EXHIBIT 13

                       2000 ANNUAL REPORT TO STOCKHOLDERS


<PAGE>









                       2000 ANNUAL REPORT TO STOCKHOLDERS
                         LEEDS FEDERAL BANKSHARES, INC.








<PAGE>



                                TABLE OF CONTENTS


                                                                          Page
                                                                          ----

Message to Our Stockholders..............................................   1
Selected Consolidated Financial and Other Data...........................   2
Management's Discussion and Analysis of
  Financial Condition and Results of Operations..........................   4
Selected Quarterly Financial Data........................................  14
Common Stock and Related Matters.........................................  15
Independent Auditors' Report............................................. F-1
Consolidated Statements of Financial Condition........................... F-2
Consolidated Statements of Income and Comprehensive Income............... F-3
Consolidated Statements of Stockholders' Equity.......................... F-4
Consolidated Statements of Cash Flows.................................... F-5
Notes to Consolidated Financial Statements............................... F-7



<PAGE>


                 [LETTERHEAD OF LEEDS FEDERAL BANKSHARES, INC.]



                                                              September 25, 2000

To Our Stockholders:

We are pleased to report the financial results of Leeds Federal Bankshares, Inc.
On  June  30,  2000,  the  Company  had  total  assets  of  $337.0  million  and
stockholders'  equity of $47.4 million,  which  resulted in a  capital-to-assets
ratio of 14.1%. The Company's  relatively high level of capital provides us with
a strong foundation for future growth and new business opportunities.

During this year,  we continued to repurchase  our common  stock.  At August 15,
2000, we had repurchased  667,416 shares.  Quarterly dividends have continued at
$.15 per  share.  We  believe  these are  important  means for us to invest  our
capital resources and to enhance stockholder value.

The  Company's  net  income for the fiscal  year ended June 30,  2000,  was $3.6
million, or $.77 per diluted share of common stock, compared to $3.5 million, or
$.69 per diluted  share for the previous  fiscal year.  We continue to emphasize
residential real estate financing,  as evidenced by an increase of $15.3 million
in loans receivable.  Our low ratio of noninterest expense to average assets was
 .93% and .91% for the fiscal  years ended June 30, 2000 and 1999,  respectively.
The enclosed  annual report  discusses our  operating  results  through June 30,
2000, in more detail.

The board, management and staff are dedicated to providing the quality financial
services our customers have come to expect from an independent  community  bank.
Our deposits are received from within our community and  reinvested in mortgages
within our community.  Our stockholders have shared in the success and growth of
their community bank.

Thank  you for the  confidence  you have  placed  in Leeds  Federal.  We hope to
justify that confidence by continuing to be a leading community-based  financial
institution and by sharing our growth and our success with our stockholders.

Sincerely,




/s/  John F. Amer                    /s/  Gordon E. Clark
---------------------                -------------------------------------
John F. Amer                         Gordon E. Clark
Chairman                             President and Chief Executive Officer



<PAGE>


                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

         The  following  table sets forth  certain  financial  and other data of
Leeds Federal Bankshares,  Inc. (the "Company"),  or, prior to January 21, 1998,
Leeds  Federal  Savings  Bank (the  "Bank")  at the  dates  and for the  periods
indicated.  For additional  information about the Company,  reference is made to
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the Consolidated Financial Statements of the Company and related
notes included elsewhere herein.

<TABLE>
<CAPTION>
                                                                             At June 30,
                                                   -----------------------------------------------------------
                                                     2000          1999         1998         1997         1996
                                                     ----          ----         ----         ----         ----
                                                                             (In Thousands)
<S>                                                <C>          <C>          <C>          <C>           <C>
Selected Consolidated Financial Condition Data
Total assets....................................   $ 337,048    $ 331,642    $ 302,737    $ 286,999     $273,278
Loans receivable, net...........................     219,204      203,886      190,181      174,095      152,076
Investments* ...................................      95,935      102,572       85,355       82,553       84,564
Mortgage-backed securities......................       8,317       10,008       16,412       22,160       28,917
Deposits........................................     281,866      274,626      245,270      232,590      222,146
Borrowed funds..................................         384          471          552          648          744
Stockholders' equity, substantially restricted..      47,409       48,504       49,308       46,741       44,192
</TABLE>

-----------
*    Includes  investment  securities,   interest-bearing  deposits,  and  other
     investments.


<TABLE>
<CAPTION>
                                                                         Year Ended June 30,
                                                   -----------------------------------------------------------
                                                     2000          1999         1998         1997         1996
                                                     ----          ----         ----         ----         ----
                                                                (In Thousands Except Per Share Data)
<S>                                                <C>          <C>          <C>          <C>           <C>
Selected Consolidated Operating Data:
Interest income................................    $  22,070    $  20,842    $  20,309    $  19,606     $ 18,567
Interest expense...............................       13,928       13,009       12,171       11,613       11,232
                                                   ---------    ---------    ---------    ---------     --------
  Net interest income before provision for losses      8,142        7,833        8,138        7,993        7,335
Provision for loan losses......................           21           39          192          151           33
                                                   ---------    ---------    ---------    ---------     --------
  Net interest income after provision for losses       8,121        7,794        7,946        7,842        7,302
                                                   ---------    ---------    ---------    ---------     --------

Noninterest income:
  Service fees and charges.....................          156          132          137          130          116
  Other income ................................          288          268          213          140          168
                                                   ---------    ---------    ---------    ---------     --------
    Total noninterest income...................          444          400          350          270          284
                                                   ---------    ---------    ---------    ---------     --------

Noninterest expense:
  Compensation and employee benefits...........        1,759        1,573        1,770        1,528        1,516
  Occupancy....................................          260          222          195          197          192
  SAIF deposit insurance premiums..............          184          222          222        1,755          558
  Advertising..................................          159          128          208          172          216
  Other   .....................................          717          696          700          637          580
                                                   ---------    ---------    ---------    ---------     --------
    Total noninterest expenses.................        3,079        2,841        3,095        4,289        3,062
                                                   ---------    ---------    ---------    ---------     --------
Income before provision for income taxes.......        5,486        5,353        5,201        3,823        4,524
Provision for income taxes.....................        1,891        1,889        1,895        1,458        1,737
                                                   ---------    ---------    ---------    ---------     --------
      Net income...............................    $   3,595    $   3,464    $   3,306    $   2,365     $  2,787
                                                   =========    =========    =========    =========     ========
Net income per common share
  Basic........................................    $    0.78    $    0.69    $    0.65    $    0.46     $   0.55
  Diluted......................................         0.77         0.69         0.64         0.46         0.55
Dividends declared per common share............         0.58         0.56         0.55         0.48         0.44
                                                   =========    =========    =========    =========     ========
</TABLE>


                                        2

<PAGE>


<TABLE>
<CAPTION>
                                                    At or for the Year Ended June 30,
                                             -----------------------------------------------
                                             2000       1999      1998       1997     1996
                                             ----       ----      ----       ----     ----
<S>                                          <C>        <C>       <C>      <C>      <C>
Key Operating Ratios and Other Data:

Return on average assets (net income
 divided by average total assets)* ....        1.08%     1.11%     1.13%      .85%     1.06%
Return on average equity (net income
 divided by average equity)* ..........        7.54      7.05      6.86      5.26      6.50
Net interest rate spread (difference
 between average yield on interest-
 earning assets and average cost of
 interest-bearing liabilities) ........        1.86      1.80      2.03      2.12      2.00
Net interest margin (net interest
 income as a percentage of average
 interest-earning assets)  ............        2.53      2.57      2.85      2.94      2.85
Net interest income to noninterest
 expense* .............................      264.44    275.71    262.94    186.36    239.54
Net interest income after provision
 for losses, to total noninterest
 expense* .............................      263.75    274.33    256.74    182.84    238.44
Noninterest income to average assets ..         .13       .13       .12       .10       .11
Noninterest expense to average assets*          .93       .91      1.06      1.54      1.17
Nonperforming loans to total loans ....        1.16      1.36      1.32       .05       .06
Nonperforming assets to total assets ..         .76       .83       .83       .03       .07
Average interest-earning assets to
 average interest-bearing liabilities .      115.43    118.03    119.46    119.15    119.50
Allowance for losses to nonperforming
 assets ...............................       29.12     26.24     28.70    609.09    213.67
Stockholders' equity to average assets
 (average stock-holders' equity divided
 by average total assets) 14.33 .......       15.68     16.49     16.18     16.36
Equity to assets at period end ........       14.07     14.63     16.28     16.29     16.17
Number of full-service offices ........           2         1         1         1         1
</TABLE>

---------------
*    Excluding the one-time  assessment to recapitalize the Savings  Association
     Insurance Fund, for the year ended June 30, 1997,  return on average assets
     was 1.16%,  return on average  equity  was  7.14%,  noninterest  expense to
     average assets was 1.05%,  net interest  income to noninterest  expense was
     275.05% and net interest  income after  provision  for loan losses to total
     noninterest expense was 269.86%.


                                        3

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           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

General

         The earnings of the Company  depend  primarily on the earnings of Leeds
Federal Savings Bank (the "Bank"),  which is discussed  herein on a consolidated
basis.  The  Company's  earnings  depend  primarily on its level of net interest
income,  which  is the  difference  between  interest  earned  on the  Company's
interest-   earning   assets,    consisting   primarily   of   mortgage   loans,
mortgage-backed  securities,  interest-earning  deposits at other  institutions,
investment   securities  and  other  investments,   and  the  interest  paid  on
interest-bearing liabilities. Net interest income is a function of the Company's
interest  rate  spread,  which is the  difference  between the average  yield on
interest-earning   assets  and  the  average   rate  paid  on   interest-bearing
liabilities,  as well as a function of the average  balance of  interest-earning
assets as compared to interest-bearing  liabilities. The Company's earnings also
are affected by its level of noninterest  income,  including  primarily  service
fees and charges, and noninterest expense,  including primarily compensation and
employee  benefits,  occupancy  costs and  Savings  Association  Insurance  Fund
("SAIF") deposit insurance  premiums.  Earnings of the Company also are affected
significantly  by general  economic  and  competitive  conditions,  particularly
changes in market interest rates,  government policies and actions of regulatory
authorities, which events are beyond the control of the Company.

Forward-Looking Statements

         When used in this  Annual  Report,  the words or phrases  "will  likely
result," "are  expected  to," "will  continue,"  "is  anticipated,"  "estimate,"
"project"  or similar  expressions  are  intended to  identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  Such  Statements  are  subject  to  certain  risks  and  uncertainties
including changes in economic  conditions in the Company's market area,  changes
in policies by regulatory agencies,  fluctuations in interest rates, and changes
in demand for loans in the Company's  market area,  competition  and information
provided  by  third-party  vendors  that could  cause  actual  results to differ
materially  from  historical   earnings  and  those  presently   anticipated  or
projected.  The Company wishes to caution readers not to place undue reliance on
any such forward-looking  statements,  which speak only as of the date made. The
Company  wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ  materially  from any opinions or statements  expressed
with respect to future periods in any current statements.

         The  Company  does  not  undertake,   and  specifically  disclaims  any
obligation, to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or  unanticipated
events.

Business Strategy

         The  Company's  current  business  strategy is to operate the Bank as a
well-capitalized,  profitable and  independent  community-oriented  savings bank
dedicated to providing  quality  customer  service.  Generally,  the Company has
sought to implement this strategy by using only retail deposits as its source of
funds and maintaining a substantial  part of its assets in loans secured by one-
to four-family  residential  real estate  located in the Company's  market area,
home equity  loans,  consumer  loans,  mortgage-backed  securities  and in other
liquid  investment  securities.  Specifically,  the Company's  business strategy
incorporates  the  following  elements:  (1)  operating as a  community-oriented
financial institution, maintaining a strong core

                                        4

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customer base by providing quality service and offering  customers the access to
senior management and services that a community-based institution can offer; (2)
maintaining high asset quality by emphasizing investment in residential mortgage
loans,  mortgage-backed  securities and other securities issued or guaranteed by
the United States  Government or agencies  thereof;  (3) maintaining  capital in
excess of regulatory  requirements  and growing only to the extent that adequate
capital levels can be maintained;  and (4) managing  interest rate risk exposure
while achieving desirable levels of profitability.

Results of Operations

         The  earnings  of the  Company  depend  primarily  on its  level of net
interest  income,  which  is  the  difference  between  interest  earned  on the
Company's  interest-earning  assets,  consisting  primarily  of mortgage  loans,
mortgage-backed  securities,  interest-earning  deposits at other  institutions,
investment   securities  and  other  investments,   and  the  interest  paid  on
interest-bearing  liabilities,  which consist primarily of savings deposits. The
Company  had net income of $3.6  million for the year ended June 30,  2000.  Net
income  totaled  $3.5  million  and $3.3  million  for  fiscal  1999  and  1998,
respectively.

         Interest Income.  Total interest income  increased by $1.2 million,  or
5.9%, to $22.1  million for the year ended June 30, 2000,  from $20.8 million of
the year ended June 30, 1999. The increase in interest  income was primarily due
to an  increase  in the  balance  of average  interest-earning  assets to $322.3
million  for the year ended June 30,  2000,  from  $305.1  million for the prior
year, and a small increase in the yield on average  interest-earnings  assets to
6.9%, from 6.8%. The increase in average interest-earning assets during the year
ended June 30,  2000,  resulted  primarily  from an increase in mortgage  loans,
partially offset by a decrease in  mortgage-backed  securities.  The increase in
average  yield  was  caused  primarily  by  increases  in  yield  on  short-term
investments, partially offset by a decrease in yield on mortgage loans.

         Interest on mortgage loans increased by $1.1 million, or 7.5%, to $15.1
million for the year ended June 30, 2000,  from $14.0 million for the year ended
June 30, 1999,  primarily  because of an increase in average  mortgage  loans to
$213.1  million for the year ended June 30,  2000,  from $190.1  million for the
year ended June 30,  1999,  partially  offset by a decrease in average  yield on
mortgage  loans to 7.1% from  7.3%.  The  increase  in  average  mortgage  loans
resulted from increased loan demand in the Bank's community and from an increase
in the volume of loan  originations  from  brokers.  The lower yield on mortgage
loans  reflected   generally  lower  market  rates,   including  the  effect  of
reinvesting the proceeds of loan  prepayments in lower yielding  mortgage loans.
Interest  income on consumer loans decreased by $54,000 to $275,000 for the year
ended June 30, 2000, from $329,000 for the prior year. The decrease was due to a
decrease in average balance of consumer loans to $3.8 million from $4.5 million,
as a result of reduced  marketing of consumer  loans  during the year.  Yield on
consumer loans for the year ended June 30, 2000,  decreased to 7.2%,  from 7.3%.
Interest income on mortgage-backed  securities decreased $280,000,  or 30.5%, to
$637,000 for the year ended June 30, 2000, from $917,000 for the prior year. The
decrease was  principally  due to a $4.1 million  decrease in average balance of
mortgage-backed  securities  to $9.1  million for the year ended June 30,  2000,
from $13.2 million for the prior year. Yield on  mortgage-backed  securities for
the year ended June 30, 2000,  increased to 7.0%, from 6.9%.  Interest income on
investment  securities  increased by $1.1 million,  to $4.8 million for the year
ended June 30, 2000, from $3.6 million for the prior year. Such increase was the
result of a $17.4 million  increase in average balance of investment  securities
to $71.7  million for the year ended June 30, 2000,  from $54.3  million for the
year ended June 30,  1999.  The  increase in the average  balance of  investment
securities was primarily the result of a decrease in short-term interest-earning
deposits.  Interest income from interest-earning  deposits decreased by $798,000
to $605,000  for the year ended June 30,  2000,  from $1.4 million for the prior
year.  Such  decrease  was  primarily  the result of  purchase  of longer-  term
investment  securities.  Yield on  interest-earning  deposits for the year ended
June 30, 2000,  increased to 5.6%,  from 4.9%,  due to increases in market rates
during the year.

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<PAGE>



         Total interest income increased by $533,000,  or 2.6%, to $20.8 million
for the year ended June 30, 1999, from $20.3 million for the year ended June 30,
1998.  The increase in interest  income was  primarily due to an increase in the
balance of average  interest-earning assets to $305.1 million for the year ended
June 30, 1999,  from $285.4  million for the prior year,  partially  offset by a
decrease in yield on average  interest-  earning assets to 6.8%,  from 7.1%. The
increase in average  interest-earning assets during the year ended June 30, 1999
resulted primarily from an increase in average loans and investment  securities,
partially offset by a decrease in  mortgage-backed  securities.  The decrease in
the average yield was caused  primarily by decreases in market rates on mortgage
loans and short-term investments.

         Interest on mortgage  loans  increased by $631,000,  or 4.7%,  to $14.0
million for the year ended June 30, 1999, from $13.4 for the year ended June 30,
1998,  primarily  because of an  increase  in average  mortgage  loans to $190.8
million for the year ended June 30, 1999, from $177.8 million for the year ended
June 30, 1998, partially offset by a decrease in average yield on mortgage loans
to 7.3% from  7.5%.  The  increase  in  average  mortgage  loans  resulted  from
increased loan demand in the Bank's community and from an increase in the volume
of loan originations  from brokers.  The lower yield on mortgage loans reflected
generally lower market rates,  including the effects of reinvesting the proceeds
of loan  prepayments  in lower  yielding  mortgage  loans.  Interest  income  on
consumer  loans  decreased  by $30,000 to  $329,000  for the year ended June 30,
1999,  from  $359,000 for the prior year.  The decrease was due to a decrease in
average balance of consumer loans to $4.5 million from $5.1 million, as a result
of reduced  marketing of consumer loans during the year. Yield on consumer loans
for the year ended June 30,  1999,  increased  to 7.3%,  from 7.1% for the prior
year.  Interest income on  mortgage-backed  securities  decreased  $506,000,  or
35.6%,  to $917,000 for the year ended June 30, 1999,  from $1.4 million for the
prior year.  The decrease  was  principally  due to a $6.4  million  decrease in
average  balance of  mortgage-backed  securities  to $13.2  million for the year
ended June 30, 1999,  from $19.6 million for the prior year.  Interest income on
investment  securities increased by $536,000, to $3.6 million for the year ended
June 30,  1999,  from $3.1  million for the prior year.  Such  increase  was the
result of an $8.0 million  increase in average balance of investment  securities
to $54.3  million for the year ended June 30, 1999,  from $46.3  million for the
year ended June 30,  1998.  The  increase in the average  balance of  investment
securities was the result of increases in savings deposits. Interest income from
interest-earning  deposits  decreased  by $135,000 to $1.4  million for the year
ended  June  30,  1999,  from  $1.5  million  for  the  prior  year.   Yield  on
interest-earning  deposits  decreased  to 4.9%  from  5.7% for the  prior  year.
Interest income on other investments  increased $37,000 to $539,000 for the year
ended June 30, 1999,  from  $502,000 for the prior year.  Such  increase was the
result of an increase in average  balance of other  investments of $3.8 million,
partially offset by a decrease in the average yield on other investments to 4.1%
from 5.3% for the prior year.

         Interest  Expense.  Total interest  expense  increased by $919,000,  or
7.1%, to $13.9 million for the year ended June 30, 2000,  from $13.0 million for
the year ended June 30, 1999.  Such  increase was  principally  the result of an
increase in the average balance in interest bearing liabilities of $20.7 million
to $279.2 million for the year ended June 30, 2000,  from $258.5 million for the
prior year.

         Total interest expense increased by $838,000, or 6.9%, to $13.0 million
for the year ended June 30, 1999, from $12.2 million for the year ended June 30,
1998.  Such  increase was  principally  the result of an increase in the average
balance in interest  bearing  liabilities of $19.6 million to $258.5 million for
the year ended June 30, 1999, from $238.9 million for the prior year.

         Net Interest  Income.  Net interest  income  increased by $309,000,  or
3.9%,  to $8.1 million for the year ended June 30,  2000,  from $7.8 million for
the year ended June 30,  1999.  This  increase was due  principally  to slightly
lower  rates paid on  deposits,  partially  offset by a decrease in the ratio of
average interest-earning assets to average interest-bearing liabilities.

                                        6

<PAGE>



         Net interest income decreased by $305,000, or 3.7%, to $7.8 million for
the year  ended June 30,  1999,  from $8.1  million  for the year ended June 30,
1998.  This decrease was due  principally  to a decrease in the ratio of average
interest-earning assets to average interest bearing liabilities,  and a decrease
in yield on interest-earning assets.

         Provision  for Losses.  The Company  maintains  an  allowance  for loan
losses,  which was  $742,000 at June 30,  2000,  in  accordance  with  generally
accepted  accounting  principles.  The  allowance  exists  to  absorb  known and
inherent  losses  in the  Company's  overall  loan  portfolio.  In  addition  to
historical loss experience,  the Company considers other factors that are likely
to cause loan losses,  including changes in economic and business conditions and
developments,  changes in the nature and volume of the portfolio,  trends in the
level of past due and classified  loans and the status of  nonperforming  loans.
The Company's  provision for loan losses decreased to $21,000 for the year ended
June 30,  2000,  from $39,000 for the year ended June 30,  1999.  The  Company's
allowance for loan losses as a percentage of  nonperforming  loans was 29.1% and
26.2% at June 30, 2000 and 1999,  respectively,  and the Company's nonperforming
loans as a percentage  of total loans was 1.2% at June 30, 2000 and 1.4% at June
30, 1999. At June 30 2000 and 1999, nonperforming loans consisted primarily of a
$2.5 million  commercial  mortgage loan which was due in June 1998. The borrower
has declared bankruptcy and foreclosure proceedings are in progress.  Based on a
recent appraisal of the property  securing the loan and other relevant  factors,
management  does not believe that the Company will incur a  significant  loss on
this loan. Management also believes that, on an overall basis, the allowance for
loan losses at June 30, 2000,  is  sufficient  to address the credit risk in the
loan portfolio.

         Noninterest Income. Noninterest income increased by $44,000 to $445,000
for the year  ended June 30,  2000,  from  $400,000  for the year ended June 30,
1999.  The  increase  was due to  increases  in  service  fees and  charges  and
increases in the cash surrender value of life insurance investments.

         Noninterest  income increased by $50,000 to $400,000 for the year ended
June 30, 1999,  from $350,000 for the year ended June 30, 1998. The increase was
due  principally  to increases  in the cash  surrender  value of life  insurance
investments.

         Noninterest Expense. Noninterest expense increased by $238,000, to $3.1
million for the year ended June 30,  2000,  from $2.8 million for the year ended
June 30, 1999.  Compensation and employee benefits increased by $186,000 to $1.8
million for the year ended June 30, 2000,  from $1.6 million for the prior year.
The increase was due  principally  to staffing added for a new branch office and
other normal  increases in salary levels.  Occupancy  expenses,  advertising and
other expenses also increased principally due to additional costs of opening and
operating the new branch. These increases were partially offset by a decrease in
SAIF deposit  insurance  premiums due to a decrease in the premium rate assessed
on insured deposits.

         Noninterest expense decreased by $254,000, to $2.8 million for the year
ended  June 30,  1999,  from $3.1  million  for the year  ended  June 30,  1999.
Compensation and employee  benefits  decreased by $196,000,  to $1.6 million for
the year ended June 30, 1999, from $1.8 million for the prior year. The decrease
was due  principally to a decrease of $116,000 in Employee Stock  Ownership Plan
("ESOP")  contribution  expense  as a result of  decreases  in the price of ESOP
shares, the basis used to determine the expense. Other decreases in compensation
and employee benefits were primarily the result of the retirement of an officer.
Advertising decreased due to a decreased emphasis on advertising.

         The ratio of noninterest expenses to average assets was .93%, 0.91% and
1.06% for the years ending June 30, 2000, 1999 and 1998, respectively.


                                        7

<PAGE>



         The provision for income taxes was  approximately  $1.9 million for the
years ended June 30, 2000,  1999 and 1998.  The  effective tax rates were 34.5%,
35.3% and 36.4% for the years ending June 30,2000, 1999 and 1998,  respectively.
The  decrease  in the  effective  rates in 2000 and 1999 was due to lower  state
income taxes.

         Other  comprehensive  income.  The  accumulated   unrealized  gains  on
securities  available-for-sale,  net of related income taxes, decreased $802,000
for the year ended June 30,  2000,  as compared  to  increases  of $376,000  and
$554,000 for the years ended June 30, 1999 and 1998, respectively. These changes
primarily reflect fluctuations in interest rates and general market trends.




                                        8

<PAGE>



Average Balance Sheet

         The  following  table sets forth  certain  information  relating to the
Company's  average  balance  sheet and reflects the average  yield on assets and
average cost of liabilities for the periods indicated. Such yields and costs are
derived  by  dividing  income or  expense  by the  average  balance of assets or
liabilities,  respectively,  for the periods  presented.  Average  balances  are
derived from daily balances.

<TABLE>
<CAPTION>
                                                                         Year Ended June 30,
                                    ----------------------------------------------------------------------------------------------
                                                2000                              1999                           1998
                                    ----------------------------    -------------------------------   ----------------------------
                                                         Average                            Average                       Average
                                     Average              Yield/      Average                Yield/   Average               Yield/
                                     Balance  Interest     Cost       Balance    Interest     Cost    Balance   Interest     Cost
                                     -------  --------     ----       -------    --------     ----    -------   --------     ----
                                                                        (Dollars in Thousands)
Interest-earning assets:
<S>             <C>                <C>       <C>           <C>     <C>         <C>           <C>    <C>        <C>           <C>
  Mortgage loans(1)..............  $213,071  $  15,054     7.06%   $ 190,836   $  14,007     7.34%  $177,817   $  13,376     7.52%
  Consumer and other loans.......     3,836        275     7.17        4,535         329     7.25      5,065         359     7.09
  Mortgage-backed securities.....     9,141        637     6.97       13,210         917     6.94     19,604       1,423     7.26
  Investment securities..........    71,687      4,757     6.64       54,322       3,647     6.71     46,311       3,111     6.72
  Interest-earning deposits(2)...    10,889       6.05     5.56       28,931       1,403     4.85     27,161       1,538     5.66
  Other investments(3)...........    13,660       7.42     5.44       13,221         539     4.08      9,424         502     5.33
                                   --------  ---------  -------    ---------   ---------  -------   --------   ---------  -------
    Total interest-earning assets   322,284     22,070     6.85      305,055      20,842     6.83    285,382      20,309     7.12
                                             ---------  -------                ---------  -------              ---------  -------
Noninterest-earning assets.......    10,348                            8,353                           7,046
                                   --------                        ---------                        --------
    Total assets.................  $332,632                        $ 313,408                        $292,428
                                   ========                        =========                        ========
Interest-bearing liabilities:
  Savings deposits..............   $278,775     13,890     4.98    $ 257,942      12,965     5.03   $238,272      12,114     5.09
  Other borrowed funds..........        422         38     9.00          518          44     8.49        616          57     8.28
                                   --------  ---------  -------    ---------   ---------  -------   --------   ---------  -------
    Total interest-bearing
     liabilities ...............    279,197     13,928     4.99      258,460      13,009     5.03    238,888      12,171     5.09
                                             ---------  -------                ---------  -------              ---------  -------
Noninterest-bearing
 liabilities ...................      5,774                            5,800                           5,331
                                   --------                        ---------                        --------
    Total liabilities...........    284,971                          264,260                         244,219
Stockholders' equity............     47,661                           49,148                          48,209
                                   --------                        ---------                        --------
    Total liabilities and
    stockholders' equity........   $332,632                        $ 313,408                        $292,428
                                   ========                        =========                        ========
Net interest income.............             $   8,142                         $   7,833                       $   8,138
                                             =========                         =========                       =========
Net interest rate spread (4)....                           1.86%                             1.80%                           2.03%
                                                        =======                           =======                         =======
Net interest margin (5).........                           2.53%                             2.57%                           2.85%
                                                        =======                           =======                         =======
Ratio of average interest-
 earning assets to average
 interest-bearing liabilities...                         115.43%                           118.03%                         119.46%
                                                        =======                           =======                         =======
</TABLE>
----------
(1)  Includes one- to  four-family  residential  real estate loans,  home equity
     loans, and commercial real estate loans.
(2)  Includes secured short term loans to commercial banks and  interest-earning
     deposits in other institutions.
(3)  Includes Federal Home Loan Bank stock and other assets.
(4)  Net interest  rate spread  represents  the  difference  between the average
     yield on  interest-earning  assets and the average cost of interest-bearing
     liabilities.
(5)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.


                                        9

<PAGE>


Rate/Volume Analysis

         The table below sets forth  certain  information  regarding  changes in
interest income and interest  expense of the Company for the periods  indicated.
For each category of interest-earning  assets and interest- bearing liabilities,
information is provided on changes attributable to (i) changes in average volume
(changes  in  average  volume  multiplied  by old rate);  (ii)  changes in rates
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in rate multiplied by the changes in average volume);  and (iv) the net
change.

<TABLE>
<CAPTION>
                                                                 Year Ended June 30,
                               -----------------------------------------------------------------------------------------
                                              2000 vs. 1999                                 1999 vs. 1998
                               ------------------------------------------    -------------------------------------------
                                      Increase/(Decrease)                        Increase/(Decrease)
                                            Due to                                     Due to
                                -----------------------------     Total      -----------------------------       Total
                                                        Rate/    Increase                           Rate/      Increase
                                 Volume      Rate      Volume   (Decrease)     Volume     Rate      Volume    (Decrease)
                                 ------      ----      ------   ----------     ------     ----      ------    ----------
                                                                   (In Thousands)
Interest income:
<S>             <C>            <C>        <C>        <C>        <C>           <C>         <C>        <C>        <C>
  Mortgage loans(1)........... $ 1,632    $  (534)   $   (51)   $ 1,047       $   979     $ (320)    $  (28)    $  631
  Consumer and other loans....     (51)        (4)         1        (54)          (38)         8         --        (30)
  Mortgage-backed securities..    (283)         4         (1)      (280)         (464)       (62)        20       (506)
  Investment securities.......   1,165        (38)       (17)     1,110           538         (5)         3        536
  Interest-earning deposits(2)    (875)       205       (128)      (798)          100       (220)       (15)      (135)
  Other investments(3)........      18        180          5        203           203       (117)       (48)        37
                               -------    -------    -------    -------       -------     ------     ------     ------

  Total interest-earning
   assets ....................   1,606       (187)      (191)     1,228         1,317       (716)       (68)       533
                               -------    -------    -------    -------       -------     ------     ------     ------
Interest expense..............   1,043       (103)       (21)       919           996       (143)       (15)       838
                               -------    -------    -------    -------       -------     ------     ------     ------

Change in net interest
 income....................... $   563    $   (84)   $  (170)   $   309       $   321     $ (573)    $  (53)    $ (305)
                               =======    =======    =======    =======       =======     ======     ======     ======
</TABLE>
-------------
(1)  Includes one- to  four-family  residential  real estate loans,  home equity
     loans, and commercial real estate loans.
(2)  Includes secured short term loans to commercial banks and  interest-earning
     deposits in other institutions.
(3)  Includes Federal Home Loan Bank stock and other assets.


Management of Market Risk

         Like other financial institution holding companies,  the Company's most
significant form of market risk is interest rate risk. The Company is subject to
interest  rate risk because its  liabilities  generally  have  shorter  terms or
maturities than its assets.  As a result,  its liabilities are more sensitive to
changes  in market  interest  rates.  The  general  objective  of the  Company's
interest  rate risk  management is to determine  the  appropriate  level of risk
given the  Company's  business  strategy,  and then manage that risk in a manner
that is consistent with the Company's policy to reduce exposure of the Company's
net interest income to changes in market interest rates.

         The  Company's  policy in recent  years has been to  attempt  to better
match the maturities  and interest  rates of its interest rate sensitive  assets
and  liabilities by emphasizing  fixed-rate  one- to four-family  mortgage loans
with terms of 15 years or less,  adjustable-rate first mortgages and home equity
loans,  and to maintain  relatively  high levels of liquidity.  By maintaining a
significant  percentage of its assets in cash and other liquid investments,  the
Company is able to reinvest a higher  percentage  of its assets more  quickly in
response to changes in market interest rates,  thereby  reducing its exposure to
interest rate volatility. The Company does not utilize derivative instruments or
engage in other hedging activities to manage interest rate risk.


                                       10

<PAGE>



         The  Company  has an  Asset-Liability  Management  Committee  which  is
responsible  for  reviewing  the Company's  asset and  liability  policies.  The
Committee meets weekly and reports monthly to the Board of Directors on interest
rate risks and trends, as well as liquidity and capital ratios and requirements.

         The Company measures  interest rate risk in terms of the sensitivity of
the Company's net portfolio value ("NPV") to changes in interest  rates.  NPV is
the difference between incoming and outgoing  discounted cash flows from assets,
liabilities,  and off-balance sheet contracts.  The following table presents the
pro forma computations of the Company's NPV as of June 30, 2000.

<TABLE>
<CAPTION>
                                                                                    NPV as Percentage of
       Change in                                                                  Present Value of Assets
     Interest Rates                 Net Portfolio Value                       ------------------------------
     in Basis Points   ----------------------------------------------                           Basis Point
     (Rate Shock)      $ Amount          $ Change           % Change          NPV Ratio            Change
     ------------      --------          --------           --------          ---------            ------
                                               (Dollars in Thousands)
<S>                      <C>              <C>                  <C>              <C>               <C>
        300              13,319           (34,094)             (72)%            4.50%             (964)bp
        200              22,778           (24,635)             (52)%            7.42%             (672)bp
        100              32,895           (14,518)             (31)%           10.31%             (383)bp
     Static              47,413                --               --             14.14%               --
       (100)             51,961             4,548               10%            15.21%              107bp
       (200)             56,179             8,766               18%            16.15%              201bp
       (300)             57,510            10,098               21%            16.38%              224bp
</TABLE>


         The above  table  indicates  that at June 30,  2000,  in the event of a
sudden and  sustained  increase in prevailing  market  rates,  the Company's NPV
would be expected to decrease,  and that in the event of a sudden and  sustained
decrease  in  prevailing  market  interest  rates,  the  Company's  NPV would be
expected to increase. The Company's Board of Directors reviews the Company's NPV
position quarterly,  and, if estimated changes in NPV are not within the targets
established  by the Board,  the Board may direct  management to adjust the asset
and liability mix to bring interest rate risk within Board approved targets.

         Certain  shortcomings are inherent in the methodology used in the above
interest rate risk measurements. Modeling changes in NPV requires making certain
assumptions  that may or may not reflect the manner in which  actual  yields and
costs respond to changes in market interest rates. The NPV table presented above
assumes that the  composition  of the Company's  interest  sensitive  assets and
liabilities  existing at the  beginning of a period  remains  constant  over the
period being  measured.  It also  assumes  that a particular  change in interest
rates is reflected  uniformly  across the yield curve regardless of the duration
to maturity or repricing  characteristics  of specific  assets and  liabilities.
Accordingly,  although the NPV table  provides an  indication  of the  Company's
interest rate risk exposure at a particular point in time, such measurements are
not  intended to and do not provide a precise  forecast of the effect of changes
in market  interest  rates on the Company's net interest  income and will differ
from actual results.

                                       11

<PAGE>



Liquidity and Capital Resources

         The Bank is  required to maintain  minimum  levels of liquid  assets as
defined by Office of Thrift Supervision ("OTS")  regulations.  This requirement,
which varies from time to time  depending  upon economic  conditions and deposit
flows,  is based upon a percentage of deposits and  short-term  borrowings.  The
required ratio currently is 4%. The Bank's liquidity ratio averaged 36.2% during
the quarter ended June 30, 2000. The Bank adjusts its liquidity  levels in order
to meet  funding  needs of deposit  outflows,  payment of real  estate  taxes on
mortgage  loans  and  loan  commitments.  The Bank  also  adjusts  liquidity  as
appropriate to meet its asset and liability management objectives.

         The Bank's  primary  sources of funds are  deposits,  amortization  and
prepayment  of loans and  mortgage-backed  securities,  maturities of investment
securities  and  other  investments,   and  earnings  and  funds  provided  from
operations.  While scheduled  principal  repayments on loans and mortgage-backed
securities are a relatively  predictable source of funds, deposit flows and loan
prepayments  are  greatly   influenced  by  general  interest  rates,   economic
conditions,  and  competition.  The Bank  manages the pricing of its deposits to
maintain a desired deposit balance. In addition,  the Bank invests in short-term
interest-earning  assets, which provide liquidity to meet lending  requirements.
Assets  qualifying  for  liquidity  held at June 30,  2000,  amounted  to $101.9
million. For additional  information about cash flows from the Bank's operating,
financing, and investing activities, see "Consolidated Statements of Cash Flows"
included in the Consolidated Financial Statements.

         A major  portion  of the  Bank's  liquidity  consists  of cash and cash
equivalents,  which are a product of its  operating,  investing,  and  financing
activities.  The primary sources of cash are net income, principal repayments on
loans  and  mortgage-backed  securities,  and  increases  in  deposit  accounts.
Liquidity  management  is  both a  daily  and  long-term  function  of  business
management.  If the Bank  requires  funds  beyond its ability to  generate  them
internally, borrowing agreements exist with the FHLB which provide an additional
source of funds; however, the Bank has never borrowed funds from the FHLB.

         At June  30,  2000,  the  Bank  had  outstanding  loan  commitments  of
$910,000.  This amount does not include  $13.2 million of  undisbursed  lines of
credit on home  equity  loans,  and the  unfunded  portion of loans in  process.
Certificates  of deposit  scheduled  to mature in less than one year at June 30,
2000,  totaled $132.6 million.  Based on prior experience,  management  believes
that a significant portion of such deposits will remain with the Bank.

         At June 30, 2000, the Bank exceeded OTS capital requirements. Set forth
below is a summary of the  Bank's  compliance  with the  following  OTS  capital
standards as of June 30, 2000.

<TABLE>
<CAPTION>
                                                                        Minimum          To Be Well Capitalized
                                                                      For Capital        Under Prompt Corrective
                                             Actual               Adequacy Purposes         Action Provisions
                                      ---------------------     ----------------------    ---------------------
                                        Amount    Ratio (1)       Amount     Ratio (1)      Amount     Ratio(1)
                                        ------    ---------       ------     ---------      ------     --------
As of June 30, 2000:
<S>                                   <C>           <C>         <C>             <C>       <C>            <C>
  Tier I core capital...............  $  45,491     13.6%       $  13,375       4.0%      $  16,719     >5.0%
  Tier I risk-based capital.........     45,491     27.7            6,566       4.0           9,849      >6.0
  Total risk-based capital..........     47,393     28.9           13,133       8.0          16,416     >10.0
</TABLE>
-------------
(1)  Core capital is calculated  on the basis of a percentage of total  adjusted
     assets;  risk-based  capital  levels  are  calculated  on  the  basis  of a
     percentage of risk-weighted assets.


                                       12

<PAGE>



Impact of Inflation and Changing Prices

         The financial  statements of the Company and notes  thereto,  presented
elsewhere  herein,  have been prepared in  accordance  with  generally  accepted
accounting  principles,  which require the measurement of financial position and
operating results in terms of historical dollars without  considering the change
in the relative  purchasing  power of money over time and due to inflation.  The
impact  of  inflation  is  reflected  in the  increased  cost  of the  Company's
operations.  Unlike  most  industrial  companies,  nearly  all  the  assets  and
liabilities  of the Company are  monetary.  As a result,  interest  rates have a
greater  impact on the  Company's  performance  than do the  effects  of general
levels  of  inflation.  Interest  rates  do not  necessarily  move  in the  same
direction or to the same extent as the price of goods and services.

Impact of New Accounting Standards

         In June  1998,  the  FASB  issued  Statement  of  Financial  Accounting
Standards  (SFAS) No. 133  "Accounting  for Derivative  Instruments  and Hedging
Activities."  SFAS No. 133  establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  (collectively  referred  to as  derivatives),  and for hedging
activities.  SFAS No. 133 requires that an entity  recognize all  derivatives as
assets or liabilities  in the statement of financial  position and measure those
instruments  at fair value and is  effective  with respect to the Company in the
first  quarter of 2001.  The  adoption  of SFAS No. 133 will not have a material
effect on the Company's financial position or results of operations.

Common Stock Repurchase Plan

         As of June 30, 2000,  the Company was  authorized  to  repurchase up to
1,023,441  shares of its common  stock  pursuant to its Stock  Repurchase  Plan.
During the years ended June 30, 2000, and 1999, the Company  repurchased 324,475
and  292,736  shares  at an  average  cost  of  $10.71  and  $13.56  per  share,
respectively.


                                       13

<PAGE>


                        SELECTED QUARTERLY FINANCIAL DATA

         A summary of selected quarterly financial data for the years ended June
30, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                          First            Second             Third           Fourth
                                         Quarter           Quarter           Quarter          Quarter
                                         -------           -------           -------          -------
                                                     (In Thousands Except Per Share Data)
Fiscal 2000
-----------
<S>                                     <C>               <C>              <C>               <C>
Interest income..................       $   5,448         $  5,498         $   5,542         $  5,582
Net interest income..............           2,027            2,039             2,073            2,003
Provision for losses.............              12                9                --               --
Income before provision
  for income taxes...............           1,431            1,360             1,429            1,266
Net income.......................             931              892               940              832
                                        =========         ========         =========         ========

Net income per common share:
  Basic..........................       $     .20         $    .19         $     .21         $    .18
  Diluted........................             .19              .19               .21              .18
                                        =========         ========         =========         ========

Fiscal 1999
-----------
Interest income..................       $   5,267         $  5,147         $   5,149         $  5,279
Net interest income..............           2,069            1,915             1,904            1,945
Provision for losses.............              29                2                --                8
Income before provision
  for income taxes...............           1,437            1,330             1,268            1,318
Net income.......................             923              856               818              867
                                        =========         ========         =========         ========

Net income per common share:
  Basic..........................       $     .18         $    .17         $     .16         $    .18
  Diluted........................             .18              .17               .16              .18
                                        =========         ========         =========         ========
</TABLE>



                                       14

<PAGE>



                        COMMON STOCK AND RELATED MATTERS

         The  Company's  common  stock is listed on the Nasdaq  National  Market
under the symbol  "LFED." As of August 15,  2000,  the Company had 5  registered
market makers,  474  stockholders of record  (excluding the number of persons or
entities  holding stock in street name through  various  brokerage  firms),  and
4,538,181 shares outstanding. As of such date, Leeds Federal Bankshares,  M.H.C.
(the "Mutual  Holding  Company"),  the Company's  mutual holding  company,  held
3,300,000 shares of common stock and stockholders  other than the Mutual Holding
Company held 1,238,181 shares.

         The  following  table sets forth market price and dividend  information
for the common stock for each quarter of the previous two fiscal years.

       Fiscal Year Ended                                      Cash Dividends
         June 30, 2000            High            Low            Declared
       -----------------       ---------       ---------      --------------
      First quarter            $   11.88       $   10.38       $    .14
      Second quarter               10.75            8.50            .15
      Third quarter                10.25            9.00            .15
      Fourth quarter               11.06            9.63            .15


       Fiscal Year Ended                                      Cash Dividends
         June 30, 1999            High            Low            Declared
       -----------------       ---------       ---------      --------------
      First quarter            $   18.88       $   15.50       $    .14
      Second quarter               15.75           11.75            .14
      Third quarter                14.75           12.00            .14
      Fourth quarter               12.50           10.75            .14


         Payment  of  dividends  on the  Company's  common  stock is  subject to
determination  and  declaration by the Board of Directors and will depend upon a
number of factors, including capital requirements, regulatory limitations on the
payment  of  dividends,  the  Company's  results  of  operations  and  financial
condition, tax considerations and general economic conditions.  No assurance can
be given that  dividends  will be declared or, if  declared,  what the amount of
dividends will be, or whether such dividends, once declared, will continue.

         OTS regulations impose limitations upon all "capital  distributions" by
savings   institutions,   including  cash  dividends,   payments  by  a  savings
institution  to  repurchase  or  otherwise   acquire  its  stock,   payments  to
stockholders  of another  savings  institution in a cash-out  merger,  and other
distributions  charged against capital. The regulations establish a three-tiered
system  of  regulation,   with  the  greatest   flexibility  being  afforded  to
well-capitalized or Tier 1 savings  associations.  As of June 30, 2000, the most
recent  notification  categorized the Bank as  "well-capitalized."  Accordingly,
under the OTS capital distribution  regulations,  the Bank would be permitted to
pay,  upon  notice to the OTS,  dividends  during  any  calendar  year up to 100
percent of its net income  during that  calendar  year,  plus its  retained  net
income for the preceding two years.

         In addition to the foregoing,  earnings of the Company  appropriated to
bad debt reserves and deducted for federal income tax purposes are not available
for payment of cash dividends or other  distributions  to  stockholders  without
payment of taxes at the  then-current  tax rate by the  Company on the amount of
earnings removed from the reserves for such  distributions.  The Company intends
to make full use of this  favorable tax treatment and does not  contemplate  any
distribution by the Company in a manner that would create federal tax liability.

         The Mutual Holding Company has waived the receipt of all dividends paid
by the Company. OTS regulations require the Mutual Holding Company to notify the
OTS of any proposed  waiver of the receipt of  dividends.  It is the OTS' recent
practice to review  dividend  waiver  notices on a case-by  case-basis,  and, in
general,  not object to any such  waiver if:  (i) the mutual  holding  company's
board of  directors  determines  that  such a waiver  is  consistent  with  such
directors' fiduciary duties to the mutual holding company's members; (ii) for as
long as the savings association subsidiary

                                       15

<PAGE>



is  controlled  by the mutual  holding  company,  the dollar amount of dividends
waived by the mutual  holding  company is  considered  as a  restriction  on the
retained  earnings  of  the  savings  association  in a note  to  the  financial
statements;  (iii) the  amount of any  dividend  waived  by the  mutual  holding
company is available for  declaration as a dividend solely to the mutual holding
company,  and,  in  accordance  with SFAS No. 5, where the  savings  association
determines  that the payment of such dividend to the mutual  holding  company is
probable,  an  appropriate  dollar  amount is recorded as a liability;  (iv) the
amount of any waived  dividend is  considered as having been paid by the savings
association (and the savings  association's capital ratios adjusted accordingly)
in evaluating any proposed dividend under OTS capital distribution  regulations;
and (v) in the event the mutual  holding  company  converts to stock  form,  the
appraisal  submitted to the OTS in connection  with the  conversion  application
takes into account the aggregate  amount of the  dividends  waived by the mutual
holding company.





                                       16

<PAGE>


                          Independent Auditors' Report


The Board of Directors
Leeds Federal Bankshares, Inc.
Baltimore, Maryland:


We have audited the accompanying  consolidated statements of financial condition
of Leeds Federal  Bankshares,  Inc. and subsidiary as of June 30, 2000 and 1999,
and the related  consolidated  statements  of income and  comprehensive  income,
stockholders'  equity,  and cash  flows for each of the years in the  three-year
period ended June 30, 2000.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Leeds  Federal
Bankshares, Inc. and subsidiary as of June 30, 2000 and 1999, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended June 30, 2000 in conformity  with accounting  principles  generally
accepted in the United States of America.



/s/  KPMG LLP
------------------------



August 18, 2000


                                      F-1
<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                 Consolidated Statements of Financial Condition

                             June 30, 2000 and 1999

<TABLE>
<CAPTION>

                                                                                                      2000                  1999
                                                                                                      ----                  ----
      Assets
<S>                                                                                             <C>                    <C>
Cash, including interest-bearing deposits of  $1,982,152 in
  2000 and $4,964,126 in 1999 ..........................................................        $   4,041,162            10,057,442
Short-term investments .................................................................            9,551,979            12,941,254
Secured short-term loans to commercial banks ...........................................            9,562,746            10,011,970
Securities available-for-sale, amortized cost of $2,731,760 (note 3) ...................            5,258,493             6,551,478
Investment securities held-to-maturity (fair value of $62,206,406
  in 2000 and $63,428,635 in 1999 (note 4) .............................................           67,392,698            66,167,181
Mortgage-backed securities held-to-maturity (fair value of
  $8,342,663 in 2000 and $10,214,065 in 1999) (note 5) .................................            8,317,018            10,008,111
Loans receivable, net (note 6) .........................................................          219,203,607           203,886,170
Investment in Federal Home Loan Bank of Atlanta stock, at cost (note 10) ...............            2,187,200             1,935,700
Property and equipment, net (note 7) ...................................................            2,242,783             1,484,620
Cash surrender value of life insurance (note 11) .......................................            6,687,537             6,399,473
Accrued interest receivable ............................................................            2,116,855             1,994,604
Prepaid expenses and other assets ......................................................              486,229               204,020
                                                                                                -------------         -------------
                                                                                                $ 337,048,307           331,642,023
                                                                                                =============         =============

     Liabilities and Stockholders' Equity

Liabilities:
  Savings accounts (note 8) ............................................................        $ 281,866,206           274,625,611
  Borrowed funds-- Employee Stock Ownership Plan (note 12) .............................              384,000               470,813
  Advance payments by borrowers for taxes, insurance
    and ground rents ...................................................................            5,073,906             5,203,532
  Federal and state income taxes (note 9):
    Currently payable ..................................................................              267,283               107,577
    Deferred ...........................................................................              493,303             1,393,803
  Accrued expenses and other liabilities (notes 11 and 13) .............................            1,554,136             1,336,275
                                                                                                -------------         -------------
       Total liabilities ...............................................................          289,638,834           283,137,611
                                                                                                -------------         -------------
Stockholders' equity (notes 10, 12 and 15):
  Common stock, $1 par value; 20,000,000 shares authorized; 5,205,597
    and 5,195,597 shares issued in 2000 and 1999, respectively .........................            5,205,597             5,195,597
  Additional paid-in-capital ...........................................................            9,606,811             9,367,161
  Unearned employee stock ownership plan shares ........................................             (297,066)             (390,682)
  Treasury stock, at cost; 656,416 and 331,941 shares
    in 2000 and 1999, respectively .....................................................           (8,216,719)           (4,740,869)
  Retained income, substantially restricted ............................................           39,573,847            36,734,317
  Accumulated other comprehensive income ...............................................            1,537,003             2,338,888
                                                                                                -------------         -------------
       Total stockholders' equity ......................................................           47,409,473            48,504,412
                                                                                                -------------         -------------

Commitments (notes 11, 12 and 14)

                                                                                                $ 337,048,307           331,642,023
                                                                                                =============         =============
</TABLE>


See accompanying notes to consolidated financial statements.


                                       F-2

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

           Consolidated Statements of Income and Comprehensive Income

                    Years ended June 30, 2000, 1999 and 1998


<TABLE>
<CAPTION>

                                                2000             1999           1998
                                                ----             ----           ----
<S>                                        <C>              <C>             <C>
Interest income:
     First mortgage and other loans .....   $ 15,328,947      14,336,211     13,734,747
     Investment securities and short-
      term investments ..................      6,104,071       5,588,307      5,150,921
     Mortgage-backed securities .........        636,556         917,074      1,423,221
                                            ------------    ------------   ------------
               Total interest income ....     22,069,574      20,841,592     20,308,889
                                            ------------    ------------   ------------

Interest expense:
     Savings accounts (note 8) ..........     13,889,755      12,965,300     12,114,148
     Other ..............................         38,030          43,489         56,971
                                            ------------    ------------   ------------
               Total interest expense ...     13,927,785      13,008,789     12,171,119
                                            ------------    ------------   ------------
               Net interest income ......      8,141,789       7,832,803      8,137,770

Provision for loan losses (note 6) ......         20,983          39,412        191,705
                                            ------------    ------------   ------------

               Net interest income after
                provision for loan losses      8,120,806       7,793,391      7,946,065
                                            ------------    ------------   ------------

Noninterest income:
     Service fees and charges ...........        156,241         132,219        137,190
     Other ..............................        288,584         268,175        212,889
                                            ------------    ------------   ------------
                                                 444,825         400,394        350,079
                                            ------------    ------------   ------------

Noninterest expense:
     Compensation and employee benefits .      1,759,282       1,573,399      1,769,715
     Occupancy expense ..................        259,710         221,527        195,151
     SAIF deposit insurance premiums
      (note 10) .........................        184,213         222,022        222,147
     Advertising ........................        158,807         127,933        208,165
     Other ..............................        717,186         696,020        699,885
                                            ------------    ------------   ------------
                                               3,079,198       2,840,901      3,095,063
                                            ------------    ------------   ------------
               Income before provision
                for income taxes ........      5,486,433       5,352,884      5,201,081

Provision for income taxes (note 9) .....      1,891,125       1,889,368      1,895,072
                                            ------------    ------------   ------------
               Net income ...............      3,595,308       3,463,516      3,306,009

Other comprehensive income, net of tax:
     Unrealized gain (loss) on
        securities available-for-sale,
        net .............................       (801,885)        376,407        554,353
                                            ------------    ------------   ------------
               Comprehensive income .....   $  2,793,423       3,839,923      3,860,362
                                            ============    ============   ============

Net income per share of common stock
 (note 16):
     Basic ..............................   $       0.78            0.69           0.65
     Diluted ............................           0.77            0.69           0.64
                                            ============    ============   ============
</TABLE>



See accompanying notes to consolidated financial statements.

                                       F-3


<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                 Consolidated Statements of Stockholders' Equity

                    Years ended June 30, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                                              Unearned
                                                              employee
                                                                stock                      Retained        Accumu-          Total
                                               Additional     ownership       Treasury      income,      lated other        stock-
                                  Common         paid-in         plan          stock,    substantially    comprehen-        holders'
                                   stock         capital        shares         at cost     restricted     sive income       equity
                                   -----         -------        ------         -------     ----------     -----------       ------
<S>                            <C>             <C>            <C>             <C>         <C>           <C>              <C>
Balance at June 30, 1997 ....   $ 5,182,097     8,887,978      (591,300)            --     31,854,434      1,408,128     46,741,337

Compensation expense-- ESOP .            --       217,378       103,409             --             --             --        320,787

Compensation expense-- MRP ..            --        48,234            --             --             --             --         48,234

Other comprehensive income ..            --            --            --             --             --        554,353        554,353

Exercise of stock options ...        13,500        93,420            --             --             --             --        106,920

Dividends ($.55 per share) ..            --            --            --             --       (997,700)            --       (997,700)

Net income ..................            --            --            --             --      3,306,009             --      3,306,009

Purchases of treasury stock .            --            --            --       (772,430)            --             --       (772,430)
                                -----------   -----------   -----------    -----------    -----------    -----------    -----------
Balance at June 30, 1998 ....     5,195,597     9,247,010      (487,891)      (772,430)    34,162,743      1,962,481     49,307,510

Compensation expense-- ESOP .            --       108,244        97,209             --             --             --        205,453

Compensation expense-- MRP ..            --        11,907            --             --             --             --         11,907

Other comprehensive income ..            --            --            --             --             --        376,407        376,407

Dividends ($.56 per share) ..            --            --            --             --       (891,942)            --       (891,942)

Net income ..................            --            --            --             --      3,463,516             --      3,463,516

Purchases of treasury stock .            --            --            --     (3,968,439)            --             --     (3,968,439)
                                -----------   -----------   -----------    -----------    -----------    -----------    -----------
Balance at June 30, 1999 ....     5,195,597     9,367,161      (390,682)    (4,740,869)    36,734,317      2,338,888     48,504,412

Compensation expense-- ESOP .            --        48,535        93,616             --             --             --        142,151

Other comprehensive income ..            --            --            --             --             --       (801,885)      (801,885)

Exercise of stock options ...        10,000        69,200            --             --             --             --         79,200

Income tax benefit of MRP
    awards and stock options             --       121,915            --             --             --             --        121,915

Dividends ($.59 per share) ..            --            --            --             --       (755,778)            --       (755,778)

Net income ..................            --            --            --             --      3,595,308             --      3,595,308

Purchases of treasury stock .            --            --            --     (3,475,850)            --             --     (3,475,850)
                                -----------   -----------   -----------    -----------    -----------    -----------    -----------
Balance at June 30, 2000 ....   $ 5,205,597     9,606,811      (297,066)    (8,216,719)    39,573,847      1,537,003     47,409,473
                                ===========   ===========   ===========    ===========    ===========    ===========    ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       F-4

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                      Consolidated Statements of Cash Flows

                    Years ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                                         2000            1999            1998
                                                         ----            ----            ----
Cash flows from operating activities:
<S>                                                 <C>                <C>             <C>
  Net income ....................................   $  3,595,308       3,463,516       3,306,009
  Adjustments to reconcile net income to net
     cash provided by operating activities:
         Accretion of loan fees .................        (80,866)       (218,168)        (98,772)
         Provision for loan losses ..............         20,983          39,412         191,705
         Accretion of discounts on investment
            securities and mortgage-
            backed securities ...................        (10,650)        (10,763)        (18,835)
         Loss (gain) on sale of assets, net .....             --           2,190          (1,806)
         Depreciation ...........................        144,237         133,791         125,639
         Noncash compensation under stock-
            based benefit plans .................        142,151         217,360         369,021
         Income tax benefit of MRP awards
            and stock options ...................        121,915              --              --
         Deferred income tax benefit ............       (409,400)       (171,083)        (86,626)
         Increase in accrued interest receivable        (122,251)       (161,286)        (44,708)
         Increase (decrease) in income taxes
            currently payable ...................        159,706         (26,099)       (202,165)
         Increase in accrued expenses and
            other liabilities ...................        250,517         260,991         329,633
         Increase in unearned loan fees .........         55,222         155,797         110,922
         Increase in prepaid expenses and
            other assets ........................       (282,209)         (2,812)        (14,333)
                                                    ------------    ------------    ------------
            Net cash provided by
                operating activities ............      3,584,663       3,682,846       3,965,684
                                                    ------------    ------------    ------------
Cash flows from investing activities:
  Purchases of securities available-for-sale ....             --      (1,000,000)     (1,175,000)
  Maturities of securities available-for-sale ...             --       3,000,000       2,200,000
  Purchase of investment securities
     held-to-maturity ...........................     (1,700,000)    (69,225,000)    (35,903,264)
  Maturities of and principal repayments on
     investment securities held-to-maturity .....        477,213      43,041,421      38,888,255
  Purchase of mortgage-backed securities
     held-to-maturity ...........................       (400,000)             --              --
  Principal repayments on mortgage-backed
     securities held-to-maturity ................      2,099,013       6,414,919       5,769,485
  (Purchase) sale of Federal Home Loan
     Bank of Atlanta stock ......................       (251,500)        441,500              --
  Loan disbursements, net of repayments .........    (15,312,776)    (13,681,964)    (16,289,600)
  Purchases of property and equipment ...........       (902,400)       (769,336)       (117,276)
  Sale of property and equipment ................             --              --           6,001
  Investment in life insurance policies .........       (288,064)       (266,544)     (2,979,736)
  Sale of ground rents owned ....................             --              --          39,500
                                                    ------------    ------------    ------------
            Net cash used in investing activities    (16,278,514)    (32,045,004)     (9,561,635)
                                                    ------------    ------------    ------------

</TABLE>


                                                                     (Continued)

                                       F-5

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                      Consolidated Statements of Cash Flows

                    Years ended June 30, 2000, 1999 and 1998


<TABLE>
<CAPTION>

                                                       2000           1999            1998
                                                       ----           ----            ----
Cash flows from financing activities:
<S>                                                  <C>             <C>             <C>
  Payment of dividends .......................       (788,434)       (988,540)       (973,322)
  Repayment of borrowed funds ................        (86,813)        (81,187)        (96,000)
  Net increase in savings accounts ...........      7,240,595      29,356,009      12,679,593
  (Decrease) increase in advance payments
     by borrowers for taxes, insurance and
     ground rents ............................       (129,626)        197,512         201,960
  Purchases of treasury stock ................     (3,475,850)     (3,968,439)       (772,430)
  Exercise of stock options ..................         79,200              --         106,920
                                                 ------------    ------------    ------------

            Net cash provided by
                financing activities .........      2,839,072      24,515,355      11,146,721
                                                 ------------    ------------    ------------

            Net (decrease) increase in cash
                and cash equivalents .........     (9,854,779)     (3,846,803)      5,550,770

Cash and cash equivalents at beginning of year     33,010,666      36,857,469      31,306,699
                                                 ------------    ------------    ------------
Cash and cash equivalents at end of year .....   $ 23,155,887      33,010,666      36,857,469
                                                 ============    ============    ============
</TABLE>




See accompanying notes to consolidated financial statements.


                                       F-6


<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(1)  Description  of Business,  Summary of Significant  Accounting  Policies and
     Other Matters

     (a)  Business

          Leeds Federal Bankshares,  Inc. (the Company) is a federally chartered
          corporation which owns all of the issued and outstanding  common stock
          of Leeds  Federal  Savings  Bank  (the  Bank),  a  federally-chartered
          savings  bank  that  conducts  its  operations   through  branches  in
          Baltimore  County  and  Howard  County,  Maryland.  At June 30,  2000,
          approximately  73% of the  outstanding  shares of common  stock of the
          Company were held by Leeds Federal Bankshares, M.H.C. (MHC), a federal
          mutual holding company.

          The  primary  business  of  the  Bank  is  attracting   deposits  from
          individuals  and corporate  customers and  originating  mortgage loans
          secured by residential real estate properties.  The Bank is subject to
          competition  from  other  financial  institutions  in  attracting  and
          retaining  deposits and in making  loans.  The Bank is also subject to
          the  regulations  of certain  agencies of the federal  government  and
          undergoes periodic examinations by those agencies.

     (b)  Basis of Presentation

          The  consolidated  financial  statements  include the  accounts of the
          Company, the Bank and its wholly owned subsidiaries,  Leeds Investment
          Corporation  and  Leeds  Investor   Services,   Inc.  All  significant
          intercompany   accounts  and  transactions  have  been  eliminated  in
          consolidation.

          In preparing  the  consolidated  financial  statements,  management is
          required to make  estimates and  assumptions  that affect the reported
          amounts of assets and liabilities and disclosures of contingent assets
          and  liabilities  as of the  dates  of  the  statements  of  financial
          condition  and the  reported  amounts of income and  expenses  for the
          periods.   Actual  results  could  differ   significantly  from  those
          estimates.

          Material  estimates that are  particularly  susceptible to significant
          change in the near term relate to the  determination  of the allowance
          for loan losses.  In connection  with this  determination,  management
          obtains independent appraisals for significant properties and prepares
          fair value  analyses,  as  appropriate.  Management  believes that the
          allowance  for  losses on loans is  adequate.  While  management  uses
          available  information to recognize losses on loans,  future additions
          to the  allowance  may be  necessary  based  on  changes  in  economic
          conditions,  particularly  in the  State  of  Maryland.  In  addition,
          various regulatory agencies,  as an integral part of their examination
          processes,  periodically  review  the Bank's  allowance  for losses on
          loans.  Such  agencies may require the Bank to recognize  additions to
          the allowance based on their judgments about information  available to
          them at the time of their examinations.

     (c)  Short-Term Investments

          Short-term  investments,  which consist of money market accounts,  are
          carried at cost which approximates fair value.

     (d)  Secured Short-Term Loans to Commercial Banks

          Secured short-term loans to commercial banks, which consist of Federal
          funds  sold,  are  carried  at cost  which  approximates  fair  value.
          Generally, Federal funds are purchased and sold for one-day periods.

                                                                     (Continued)

                                       F-7

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     (e)  Investment Securities and Mortgage-Backed Securities

          Debt  securities  that the Company has the positive intent and ability
          to hold to maturity are classified as held-to-maturity and recorded at
          amortized cost. Debt securities not classified as held-to-maturity and
          equity securities with readily determinable fair values are classified
          as trading  securities if bought and held  principally for the purpose
          of selling them in the near term.  Trading  securities are reported at
          fair value,  with  unrealized  gains and losses  included in earnings.
          Investments  not  classified  as   held-to-maturity   or  trading  are
          considered  available-for-sale  and are  reported  at fair  value with
          unrealized gains and losses, net of the related tax effects,  excluded
          from  income and  reported  as an item of other  comprehensive  income
          until realized. Fair value is determined based on published bid prices
          or bid quotations received from securities dealers.  Realized gains or
          losses on the sales of investments  are determined  using the specific
          identification method and are recognized at the time of sale. Premiums
          and  discounts  on  investment  and  mortgage-backed   securities  are
          amortized over the term of the security using methods that approximate
          the interest method.

     (f)  Loan Fees

          Loan origination and commitment fees and direct  origination  costs of
          loans are  deferred  and  amortized  into income over the  contractual
          lives of the related  loans using the interest  method.  Under certain
          circumstances,  commitment  fees are  recognized  over the  commitment
          period or upon the expiration of the commitment

     (g)  Loans Receivable

          Loans are stated at the amount of unpaid principal reduced by unearned
          income and the  allowance  for loan  losses.  Interest on loans is not
          accrued  when,  in the  opinion  of  management,  full  collection  of
          principal or interest is in doubt, or payment of principal or interest
          has become 90 days past due. Interest accrued prior to a loan becoming
          90 days past due is not retained in income.  Any  interest  ultimately
          collected  on such  loans is  recorded  in  income  in the  period  of
          recovery.

          The provision for losses on loans is determined  based on management's
          review of the loan  portfolio  and analyses of  borrowers'  ability to
          pay, past collection  experience,  risk  characteristics of individual
          loans or groups of similar loans and  underlying  collateral,  current
          economic  conditions,  the status of  nonperforming  loans,  and other
          relevant  factors.  Loans or  portions  thereof  are  charged off when
          considered uncollectible by management.

          A loan is considered  impaired when, based on current  information and
          events,  it is probable  that a creditor will be unable to collect all
          amounts due according to the contractual  terms of the loan agreement.
          Loans that experience  insignificant  payment delays (90 days or less)
          or shortfalls generally are not considered  impaired.  Impairment of a
          loan is measured  based on the present  value of expected  future cash
          flows  discounted  at the loan's  effective  interest  rate, or at the
          loan's  observable market price or the fair value of the collateral if
          the loan is collateral dependent.  If the measure of the impaired loan
          is less than the recorded  investment  in the loan,  an  impairment is
          recognized through a valuation allowance and a corresponding provision
          for loan losses.

          Large  groups  of  smaller   balance   homogenous   loans,   including
          residential   mortgage  loans  and  consumer  installment  loans,  are
          collectively   evaluated  for  impairment.   Accordingly,   individual
          consumer  and  residential  loans are not  separately  identified  for
          impairment disclosures.

                                                                     (Continued)

                                       F-8

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     (h)  Property and Equipment

          Property  and   equipment   are  carried  at  cost  less   accumulated
          depreciation.  Depreciation is computed using the straight-line method
          over  the  estimated  useful  lives  of  the  assets.   Additions  and
          betterments are  capitalized,  and charges for repairs and maintenance
          are   expensed  as  incurred.   The  related   cost  and   accumulated
          depreciation are eliminated from the accounts when an asset is sold or
          retired  and the  resultant  gain or loss is  credited  or  charged to
          income.

     (i)  Real Estate Owned

          Real estate acquired  through  foreclosure is recorded at the lower of
          cost or fair value less  estimated  costs to sell.  Costs  relating to
          holding real estate are charged against  income,  while costs relating
          to improving real estate are capitalized  until a salable condition is
          reached.

     (j)  Income Taxes

          Deferred  income taxes are accounted for using the asset and liability
          method. Under this method, deferred income taxes are recognized,  with
          certain  exceptions,  for temporary  differences between the financial
          reporting basis and income tax basis of assets and  liabilities  based
          on enacted tax rates  expected  to be in effect when such  amounts are
          realized or settled.  Deferred tax assets are  recognized  only to the
          extent  that it is more  likely  than not that  such  amounts  will be
          realized based on consideration of available  evidence,  including tax
          planning  strategies and other factors.  The effects of changes in tax
          laws or rates on deferred tax assets and liabilities are recognized in
          the period that includes the enactment date.

          Qualified  thrift lenders such as the Bank are not required to provide
          a deferred tax  liability  for bad debt reserves for tax purposes that
          arose in fiscal years  beginning  before  December 31, 1987.  Such bad
          debt reserve for the Bank amounted to approximately $7,100,000 with an
          income tax effect of  approximately  $2,700,000 at June 30, 2000. This
          bad debt  reserve  could  become  taxable  in the  future  if  certain
          conditions are met by the Bank.

     (k)  Stock-Based Compensation

          The Company uses the intrinsic value method to account for stock-based
          employee  compensation plans. Under this method,  compensation cost is
          recognized  for awards of shares of common stock to employees  only if
          the  quoted  market  price of the  stock at the  grant  date (or other
          measurement  date,  if later) is greater  than the amount the employee
          must pay to acquire  the stock.  Compensation  cost is  recorded  on a
          pro-rata  basis as the  employees  perform  the  services  required to
          acquire the stock.

          The Company has  established an Employee  Stock  Ownership Plan (ESOP)
          for its employees.  The Company  recognizes the costs  associated with
          the ESOP in accordance  with provisions of AICPA Statement of Position
          93-6,  Employers'  Accounting  for  Employee  Stock  Ownership  Plans.
          Accordingly,  compensation  expense  is  recorded  based on the market
          value of shares committed-to-be-released to the ESOP for allocation to
          participants for services rendered.

                                                                     (Continued)

                                       F-9

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     (l)  Comprehensive Income

          Comprehensive  income  includes  all changes in  stockholders'  equity
          during  a  period,   except  those  relating  to  investments  by  and
          distributions  to  stockholders.  The Company's  comprehensive  income
          consists of net earnings and unrealized gains and losses on securities
          available-for-sale  and is presented in the  statements  of income and
          comprehensive  income.   Accumulated  other  comprehensive  income  is
          displayed as a separate component of stockholders' equity.

     (m)  Cash Equivalents and Cash Flow Information

          For purposes of the  consolidated  statement of cash flows, all highly
          liquid  investments  with  maturities  at dates of  purchase  of three
          months or less are considered to be cash equivalents. Cash equivalents
          include interest-bearing deposits,  short-term investments and secured
          short-term loans to commercial banks.

          The Company  made income tax  payments  of  approximately  $1,985,000,
          $2,169,000 and $2,184,000 in 2000,  1999 and 1998,  respectively.  The
          Company paid approximately $13,928,000, $13,012,000 and $12,159,000 in
          interest  on deposits  and other  borrowings  in 2000,  1999 and 1998,
          respectively.


(2)  Securities Purchased Under Agreements to Resell

     The Bank  periodically  purchases  securities  under  agreements  to resell
     (repurchase   agreements).   The  amounts  advanced  under  the  agreements
     represent  short-term loans and are reflected as short-term  investments in
     the consolidated statements of financial condition.

     The   securities   underlying  the  agreements  are  generally  book  entry
     securities  which are delivered by appropriate  entry in the Bank's account
     maintained at a commercial  bank under a written  custodial  agreement that
     explicitly recognizes the Bank's interest in the securities.  There were no
     securities  purchased  under  agreements to resell at June 30, 2000 or 1999
     and the Bank did not enter into any repurchase  agreements in 2000 or 1999.
     Securities  purchased under agreements to resell averaged $3,412,000 during
     1998, and the maximum amount outstanding at any month-end was $7,037,000.


                                                                     (Continued)

                                      F-10

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(3)  Securities Available-for-Sale

     Securities available-for-sale are summarized as follows at June 30:

<TABLE>
<CAPTION>

                                                                     2000
                                            --------------------------------------------------
                                                          Gross         Gross
                                            Amortized   unrealized    unrealized
                                              cost        gains          losses     Fair value
                                              ----        -----          ------     ----------
<S>                                        <C>         <C>            <C>           <C>
U.S. Government and agency obligations
    due:
      Beyond 5 years but within 10 years   $  500,000           --       (10,156)      489,844
      Beyond 10 years ..................    2,075,000           --      (112,887)    1,962,113

Federal Home Loan Mortgage Corporation
    (FHLMC) preferred stock ............       56,760    2,701,776            --     2,758,536
Other equity securities ................      100,000           --       (52,000)       48,000
                                           ----------   ----------    ----------    ----------
                                           $2,731,760    2,701,776      (175,043)    5,258,493
                                           ==========   ==========    ==========    ==========
</TABLE>


<TABLE>
<CAPTION>

                                                                     1999
                                            --------------------------------------------------
                                                          Gross         Gross
                                            Amortized   unrealized    unrealized
                                              cost        gains          losses     Fair value
                                              ----        -----          ------     ----------
<S>                                        <C>         <C>            <C>           <C>
U.S. Government and agency obligations
    due:
      Beyond 5 years but within 10 years   $  500,000          938            --       500,938
      Beyond 10 years ..................    2,075,000           --       (42,956)    2,032,044
FHLMC preferred stock ..................       56,760    3,893,736            --     3,950,496
Other equity securities ................      100,000           --       (32,000)       68,000
                                           ----------   ----------    ----------    ----------
                                           $2,731,760    3,894,674       (74,956)    6,551,478
                                           ==========   ==========    ==========    ==========
</TABLE>


                                                                     (Continued)


                                      F-11

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(4)  Investment Securities Held-to-Maturity

     Investment  securities  held-to-maturity  are summarized as follows at June
     30:

<TABLE>
<CAPTION>

                                                       2000
                              -----------------------------------------------------
                                               Gross        Gross
                              Amortized     unrealized    unrealized
                                 cost         gains         losses      Fair value
                                 ----         -----         ------      ----------
<S>                          <C>             <C>           <C>          <C>
U.S. Government and agency
     obligations .........   $67,392,698        25,120    (5,211,412)    62,206,406
                             ===========   ===========   ===========    ===========
</TABLE>


<TABLE>
<CAPTION>

                                                       1999
                              -----------------------------------------------------
                                               Gross        Gross
                              Amortized     unrealized    unrealized
                                 cost         gains         losses      Fair value
                                 ----         -----         ------      ----------
<S>                          <C>             <C>           <C>          <C>
U.S. Government and agency
     obligations .........   $66,167,181        47,331    (2,785,877)    63,428,635
                             ===========   ===========   ===========    ===========
</TABLE>


     Investment securities mature as follows at June 30:

                                      2000                         1999
                            ------------------------    ------------------------
                            Amortized                    Amortized
                              cost        Fair value        cost      Fair value
                              ----        ----------        ----      ----------
Due within 12 months ...   $   487,445       487,445       575,879       575,879
Due beyond 12 months
  but within 5 years ...     1,800,000     1,790,933     1,600,000     1,633,283
Due beyond 5 years
  but within 10 years ..     1,800,000     1,690,370     2,000,000     1,941,710
Due beyond 10 years ....    63,305,253    58,237,658    61,991,302    59,277,763
                           -----------   -----------   -----------   -----------
                           $67,392,698    62,206,406    66,167,181    63,428,635
                           ===========   ===========   ===========   ===========


                                                                     (Continued)


                                      F-12

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(5)  Mortgage-Backed Securities Held-to-Maturity

     Mortgage-backed  securities  held-to-maturity  are summarized as follows at
     June 30:

                                                2000
                         -------------------------------------------------------
                                            Gross          Gross
                          Amortized       unrealized     unrealized
                            cost            gains          losses     Fair value
                            ----            -----          ------     ----------
Government National
 Mortgage Association
 (GNMA) ..............   $ 5,756,560        51,400         (4,503)     5,803,457
Federal National
 Mortgage Association
 (FNMA) ..............     1,256,720           908        (14,615)     1,243,013
FHLMC ................       755,331         2,033         (6,478)       750,886
Collateralized
 Mortgage Obligation--
 FNMA REMIC ..........       548,407            --         (3,100)       545,307
                         -----------   -----------    -----------    -----------
                         $ 8,317,018        54,341        (28,696)     8,342,663
                         ===========   ===========    ===========    ===========


                                                1999
                         -------------------------------------------------------
                                            Gross          Gross
                          Amortized       unrealized     unrealized
                            cost            gains          losses     Fair value
                            ----            -----          ------     ----------
GNMA .................   $ 6,676,664       168,976             --      6,845,640
FNMA .................     1,478,778        10,523             --      1,489,301
FHLMC ................     1,245,714        16,047             --      1,261,761
Collateralized
 Mortgage Obligation--
 FNMA REMIC ..........       606,955        10,408             --        617,363
                         -----------   -----------    -----------    -----------
                         $10,008,111       205,954             --     10,214,065
                         ===========   ===========    ===========    ===========


                                                                     (Continued)

                                      F-13

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(6)  Loans Receivable

     Loans receivable are summarized as follows at June 30:


                                                        2000            1999
                                                        ----            ----
First mortgage loans:
     One-to-four family residential ............    $202,342,561     186,040,721
     Commercial ................................       2,500,000       2,500,000
     Construction ..............................       2,238,615       3,284,893
                                                    ------------    ------------
                                                     207,081,176     191,825,614

Home equity loans ..............................      11,070,571      11,454,227
Loans secured by savings accounts ..............         445,401         436,745
Consumer loans .................................       3,361,863       3,539,664
                                                    ------------    ------------
                                                     221,959,011     207,256,250
Less:
     Allowance for loan losses .................         741,678         725,152
     Unearned loan fees ........................         765,444         739,800
     Undisbursed portion of loans in process ...       1,248,282       1,905,128
                                                    ------------    ------------
                Loans receivable, net ..........    $219,203,607     203,886,170
                                                    ============    ============


     Substantially  all of the loans  receivable  are mortgage  loans secured by
     residential real estate properties located in the State of Maryland.  Loans
     are  extended   only  after   evaluation   by   management   of  customers'
     creditworthiness,  the loan-to-value ratio and other relevant factors.  The
     Bank  generally  does not lend  more than 80% of the  appraised  value of a
     property and, with limited exceptions,  requires private mortgage insurance
     on  residential  mortgages with  loan-to-value  ratios in excess of 80%. In
     addition,  the Bank generally obtains personal guarantees of repayment from
     borrowers and/or others for construction and commercial loans and disburses
     the proceeds of  construction  and similar loans only as work progresses on
     the related properties.

     Residential lending is generally considered to involve less risk than other
     forms of lending,  although payment  experience on these loans is dependent
     to some  extent on economic  and market  conditions  in the Bank's  lending
     area.

     Nonaccrual  loans totaled  approximately  $2,547,823 and $2,764,000 at June
     30, 2000 and 1999,  respectively.  For the years ended June 30, 2000,  1999
     and 1998,  the amount of interest  income that would have been  recorded on
     loans  in  nonaccrual  status  at year  end had  such  loans  performed  in
     accordance  with  their  terms was  approximately  $305,000,  $286,000  and
     $281,000,  respectively. The actual interest income recorded on these loans
     for the years ended June 30, 2000, 1999 and 1998 was approximately  $2,000,
     $193,000 and $211,000, respectively. At June 30, 2000 and 1999 the Bank has
     one  impaired  loan  with an  unpaid  principal  balance  of  approximately
     $2,500,000.   No  interest  income  was  recognized  on  this  loan  during
     impairment and an allocation of approximately  $250,000 was included in the
     allowance for loan losses relating to this loan at each date.

                                                                     (Continued)


                                      F-14
<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     Activity in the  allowance for loan losses is summarized as follows for the
     years ended June 30:


                                         2000            1999            1998
                                         ----            ----            ----
Beginning balance ..............      $ 725,152         722,860         536,280
Provision for loan losses ......         20,983          39,412         191,705
Charge-offs ....................         (4,457)        (37,120)         (5,125)
                                      ---------       ---------       ---------
         Ending balance ........      $ 741,678         725,152         722,860
                                      =========       =========       =========


(7)  Property and Equipment

     Property and equipment are summarized as follows at June 30:


                                                                     Useful life
                                             2000           1999      in years
                                             ----           ----      --------
Land .................................    $  729,749       729,749            --
Building and improvements ............     1,569,628       925,789    50 years
Furniture, fixtures and equipment ....     1,246,580       988,019    3-10 years
                                          ==========    ==========    ==========
    Total, at cost ...................     3,545,957     2,643,557

Less accumulated depreciation ........     1,303,174     1,158,937
                                          ----------    ----------
    Property and equipment, net ......    $2,242,783     1,484,620
                                          ==========    ==========

                                                                     (Continued)


                                      F-15
<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(8)  Savings Accounts

     Savings accounts are summarized as follows at June 30:

<TABLE>
<CAPTION>

                           Weighted
                           average
                             rate                  2000                         1999
                        --------------     ----------------------     ----------------------
<S>                     <C>       <C>       <C>             <C>       <C>              <C>
    Type of Account     2000      1999         Amount          %           Amount         %
Certificates            5.74%     5.35%    $197,247,164       70%     $181,657,046       66%
Anniversary bonus       3.32%     3.33%       3,603,206         1        4,466,317        2
Money Market            4.78%     4.68%      50,420,733        18       61,368,492       22
Passbook                3.15%     3.15%      21,443,796         8       20,160,926        7
NOW and demand          1.99%     1.99%       9,151,307         3        6,972,830        3
                        ----      ----        ---------      ----        ---------      ----
                                           $281,866,206      100%     $274,625,611      100%
                                           ============      ====     ============      ====

Certificate accounts
 mature as follows:
  Within 12 months                         $132,565,286       67%     $ 98,562,974       54%
  12 to 24 months                            45,886,252       23%       65,163,034        36
  24 to 36 months                            10,634,922        5%       10,891,676         6
  36 to 48 months                             3,374,479        2%        3,705,841         2
  48 to 60 months                             4,786,225        3%        3,333,521         2
  --    --                                 ------------      ----     ------------      ----
                                           $197,247,164      100%     $181,657,046      100%
                                           ============      ====     ============      ====
</TABLE>


     At June 30,  2000 and  1999,  the Bank had  customer  deposits  in  savings
     accounts of $100,000 or more of approximately  $65,096,000 and $58,989,000,
     respectively.

     Interest  expense on savings  accounts  consists of the  following  for the
     years ended June 30:


                                         2000            1999             1998
                                         ----            ----             ----
Time deposits ..................     $10,289,585       9,132,231       7,905,150
Checking and money market ......       2,972,732       3,237,150       3,607,568
Passbook and other .............         627,438         595,919         601,430
                                     -----------     -----------     -----------
                                     $13,889,755      12,965,300      12,114,148
                                     ===========     ===========     ===========

                                                                     (Continued)

                                      F-16

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(9)  Income Taxes

     The  provision for income taxes is comprised of the following for the years
     ended June 30:


                                   2000               1999              1998
                                   ----               ----              ----
Current:
     Federal .............      $ 2,240,711         1,852,003         1,767,197
     State ...............           59,814           208,448           214,501
                                -----------       -----------       -----------
                                  2,300,525         2,060,451         1,981,698
                                -----------       -----------       -----------

Deferred:
     Federal .............         (367,454)         (140,074)          (70,925)
     State ...............          (41,946)          (31,009)          (15,701)
                                -----------       -----------       -----------
                                   (409,400)         (171,083)          (86,626)
                                -----------       -----------       -----------
                                $ 1,891,125         1,889,368         1,895,072
                                ===========       ===========       ===========


     The net deferred tax  liability at June 30, 2000 and 1999 consists of total
     deferred  tax assets of  $986,743  and  $729,237,  respectively,  and total
     deferred tax  liabilities of $1,480,046 and $2,123,040,  respectively.  The
     tax effects of temporary  differences  between the financial  reporting and
     income tax basis of assets and liabilities  relate to the following at June
     30:


                                                       2000             1999
                                                       ----             ----
Tax bad debt reserve in excess
 of base year ................................     $  (199,931)        (299,897)
Allowance for losses on loans ................         286,436          280,054
Federal Home Loan Bank stock dividends .......        (304,291)        (304,291)
Compensation plans ...........................         435,483          324,927
Unrealized gains on securities
 available-for-sale, net .....................        (980,511)      (1,480,830)
Other, net ...................................         269,511           86,234
                                                   -----------      -----------
                                                   $  (493,303)      (1,393,803)
                                                   ===========      ===========


     Reconciliations  between  the  provisions  for  income  taxes  computed  by
     multiplying  income before income taxes by the statutory Federal income tax
     rate (34%) and the actual  provisions  for income  taxes are as follows for
     the years ended June 30:


                                           2000          1999            1998
                                           ----          ----            ----
Federal income taxes at
 statutory rate ....................    $1,865,387     1,819,981      1,768,368
State income taxes, net
 of Federal income tax benefit .....        11,793       114,054        131,208
Other, net .........................        13,945       (44,667)        (4,504)
                                        ----------    ----------     ----------
                                        $1,891,125     1,889,368      1,895,072
                                        ==========    ==========     ==========


                                                                     (Continued)

                                      F-17

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(10) Regulatory Matters

     The Federal Deposit Insurance Corporation,  through the Savings Association
     Insurance Fund (SAIF),  insures deposits of  accountholders up to $100,000.
     The Bank pays an annual premium to provide for this insurance.  The Bank is
     also a member of the  Federal  Home Loan Bank  System  and is  required  to
     maintain  an  investment  in the  stock of the  Federal  Home  Loan Bank of
     Atlanta (FHLB) equal to at least 1% of the unpaid principal balances of its
     residential  mortgage  loans,  or 5% of its  outstanding  advances from the
     Bank, whichever is greater.  Purchases and sales of stock are made directly
     with the FHLB at par value.

     The Bank is subject to various regulatory capital requirements administered
     by  the  federal  banking   agencies.   Failure  to  meet  minimum  capital
     requirements  can  initiate  certain  mandatory,  and  possibly  additional
     discretionary,  actions by  regulators  that, if  undertaken,  could have a
     direct material effect on the financial statements.  Under capital adequacy
     guidelines and the regulatory  framework for prompt corrective  action, the
     Bank  must meet  specific  capital  guidelines  that  involve  quantitative
     measures of the Bank's assets,  liabilities,  and certain off-balance-sheet
     items as  calculated  under  regulatory  accounting  practices.  The Bank's
     capital  amounts  and   classification  are  also  subject  to  qualitative
     judgments by the regulators about  components,  risk weightings,  and other
     factors.

     Quantitative  measures established by regulation to ensure capital adequacy
     require the Bank to maintain  minimum amounts and ratios (as defined in the
     regulations and as set forth in the table below).  As of June 30, 2000, the
     most  recent  notification  from the  Office  of Thrift  Supervision  (OTS)
     categorized the Bank as well capitalized under the regulatory framework for
     prompt  corrective  action.  There are no  conditions  or events since that
     notification that management believes have changed the Bank's category.

     Regulatory  capital  amounts  and ratios  for the Bank are as  follows  (in
     thousands):


<TABLE>
<CAPTION>
                                                                                          To be well
                                                                    Minimum            capitalized under
                                                                  for capital          prompt corrective
                                              Actual           adequacy purposes       action provisions
                                       --------------------   ------------------     -------------------
                                        Amount       Ratio     Amount      Ratio      Amount       Ratio
                                        ------       -----     ------      -----      ------       -----
<S>                                    <C>           <C>      <C>           <C>      <C>              <C>
As of June 30, 2000:
    Tier I core capital (a)            $45,491       13.60%   $13,375       4%       $16,719         >5%
    Tier I risk-based capital (b)       45,491       27.71%     6,566       4%         9,849         >6%
    Total risk-based capital (b)        47,393       28.87%    13,133       8%        16,416        >10%

As of June 30, 1999:
    Tier I core capital (a)             46,062       14.06%    13,109       4%        16,386         >5%
    Tier I risk-based capital (b)       46,062       28.71%     6,418       4%         9,627         >6%
    Total risk-based capital (b)        48,520       30.24%    12,837       8%        16,046        >10%

</TABLE>
-------------
     (a)  Percentage of capital to ending assets.
     (b)  Percentage of risk-based capital to ending risk-weighted assets.


                                                                     (Continued)

                                      F-18


<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(11) Retirement and Deferred Compensation Plans

     The Bank has a 401(k) Employee  Investment Plan covering  substantially all
     employees.  Participation is voluntary and employee contributions are based
     on a percentage of compensation,  ranging from a minimum of 1% to a maximum
     of 10%.  The Bank  matches  employees'  contributions,  not to exceed 6% of
     compensation or a maximum of $2,400 annually. The Bank's contributions were
     $38,644,  $37,936,  and $34,432 for the years ended June 30, 2000, 1999 and
     1998, respectively.

     The Bank has a  supplemental  retirement  income plan (SERP) for  executive
     officers.  The SERP supplements the 401(k) plan to bring officer retirement
     benefits up to targeted levels (2% for each year of service,  not to exceed
     70% of  final  salary).  In  addition,  the  SERP  provides  death  benefit
     protection  for  officers'  beneficiaries.  The cost of each  participant's
     retirement  benefits is accrued over the participant's  active  employment.
     The  accrued  liability  under  the SERP  was  approximately  $186,000  and
     $204,000  as of June 30,  2000 and 1999,  respectively.  Compensation  cost
     related to the SERP was  $129,001,  $118,640,  and  $116,468  for the years
     ended June 30, 2000, 1999 and 1998, respectively.

     The Bank also has a deferred  compensation  agreement  with one  officer to
     provide  certain death and retirement  benefits.  The benefits  payable are
     accrued by annually by charges to income of $1,383.  The accrued  liability
     for these  benefits  amounted  to $30,976  and $29,593 at June 30, 2000 and
     1999,  respectively,   and  is  included  in  accrued  expenses  and  other
     liabilities.

     The Bank has a Directors  Retirement Plan which is a nonqualified  plan for
     income tax  purposes.  Under the plan,  each  director  will be paid 75% of
     annual directors' fees for ten years or until death after  retirement.  The
     benefits  payable are accrued  annually and are based on the retirement age
     selected by each  director  and an assumed 4% increase in annual fees until
     retirement. The accrued liability under this plan was $413,410 and $269,010
     at June  30,  2000 and  1999,  respectively,  and is  included  in  accrued
     expenses and other liabilities.  Compensation cost related to this plan was
     $144,400  $117,658 and $105,414 for the years ended June 30, 2000, 1999 and
     1998, respectively.

     The Bank also has an  optional  plan for the  deferral of  directors'  fees
     which is nonqualified for income tax purposes.  The accrued liability under
     this  plan  was   $497,504   and  $410,187  at  June  30,  2000  and  1999,
     respectively, and is included in accrued expenses and other liabilities.

     The Bank has invested in whole-life  insurance policies on the lives of the
     individual  participants for purposes of providing income and assets in the
     future to offset the costs of the officers and directors'  plans.  The life
     insurance companies and related investments are as follows at June 30:


                                                     2000                 1999
                                                     ----                 ----
Transamerica ...........................          $3,518,280           3,341,297
American General .......................           2,046,057           1,969,051
Massachusetts Mutual ...................             638,642             608,533
Pacific Mutual .........................             484,558             480,592
                                                  ----------          ----------
                                                  $6,687,537           6,399,473
                                                  ==========          ==========


                                                                     (Continued)

                                      F-19

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(12) Stock-Based Benefit Plans

     Employees  who attain the age of 21 and  complete  one year of service with
     the Bank are eligible to  participate in the Company's  ESOP.  Participants
     are 100% vested in their accounts after five years of service with the Bank
     or, if earlier,  upon death,  disability or attainment of normal retirement
     age.  Participants  received  credit for service with the Bank prior to the
     establishment of the ESOP.

     In 1994 the ESOP  borrowed  $960,000  from an unrelated  third party lender
     under a ten year loan bearing  interest at the Federal funds rate plus 2.5%
     per annum,  with payments of principal and interest due  quarterly.  Annual
     principal  payments are $96,000.  The proceeds of the loan were used by the
     ESOP to  acquire  144,000  shares  of the  Bank's  common  stock  upon  its
     conversion  to a capital  stock  form of  organization.  The ESOP holds the
     common stock in a trust for allocation among participating employees, which
     occurs as the ESOP repays the loan.  The ESOP's sources of repayment of the
     loan are  dividends on the common  stock,  if any,  either held in trust or
     allocated to the participants'  accounts, and quarterly  contributions from
     the Bank to the ESOP and  earnings  thereon.  For the years  ended June 30,
     2000,  1999 and 1998 the Bank made  contributions  to the ESOP of $130,385,
     $134,790 and $146,944, respectively.

     The debt of the ESOP is  recorded  as debt of the  Company  and the  shares
     pledged as collateral are reported as unearned ESOP shares in the statement
     of financial  condition.  Dividends  on allocated  shares are recorded as a
     reduction  of  retained  earnings;  dividends  on  unallocated  shares  are
     recorded as a reduction of debt and accrued  interest.  The Bank recognized
     interest  expense  of  $34,385,  $38,790  and  $50,944,  respectively,  and
     compensation  expense of  $141,548,  $205,453 and  $320,787,  respectively,
     related  to the ESOP for the  years  ended  June 30,  2000,  1999 and 1998.
     Dividends on ESOP shares used for debt service  were  $33,303,  $40,963 and
     $48,380 for the years ended June 30, 2000, 1999 and 1998, respectively. The
     related tax  benefits to the Bank for  dividends  paid to the ESOP were not
     material. The ESOP shares as of June 30 were as follows:


                                                            2000          1999
                                                            ----          ----
Allocated shares .................................         92,263         78,417
Shares earned, but unallocated ...................          6,935          7,466
Unearned shares ..................................         44,802         58,117
                                                         --------       --------
                                                          144,000        144,000
                                                         --------       --------
Fair value of unearned shares at June 30 .........       $467,621        639,287
                                                         ========       ========


     In 1994 the Company  established  a  Management  Recognition  Plan (MRP) to
     retain   personnel  of   experience   and  ability  in  key   positions  of
     responsibility.  Under  the MRP,  members  of the  Board of  Directors  and
     certain  executive  officers of the  Company  were issued a total of 72,000
     shares of common stock.  Participants become one-fifth vested in the shares
     awarded  on  January  1 of each  year  from  1995  to  1999.  There  was no
     compensation  expenses  related  to the MRP  during the year ended June 30,
     2000. Compensation expense was $11,907 and $48,234 for the years ended June
     30, 1999 and 1998, respectively.

                                                                     (Continued)


                                      F-20

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     In 1994, the Company adopted a Stock Option Plan (Option Plan), under which
     180,000  shares of common stock were  granted to officers and  directors of
     the Bank.  Options  granted  under the Option Plan may be  Incentive  Stock
     Options  within the meaning of Section 422 of the Internal  Revenue Code of
     1986,  as amended,  or  nonqualifying  stock  options.  The 72,000  options
     granted  to  directors  vested at grant  date,  while the  108,000  options
     granted to officers vest at a rate of 20% per year. Options are exercisable
     at the  market  price of the  common  stock on the date of grant  which was
     $7.92 per share.  The options must be  exercised  within ten years from the
     date of grant.

     A summary of changes in shares under option and options exercisable for the
     years ended June 30 is presented below:


                                              2000          1999          1998
                                              ----          ----          ----
Outstanding at beginning of year ......      148,500       148,500      162,000
Exercised .............................      (10,000)           --      (13,500)
                                            --------      --------     --------
       Outstanding at end of year .....      138,500       148,500      148,500
                                            --------      --------     --------
Exercisable at end of year ............      138,500       148,500      133,200
                                            ========      ========     ========


(13) Postretirement Benefits Other Than Pensions

     The Bank  offers a  postretirement  health  care  benefit  plan to  certain
     Directors  and  employees.  The net  cost  of the  plan  was  approximately
     $39,000,  $46,000 and  $46,000  for each of the years ended June 30,  2000,
     1999 and 1998,  respectively.  The accrued liability for these benefits was
     approximately   $175,000   and   $147,000   at  June  30,  2000  and  1999,
     respectively, and is included in accrued expenses and other liabilities.


(14) Financial Instruments

     The Bank is a party to financial instruments with off-balance sheet risk in
     the normal  course of business,  including  mortgage loan  commitments  and
     lines of credit on home equity loans. These instruments involve, to various
     degrees,  elements of credit and interest rate risk in excess of the amount
     recognized in the consolidated statements of financial condition.

     The Bank's  exposure to credit loss in the event of  nonperformance  by the
     other party to a financial instrument is represented by the contract amount
     of the  financial  instrument.  The Bank uses the same  credit  policies in
     making commitments for  off-balance-sheet  financial instruments as it does
     for  on-balance-sheet  financial  instruments.  Financial  instruments with
     off-balance-sheet risk are as follows at June 30, 2000:


                                                                       Contract
                                                                        amount
                                                                        ------
Undisbursed lines of credit on home equity loans .............       $13,209,000
Residential mortgage loans to be funded ......................           910,000
                                                                     -----------
                                                                     $14,119,000
                                                                     ===========



                                                                     (Continued)


                                      F-21


<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     The  Bank had  outstanding  mortgage  loan  commitments,  exclusive  of the
     undisbursed  portion of loans in process,  of  approximately  $568,000  for
     fixed rate loans and $342,000 for floating rate loans at June 30, 2000. The
     interest rate range on fixed rate mortgage  loan  commitments  was 8.00% to
     8.75% and all commitments  expire within one year. The loan commitments and
     undisbursed  lines of credit are  expected  to be settled at face amount or
     expire unused.  The fair value of these  commitments was not significant at
     June 30, 2000.

     The Bank has an unsecured  line of credit with a commercial  bank for up to
     $2 million. There were no borrowings outstanding as of June 30, 2000.

     The carrying amounts and estimated fair values of financial instruments are
     summarized as follows at June 30:

<TABLE>
<CAPTION>
                                                  2000                          1999
                                       --------------------------    -------------------------
                                         Carrying         Fair         Carrying          Fair
                                          amount          value         amount           value
                                          ------          -----         ------           -----
<S>                                   <C>              <C>            <C>           <C>
Assets:
     Cash and interest-bearing
         deposits .................   $  4,041,162      4,041,000     10,057,442     10,057,000
     Short-term investments .......      9,551,979      9,552,000     12,941,254     12,941,000
     Secured short-term loans to
         commercial banks .........      9,562,746      9,563,000     10,011,970     10,012,000
     Securities available-for-sale       5,258,493      5,258,000      6,551,478      6,551,000
     Investment securities
         held-to-maturity .........     67,392,698     62,206,000     66,167,181     63,429,000
     Mortgage-backed securities
         held-to-maturity .........      8,317,018      8,343,000     10,008,111     10,214,000
     Loans receivable .............    219,203,607    210,975,000    203,886,170    202,890,000
     Investment in Federal Home
         Loan Bank stock ..........      2,187,200      2,187,000      1,935,700      1,936,000
     Accrued interest receivable ..      2,116,855      2,117,000      1,994,604      1,995,000

Liabilities:
     Savings accounts .............    281,866,206    281,357,000    274,625,611    275,218,000
     Borrowed funds ...............        384,000        384,000        470,813        471,000
     Advances payments by
         borrowers for taxes,
         insurance and ground rents      5,073,906      5,074,000      5,203,532      5,204,000
                                      ============   ============   ============   ============

</TABLE>


                                                                     (Continued)

                                      F-22

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     the methods and assumptions  used to determine fair value estimates are set
     forth below.

     (a)  Cash, Cash Equivalents, Investments and Mortgage-Backed Securities

          For cash and cash  equivalents,  the carrying value  approximates fair
          value due to the short maturity of these instruments.  The fair values
          of U.S.  Government  and agency  obligations,  equity  securities  and
          mortgage-backed securities are estimated based on published bid prices
          or bid quotations received from securities dealers.  The fair value of
          Federal  Home Loan Bank stock is estimated to be equal to its carrying
          amount since it is not a publicly  traded equity  security,  it has an
          adjustable  dividend  rate  and  all  transactions  in the  stock  are
          executed at the stated par value.

     (b)  Loans Receivable

          The  fair  value of  loans  receivable  is  estimated  by  discounting
          anticipated  future cash flows (based on  contractual  maturities  and
          weighted-average   coupons  and  prepayment   assumptions)   at  rates
          currently  offered  by the Bank for loans to  borrowers  with  similar
          credit histories.

     (c)  Savings Accounts, Borrowed Funds and Advance Payments by Borrowers for
          Taxes, Insurance and Ground Rents

          The fair value of savings accounts,  other than certificate  accounts,
          and advance  payments by  borrowers  for taxes,  insurance  and ground
          rents is the  amount  payable  on demand at June 30. The fair value of
          certificate accounts is based on the lower of redemption value (net of
          penalty) or the discounted value of contractual  cash flows.  Discount
          rates are estimated using the rates currently  offered by the Bank for
          accounts  with  similar  remaining  maturities.   Borrowed  funds  are
          considered to be at fair value due to their adjustable rate nature.

     Fair  value  estimates  are made at a  specific  point  in  time,  based on
     relevant market  information and information  about financial  instruments.
     These  estimates  do not reflect any premium or discount  that could result
     from  offering  for sale at one time the entire  holdings  of a  particular
     financial instrument. Fair value estimates are based on judgments regarding
     future  expected  loss  experience,   current  economic  conditions,   risk
     characteristics of various financial  instruments and other factors.  These
     estimates are subjective in nature and involve uncertainties and matters of
     significant  judgment and therefore  cannot be determined  with  precision.
     Changes in assumptions could significantly affect the estimates.


(15) Stockholders' Equity

     In March  1994,  the  members of Leeds  Federal  Savings  Association  (the
     Association)  approved  a plan  of  reorganization  from a  mutual  savings
     association  to  a  mutual  holding  company.   Pursuant  to  the  plan  of
     reorganization, the Association transferred substantially all of its assets
     and  all of its  liabilities  to a new  federally-chartered  stock  savings
     association   which   became  a  wholly  owned   subsidiary   of  MHC.  The
     reorganization was consummated in April 1994.

                                                                     (Continued)

                                      F-23

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     The principal purpose of the reorganization was to organize the Association
     into a  corporate  form so that it would  have  more  flexibility  to raise
     capital, diversify operations and establish employee incentive plans. Under
     the terms of the reorganization, the membership rights of the Association's
     members became rights in the mutual holding company and the Company has the
     authority to issue shares of capital stock to persons other than MHC for up
     to  49.9%  (a  minority  ownership  interest)  of  the  shares  issued  and
     outstanding.

     OTS regulations impose limitations on all capital  distributions by savings
     institutions.  Capital  distributions  include cash dividends,  payments to
     repurchase  or  otherwise  acquire the  institution's  shares,  payments to
     shareholders  of  another  institution  in  a  cash-out  merger  and  other
     distributions  charged against  capital.  The  regulations  establish three
     tiers of institutions.  An institution,  such as the Bank, that exceeds all
     capital  requirements  before  and after a  proposed  capital  distribution
     ("Tier 1 institution")  may, after prior notice but without the approval of
     the OTS,  make  capital  distributions  during a year up to 100% of its net
     income  to date  during  the year  plus its  retained  net  income  for the
     preceding  two years.  Any  additional  capital  distributions  require OTS
     approval.

     MHC has waived  receipt of its quarterly  dividends,  thereby  reducing the
     actual  dividend  payout  by the  Company  in 1999  and  prior  years.  The
     dividends  waived by MHC are  considered as a  restriction  on the retained
     earnings of the Bank. The amount of any dividend waived by MHC is available
     for  declaration  as a  dividend  solely  to MHC.  At June  30,  2000,  the
     cumulative amount of such waived dividends was $9,728,400.

     At June 30, 2000,  the Company was authorized to repurchase up to 1,023,441
     shares of common stock  pursuant to its repurchase  plan.  During the years
     ended June 30, 2000, 1999 and 1998, the Company purchased 324,475,  292,736
     and 39,205  shares,  respectively,  at an average cost per share of $10.71,
     $13.56 and $19.70, respectively.


(16) Net Income Per Share of Common Stock

     Basic  earning per share (EPS) is  calculated by dividing net income by the
     weighted  average  number of common shares  outstanding  for the applicable
     period.  Diluted EPS is  calculated  after  adjusting the numerator and the
     denominator  of the basic EPS  calculation  for the effect of all  dilutive
     potential common shares outstanding during the period. The dilutive effects
     of options and unvested  restricted  stock  awards are computed  during the
     "treasury  stock"  method.   Unearned  ESOP  shares  are  not  included  in
     outstanding shares.

                                                                     (Continued)

                                      F-24

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


     Information  related to the  calculation  of net income per share of common
     stock is summarized as follows for the years ended June 30:

<TABLE>
<CAPTION>
                                     2000                       1999                       1998
                            -----------------------    ----------------------    ----------------------
                              Basic        Diluted       Basic       Diluted        Basic       Diluted
                              -----        -------       -----       -------        -----       -------
<S>                         <C>           <C>          <C>          <C>          <C>           <C>
Net income ..............   $3,595,308    3,595,308    3,463,516    3,463,516    3,306,009     3,306,009
Dividends on unvested
   common stock
   awards ...............           --           --           --           --       (7,872)       (3,107)
                            ----------   ----------   ----------   ----------   ----------    ----------
Adjusted net income used
   in EPS calculations ..   $3,595,308    3,595,308    3,463,516    3,463,516    3,298,137     3,302,902
                            ==========   ==========   ==========   ==========   ==========    ==========

Weighted average shares
   outstanding ..........    4,634,155    4,634,155    4,983,896    4,983,896    5,091,918     5,091,918

Dilutive securities:
   Options ..............           --       31,764           --       64,867           --        89,885
   Unvested common stock
    awards ..............           --           --           --           --           --         8,716
                            ----------   ----------   ----------   ----------   ----------    ----------

Adjusted weighted average
   shares used in EPS
   calculations .........    4,634,155    4,665,919    4,983,896    5,048,763    5,091,918     5,190,519
                            ==========   ==========   ==========   ==========   ==========    ==========
</TABLE>



                                                                     (Continued)


                                      F-25

<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998


(17) Condensed Financial Information (Parent Company Only)

     Summarized  financial  information  for the Company is as follows as of and
     for the years ended June 30:


                                                        2000              1999
                                                        ----              ----
Statements of Financial Condition

Cash ...........................................     $   143,131         222,926
Securities available-for-sale ..................          53,240          68,000
Deferred tax asset .............................          19,822          12,352
Other assets ...................................         200,000              --
Investment in Bank .............................      47,180,556      48,421,166
                                                     -----------     -----------
                                                     $47,596,749      48,724,444
                                                     ===========     ===========

Accrued expenses and other liabilities .........     $   187,276         220,032
Stockholders' equity ...........................      47,409,473      48,504,412
                                                     -----------     -----------
                                                     $47,596,749      48,724,444
                                                     ===========     ===========


<TABLE>
<CAPTION>
                                                2000        1999         1998
                                                ----        ----         ----
<S>                                         <C>            <C>           <C>
Statements of Income

Interest income .........................   $   23,129       14,975        1,903

Equity in net income of subsidiary ......    3,586,547    3,449,274    3,304,106
                                            ----------   ----------   ----------

      Income before provision for
       income taxes .....................    3,609,676    3,464,249    3,306,009

Provision for income taxes ..............       14,368          733           --
                                                         ----------   ----------
      Net income ........................   $3,595,308    3,463,516    3,306,009
                                            ==========   ==========   ==========

</TABLE>


                                                                     (Continued)

                                      F-26


<PAGE>


                         LEEDS FEDERAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

                          June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                                               2000             1999          1998
                                                               ----             ----          ----
<S>                                                        <C>               <C>            <C>
Statements of Cash Flows

Cash flows from operating activities:
     Net income .........................................   $ 3,595,308      3,463,516      3,306,009
     Adjustments to reconcile net income to net cash
         provided (used) by operating activities:
            Equity in net income of subsidiary ..........    (3,586,547)    (3,449,274)    (3,304,106)
            Other, net ..................................      (238,472)            --             --
                                                            -----------    -----------    -----------

                Net cash (used) provided by operating
                    activities ..........................      (229,711)        14,242          1,903
                                                            -----------    -----------    -----------

Cash flows from investing activities:
     Dividend distribution from bank ....................     4,335,000      5,240,000        850,000
     Purchase of securities available-for-sale ..........            --       (100,000)            --
                                                            -----------    -----------    -----------
                Net cash provided by investing activities     4,335,000      5,140,000        850,000
                                                            -----------    -----------    -----------

Cash flows from financing activities:
     Payment of dividends ...............................      (788,434)      (988,540)      (260,730)
     Purchases of treasury stock ........................    (3,475,850)    (3,968,439)      (772,430)
     Exercise of stock options ..........................        79,200             --        106,920
     Net proceeds of stock exchanged ....................            --             --        100,000
                                                            -----------    -----------    -----------
                Net cash used by financing activities ...    (4,185,084)    (4,956,979)      (826,240)
                                                            -----------    -----------    -----------

                Net (decrease) increase in cash and
                    cash equivalents ....................       (79,795)       197,263         25,663

Cash and cash equivalents at beginning of year ..........       222,926         25,663             --
                                                            -----------    -----------    -----------
Cash and cash equivalents at end of year ................   $   143,131        222,926         25,663
                                                            ===========    ===========    ===========
</TABLE>





                                      F-27



<PAGE>


                             STOCKHOLDER INFORMATION


Annual Meeting
--------------

The Annual  Meeting of  Stockholders  will be held at 4:00 p.m.,  on October 25,
2000, at the Company's office at 1101 Maiden Choice Lane, Baltimore, Maryland.

Stock Listing
-------------

The Company's Common Stock trades over-the-counter on the Nasdaq National Market
under the symbol "LFED."

Special Counsel
---------------

Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Washington, D.C.  20015


Independent Auditors
--------------------

KPMG LLP
111 South Calvert Street
Baltimore, Maryland  21202

Transfer Agent
--------------

American Stock Transfer and Trust Company
59 Maiden Lane
New York, New York  10007

Annual Report on Form 10-KSB
----------------------------

A copy of the  Company's  Form 10-KSB for the fiscal  year ended June 30,  2000,
will be furnished  without charge to  stockholders as of September 6, 2000, upon
written request to the Secretary,  Leeds Federal  Bankshares,  Inc., 1101 Maiden
Choice Lane, Baltimore, Maryland 21229.