  a high  level  of  personal  service  and a wide  range of
competitively  priced financial  products.  In recent years,  additional  strong
competition has come from stock and bond dealers and brokers and, in particular,
mutual funds. The Company  competes for real estate loans primarily  through the
interest rates and loan fees it charges and advertising,  as well as by offering
high levels of personal service.

Lending Activities

         Loan Portfolio  Composition.  The principal components of the Company's
loan  portfolio are fixed- and  adjustable-rate  first mortgage loans secured by
one-to-four   family   owner-occupied   residential  real  estate,   fixed-  and
adjustable-rate  first  mortgage loans secured by  multifamily  residential  and
commercial real estate and, to a lesser extent,  secured and unsecured  consumer
loans,  with  emphasis on second  mortgage  loans.  At December  31,  2000,  the
Company's loans receivable  totalled $322.4 million, of which $176.6 million, or
54.8%, were one-to-four family residential real estate first mortgage loans, and
$100.0 million, or 31.0%, were other first mortgage loans, primarily multifamily
and  commercial  real estate loans  purchased by the  Company.  Consumer  loans,
consisting  primarily of automobile  loans and second mortgage  loans,  totalled
$45.8 million, or 14.2%, of the Company's loan portfolio.

         Savings  associations,  such as the Bank, are generally  subject to the
same  limits  on  loans  to one  borrower  as are  imposed  on  national  banks.
Generally,  under these  limits,  a savings  association  may not make a loan or
extend  credit to a single or related group of borrowers in excess of 15% of the
association's unimpaired capital and surplus. Additional amounts may be lent, in
the aggregate not exceeding 10% of unimpaired  capital and surplus,  if any such
loan or extension of credit is fully secured by  readily-marketable  collateral.
Such  collateral is defined to include  certain debt and equity  securities  and
bullion, but generally does not include real estate. For the year ended December
31,  2000,  it was the  Company's  policy to limit loans to one borrower to $2.5
million. At December 31, 2000, the Company's largest aggregate  outstanding loan
to one  borrower  was  $2.5  million  and the  second  largest  borrower  had an
aggregate balance of $2.0 million, both of which were first mortgage multifamily
residential real estate loans and both were performing as of that date.

                                       -4-
<PAGE>
         Analysis of Loan Portfolio.  Set forth below are selected data relating
to the  composition  of the Company's  loan  portfolio by type of loan as of the
dates indicated:
<TABLE>
<CAPTION>
                                                         At December 31,
                                                         ---------------
                                                  2000                         1999
                                                  ----                         ----
                                                       Percent                      Percent
                                          Amount       of Total         Amount     of Total
                                          ------       --------         ------     --------
                                                      (Dollars in thousands)
<S>                                    <C>             <C>           <C>            <C>
First mortgage loans:
   One-to-four family residential(1)   $ 176,615        54.78%       $ 164,057       56.23
   Multifamily .....................      75,858        23.53           73,417       25.16
   Commercial ......................      24,127         7.48           17,723        6.07
                                          ------         ----           ------        ----
     Total first mortgage loans ....   $ 276,600        85.79          255,197       87.47
                                       ---------        -----          -------       -----

Consumer loans:
   Automobiles .....................   $   8,803         2.73%       $   8,003        2.74%
   Second mortgage(2) ..............      31,910         9.90           23,604        8.09
   Other(3) ........................       5,095         1.58            4,956        1.70
                                           -----         ----            -----        ----
     Total consumer loans ..........      45,808        14.21           36,563       12.53
                                          ------        -----           ------       -----
     Total loans receivable ........   $ 322,408       100.00%       $ 291,760      100.00%

Less:
   Undisbursed portion of

     construction loans ............   $   1,493         0.45%       $   1,982        0.68%
   Unearned loan discount ..........          69         0.02              136        0.05
   Net deferred loan origination
      fee(expense) .................         (23)       (0.01)             106        0.04
   Allowance for loan losses .......       2,843         0.88            2,777        0.95
                                           -----         ----            -----        ----
       Total loans receivable, net .   $ 318,026        98.64%       $ 286,759       98.29%
                                       =========        =====        =========       =====
</TABLE>
<TABLE>
<CAPTION>
                                                                           At December 31,
                                                                           ---------------
                                                 1998                          1997                          1996
                                                 ----                          ----                          ----
                                                       Percent                       Percent                      Percent
                                          Amount      of Total         Amount       of Total         Amount       of Total
                                          ------      --------         ------       --------         ------       --------
                                                                     (Dollars in thousands)
<S>                                    <C>             <C>           <C>            <C>           <C>             <C>
First mortgage loans:
   One-to-four family residential(1)   $ 148,992        57.46%       $ 115,763       59.48%       $ 107,168        63.44%
   Multifamily .....................      64,895        25.02           51,345       26.38           34,488        20.42
   Commercial ......................      11,396         4.39            3,800        1.95            5,225         3.09
                                          ------         ----            -----        ----            -----         ----
     Total first mortgage loans ....     225,283        86.87          170,908       87.81          146,881        86.95
                                         -------        -----          -------       -----          -------        -----
Consumer loans:
   Automobiles .....................   $   7,348         2.83%       $   4,696        2.41%       $   4,155         2.46%
   Second mortgage(2) ..............      20,784         8.01           16,226        8.34           15,303         9.06
   Other(3) ........................       5,946         2.29            2,796        1.44            2,582         1.53
        --                                 -----         ----            -----        ----            -----         ----
     Total consumer loans ..........      34,078        13.13           23,718       12.19           22,040        13.05
                                          ------        -----           ------       -----           ------        -----
     Total loans receivable ........   $ 259,361       100.00%       $ 194,626      100.00%       $ 168,921       100.00%

Less:
   Undisbursed portion of
     construction loans ............   $   2,025         0.78%       $     453        0.23%       $     371         0.22%
   Unearned loan discount ..........         312         0.12              424        0.22              525         0.31
   Net deferred loan origination
      fee(expense) .................         316         0.12              349        0.18              241         0.14
   Allowance for loan losses .......       2,676         1.03            2,151        1.11            1,953         1.16
                                           -----         ----            -----        ----            -----         ----
       Total loans receivable, net .   $ 254,032        97.95%       $ 191,249       98.26%       $ 165,831        98.17%
                                       =========        =====        =========       =====        =========        =====
<FN>
(1)   Includes interest-only construction loans that convert to permanent loans.
(2)   Second mortgage loans included  $1.6 million, $1.5 million,  $1.4 million,
      $1.1  million  and  $862,000  (in  actual  dollars) of  nonowner-occupied
      residential first mortgage loans at December 31, 2000,  1999,  1998,  1997
      and 1996, respectively.
(3)   Other consumer loans included $1.5 million,  $1.6 million,  $2.3  million,
      $269,000 and $213,000 (in actual dollars) of commercial mortgage  loans at
      December 31, 2000, 1999, 1998, 1997 and 1996,  respectively.
</FN>
</TABLE>
                                      -5-
<PAGE>
         Loan Maturity Schedule.  The following table sets forth the maturity or
period to  repricing  of the  Company's  loan  portfolio  at December  31, 2000.
Overdraft   lines  of  credit  are   reported  as  due  in  one  year  or  less.
Adjustable-rate  loans are  included in the period in which  interest  rates are
next  scheduled to adjust rather than in which they  contractually  mature,  and
fixed  rate  loans are  included  in the  period in which the final  contractual
repayment is due.

<TABLE>
<CAPTION>
                                                             At December 31, 2000
                                                             --------------------
                              Within       1-3         3-5          5-10        10-20       Beyond 20
                              1 Year      Years        Years        Years       Years         Years       Total
                              ------      -----        -----        -----       -----         -----       -----
                                                               (In thousands)
<S>                          <C>         <C>         <C>           <C>         <C>          <C>         <C>
First mortgage loans:
    One-to-four family
      residential(1)....     $28,785     $28,897     $ 51,373      $59,487     $ 7,213      $   860     $176,615
    Multifamily.........      37,829      10,788       17,556        9,673          12           --       75,858
    Commercial..........       5,045       5,044        9,342        3,217       1,479           --       24,127
Consumer loans (2)......       5,254      12,456       26,336        1,676          74           12       45,808
                               -----      ------       ------        -----       -----        -----       ------
      Total ............     $76,913     $57,185     $104,607      $74,053     $ 8,778      $   872     $322,408
                             =======     =======     ========      =======     =======      =======     ========
<FN>
(1)      One-to-four  family loans include  $102.7  million of 7 year fixed rate
         loans that convert to  adjustable  rates at the beginning of the eighth
         year and are annually  adjustable  thereafter.  $49.4  million of these
         loans with repricing  periods greater than 5 years have been classified
         as fixed  rate  loans.  $53.3  million of these  loans  with  repricing
         periods  less than 5 years  have been  classified  as  adjustable  rate
         loans.

(2)      Includes second mortgage loans of $31.9 million at December 31, 2000.
</FN>
</TABLE>
         The following table sets forth the dollar amounts of all fixed rate and
adjustable  rate loans in each loan  category  at  December  31,  2000 due after
December 31, 2001.
<TABLE>
<CAPTION>
                                                           Due After December 31, 2001
                                                           ---------------------------
                                                  Fixed            Adjustable             Total
                                                  -----            ----------             -----
                                                                 (In thousands)
<S>                                            <C>                 <C>                <C>
First mortgage loans:
    One-to-four family residential(1).....     $  66,376           $  81,454          $ 147,830
    Multifamily...........................         5,126              32,903             38,029
    Commercial............................         7,095              11,987             19,082
Consumer loans (2)........................        38,894               1,660             40,554
                                                  ------               -----             ------
      Total...............................     $ 117,491           $ 128,004          $ 245,495
                                               =========           =========          =========
<FN>

(1)      One-to-four  family loans  include  $93.5  million of 7 year fixed rate
         loans that convert to  adjustable  rates at the beginning of the eighth
         year and are annually  adjustable  thereafter.  $49.4  million of these
         loans with repricing  periods greater than 5 years have been classified
         as fixed  rate  loans.  $44.1  million of these  loans  with  repricing
         periods  less than 5 years  have been  classified  as  adjustable  rate
         loans.

(2)      Includes second mortgage loans of $28.6 million at December 31, 2000.
</FN>
</TABLE>
         One-to-Four  Family Residential Real Estate Loans.  Traditionally,  the
Company's  primary  lending  activity  consists of the origination of fixed- and
adjustable-rate  one-to-four  family  owner-occupied  residential first mortgage
loans,  substantially all of which are  collateralized by properties  located in
the  Company's  market area.  The Company also  originates  one-to-four  family,
interest  only  construction  loans that  convert to  permanent  loans  after an
initial  construction  period that  generally  does not exceed nine  months.  At
December 2000,  37.7% of the Company's  residential  real estate loans had fixed
rates, and 62.3% had adjustable rates.

         The  Company  originates  loans for  portfolio  and sells  loans in the
secondary  mortgage  market.   However,   the  Company's   one-to-four   family,
fixed-rate, residential real estate loans originated for portfolio are generally
originated and underwritten according to standards that qualify such loans to be
included  in  Federal  Home Loan  Mortgage  Corporation  ("FHLMC")  and  Federal
National Mortgage  Association ("FNMA") purchase and guarantee programs and that
otherwise  permit resale in the  secondary  mortgage  market.  The Bank has sold
fixed-rate  loans  with  maturities  equal  to or in  excess  of 15 years in the
secondary  mortgage market.  For the year ended December 31, 2000, the Bank sold
$818,000 of mortgage loans consisting of fifteen  one-to-four family residential
mortgage  loans.  One-to-four  family  loans  are  underwritten  and  originated
according to policies  approved by the Board of Directors.  First Iowa Mortgage,
Inc., the Bank's wholly owned mortgage banking subsidiary, sold $13.3 million of
mortgage loans consisting of 146 one-to-four family residential mortgage loans.

                                        -6-
<PAGE>
         Originations of one-to-four  family fixed-rate first mortgage loans are
monitored  on an ongoing  basis and are affected  significantly  by the level of
market  interest  rates,  the Company's  interest  rate gap  position,  and loan
products offered by the Company's competitors.  The Company's one-to-four family
fixed-rate  first  mortgage loans amortize on a monthly basis with principal and
interest due each month.  The Company also offers 5 and 7-year  fixed-rate first
mortgage  loans that convert to  adjustable-rate  loans that adjust on an annual
basis after the initial fixed rate term. The overall maturity of these loans may
be up to 30 years. The Company determines whether a customer qualifies for these
loans based upon the initial fixed interest rate.

         The Company's  adjustable  rate  mortgage  loans,  or "ARM loans",  are
generally  originated  for terms of up to 30 years,  with  interest  rates  that
adjust annually.  The Company  establishes  various annual and  life-of-the-loan
caps on ARM loan interest rate  adjustments.  Currently,  the Company offers ARM
loans with  annual rate caps of 1.5% and  maximum  life-of-loan  caps of 11.95%.
Prior to 1995, the Company's ARM loans originated for retention in its portfolio
generally  were based on the 11th District Cost of Funds Index, a lagging market
index. At present, the interest rate on its ARM loans is calculated by using the
weekly average yield on United States Treasury Securities adjusted to a constant
maturity of one year. The Company determines whether a borrower qualifies for an
ARM loan based on the fully indexed rate of the ARM loan at the time the loan is
originated,  rather  than  the  introductory  or  "teaser"  rate or the  maximum
life-of-the  rate to which the loan  could  adjust.  In  addition,  the  Company
establishes floors for each loan originated below which the loan may not adjust.
One-to- four family residential ARM loans totalled $110.0 million,  or 34.1%, of
the Company's total net loan portfolio at December 31, 2000.

         The primary purpose of offering ARM loans is to make the Company's loan
portfolio more interest rate sensitive.  ARM loans carry  increased  credit risk
associated  with  potentially  higher  monthly  payments by borrowers as general
market interest rates increase. It is possible,  therefore,  that during periods
of rising interest  rates,  the risk of default on ARM loans may increase due to
the upward  adjustment of interest  costs to the borrower.  Management  believes
that the Company's  credit risk associated with its ARM loans is reduced because
of the annual and lifetime  interest rate adjustment  limitations on such loans,
although such  limitations  do create an element of interest rate risk. See Item
7A. "Discussion of Market Risk-- Interest Rate Sensitivity Analysis" in the 2000
Annual  Report to  Shareholders,  which is attached to this Form 10-K as Exhibit
13.

         The Company's  one-to-four  family  residential  first  mortgage  loans
customarily include due-on-sale clauses, which are provisions giving the Company
the right to declare a loan  immediately  due and  payable  in the event,  among
other things,  that the borrower  sells or otherwise  disposes of the underlying
real  property  serving as  security  for the loan.  Due-on-sale  clauses are an
important means of adjusting the rates on the Company's fixed rate mortgage loan
portfolio,  and the  Company  has  generally  exercised  its rights  under these
clauses.

         Regulations  limit  the  amount  that a  savings  institution  may lend
relative  to the  appraised  value of the real  estate  securing  the  loan,  as
determined    by   an   appraisal    at   the   time   of   loan    origination.
"Regulation-Regulation  of  Federal  Savings  Associations-Real  Estate  Lending
Standards." The Company's lending policies limit the maximum loan-to-value ratio
on mortgage loans without private mortgage insurance to 80% of the lesser of the
appraised value or the purchase price of the property to serve as collateral for
the loan. The Company generally makes one-to-four family first real estate loans
with  loan-to-value  ratios of up to 95%; however,  for one-to-four  family real
estate loans with  loan-to-value  ratios greater than 80%, the Company  requires
the loan  amount to be  covered  by  private  mortgage  insurance.  The  Company
requires fire and casualty  insurance,  flood insurance,  where  applicable,  an
abstract of title,  and a title opinion on all  properties  securing real estate
loans originated by the Company.

         Multifamily Residential and Commercial Real Estate Loans. The Company's
loan portfolio contains loans secured by multifamily  residential and commercial
real estate. Such loans constituted  approximately  $100.0 million, or 31.4%, of
the  Company's  total net loan  portfolio at December  31, 2000.  Of such loans,
$92.2  million,  or 92.3%,  were purchased or originated by the Company and were
secured by properties outside the State of Iowa (the "out of state" properties).
There were two loans secured by multifamily and commercial real estate more than
90 days past due at December 31, 2000.  They  consisted of one  commercial  real
estate loan in the amount of $489,000  and one  multifamily  real estate loan in
the amount of $67,000.  Subsequent  to year end,  the  $67,000  loan was paid in
full. The multifamily and commercial real estate loans are primarily secured by

                                        -7-
<PAGE>
multifamily  residences such as apartment buildings and by commercial facilities
such as office  buildings and retail  buildings.  Multifamily  residential  real
estate loans are offered with fixed and adjustable rates and are structured in a
number of different ways depending  upon the  circumstances  of the borrower and
the type of multifamily project.  Fixed rate loans generally amortize over 15 to
30 years,  and  generally  contain  call  provisions  permitting  the Company to
require  that the  entire  principal  balance  be  repaid  at the end of five to
fifteen years.  Such loans are priced as five to fifteen year loans with maximum
loan-to-value  ratios  of 80%.  See " --  Purchased  or Out of State  Originated
Loans".

         All  purchased or out of state  originated  loans in excess of $200,000
are approved by the Chief Executive  Officer,  Chief  Operating  Officer and the
Board of  Directors  and are subject to the same  underwriting  standards as for
loans originated by the Company.  All purchased or out of state originated loans
less than  $200,000  are  approved  by the  Chief  Executive  Officer  and Chief
Operating  Officer and ratified by the Board of Directors and are subject to the
same underwriting standards as loans originated by the Company. Before a loan is
purchased,  the  Company  obtains  a copy  of  the  original  loan  application,
certified rent rolls, the original title insurance policy and personal financial
statements of any  guarantors  of the loan. An executive  officer or director of
the Company also makes a personal  inspection of the property securing the loan.
Such purchases are made without recourse to the seller. $25.4 million, or 24.9%,
of out of state loans are serviced by the Bank.  $76.3 million,  or 75.1% of the
out of state loans are  serviced by the  originating  financial  institution  or
mortgage company. The Company imposes a $2.5 million limit on the aggregate size
of multifamily and commercial  loans to any one borrower.  Any exceptions to the
limit must be specifically  approved by the Board of Directors on a loan-by-loan
basis within the Company's legal lending limit. See "Regulation -- Regulation of
Federal Savings Associations -- Loans to One Borrower".

         Loans  secured by  multifamily  and  commercial  real estate  generally
involve a greater degree of credit risk than single-family  residential mortgage
loans and typically,  such loans also have larger loan balances.  This increased
credit  risk is a result of several  factors,  including  the  concentration  of
principal  in a limited  number of loans and  borrowers,  the effects of general
economic conditions on income producing properties, and the increased difficulty
of evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multifamily and commercial  real estate is typically  dependent
upon the successful  operation of the related real estate property.  If the cash
flow from such real estate projects are reduced, the borrower's ability to repay
the loan may be impaired.

         Consumer  Loans,  Including  Second  Mortgage  Loans.  The Company also
originates  consumer loans, which primarily include second mortgage loans. As of
December  31, 2000,  consumer  loans  totalled  $45.8  million,  of which second
mortgage loans totalled $31.9 million, or 10.0%, of the Company's net total loan
portfolio. The Company's second mortgage loans have fixed interest rates and are
generally for terms of 3 to 5 years.  The Company's  second  mortgage  loans are
secured  by the  borrower's  principal  residence  with a maximum  loan-to-value
ratio,  including the principal  balances of both the first and second  mortgage
loans,  of  generally  no more than 80%.  The  average  principal  amount of the
Company's second mortgage loans is approximately $15,000.

         To a lesser  extent,  the  Company  also  originates  loans  secured by
automobiles,  with fixed rates  generally on a 80%  loan-to-value  basis for new
cars. All of the Company's  automobile  loans were originated by the Company and
generally, have terms of up to five years.

         In  addition,  the Company  also makes  other types of consumer  loans,
primarily  unsecured  signature  loans for various  purposes.  The minimum  loan
amount for such  loans is  $1,000,  the  maximum  loan  amount for such loans is
generally $7,500, and the average balance of such loans is approximately $2,600.

         The Company  originates a limited number of commercial  business loans,
which the Company  includes  with its  consumer  loan  portfolio  for  reporting
purposes.  Such  loans may be  unsecured  and are  originated  for any  business
purpose,  such as for the purchase of  computers  and  business  equipment.  The
maximum loan amount for such unsecured loans is generally $7,500.

         The Company's  business plan calls for an increase in consumer  lending
for the foreseeable future,  particularly  second mortgage lending.  The Company
generally  expects  consumer  loan  demand  will  come  from its  mortgage  loan
customers.  Consumer loans generally provide for shorter terms and higher yields
as compared to residential  first  mortgage  loans,  but generally  carry higher
risks of default.  At December 31, 2000,  $244,000,  or 0.53%,  of the Company's
consumer loan portfolio was on non-accrual status.

                                        -8-
<PAGE>
         Loan  Originations,  Solicitation,  Processing,  and Commitments.  Loan
originations  are derived  from a number of sources  such as real  estate  agent
referrals, existing customers,  borrowers, builders, and walk-in customers. Upon
receiving a loan application, the Company obtains a credit report and employment
verification  to  verify  specific   information  relating  to  the  applicant's
employment,  income, and credit standing.  In the case of a real estate loan, an
appraiser  approved  by the  Company  appraises  the  real  estate  intended  to
collateralize the proposed loan. An underwriter in the Company's loan department
checks the loan application file for accuracy and completeness, and verifies the
information  provided.  Pursuant to the Company's written loan policies,  senior
management approves all first mortgage loans. The Loan Committee of the Board of
Directors  meets  monthly to review a sampling  of all loans  originated  in the
month.

         After a loan is approved,  a loan commitment  letter is promptly issued
to the borrower. The commitment letter specifies the terms and conditions of the
proposed loan  including  the amount of the loan,  interest  rate,  amortization
term, a brief  description of the required  collateral,  and required  insurance
coverage.  Commitments  are typically  issued for 60-day  periods in the case of
loans to refinance,  loans to purchase  existing real estate,  and  construction
loans.  The borrower  must provide  proof of fire and casualty  insurance on the
property  serving as collateral,  which insurance must be maintained  during the
full term of the loan.  An  abstract  of title  along with an  attorney's  title
opinion is  required on all first  mortgage  loans  secured by real  property in
Iowa. At December 31, 2000, the Company had outstanding commitments to originate
$480,000 of loans.  This amount does not include  commitments to purchase loans,
the undisbursed  overdraft loan  privileges or the unfunded  portion of loans in
process.

         Purchased  or  Out  of  State  Originated  Loans.  The  Company's  loan
portfolio  contains $101.7 million of loans secured by out of state  properties.
These loans  represented 31.5% of the Company's total loan portfolio at December
31, 2000.  Substantially all of the multifamily  residential and commercial real
estate loans in the Company's  loan portfolio are purchased or originated out of
state by the  Company  without  recourse to the seller.  At December  31,  2000,
approximately  $20.2 million of these purchased loans  represented loans secured
by real estate in the West Coast states of California, Oregon and Washington. At
that date, the Company's investment in properties located in California totalled
$16.4  million  and  was  distributed  primarily  in  southern  California.  The
Company's  investment in properties  located in Wisconsin totalled $33.4 million
and was  primarily  distributed  between the Milwaukee  and Madison  areas.  The
Company's  investment in properties in Colorado  totalled  $28.4 million and was
primarily  distributed  between  the  Colorado  Springs  and Denver  areas.  The
remainder  of the  Company's  purchased  or out of state  originated  loans  are
distributed in various states.  At December 31, 2000, the Company's  multifamily
residential  and commercial real estate loans had an average balance of $435,000
and the largest loan had a principal balance of $2.5 million. As of December 31,
2000 there was one  multifamily  and one  commercial  real estate loan that were
more than 90 days past due and were on nonaccrual status.

         To supplement  its  origination  of  one-to-four  family first mortgage
loans, the Company also purchases loans secured by one-to-four family residences
out of state.  At December 31, 2000,  $9.5  million,  or 2.9%,  of the Company's
total loan portfolio  consisted of purchased  one-to-four family loans, of which
$5.8  million were  secured by  properties  located in Missouri and $1.6 million
were secured by properties  in Wisconsin.  As of December 31, 2000 there were no
purchased  one-to-four  family  first  mortgage  loans that were on a nonaccrual
status.

         Loans  purchased by the Company  entail  certain risks not  necessarily
associated with loans the Company originates.  The Company's purchased loans are
generally  acquired without recourse.  $25.4 million,  or 24.9%, of out of state
loans are  serviced  by the Bank.  $76.3  million,  or 75.1% of the out of state
loans are serviced by the originating financial institution or mortgage company.
Although  the  Company   reviews  each   purchased   loan  using  the  Company's
underwriting  criteria  for  originations  and a  Company  officer  or  director
performs an on-site  inspection of each purchased loan, the Company is dependent
on the  servicer  of the loan for  ongoing  collection  efforts  and  collateral
review.  In  addition,  the  Company  purchases  loans  with a variety of terms,
including maturities,  interest rate caps and indices for adjustment of interest
rates  that  may  differ  from  those  offered  at the  time by the  Company  in
connection with loans the Company originates. Finally, the market areas in which
the  properties  which  secure the  purchased  loans are  located are subject to
economic and real estate market  conditions that may  significantly  differ from
those experienced in the Company's market areas. If economic conditions continue
to limit the Company's opportunities to originate loans in its market areas, the
Company may increase its investment in out of state mortgage loans. There can be
no assurance, however, that economic conditions in these out of state areas will
not deteriorate in the future resulting in increased loan delinquencies and loan
losses among the loans secured by property in these areas.

                                        -9-
<PAGE>
         In an  effort  to  reduce  the risk of loss on out of  state  purchased
loans, the Company only purchases loans that meet the underwriting  policies for
loans  originated by the Company  although  specific  rates and terms may differ
from the rates and terms  offered by the  Company.  The  Company  also  requires
appropriate  documentation,  and personal  inspections  of the  underlying  real
estate collateral by an executive officer or director prior to purchase.

         Set forth below is a table of the  Company's  purchased or out of state
originated  loans  by  state  of  origin  (including  multifamily   residential,
commercial  real  estate and  one-to-four  family  first  mortgage  loans) as of
December 31, 2000.

                                          Balance as of
                       State            December 31, 2000
                       -----            -----------------
                                         (In thousands)
                      Arizona         $       695
                      California           16,370
                      Colorado             28,368
                      Florida                 275
                      Georgia                  48
                      Illinois                  7
                      Indiana                 802
                      Kansas                  766
                      Michigan                 11
                      Minnesota               772
                      Missouri              8,599
                      Montana                  77
                      Nebraska                541
                      Nevada                  640
                      New Mexico                7
                      North Carolina          653
                      North Dakota              61
                      Ohio                   2,886
                      Oregon                 1,880
                      South Carolina           117
                      Tennessee                189
                      Texas                  1,393
                      Utah                   1,157
                      Virginia                  39
                      Washington             1,901
                      Wisconsin             33,442
                                            ------
                        Total          $   101,696
                                       ===========


                                       -10-
<PAGE>
         Origination,  Purchase  and Sale of Loans.  The table  below  shows the
Company's originations, purchases and sales of loans for the periods indicated.

<TABLE>
<CAPTION>
                                                                             For the Years Ended
                                                                                  December 31,
                                                                                  ------------
                                                                2000                  1999                  1998
                                                                ----                  ----                  ----
                                                                               (In thousands)
<S>                                                       <C>                    <C>                   <C>
Total loans receivable at beginning of period.........    $   291,760            $   258,361           $   194,626
                                                          -----------            -----------           -----------
Originations:
First mortgage loans:
   One-to-four family residential.....................         35,512                 31,645                36,226
   Multifamily........................................             --                    700                    --
   Commercial.........................................             --                     --                 1,100
Consumer loans:
   Automobile.........................................          6,856                  4,866                 6,349
   Second mortgage ...................................         21,500                 12,321                14,493
   Other .............................................          2,853                  1,778                 2,595
                                                                -----                  -----                 -----
     Total originations:..............................         66,721                 51,310                60,763
   Effect of Valley Financial Acquisition.............             --                     --                58,911
Loan Purchases:
   First mortgage-- one-to-four family................          1,677                  5,870                 3,159
   First mortgage-- multifamily.......................         10,449                 23,332                21,315
   First mortgage-- commercial........................          7,499                 11,142                    --
Loan Sales:
   First mortgage-- one-to-four family................            818                    475                 4,517
Transfer of mortgage loans to (from)
   foreclosed real estate.............................           (166)                   212                   373
Repayments............................................         55,046                 57,567                75,523
                                                               ------                 ------                ------
Net loan activity.....................................         30,648                 33,400                63,734
                                                               ------                 ------                ------
     Total loans receivable at end of period..........    $   322,408            $   291,760           $   258,361
                                                          ===========            ===========           ===========
</TABLE>

         Loan Origination Fees and Other Income.  In addition to interest earned
on  loans,  the  Company  generally   receives  fees  in  connection  with  loan
originations.  Such  loan  origination  fees,  net of  costs to  originate,  are
deferred and amortized using an interest method over the contractual life of the
loan.  Fees deferred are recognized into income  immediately  upon prepayment of
the related loan. At December 31, 2000, the Company had $23,000 of deferred loan
origination expenses, net. Such fees vary with the type of loans and commitments
made. The Company  typically  charges an document  preparation fee on fixed- and
adjustable-rate  first mortgage loans. In addition to loan origination fees, the
Company also receives other fees,  service charges (such as overdraft fees), and
other  income that  consist  primarily of deposit  transaction  account  service
charges and late charges.  The Company  recognized  fees and service  charges of
$1.6 million,  $1.5 million and $1.2 million for the fiscal years ended December
31, 2000, 1999 and 1998 respectively.

Investment Activities

         At December 31, 2000, the Company's  investment  portfolio is comprised
of United States Government  Agencies,  Municipal  Obligations,  mortgage-backed
securities,  interest-bearing deposits and equity securities consisting of FHLMC
preferred stocks,  FNMA preferred stock, FHLB stock,  other common and preferred
stocks.  At December 31, 2000,  $362,000,  or 1.2%, of the Company's  investment
portfolio,  excluding equity securities,  was scheduled to mature in one year or
less,  and $17.0  million,  or 56.9% was  scheduled to mature within one to five
years.

         The Company is required under federal regulations to maintain a minimum
amount of liquid assets that may be invested in specified  short term securities
and certain other investments.  The Company generally has maintained a portfolio
of liquid assets that exceeds regulatory  requirements.  Liquidity levels may be
increased or decreased depending upon the yields on investment  alternatives and
upon management's judgment as to the attractiveness of the yields then available
in relation to other  opportunities  and its  expectation  of the level of yield
that will be available in the future, as well as

                                       -11-
<PAGE>
management's projections as to the short term demand for funds to be used in the
Company's loan  origination  and other  activities.  In addition,  the Company's
liquidity levels are affected by the level and source of its borrowed funds.

         Investment Portfolio. The following table sets forth the carrying value
of the Company's investment portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                 At December 31,
                                                                 ---------------
                                                   2000                1999                 1998
                                                   ----                ----                 ----
                                                                 (In thousands)
<S>                                           <C>                 <C>                  <C>
Investment securities:
     U.S. Treasury  Notes..................   $        --         $     4,260          $     9,410
     U.S. Government agencies (1)..........        17,278              18,799               18,884
     Mortgage-backed securities............         8,183               9,955                7,508
     State and Local Obligations (1).......         4,473               4,772                4,378
     FHLB stock............................         4,429               3,035                2,379
     Equity securities.....................         8,989               8,872                7,323
                                                    -----               -----                -----
       Total investment securities.........        43,352              49,693               49,882
     Interest-earning deposits.............         6,331               4,127               13,201
                                                    -----               -----               ------
       Total investments...................   $    49,683         $    53,820          $    63,083
                                              ===========         ===========          ===========
<FN>
(1) Certain  securities  have call features  which allows the issuer to call the
    security prior to maturity date.
</FN>
</TABLE>
                                       -12-
<PAGE>
         Investment  Portfolio  Maturities.  The following  table sets forth the
scheduled maturities, carrying values, market values and weighted average yields
for the Company's investment portfolio at December 31, 2000.

<TABLE>
<CAPTION>
                                                                           At December 31, 2000
                                                                           --------------------
                                         One Year or Less            One to Five Years             Five to Ten Years
                                         ----------------            -----------------             -----------------
                                                  Annualized                  Annualized                   Annualized
                                                   Weighted                    Weighted                     Weighted
                                     Carrying      Average       Carrying      Average       Carrying        Average
                                       Value        Yield          Value        Yield          Value          Yield
                                       -----        -----          -----        -----          -----          -----

<S>                                 <C>             <C>          <C>           <C>           <C>             <C>
Investment securities:
   U.S. Government agencies(1) ..   $    --           --%        $16,091       5.92%         $ 1,187         7.09%
   Mortgage-backed securities ...        --           --           1,561       5.51            1,950         5.76
   State and Local Obligations(1)       362         4.35             937       4.09            2,609         4.78
   FHLB Stock ...................        --           --              --          --              --           --
   Common and Preferred Stock ...        --           --              --          --              --           --
   Preferred Stock-FNMA .........        --           --              --          --              --           --
   Preferred Stock-FHLMC ........        --           --              --          --              --           --
                                     ------        -----         -------       -----           -----         ----
     Total ......................   $   362         4.35%        $18,589       5.79%          $5,746         5.59%
Interest-bearing deposits
   at the FHLB ..................     6,330         6.10              --         --               --           --
                                      -----        -----          ------       -----           -----         -----
      Total investments ..........  $ 6,692         6.01%        $18,589       5.79%         $ 5,746         5.59%
                                    =======         ====         =======       ====          =======         ====
</TABLE>

<TABLE>
<CAPTION>

                                                            At December 31, 2000
                                                            --------------------
                                        Over Ten Years                                 Total
                                        --------------                                 -----
                                                Annualized                                                Annualized
                                                 Weighted                                     Average      Weighted
                                    Carrying     Average         Carrying    Market           Life in      Average
                                      Value        Yield           Value      Value             Years        Yield
                                      -----        -----           -----      -----             -----        -----
                                                              (Dollars in thousands)
<S>                                 <C>              <C>         <C>         <C>                  <C>        <C>
Investment securities:
   U.S. Government agencies(1) ..   $    --           --%        $17,278     $17,278              4          5.99%
   Mortgage-backed securities ...     4,672          6.16          8,183       8,183              4          5.94
   State and Local Obligations(1)       565          5.20          4,473       4,473              4          4.65
   FHLB Stock ...................        --            --          4,429       4,429                         7.10
   Common and Preferred Stock ...        --            --            464         464                         4.78
   Preferred Stock-FNMA .........        --            --          5,130       5,130                         6.48
   Preferred Stock-FHLMC ........        --            --          3,395       3,395                         5.73
                                      -----          ----          -----       -----                         ----

     Total ......................   $ 5,237          6.06%       $43,352     $43,352                         5.98%
Interest-bearing deposits
   at the FHLB ..................        --            --          6,330       6,330                         6.10
                                      -----          -----         -----       -----                         ----
     Total investments ..........   $ 5,237          6.06%       $49,682     $49,682                         5.99%
                                    =======          ====        =======     =======                         ====
<FN>
(1)   Certain securities have call features which allows the issuer to call the
      security prior to maturity date.
</FN>
</TABLE>
                                       -13-
<PAGE>
Sources of Funds

         General.  Deposits  are the  major  source of the  Company's  funds for
lending and other  investment  purposes.  In addition to  deposits,  the Company
derives funds from FHLB advances,  the amortization and prepayment of loans, the
maturity of investment  securities  and  operations.  Scheduled  loan  principal
repayments are a relatively  stable source of funds,  while deposit  inflows and
outflows and loan  prepayments are influenced  significantly by general interest
rates and market  conditions.  The Company may use  borrowings  on a  short-term
basis to  compensate  for  reductions  in the  availability  of funds from other
sources or on a longer term basis for general business purposes.

         Deposits.  During 2000, consumer and commercial deposits were attracted
principally  from within the  Company's  market area  through the  offering of a
broad selection of deposit instruments including NOW accounts, savings accounts,
money  market  savings,   certificates  of  deposit  and  individual  retirement
accounts. The Company also offers these products in its new market area which it
now serves as a result of the Acquisition.  See "Acquisition of Valley Financial
Corp." Deposit account terms vary according to the minimum balance required, the
period of time during  which the funds must remain on deposit,  and the interest
rate,  among other  factors.  The maximum rate of interest which the Company may
pay is not established by regulatory authority.  The Company regularly evaluates
its internal cost of funds,  surveys  rates  offered by competing  institutions,
reviews the Company's  cash flow  requirements  for lending and  liquidity,  and
executes rate changes when deemed appropriate. During 1999 and 2000, the Company
became a more active  bidder for public funds in the state of Iowa. As a result,
public fund deposits  totalled  $15.8 million at December 31, 2000.  The Company
does not obtain retail funds through  brokers  through a solicitation  of funds,
nor by  offering  negotiated  rates on  certificates  of  deposit  in  excess of
$100,000.

         Deposit Portfolio.   Deposits with the Company as of December 31, 2000,
were represented by the various types of deposit programs described below.

<TABLE>
<CAPTION>
   Weighted                                                                                                 Percentage
   Average                                    Checking and                 Minimum                           of Total
Interest Rate   Original Term                Savings Deposits              Balance          Balances         Deposits
-------------   -------------                ----------------              -------          --------         --------
                                                                                          (Dollars in
                                                                                           thousands)

<S>             <C>                      <C>                                <C>           <C>                <C>
    0.00%        None                    Noninterest-bearing demand         $   50        $  6,071            2.32%
    1.25         None                    NOW accounts                           50          30,225           11.57
    1.83         None                    Savings accounts                       25          21,724            8.32
    4.92         None                    Money Market savings                2,500          24,519            9.39

                                         Certificates of Deposit
                                         -----------------------
    6.43         1-3 months              Fixed term, fixed rate             $1,000        $  2,114            0.81
    4.63         4-6 months              Fixed term, fixed rate              1,000           2,012            0.77
    6.83         7-9 months              Fixed term, fixed rate              1,000          11,330            4.34
    5.99        10-12 months             Fixed term, fixed rate              1,000          20,360            7.80
    6.01        13-24 months             Fixed term, fixed rate              1,000          64,793           24.82
    5.81        25-36 months             Fixed term, fixed rate              1,000          27,982           10.71
    6.45        37-48 months             Fixed term, fixed rate              1,000           3,454            1.32
    6.03        49-60 months             Fixed term, fixed rate              1,000          45,628           17.47
    6.30        61 months or greater     Fixed term, fixed rate              1,000             817            0.31
    4.75        Various                  Variable rate                         100             138            0.05
                                                                                           -------          ------
                                         Total certificates of deposit                    $261,167          100.00%
                                                                                          ========          ======
</TABLE>
                                      -14-
<PAGE>
         The following  table sets forth the change in dollar amount of deposits
in the various  types of deposit  accounts  offered by the  Company  between the
dates indicated.

<TABLE>
<CAPTION>
                                               Increase        Increase                     Increase        Increase
                                 Balance      (Decrease)      (Decrease)      Balance      (Decrease)      (Decrease)     Balance
                                12/31/00         %                 $         12/31/99           %               $        12/31/98
                                -------------------------------------------------------------------------------------------------
                                                                  (Dollars in thousands)
<S>                            <C>             <C>           <C>           <C>                 <C>        <C>           <C>
Noninterest bearing demand.... $   6,071        (5.32)%      $    (341)    $    6,412          17.48%     $    954      $  5,458
NOW...........................    30,225         0.43              129         30,096           2.63          (813)       30,909
Savings account ..............    21,724       (15.90)          (4,106)        25,830           1.03          (269)       26,099
Money market savings..........    24,519        40.40            7,055         17,464          11.92        (2,364)       19,828
Certificates of deposit
  that mature:
    within 12 months..........    93,172       (20.71)         (24,343)       117,515          44.55        36,220        81,295
    within 12-36 months.......    61,972        17.58            9,265         52,707          18.86       (12,255)       64,962
    beyond 36 months..........    23,484        11.78            2,477         21,007          15.81          2,868       18,139
                                  ------        -----            -----         ------          -----          -----       ------
      Total................... $ 261,167        (3.64)%      $  (9,864)    $  271,031           9.87%     $ 24,341      $246,690
                               =========        =====        =========     ==========          ======      ========      ========
</TABLE>


<TABLE>
<CAPTION>
                                              Increase         Increase                     Increase       Increase
                                 Balance     (Decrease)       (Decrease)      Balance      (Decrease)     (Decrease)      Balance
                                12/31/98          %                $         12/31/97           %              $         12/31/96
                                -------------------------------------------------------------------------------------------------
                                                               (Dollars in thousands)
<S>                           <C>            <C>            <C>           <C>                <C>          <C>           <C>
Noninterest bearing demand..  $    5,458        73.55%      $    2,313    $    3,145          38.24%      $    870      $  2,275
NOW.........................      30,909       113.80           16,452        14,457          22.27          2,633        11,824
Passbook savings............      26,099        52.45            8,979        17,120          (3.58)          (636)       17,756
Money market savings........      19,828       121.34           10,870         8,958          23.05          1,678         7,280
Certificates of deposit
  that mature:
    within 12 months........      81,295        99.44           40,533        40,762          10.25          3,790        36,972
    within 12-36 months.....      64,962        53.20           22,558        42,404          33.24         10,578        31,826
    beyond 36 months........      18,139        27.04            3,861        14,278         (34.47)        (7,511)       21,789
           --                     ------        -----            -----        ------         ------         ------        ------
       Total................  $  246,690     $  74.80%      $  105,566    $  141,124           8.79%      $  11,402     $129,722
                              ==========     ========       ==========    ==========         ======       =========     ========
</TABLE>
                                      -15-
<PAGE>
         The  following  table  sets  forth the  certificates of deposit in the
Company classified by rates as of the dates indicated:
<TABLE>
<CAPTION>
                                                        At December 31,
                                 ------------------------------------------------------------
                                 2000                        1999                        1998
                                 ----                        ----                        ----
                                                        (In thousands)
<S>                        <C>                         <C>                         <C>
Rate
----
3.99% or less.........     $        24                 $       688                 $       232
4.00-5.99%............          78,138                     154,231                     110,152
6.00-7.99%............         100,455                      36,300                      53,829
8.00% or greater......              11                          10                         183
                               -------                     -------                     -------
                           $   178,628                 $   191,229                 $   164,396
                           ===========                 ===========                 ===========
</TABLE>

         The   following   table  sets  forth  the  amount  and   maturities  of
certificates of deposit at December 31, 2000.

<TABLE>
<CAPTION>
                                                                   Amount Due
                           --------------------------------------------------------------------------------------
                           Less
                          Than 1         1-2           2-3          3-4           4-5          After 5
                           Year         Years         Years        Years         Years          Years         Total
                           ----         -----         -----        -----         -----          -----         -----
                                                               (In thousands)
Rate
----
<S>                    <C>            <C>           <C>          <C>           <C>           <C>           <C>
3.99% or less......    $     24       $     --      $     --     $     --      $     --      $     --      $     24
4.00-5.99%               46,225         11,553         9,270        8,227         2,861             2         78,138
6.00-7.99%.........      46,923         31,946         9,192        2,190         9,996           208        100,455
8.00% or greater...          --             11            --           --            --            --             11
----                     ------         ------        ------       ------        ------        ------        -------
                       $ 93,172       $ 43,510      $ 18,462     $ 10,417      $ 12,857      $    210      $ 178,628
                       ========       ========      ========     ========      ========      ========      =========
</TABLE>

         The following table indicates the amount of the Company's  certificates
of deposit of $100,000 or more by time remaining  until maturity at December 31,
2000.  This amount does not include  savings  accounts of greater than $100,000,
which totalled approximately $697,000 at December 31, 2000.

                                                     Certificates
                                                    of Deposit over

             Remaining Maturity                        $100,000
-------------------------------------------------   ---------------
                                                    (In thousands)

Three months or less.............................    $   6,955
Three through six months.........................        4,944
Six through twelve months........................        7,995
Over twelve months...............................       10,437
                                                        ------
  Total..........................................    $  30,331
                                                     =========

                                      -16-
<PAGE>
         The  following  table sets forth the savings  activities of the Company
for the periods indicated:

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                 ----------------------------------------------------
                                                 2000                   1999                  1998
                                                 ----                   ----                  ----
                                                                  (In thousands)
<S>                                          <C>                   <C>                    <C>
Net increase (decrease) before interest
    credited and deposits acquired.........  $  (18,730)           $   15,582             $   (2,943)
Effect of Valley Financial Acquisition.....          --                    --                 99,269
Interest credited..........................       8,866                 8,758                  9,240
                                                  -----                 -----                  -----
    Net increase (decrease) in deposits....  $   (9,864)           $   24,340             $  105,566
                                             ==========            ==========             ==========
</TABLE>
Borrowings

         Deposits are the  Company's  primary  source of funds.  The Company may
also obtain funds from the FHLB.  FHLB advances are  collateralized  by selected
assets of the  Company.  Such  advances are made  pursuant to several  different
credit  programs,  each  of  which  has its  own  interest  rate  and  range  of
maturities.   The  maximum   amount  that  the  FHLB  will   advance  to  member
institutions,  including the Bank, for purposes other than meeting  withdrawals,
fluctuates  from time to time in accordance with the policies of the OTS and the
FHLB. The maximum amount of FHLB advances to a member  institution  generally is
reduced by borrowings from any other source.

         In conjunction with the Bank's  conversion from mutual to stock form in
1994, the Bank  established  an Employee  Stock  Ownership Plan (the "ESOP") for
eligible  employees.  The ESOP borrowed  $960,000 from an unrelated  third party
lender to finance the  purchase of 104,075  shares of the Bank's  common  stock.
Collateral  for such loan  consisted of the common  stock held by the ESOP.  The
term of the loan was 10 years.  The ESOP also  borrowed  funds in the  amount of
$840,000  from the  Holding  Company to  purchase  84,000  shares of the Holding
Company's Common Stock issued in the  reorganization  of the Bank and the MHC to
the stock holding company form in 1996. In September 1996,  these two loans were
consolidated into a single loan from the Holding Company to the ESOP.
<TABLE>
<CAPTION>
                                                                      For the
                                                              Year Ended December 31,
                                            ---------------------------------------------------------
                                                2000                    1999                  1998
                                                ----                    ----                  ----
                                                              (Dollars in thousands)
<S>                                        <C>                      <C>                   <C>
Weighted average rate paid on: (1)
      FHLB advances..................            6.20%                    5.62%                 5.81%
FHLB advances:
      Maximum balance................      $   88,572               $   60,691            $   42,550
      Average balance................          71,570                   43,711                33,980
Weighted average rate paid on:

      Other borrowings...............            1.00%                    1.00%                 1.00%
Other borrowings:
      Maximum balance................      $       34               $       38            $       42
      Average balance................              32                       36                    40
<FN>
(1)      Calculated using monthly weighted average interest rates.
</FN>
</TABLE>
Title Abstract Business

         A  component  of  the  Company's  operating  strategy  is  to  increase
non-interest  income,  primarily  through the expansion of the abstract  company
business conducted through a wholly owned subsidiary,  First Iowa Title Services
Inc. ("First Iowa"). First Iowa currently provides real estate title abstracting
services  in  Webster,  Boone  and  Jasper  counties.   These  services  include
researching  recorded documents at the county courthouse and providing a history

                                      -17-
<PAGE>
of  those documents  as they  pertain to specific  parcels of real  estate. This
information  is used to determine who owns  specific  parcels of real estate and
what encumbrances are on those specific parcels. The abstract business performed
by  First  Iowa  replaces  a  significant  portion  of the  function  of a title
insurance  company.  Iowa law prohibits  Iowa  insurance  companies or companies
authorized  to do business in Iowa from  issuing  title  insurance  or insurance
against loss or damage by reason of defective  title,  encumbrance or otherwise.
Institutions can purchase title  insurance,  for their own protection or to sell
loans on the secondary market,  but the cost of this insurance may not be passed
on to the borrower. First Iowa had 15 employees as of December 31, 2000.

Insurance and Annuity Business

         The  Company  has  another  wholly-owned   subsidiary,   First  Federal
Investment   Services,   Inc.   (formerly  known  as  First  Financial   Service
Corporation)  ("First  Federal  Investments"),  which the Company began in 1971.
First  Federal  Investments  activities  include the sale of life  insurance  on
mortgage  loans,  and credit life and accident and health  insurance on consumer
loans made by the Company.  In addition,  First Federal  Investments  sells life
insurance annuity products and mutual funds. In connection with the Acquisition,
the Bank acquired  Valley  Services,  Inc.,  which was merged into First Federal
Investments.  First Federal  Investments  has no employees.  The  subsidiary has
executed a management  agreement  with the Company which provides its management
and staff.

Mortgage Company Business

        First Iowa Mortgage, Inc. was acquired as a part of the  Acquisition  of
Valley  Financial  and is a  wholly-owned  subsidiary  of the Bank.  First  Iowa
Mortgage,  Inc.  originates  first mortgage loans and  subsequently  sells these
loans and the mortgage servicing rights to investors.  First Iowa Mortgage, Inc.
currently operates in the Bank's office in Ames, Iowa. First Iowa Mortgage, Inc.
had 3 employees at December 31, 2000.

Multifamily Apartment Building

         On July 13, 1995, the Company formed the Northridge  Apartments Limited
Partnership with the Fort Dodge Housing Corporation  ("FDHC"), a non-profit Iowa
corporation  formed to acquire,  develop  and manage  low-and  moderate-  income
housing for residents of the Fort Dodge area. The FDHC is controlled by the Fort
Dodge Municipal  Housing Agency,  an agency chartered by the City of Fort Dodge.
The  Northridge  Partnership  is a  low-income  housing  tax credit  project for
certain  federal tax  purposes.  A 44-unit  apartment  complex was  completed on
February  1, 1997.  The tax  credits  for the year ended  December  31, 2000 are
approximately $154,000. The tax credits will continue for a six-year period.

Personnel

         At December 31, 2000,  the Company had 103  full-time  and 28 part-time
employees (including the 15 employees of First Iowa and the 3 employees at First
Iowa  Mortgage,  Inc.).  None of the  Company's  employees is  represented  by a
collective  bargaining  group. The Company  believes its  relationship  with its
employees to be good.
                                      -18-
<PAGE>
                           FEDERAL AND STATE TAXATION

Federal Taxation

         General.  The following is a general discussion of material tax matters
and  does  not  purport  to be a  comprehensive  description  of the  tax  rules
applicable to the Holding  Company or the Bank. The Bank has not been audited in
the last five years.  For federal income tax purposes,  the Holding  Company and
the Bank will be  eligible  to file  consolidated  income tax returns and report
their income on a calendar year basis using the accrual method of accounting and
will be  subject  to  federal  income  taxation  in the  same  manner  as  other
corporations with some exceptions, including particularly the Bank's tax reserve
for bad debts, discussed below.

         Bad Debt Reserves.  The Bank, as a "small bank" (one with assets having
an  adjusted  tax basis of $500  million  or less) is  permitted  to  maintain a
reserve for bad debts with respect to "qualifying loans," which, in general, are
loans  secured  by  certain  interests  in real  property,  and to make,  within
specified  formula limits,  annual additions to the reserve which are deductible
for  purposes of  computing  the Bank's  taxable  income.  Pursuant to the Small
Business Job Protection Act of 1996,  the Bank is now  recapturing  (taking into
income)  over a  multi-year  period a  portion  of the  balance  of its bad debt
reserve as of December 31, 1995.

         Distributions.  To the  extent  that  the  Company  makes  "nondividend
distributions" to shareholders,  such distributions will be considered to result
in distributions from the Company's "base year reserve",  i.e. its reserve as of
December 31, 1987, to the extent thereof and then from its supplemental  reserve
for  losses on loans,  and an amount  based on the  amount  distributed  will be
included in the Company's  taxable  income.  Nondividend  distributions  include
distributions  in excess of the Company's  current and accumulated  earnings and
profits,  distributions  in redemption of stock and  distributions in partial or
complete  liquidation.  However,  dividends paid out of the Company's current or
accumulated earnings and profits, as calculated for federal income tax purposes,
will  not  constitute  nondividend  distributions  and,  therefore,  will not be
included in the Company's income.

         The amount of  additional  taxable  income  created from a  nondividend
distribution  is an amount  that,  when reduced by the tax  attributable  to the
income, is equal to the amount of the distribution.  Thus, approximately one and
one-half times the nondividend  distribution would be includable in gross income
for federal  income tax purposes,  assuming a 34% federal  corporate  income tax
rate.
         Corporate  Alternative  Maximum  Tax.  The  Internal  Revenue Code (the
"Code")  imposes a tax on alternative  minimum taxable income ("AMTI") at a rate
of 20%.  Only 90% of AMTI can be offset by net  operating  losses.  AMTI is also
adjusted by  determining  the tax  treatment  of certain  items in a manner that
negates the deferral of income resulting from the regular tax treatment of those
items.  Thus,  the Company's  AMTI is increased by an amount equal to 75% of the
amount  by which  the  Company's  adjusted  current  earnings  exceeds  its AMTI
(determined  without  regard to this  adjustment  and prior to reduction for net
operating losses). The Company does not expect to be subject to the AMT.

         Dividends-Received  Deduction. The Holding Company may exclude from its
income  100% of  dividends  received  from  the  Bank as a  member  of the  same
affiliated group of corporations.  The corporate dividends-received deduction is
generally 70% in the case of dividends  received from unaffiliated  corporations
with which the  Holding  Company and the Bank will not file a  consolidated  tax
return, except that if the Holding Company or the Bank owns more than 20% of the
stock of a  corporation  distributing  a  dividend,  then  80% of any  dividends
received may be deducted.

State and Local Taxation

         Iowa Taxation.  The Holding  Company and the Bank's  subsidiaries  will
file Iowa  corporation  tax returns and the Bank will file an Iowa franchise tax
return.  The Bank currently files an Iowa franchise tax return,  and the Holding
Company and the Bank's  subsidiaries  file Iowa  corporation  tax returns,  on a
calendar year basis.

         The State of Iowa imposes a tax on the Iowa franchise taxable income of
thrift  institutions  at the  rate  of 5%.  Iowa  franchise  taxable  income  is
generally  similar to federal taxable income except that interest from state and

                                      -19-
<PAGE>
municipal  obligations  is  taxable,  and no  deduction  is  allowed  for  state
franchise  taxes.  The net operating loss carryback and  carryforward  rules are
similar to the federal rules.

         The state  corporation  income tax rate ranges from 6% to 12% depending
upon Iowa corporation  taxable income.  Interest from federal  securities is not
deductible for purposes of the Iowa corporation income tax.

                                   REGULATION
General

         The  Bank  is  a  federal  savings  bank  subject  to  the  regulation,
examination  and  supervision by the OTS and is subject to the  examination  and
supervision of the Federal Deposit Insurance Corporation ("FDIC") as its deposit
insurer.  The Bank is a member of the SAIF, and its deposit accounts are insured
up to  applicable  limits by the FDIC.  All of the deposit  premiums paid by the
Bank to the FDIC for deposit  insurance are currently paid to the SAIF. The Bank
is also a member  of the  FHLB of Des  Moines,  which is one of the 12  regional
FHLBs.  The Bank  must file  reports  with the OTS and the FDIC  concerning  its
activities  and financial  condition,  and it must obtain  regulatory  approvals
prior  to  entering  into  certain  transactions,   such  as  mergers  with,  or
acquisitions  of, other  depository  institutions.  The OTS and the FDIC conduct
periodic  examinations to assess the Bank's  compliance with various  regulatory
requirements.  This  regulation  and  supervision  establishes  a  comprehensive
framework  of  activities  in which a  savings  association  can  engage  and is
intended primarily for the protection of the insurance fund and depositors.  The
Holding Company,  as a savings and loan holding  company,  files certain reports
with, and otherwise  complies with, the rules and  regulations of the OTS and of
the SEC under the federal securities laws.

         The OTS and the FDIC have  significant  discretion in  connection  with
their supervisory and enforcement activities and examination policies, including
policies with respect to the  classification  of assets and the establishment of
adequate  loan  loss  reserves  for  regulatory  purposes.  Any  change  in such
policies,  whether by the OTS, the FDIC or the  Congress,  could have a material
adverse impact on the Company, the Bank, and their operations and stockholders.

         On November  12,  1999,  President  Clinton  signed  into law  landmark
financial services legislation,  titled the  Gramm-Leach-Bliley Act ("GLB Act").
The GLB Act repeals  depression-era  laws restricting  affiliations among banks,
securities firms,  insurance  companies and other financial services  providers.
The  impact of the GLB Act on the  Company  and the  Bank,  where  relevant,  is
discussed throughout the regulation section below.

         The  following  discussion  is intended to be a summary of the material
statutes and regulations  applicable to savings  associations  and their holding
companies, and it does not purport to be a comprehensive description of all such
statutes and regulations.

Regulation of Savings and Loan Holding Companies

         The  Holding  Company  is a savings  and loan  holding  company  and is
subject   to  OTS   regulations,   examinations,   supervision   and   reporting
requirements.  In addition,  the OTS has enforcement  authority over the Holding
Company and any of its non-savings association subsidiaries. Among other things,
this  authority  permits the OTS to restrict  or  prohibit  activities  that are
determined to be a serious risk to the financial safety,  soundness or stability
of a subsidiary savings association.

         The Home Owner and Loan Act ("HOLA"),  as amended,  prohibits a savings
and loan  holding  company,  directly  or  indirectly,  or  through  one or more
subsidiaries,  from acquiring  another  savings  association or holding  company
thereof, without prior written approval of the OTS; acquiring or retaining, with
certain exceptions,  more than 5.0% of a non-subsidiary  savings association,  a
non-subsidiary holding company or a non-subsidiary company engaged in activities
other than those  permitted by HOLA;  or  acquiring  or  retaining  control of a
depository  institution  that is not  insured  by the  FDIC.  In  evaluating  an
application by a holding company to acquire a savings association,  the OTS must
consider the financial  and  managerial  resources  and future  prospects of the
company and savings association  involved,  the effect of the acquisition on the
risk to the  insurance  funds,  the  convenience  and needs of the community and
competitive factors.

                                      -20-
<PAGE>
         As a unitary savings and loan holding company, the Company generally is
not  restricted  under  existing laws as to the types of business  activities in
which it may engage,  provided that the Bank  continues to satisfy the QTL test.
See "-- Regulation of Federal Savings Associations -- QTL Test" for a discussion
of the QTL requirements.

         In addition, for grandfathered savings and loans companies (such as the
Company),  the GLB Act  prohibits  the  sale of such  entities  to  nonfinancial
companies.   This   prohibition   is  intended  to  restrict   the  transfer  of
grandfathered  rights to other  entities and,  thereby,  prevent  evasion of the
limitation on the creation of new unitary savings and loan holding companies.

           The  Company  believes  that the GLB Act  will  not  have a  material
adverse effect on its operations in the near-term.  However,  to the extent that
it permits banks,  securities  firms and insurance  companies to affiliate,  the
financial  services industry may experience  further  consolidation.  This could
result in a growing number of larger financial  institutions  that offer a wider
variety of financial  services  than the Company  currently  offers and that can
aggressively compete in the markets that the Company currently serves.

         Upon any  nonsupervisory  acquisition by the Company of another savings
association  or  savings  bank  that  meets  the QTL test and is  deemed to be a
savings  association by the OTS and that will be held as a separate  subsidiary,
the Holding Company would become a multiple savings and loan holding company and
would be subject to limitations on the types of business  activities in which it
could engage.  HOLA limits the activities of a multiple savings and loan holding
company and its  non-insured  association  subsidiaries  primarily to activities
permissible for bank holding companies under Section 4(c)(8) of the Bank Holding
Company Act (the "BHC Act"),  subject to the prior  approval of the OTS,  and to
other activities authorized by OTS regulation.

         The OTS is prohibited from approving any acquisition  that would result
in a multiple savings and loan holding company controlling savings  associations
in more than one state,  subject to two exceptions:  an acquisition of a savings
association in another state (i) in a supervisory transaction, and (ii) pursuant
to authority  under the laws of the state of the association to be acquired that
specifically  permit such  acquisitions.  The conditions imposed upon interstate
acquisitions  by those states that have enacted  authorizing  legislation  vary.
Some states impose conditions of reciprocity, which have the effect of requiring
that the  laws of both the  state in which  the  acquiring  holding  company  is
located (as  determined by the location of its subsidiary  savings  association)
and the state in which the  association  to be acquired  is  located,  have each
enacted  legislation  allowing  its  savings  associations  to  be  acquired  by
out-of-state holding companies on the condition that the laws of the other state
authorize such  transactions on terms no more  restrictive than those imposed on
the acquiror by the state of the target  association.  Some of these states also
impose regional limitations, which restrict such acquisitions to states within a
defined  geographic  region.  Other states allow full nationwide banking without
any  condition  of  reciprocity.   Some  states  do  not  authorize   interstate
acquisitions of savings associations.

         Transactions  between  the Bank and the  Holding  Company and its other
subsidiaries  are  subject  to  various  conditions  and  limitations.  See  "--
Regulation  of  Federal  Savings   Associations  --  Transactions  with  Related
Parties."  The Bank must  give  30-days  written  notice to the OTS prior to any
declaration  of the payment of any dividends or other capital  distributions  to
the Holding  Company.  See "--  Regulation of Federal  Savings  Associations  --
Limitation on Capital Distributions."

Federal Securities Laws

         The  Company's  common stock is  registered  with the SEC under Section
12(g) of the Securities  Exchange Act of 1934, as amended (the "Exchange  Act").
The  Company is subject to  information,  proxy  solicitation,  insider  trading
restrictions and other requirements under the Exchange Act.

Regulation of Federal Savings Associations

         Business Activities. The Bank derives its lending and investment powers
from the HOLA and the  regulations of the OTS  thereunder.  Under these laws and
regulations,  the Bank may invest in mortgage loans secured by  residential  and
commercial  real estate,  commercial and consumer  loans,  certain types of debt
securities,  and  certain  other  assets.  The Bank may also  establish  service
corporations  that may engage in activities  not otherwise  permissible  for the
Bank,  including  certain real estate  equity  investments  and  securities  and
insurance brokerage. These investment powers are subject to

                                      -21-
<PAGE>
various limitations, including: (i) a prohibition against the acquisition of any
corporate  debt  security  that is not rated in one of the four  highest  rating
categories;  (ii) a limit of 400% of an  association's  capital on the aggregate
amount of loans secured by nonresidential real estate property; (iii) a limit of
20% of an association's assets on commercial loans with the amount of commercial
loans in excess of 10% of assets being limited to small business  loans;  (iv) a
limit of 35% of an  association's  assets on the  aggregate  amount of  consumer
loans and acquisitions of certain debt securities; (v) a limit of 5.0% of assets
on non-conforming  loans (loans in excess of the specific  limitations of HOLA);
and (vi) a limit of the greater of 5.0% of assets or an association's capital on
certain  construction  loans  made for the  purpose of  financing  what is or is
expected to become residential property.

         Loans to One Borrower.  Under HOLA, savings  associations are generally
subject to the same  limits on loans to one  borrower as are imposed on national
banks. Generally,  under these limits, a savings association may not make a loan
or extend  credit to a single or related  group of borrowers in excess of 15% of
the  association's  unimpaired  capital and surplus.  Additional  amounts may be
lent, in the aggregate not exceeding 10% of unimpaired  capital and surplus,  if
any such loan or  extension  of credit is fully  secured  by  readily-marketable
collateral.  Such  collateral  is  defined to  include  certain  debt and equity
securities and bullion, but generally does not include real estate. For the year
ended December 31, 2000, the Bank imposed a $2.5 million limit on the  aggregate
size of loans to  any  one  borrower.   Any  exception  to  the  limit  must  be
specifically  approved by the Board of Directors on a loan-by-loan  basis within
the Bank's  legal  lending  limit.  At December  31,  2000,  the Bank's  largest
aggregate  amount of loans to one  borrower  was $2.5  million,  and the  second
largest  borrower  had an  aggregate  balance  of  $2.0  million.  See  Item  7.
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Liquidity and Capital Resources."

         QTL Test. HOLA requires a savings association to meet a QTL test. Under
the QTL test, a savings  association is required to maintain at least 65% of its
"portfolio  assets"  in certain  "qualified  thrift  investments"  in at least 9
months of the most recent 12-month period. "Portfolio assets" means, in general,
an association's  total assets less the sum of (i) specified liquid assets up to
20% of total assets,  (ii) goodwill and other intangible  assets,  and (iii) the
value of property used to conduct the association's business.  "Qualified thrift
investments"  includes  various types of loans made for  residential and housing
purposes,    investments   related   to   such   purposes,   including   certain
mortgage-backed  and  related  securities,   and  loans  for  personal,  family,
household  and certain other  purposes up to a limit of 20% of an  association's
portfolio assets.  Recent  legislation  broadened the scope of "qualified thrift
investments" to include 100% of an  institution's  credit card loans,  education
loans, and small business loans. A savings  association may also satisfy the QTL
test by qualifying as a "domestic  building and loan  association" as defined in
the Internal  Revenue Code of 1986.  At December 31, 2000,  the Bank  maintained
90.9% of its portfolio assets in qualified thrift  investments,  and it had more
than  65% of  its  portfolio  assets  in  qualified  thrift  investments  in the
requisite  number of the prior 12 months.  A savings  association that fails the
QTL test must either  operate under certain  restrictions  on its  activities or
convert to a bank charter.

         Capital Requirements.  The OTS regulations require savings associations
to meet three minimum capital standards: a tangible capital ratio requirement of
1.5% of total assets as adjusted  under the OTS  regulations,  a leverage  ratio
requirement of 3.0% of core capital to such adjusted total assets,  if a savings
association  has been  assigned  the  highest  composite  rating  of 1 under the
Uniform Financial  Institutions  Rating System,  and a risk-based  capital ratio
requirement  of 8.0% of core  and  supplementary  capital  to  total  risk-based
assets. The minimum leverage capital ratio for any other depository  institution
that does not have a composite  rating of 1 will be 4%, unless a higher leverage
capital ratio is warranted by the  particular  circumstances  or risk profile of
the depository  institution.  In determining the amount of risk-weighted  assets
for purposes of the risk-based capital  requirement,  a savings association must
compute its risk-based assets by multiplying its assets and certain  off-balance
sheet items by risk-weights, which range from 0% for cash and obligations issued
by the  United  States  Government  or its  agencies  to 100% for  consumer  and
commercial loans, as assigned by the OTS  capital  regulation based on the risks
found by the OTS to be inherent in the type of asset.

         Tangible capital is defined,  generally, as common stockholder's equity
(including retained earnings),  certain noncumulative  perpetual preferred stock
and  related   earnings,   minority   interests  in  equity  accounts  of  fully
consolidated   subsidiaries,   less  intangibles  other  than  certain  mortgage
servicing  rights  and  investments  in and  loans to  subsidiaries  engaged  in
activities  not  permissible  for a  national  bank.  Core  capital  is  defined
similarly to tangible capital, but core capital also includes certain qualifying
supervisory   goodwill  and  certain   purchased   credit  card   relationships.
Supplementary  capital currently includes cumulative preferred stock,  long-term
perpetual preferred stock, mandatory convertible  securities,  subordinated debt
and  intermediate  preferred  stock and the allowance for loan and lease losses.

                                      -22-
<PAGE>
The allowance for loan and lease losses  includable in supplementary  capital is
limited  to a  maximum  of 1.25% of  risk-weighted  assets,  and the  amount  of
supplementary  capital that may be included as total  capital  cannot exceed the
amount of core capital.

         The OTS and the other  federal  banking  agencies  are required to take
into account interest rate risk ("IRR") in their risk-based  capital  standards.
The OTS  adopted  regulations,  effective  January 1,  1994,  that set forth the
methodology  for  calculating an IRR component to be  incorporated  into the OTS
risk-based  capital   regulations.   The  OTS  has  indefinitely   deferred  the
implementation  of the IRR  component  in the  computation  of an  institution's
risk-based  capital  requirement.  The  OTS  continues  to  monitor  the  IRR of
individual  institutions and retains the right to impose  additional  capital on
individual  institutions.  At December  31,  2000,  the Bank was not required to
maintain any additional risk-based capital under this regulation.

         At December 31, 2000, the Bank met each of its capital requirements, in
each case on a fully  phased-in  basis.  The table  below  presents  the  Bank's
regulatory  capital as compared to the OTS regulatory  capital  requirements  at
December 31, 2000:

<TABLE>
<CAPTION>
                                                                           Capital
                                                      Bank              Requirements         Excess Capital
                                                    ------              ------------         --------------
                                                                       (In thousands)
<S>                                              <C>                     <C>                   <C>
Tangible capital.............................    $  28,456               $   5,732             $  22,724
Core capital.................................       28,456                  11,464                16,992
Risk-based capital...........................       31,241                  17,830                13,411
</TABLE>

         A  reconciliation  between  regulatory  capital  and  GAAP  capital  at
December 31, 2000 in the accompanying financial statements is presented below:
<TABLE>
<CAPTION>

                                                  Tangible Capital         Core Capital        Risk-based Capital
                                                  ----------------         ------------        ------------------
                                                                          (In thousands)
<S>                                                  <C>                     <C>                   <C>
GAAP capital...................................      $ 34,649                $ 34,649              $ 34,649
Intangible assets..............................        (6,368)                 (6,368)               (6,368)
Unrealized loss on certain available for sale
  assets.......................................           175                     175                   175
Allowance for loan losses includable
  in supplementary capital.....................            --                      --                 2,785
                                                     --------                --------              --------
Regulatory capital.............................      $ 28,456                $ 28,456              $ 31,241
                                                     ========                ========              ========
</TABLE>
         Limitation  on Capital  Distributions.  Under OTS capital  distribution
regulations,   certain  savings   associations  are  permitted  to  pay  capital
distributions  during a calendar year that do not exceed the  association's  net
income  for that year plus its  retained  net  income  for the prior two  years,
without notice to, or the approval of, the OTS. However,  a savings  association
subsidiary  of a  savings  and loan  holding  company,  such as the  Bank,  will
continue  to have to file a notice  unless  the  specific  capital  distribution
requires an application.  In addition,  the OTS can prohibit a proposed  capital
distribution,  otherwise  permissible  under the  regulation,  if  the  OTS  has
determined that the association is in need of more than normal supervision or if
it determines that a proposed distribution by an association would constitute an
unsafe or unsound practice.  Furthermore, under the OTS prompt corrective action
regulations,  the Bank would be prohibited from making any capital  distribution
if,  after  the  distribution,  the  Bank  failed  to meet its  minimum  capital
requirements, as described below. See "Prompt Corrective Regulatory Action."

         Liquidity. The Bank is required to maintain an average daily balance of
liquid assets (cash,  certain time  deposits,  bankers'  acceptances,  specified
United States Government, state or federal agency obligations, shares of certain
mutual funds and certain  corporate debt securities and commercial  paper) equal
to a  monthly  average  of not  less  than a  specified  percentage  of its  net
withdrawable  deposit  accounts  plus  short-term  borrowings.   This  liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4.0% to 10% depending upon economic conditions and the savings flows of
member  institutions,  and is currently 4.0%.  Monetary penalties may be imposed
for failure to meet these  liquidity  requirements.  At December 31,  2000,  the
Bank's liquidity position was $26.0 million or 8.27% of liquid assets,  compared
to $31.7 million or 10.84% at December 31, 1999.

                                      -23-
<PAGE>
         Assessments. Savings associations are required by OTS regulation to pay
assessments  to  the  OTS  to  fund  the  operations  of the  OTS.  The  general
assessment,  paid  on  a  semi-annual  basis,  is  computed  by  totaling  three
components: the size of the association,  on which the basic assessment would be
based;  the  association's  supervisory  condition,  which  would  result  in an
additional  assessment  based of a percentage  of the basic  assessment  for any
savings  institution  with a  composite  rating of 3, 4 or 5 in its most  recent
safety  and  soundness  examination;  and the  complexity  of the  association's
operations, which would result in an additional assessment based of a percentage
of the basic assessment for any savings association that managed over $1 billion
in trust assets,  serviced for others loans aggregating more than $1 billion, or
had certain  off-balance sheet assets aggregating more than $1 billion. In order
to avoid a disproportionate  impact on the smaller savings  institutions,  which
are those whose total assets never  exceeded $100 million,  the new  regulations
provide that the portion of the  assessment  based on assets size will be lesser
of the assessment  under the amended  regulations or the regulations  before the
amendment.

         Branching. Subject to certain limitations, HOLA and the OTS regulations
permit federally  chartered  savings  associations to establish  branches in any
state of the  United  States.  The  authority  to  establish  such a  branch  is
available  (i)  in  states  that   expressly   authorize   branches  of  savings
associations  located in another state and (ii) to an association that qualifies
as a "domestic  building and loan  association"  under the Code,  which  imposes
qualification  requirements  similar to those for a  "qualified  thrift  lender"
under HOLA. See "-- QTL Test." The authority for a federal  savings  association
to  establish  an  interstate  branch  network  would  facilitate  a  geographic
diversification of the association's  activities.  This authority under HOLA and
the OTS regulations  preempts any state law purporting to regulate  branching by
federal savings associations.

         Community  Reinvestment.  Under the Community Reinvestment Act ("CRA"),
as implemented by OTS  regulations,  a savings  association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire  community,  including  low and  moderate  income
neighborhoods.  The CRA does not  establish  specific  lending  requirements  or
programs  for  financial   institutions  nor  does  it  limit  an  institution's
discretion  to develop the types of products and  services  that it believes are
best  suited  to its  particular  community,  consistent  with the CRA.  The CRA
requires the OTS, in connection with its  examination of a savings  association,
to assess the association's  record of meeting the credit needs of its community
and to take such record into account in its  evaluation of certain  applications
by such  association.  The CRA also  requires  all  institutions  to make public
disclosure of their CRA ratings.  The Bank received an "Outstanding"  CRA rating
in its most recent examination.

           The CRA  regulations  establish  an  assessment  system that bases an
associations  rating on its actual  performance in meeting  community  needs. In
particular, the assessment system focuses on three tests: (a) a lending test, to
evaluate the  institution's  record of making loans in its assessment areas; (b)
an  investment  test,  to evaluate  the  institution's  record of  investing  in
community development projects, affordable housing, and programs benefitting low
or moderate  income  individuals  and  businesses;  and (c) a service  test,  to
evaluate the institution's  delivery of services through its branches,  ATMs and
other offices.

         Transactions  with Related  Parties.  The Bank's authority to engage in
transactions  with its  "affiliates"  is limited by the OTS  regulations  and by
Sections  23A and  23B of the  Federal  Reserve  Act  ("FRA").  In  general,  an
affiliate of the Bank is any company that controls the Bank or any other company
that is  controlled  by a company that  controls the Bank,  excluding the Bank's
subsidiaries other than those that are insured depository institutions.  The OTS
regulations  prohibit  a  savings  association  (i) from  lending  to any of its
affiliates  that is  engaged in  activities  that are not  permissible  for bank
holding companies under Section 4(c) of the BHC Act and (ii) from purchasing the
securities  of any  affiliate  other than a  subsidiary.  Section 23A limits the
aggregate  amount of  transactions  with any individual  affiliate to 10% of the
capital  and surplus of the savings  association  and also limits the  aggregate
amount of transactions  with all affiliates to 20% of the savings  association's
capital and  surplus.  Extensions  of credit to  affiliates  are  required to be
secured by collateral  in an amount and of a type  described in Section 23A, and
the purchase of low quality  assets from  affiliates  is  generally  prohibited.
Section 23B provides that certain transactions with affiliates,  including loans
and asset purchases, must be on terms and under circumstances,  including credit
standards,  that are  substantially  the same or at  least as  favorable  to the
association  as those  prevailing at the time for comparable  transactions  with
nonaffiliated  companies.  In  the  absence  of  comparable  transactions,  such
transactions  may only occur under  terms and  circumstances,  including  credit
standards,   that  in  good  faith  would  be  offered  to  or  would  apply  to
nonaffiliated companies.

                                      -24-
<PAGE>
         The  Bank's  authority  to extend  credit to its  directors,  executive
officers  and  10%  stockholders,  as  well as to  entities  controlled  by such
persons,  is currently  governed by the requirements of Sections 22(g) and 22(h)
of the FRA and Regulation O of the Federal Reserve Board (the "FRB") thereunder.
Among other  things,  these  provisions  require  that  extensions  of credit to
insiders  (i) be made on terms  that are  substantially  the same as, and follow
credit  underwriting   procedures  that  are  not  less  stringent  than,  those
prevailing for comparable transactions with unaffiliated persons and that do not
involve  more than the normal risk of  repayment  or present  other  unfavorable
features  and (ii) not  exceed  certain  limitations  on the  amount  of  credit
extended to such persons,  individually  and in the aggregate,  which limits are
based,  in part,  on the  amount  of the  association's  capital.  In  addition,
extensions  of credit  in  excess of  certain  limits  must be  approved  by the
association's board of directors.

         Enforcement.  Under the Federal Deposit  Insurance Act (the "FDI Act"),
the OTS has primary enforcement responsibility over savings associations and has
the authority to bring  enforcement  action against all  "institution-affiliated
parties,"  including any controlling  stockholder or any stockholder,  attorney,
appraiser  and  accountant  who  knowingly  or  recklessly  participates  in any
violation of applicable law or regulation or breach of fiduciary duty or certain
other  wrongful  actions that causes or is likely to cause a more than a minimal
loss or other  significant  adverse  effect on an insured  savings  association.
Civil  penalties  cover a wide range of  violations  and  actions and range from
$5,000 for each day during  which  violations  of law,  regulations,  orders and
certain written agreements and conditions continue, up to $1,000,000 per day for
such violations if the person obtained a substantial  pecuniary gain as a result
of such  violation or knowingly or recklessly  caused a substantial  loss to the
institution. Criminal penalties for certain financial institution crimes include
fines of up to $10 million and  imprisonment  for up to 30 years.  In  addition,
regulators have  substantial  discretion to take  enforcement  action against an
institution that fails to comply with its regulatory requirements,  particularly
with respect to its capital  requirements.  Possible  enforcement  actions range
from the  imposition  of a capital plan and capital  directive to  receivership,
conservatorship or the termination of deposit insurance.  Under the FDI Act, the
FDIC has the  authority to  recommend  to the  Director of OTS that  enforcement
action be taken with respect to a particular savings  association.  If action is
not taken by the Director of the OTS, the FDIC has authority to take such action
under certain circumstances.

         Standards for Safety and Soundness. Pursuant to the FDI Act, as amended
by Federal Deposit Insurance Corporation  Improvement Act of 1991 ("FDICIA") and
the Riegle  Community  Development  and Regulatory  Improvement Act of 1994 (the
"Community  Development Act"), the OTS and the federal bank regulatory  agencies
adopted,  effective August 9, 1995, a set of guidelines  prescribing  safety and
soundness  standards.  The guidelines  establish general  standards  relating to
internal  controls  and  information  systems,   internal  audit  systems,  loan
documentation,  credit underwriting, interest rate exposure, asset growth, asset
quality,  earnings,  and  compensation,  fees  and  benefits.  In  general,  the
guidelines  require,  among other things,  appropriate  systems and practices to
identify and manage the risks and  exposures  specified in the  guidelines.  The
guidelines prohibit excessive compensation as an unsafe and unsound practice and
describe  compensation  as excessive when the amounts paid are  unreasonable  or
disproportionate  to the services performed by an executive  officer,  employee,
director or principal stockholder. In addition, the OTS adopted regulations that
authorize,  but do not require,  the OTS to order an  institution  that has been
given  notice  by the OTS  that it is not  satisfying  any of  such  safety  and
soundness standards to submit a compliance plan. If, after being so notified, an
institution  fails  to  submit  an  acceptable  compliance  plan or fails in any
material respect to implement an accepted compliance plan, the OTS must issue an
order  directing  action  to  correct  the  deficiency  and may  issue  an order
directing other actions of the types to which an undercapitalized association is
subject  under the "prompt  corrective  action"  provisions  of FDICIA.  See "--
Prompt  Corrective  Regulatory  Action." If an institution  fails to comply with
such an order,  the OTS may seek to enforce  such order in judicial  proceedings
and to impose civil money penalties.

         Real Estate Lending  Standards.  The OTS and the other federal  banking
agencies  adopted  regulations  to prescribe  standards for extensions of credit
that  (i) are  secured  by real  estate  or (ii) are  made  for the  purpose  of
financing the  construction of improvements on real estate.  The OTS regulations
require each savings association to establish and maintain written internal real
estate  lending  standards  that are  consistent  with  safe and  sound  banking
practices  and  appropriate  to the size of the  association  and the nature and
scope  of its  real  estate  lending  activities.  The  standards  also  must be
consistent with accompanying OTS guidelines,  which include loan-to-value ratios
for the different types of real estate loans. Associations are also permitted to
make a limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are reviewed and justified appropriately.
The guidelines also list a number of lending  situations in which  exceptions to
the loan-to-value standards are justified.

                                      -25-
<PAGE>
         Prompt Corrective  Regulatory  Action.  FDICIA  establishes a system of
prompt   corrective   action  to  resolve  the   problems  of   undercapitalized
institutions.  Under this system,  the banking  regulators  are required to take
certain supervisory actions against  undercapitalized  institutions,  based upon
the five categories of institutions  established by FDICIA:  "well capitalized,"
"adequately capitalized," "undercapitalized,"  "significantly undercapitalized,"
and  "critically   undercapitalized,"   which  are  categories  defined  by  the
institution's  regulatory capital ratios.  Generally, a capital restoration plan
must be filed  with the OTS within 45 days of the date an  association  receives
notice  that  it is  "undercapitalized,"  "significantly  undercapitalized,"  or
"critically   undercapitalized."  In  addition,  various  mandatory  supervisory
actions  become  immediately  applicable  to any  undercapitalized  institution,
including restrictions on growth of assets and other forms of expansion. The OTS
could  also  take  any one of a number  of  discretionary  supervisory  actions,
including  the issuance of a capital  directive  and the  replacement  of senior
executive  officers and  directors.  Generally,  subject to a narrow  exception,
FDICIA  requires  the  applicable  banking  regulator  to appoint a receiver  or
conservator for an institution  that is critically  undercapitalized.  Under the
OTS regulations, generally, a federally chartered savings association is treated
as well capitalized if its total risk-based capital ratio is 10% or greater, its
Tier 1 risk-based  capital ratio is 6% or greater,  and its leverage ratio is 5%
or greater, and it is not subject to any order or directive by the OTS to meet a
specific  capital  level.  As of December  31,  2000,  the  Association  met the
criteria for being considered "well capitalized" by the OTS.

         Where  appropriate,  the OTS can impose  corrective action by a savings
and loan holding  company  under the "prompt  corrective  action"  provisions of
FDICIA.

         Insurance of Deposit  Accounts.  The Bank is a member of the SAIF,  and
the Bank pays its  deposit  insurance  assessments  to the  SAIF.  The FDIC also
maintains  another  insurance  fund, the Bank Insurance  Fund,  which  primarily
insures the deposits of banks and state chartered savings banks.

         Under federal law, the FDIC established a risk based assessment  system
for  determining  the  deposit  insurance  assessments  to be  paid  by  insured
depositary  institutions.  Under the  assessment  system,  the FDIC  assigns  an
institution  to one of  three  capital  categories  based  on the  institution's
financial information as of the quarter ending three months before the beginning
of the  assessment  period.  An  institution's  assessment  rate  depends on the
capital  category and  supervisory  category to which it is assigned.  Under the
regulation,  there are nine assessment risk classifications (i.e.,  combinations
of capital groups and supervisory subgroups) to which different assessment rates
are  applied.  Assessment  rates  currently  range from 0.0% of deposits  for an
institution in the highest  category  (i.e.,  well-capitalized  and  financially
sound,  with no more than a few minor  weaknesses)  to 0.27% of deposits  for an
institution  in the lowest  category  (i.e.,  undercapitalized  and  substantial
supervisory  concern).  The FDIC is authorized to raise the assessment  rates as
necessary to maintain the required reserve ratio of 1.25%.

         In  addition,  all  FDIC  insured  institutions  are  required  to  pay
assessments  to the FDIC at an annual  rate of  approximately  .0212 of  insured
deposits to fund interest payment on bonds issued by the Financing  Corporation,
an agency of the federal government  established to recapitalize the predecessor
to the SAIF.  These  assessments  will continue until the Financing  Corporation
bonds mature in 2017.

         Federal Home Loan Bank System.  The Bank is a member of the FHLB of Des
Moines,  which is one of the regional FHLBs composing the FHLB System. Each FHLB
provides a central credit facility  primarily for its member  institutions.  The
Bank,  as a member of the FHLB of Des  Moines,  is  required to acquire and hold
shares of capital stock in the FHLB of Des Moines in an amount at least equal to
the greater of 1.0% of the aggregate  principal amount of its unpaid residential
mortgage loans and similar  obligations at the beginning of each year or 1/20 of
its  advances  (borrowings)  from  the  FHLB  of Des  Moines.  The  Bank  was in
compliance with this  requirement with an investment in FHLB of Des Moines stock
at December 31, 2000 of $4.4  million.  Any advances from a FHLB must be secured
by specified  types of  collateral,  and all long-term  advances may be obtained
only for the purpose of providing funds for residential housing finance.

         The FHLBs are required to provide funds for the resolution of insolvent
thrifts  and  to  contribute  funds  for  affordable  housing  programs.   These
requirements  could  reduce  the  amount of  earnings  that the FHLBs can pay as
dividends to their members and could also result in the FHLBs  imposing a higher
rate of interest on advances to their  members.  If dividends  were reduced,  or
interest on future FHLB advances increased, the Bank's net interest income would
be affected.

                                      -26-
<PAGE>
         Under  the GLB Act,  membership  in the FHLB is now  voluntary  for all
federally-chartered  savings  associations,  such as the Bank.  The GLB Act also
replaces  the  existing  redeemable  stock  structure  of the FHLB System with a
capital  structure  that  requires  each  FHLB to meet a  leverage  limit  and a
risk-based permanent capital  requirement.  Two classes of stock are authorized:
Class A  (redeemable  on  6-months  notice) and Class B  (redeemable  on 5-years
notice).

         Federal  Reserve  System.  The Bank is subject to provisions of the FRA
and the FRB's  regulations  pursuant  to which  depositary  institutions  may be
required  to  maintain   non-interest-earning  reserves  against  their  deposit
accounts and certain other liabilities.  Currently,  reserves must be maintained
against transaction accounts (primarily NOW and regular checking accounts).  The
FRB regulations  generally  require that reserves be maintained in the amount of
3.0% of the aggregate of transaction accounts up to $46.5 million. The amount of
aggregate  transaction accounts in excess of $46.5 million are currently subject
to a reserve  ratio of 10.0%,  which ratio the FRB may adjust  between  8.0% and
12%. The FRB regulations  currently exempt $4.9 million of otherwise  reservable
balances from the reserve  requirements,  which exemption is adjusted by the FRB
at the end of each year.  The Bank is in compliance  with the foregoing  reserve
requirements. Because required reserves must be maintained in the form of either
vault cash,  a  non-interest-bearing  account at a Federal  Reserve  Bank,  or a
pass-through  account  as  defined  by the  FRB,  the  effect  of  this  reserve
requirement  is to reduce  the  Bank's  interest-earning  assets.  The  balances
maintained  to meet the reserve  requirements  imposed by the FRB may be used to
satisfy liquidity  requirements imposed by the OTS. FHLB System members are also
authorized  to  borrow  from  the  Federal  Reserve  discount  window,  but  FRB
regulations  require  such  institutions  to  exhaust  all FHLB  sources  before
borrowing from a Federal Reserve Bank.

         New Privacy Regulations. Pursuant to the GLB Act, the OTS has published
final regulations implementing the privacy protection provisions of the GLB Act.
These regulations,  effective on November 13, 2000 with full compliance required
by July 1, 2001,  require each  financial  institution  to adopt  procedures  to
protect  customers'  "nonpublic  personal   information."  The  new  regulations
generally  require  that  the  Bank  disclose  its  privacy  policy,   including
identifying with whom it shares a customer's  "nonpublic personal  information,"
to customers at the time of establishing the customer  relationship and annually
thereafter. In addition, the Bank will be required to provide its customers with
the ability to  "opt-out"  of having it share their  personal  information  with
unaffiliated  third parties and not to disclose  account numbers or access codes
to nonaffiliated third parties for marketing purposes.  The Bank currently has a
privacy  protection policy in place and intends to review and amend that policy,
if necessary, for compliance with the regulations.

         ATM Fees.  The GLB Act also  requires the Bank to disclose,  on its ATM
machines and to its  customers  upon the issuance of an ATM card,  any fees that
may be imposed on ATM users.  For older ATMs,  the Bank will have until December
31, 2004 to provide such notices.

                                      -27-
<PAGE>
ITEM 2.           PROPERTIES

         The Company  conducts its business  through its main office  located in
Fort Dodge, Iowa and seven full-service  offices located in Fort Dodge,  Nevada,
Ames, Perry, Burlington and Mount Pleasant, Iowa. The following table sets forth
certain  information  concerning  the main office and each branch  office of the
Company and the offices of First Iowa Title  Services  and First Iowa  Mortgage,
Inc.  at December  31,  2000.  All of the  offices of the Company are owned.  In
addition to the properties listed below, First Federal Investments owns land and
an office  building  in Fort Dodge,  Iowa with a net book value of $322,000  and
Northridge  Apartments Limited Partnership owns a multifamily apartment building
with a net book value of $1.8 million at December 31, 2000.  The  aggregate  net
book value of the Company's premises and equipment,  on a consolidated basis was
$6.7 million at December 31, 2000.

<TABLE>
<CAPTION>
                                                          Lease
       Location                  Opening Date        Expiration Date             Net Book Value
       --------                  ------------        ---------------             --------------

       <S>                            <C>                  <C>                  <C>
       Main Office:
       825 Central Avenue             1973                 N/A                  $  1,056,101
       Fort Dodge, Iowa

       Branch Offices:
       201 South 25th Street          1977                 N/A                  $    258,026
       Fort Dodge, Iowa

       404 Lincolnway                 1977                 N/A                  $    504,965
       Nevada, Iowa

       316 South Duff                 1977                 N/A                  $  1,973,966
       Ames, Iowa

       1st Avenue and Hwy 141         1999                 N/A                  $    900,898
       Perry, Iowa

       321 North Third Street         1953                 N/A                  $    565,305
       Burlington, Iowa

       1010 North Roosevelt           1975                 N/A                  $    813,792
       Burlington, Iowa

       102 South Main                 1991                 N/A                  $    228,208
       Mount Pleasant, Iowa

       First Iowa Offices:
       628 Central Avenue             1982                 N/A                  $     44,652
       Fort Dodge, Iowa

       814 8th Street                 1996                 2003 (1)             $     35,702
       Boone, Iowa

       200 1st Street South           1996                 2003 (1)             $     34,662
       Newton, Iowa


       First Iowa Mortgage Office:    1998                 N/A                  $     22,005
       316 South Duff
       Ames, Iowa
<FN>
(1)  Does not include option to renew for an additional 5 years.
</FN>
</TABLE>

                                      -28-
<PAGE>
ITEM 3.           LEGAL PROCEEDINGS

         The Company is not involved in any pending legal proceedings other than
routine legal  proceedings  occurring in the ordinary  course of business.  Such
routine  legal  proceedings  in the  aggregate  are believed by management to be
immaterial to the Company's financial condition and results of operations.

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

                  There were no matters  submitted to a vote of security holders
during the fourth quarter of the year ended December 31, 2000.

                                     PART II

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
                  SHAREHOLDER MATTERS

         The  information  required  by this  Item  is  incorporated  herein  by
reference to page 63 of the Company's 2000 Annual Report to  Shareholders  under
the heading "Shareholder Information," which section is included in Exhibit 13.1
to this Annual Report.

ITEM 6.           SELECTED FINANCIAL DATA

         The  information  required  by this  Item  is  incorporated  herein  by
reference to page 4 of the Company's  2000 Annual Report to  Shareholders  under
the heading "Selected Financial Data," which section is included in Exhibit 13.1
to this Annual Report.

ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS

         The  information  required  by this  Item  is  incorporated  herein  by
reference  to  pages  7  through  26 of the  Company's  2000  Annual  Report  to
Shareholders  under  the  heading  "Management's   Discussion  and  Analysis  of
Financial  Condition  and Results of  Operations,"  which section is included in
Exhibit 13.1 to this Report.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The  information  required  by this  Item  is  incorporated  herein  by
reference  to pages  12  through  14 of the  Company's  2000  Annual  Report  to
Shareholders  under  the  heading  "Discussion  of  Market  Risk--Interest  Rate
Sensitivity Analysis," which section is included in Exhibit 13.1 to this Report.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  information  required  by this  Item  is  incorporated  herein  by
reference  to pages  28  through  60 of the  Company's  2000  Annual  Report  to
Shareholders under the headings  "Independent  Auditor's Report,"  "Consolidated
Financial  Statements" and "Notes to Consolidated  Financial  Statements," which
section are included in Exhibit 13.1 to this Report.

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE

         None.
                                      -29-
<PAGE>
                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information   regarding   Directors  and  Executive   Officers  of  the
Registrant is included under the headings  "Information with Respect to Nominees
and Continuing  Directors,"  "Nominees for Election as  Directors,"  "Continuing
Directors,"   "Executive  Officers"  and  "Section  16(a)  Beneficial  Ownership
Reporting Compliance" in the Company's Proxy Statement for its Annual Meeting of
Shareholders to be held on April 27, 2001, which has been filed with the SEC and
is incorporated herein by reference.

ITEM 11.          EXECUTIVE COMPENSATION

         Information  relating to executive  compensation  is included under the
headings "Executive Compensation" (excluding the Stock Performance Graph and the
Compensation  Committee  Report) and "Directors'  Compensation" in the Company's
Proxy  Statement for its Annual Meeting of  Shareholders to be held on April 27,
2001, which has been filed with the SEC and is incorporated herein by reference.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         Information relating to security ownership of certain beneficial owners
and management is included  under the headings  "Principal  Shareholders  of the
Company" and "Security Ownership of Management" in the Company's Proxy Statement
for its Annual Meeting of Shareholders  to be held on April 27, 2001,  which has
been filed with the SEC and is incorporated herein by reference.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information regarding certain relationships and related transactions is
included under the heading  "Transaction  with Certain  Related  Persons" in the
Company's  Proxy  Statement for its Annual Meeting of Shareholders to be held on
April 27, 2001, which has been filed with the SEC and is incorporated  herein by
reference.

                                     PART IV

ITEM 14.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Financial Statements, Schedules and Exhibits

         1.       The consolidated  balance sheets of North Central  Bancshares,
                  Inc. and  subsidiaries  as of December 31, 2000 and 1999,  and
                  the related consolidated statements of income, equity and cash
                  flows for the years ended  December 31,  2000,  1999 and 1998,
                  together with the related notes and the independent  auditor's
                  report of  McGladrey  &  Pullen,  LLP,  independent  certified
                  public accounts.

         2.       Financial  Statement  Schedules have been omitted because they
                  are not applicable or the required information is shown in the
                  Consolidated Financial Statements or Notes thereto.

         3.       See Exhibit Index on following page.

(b)      Reports on Form 8-K filed during the last quarter of 2000

         None.

                                      -30-
<PAGE>
(c)      Exhibits Required by Item 601 of Securities and Exchange Commission
         Regulation S-K:

<TABLE>
<CAPTION>

Exhibit No.                          Description                                         Page No.
-----------                          -----------                                         --------
<S>        <C>                                                                            <C>
  3.1      Articles of Incorporation of North Central Bancshares, Inc.                      *

  3.2      Bylaws of North Central Bancshares, Inc.                                         *

  3.3      Amendment to Article IV of the Bylaws of North Central Bancshares, Inc.

  4.1      Federal Stock Charter of First Federal Savings Bank of Iowa (formerly            *
           known as First Federal Savings Bank of Fort Dodge)

  4.2      Bylaws of First Federal Savings Bank of Iowa (formerly known as First
           Federal Savings Bank of Fort Dodge).                                             *

  4.3      Specimen Stock Certificate of North Central Bancshares, Inc.                     *

  4.4      Amendment to Article III of the Bylaws of First Federal Savings Bank of Iowa

 10.1      Employee Stock Ownership Plan of First Federal Savings Bank of Iowa            *****
           (formerly  known  as  First  Federal  Savings  Bank of Fort
           Dodge) and ESOP Trust Agreement (incorporating Amendments 1
           and 2)

 10.2      ESOP Loan Documents, dated September 3, 1996                                   ****

 10.3      Employee Retention Agreements between First Federal Savings Bank of Fort        **
           Dodge and certain executive officers

 10.4      Employment Agreement between First Federal Savings Bank of Iowa                  *
           (formerly known as First Federal Savings Bank of Fort Dodge) and David M.
           Bradley, effective as of August 31, 1994

 10.5      Form of Employment Agreement between First Federal Savings Bank of               *
           Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and
           David M. Bradley

 10.6      Form of Employment Agreement between North Central Bancshares, Inc.              *
           and David M. Bradley

 10.8      North Central Bancshares, Inc. 1996 Stock Option Plan                           ***

 10.9      Amendment No. 1 to the North Central Bancshares, Inc. 1996 Stock Option        *****
           Plan

 13.1      Annual Report to security holders

 21.1      Subsidiaries of the Registrant                                                   *

 23.1      Consent of McGladrey & Pullen, LLP

 99.1      Press Release dated October 27, 2000

 99.2      Press Release dated November 29, 2000

 99.3      Press Release dated January 22, 2001
</TABLE>
                                      -31-
<PAGE>

*        Incorporated herein by reference to Registration Statement No. 33-80493
         on Form S-1 of North Central Bancshares, Inc. (the "Registrant") filed
         with the Securities  and  Exchange  Commission,  (the "Commission") on
         December 18, 1995, as amended.

**       Incorporated  herein by reference to the Exhibits to the Annual  Report
         on Form 10-K filed by Registrant  for fiscal year 1995,  filed with the
         Commission on March 29, 1996.

***      Incorporated  herein  by  reference  to  the  Amended  Schedule  14A of
         Registrant filed with the Commission on August 19, 1996.

****     Incorporated  herein by reference to the Annual  Report on Form 10-K of
         the Registrant filed with the Commission on March 31, 1997.

*****    Incorporated  herein by reference to the Annual  Report on Form 10-K of
         the Registrant filed with the Commission on March 31, 1998.

                                      -32-
<PAGE>
Conformed

                                   SIGNATURES

         Pursuant  to  the  requirements  of  the  Section  13 or  15(d)  of the
Securities  Exchange Act of 1934, the Registrant and has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                              North Central Bancshares, Inc.

Date:  March 21, 2001                         /s/ David M. Bradley
                                              --------------------
                                              By: David M. Bradley
                                              Chairman, President and
                                              Chief Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

       Name                              Title                           Date
       ----                              -----                           ----
/s/ David M. Bradley           President, Chief Executive              03/21/01
--------------------           Officer, Director,and Chairman
David M. Bradley               of the Board(principal executive
                               officer)


/s/ John L. Pierschbacher      Treasurer                               03/21/01
-------------------------      (principal accounting and
John L. Pierschbacher          financial officer)


/s/ Robert H. Singer, Jr.      Director                                03/21/01
-------------------------
Robert H. Singer, Jr.

/s/ KaRene Egemo               Director                                03/21/01
----------------
KaRene Egemo

/s/ Howard A. Hecht            Director                                03/21/01
-------------------
Howard A. Hecht

/s/ Melvin R. Schroeder        Director                                03/21/01
-----------------------
Melvin R. Schroeder

/s/ Mark M. Thompson           Director                                03/21/01
--------------------
Mark M. Thompson

/s/ Craig R. Barnes            Director                                03/21/01
-------------------
Craig R. Barnes

                                      -33-
<PAGE>
                                TABLE OF CONTENTS
            List of Exhibits (filed herewith unless otherwise noted)

<TABLE>
<CAPTION>

Exhibit No.                          Description                                         Page No.
-----------                          -----------                                         --------
<S>        <C>                                                                            <C>
  3.1      Articles of Incorporation of North Central Bancshares, Inc.                      *

  3.2      Bylaws of North Central Bancshares, Inc.                                         *

  3.3      Amendment to Article IV of the Bylaws of North Central Bancshares, Inc.

  4.1      Federal Stock Charter of First Federal Savings Bank of Iowa (formerly            *
           known as First Federal Savings Bank of Fort Dodge)

  4.2      Bylaws of First Federal Savings Bank of Iowa (formerly known as First
           Federal Savings Bank of Fort Dodge).                                             *

  4.3      Specimen Stock Certificate of North Central Bancshares, Inc.                     *

  4.4      Amendment to Article III of the Bylaws of First Federal Savings Bank of Iowa

 10.1      Employee Stock Ownership Plan of First Federal Savings Bank of Iowa            *****
           (formerly  known  as  First  Federal  Savings  Bank of Fort
           Dodge) and ESOP Trust Agreement (incorporating Amendments 1
           and 2)

 10.2      ESOP Loan Documents, dated September 3, 1996                                   ****

 10.3      Employee Retention Agreements between First Federal Savings Bank of Fort        **
           Dodge and certain executive officers

 10.4      Employment Agreement between First Federal Savings Bank of Iowa                  *
           (formerly known as First Federal Savings Bank of Fort Dodge) and David M.
           Bradley, effective as of August 31, 1994

 10.5      Form of Employment Agreement between First Federal Savings Bank of               *
           Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and
           David M. Bradley

 10.6      Form of Employment Agreement between North Central Bancshares, Inc.              *
           and David M. Bradley

 10.8      North Central Bancshares, Inc. 1996 Stock Option Plan                           ***

 10.9      Amendment No. 1 to the North Central Bancshares, Inc. 1996 Stock Option        *****
           Plan

 13.1      Annual Report to security holders

 21.1      Subsidiaries of the Registrant                                                   *

 23.1      Consent of McGladrey & Pullen, LLP

 99.1      Press Release dated October 27, 2000

 99.2      Press Release dated November 29, 2000

 99.3      Press Release dated January 22, 2001
</TABLE>

                                      -34-
<PAGE>

*        Incorporated herein by reference to Registration Statement No. 33-80493
         on Form S-1 of North Central Bancshares, Inc. (the "Registrant") filed
         with the Securities and  Exchange  Commission,  (the  "Commission")  on
         December 18, 1995, as amended.

**       Incorporated  herein by reference to the Exhibits to the Annual  Report
         on Form 10-K filed by Registrant  for fiscal year 1995,  filed with the
         Commission on March 29, 1996.

***      Incorporated  herein  by  reference  to  the  Amended  Schedule  14A of
         Registrant filed with the Commission on August 19, 1996.

****     Incorporated  herein by reference to the Annual  Report on Form 10-K of
         the Registrant filed with the Commission on March 31, 1997.

*****    Incorporated  herein by reference to the Annual  Report on Form 10-K of
         the Registrant filed with the Commission on March 31, 1998.
                                      -35-