SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)

[X]  Annual report  pursuant to section 13 or 15 (d) of the Securities  Exchange
     Act of 1934

     For the fiscal year ended   September 30, 1999

[ ]  Transition  report  pursuant  to section  13 or 15(d) of the  Securities
     Exchange  Act of 1934  For the  transition  period  from       to         .
                                                              -----    -------

                           Commission File No. 0-24621

                            Farnsworth Bancorp, Inc.
                            ------------------------
                 (Name of Small Business Issuer in Its Charter)

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

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

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

Securities registered under Section 12(b) of the Exchange Act:       None
                                                                     ------

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. YES X   NO  .
                                                                       --    --
         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         The issuer's revenues for its most recent fiscal year were $3,598,793.

         The  aggregate  market  value  of the  voting  common  equity  held  by
non-affiliates, based on the average bid and asked price of the common equity on
December 1, 1999, was $3.4 million.

         As of  December  1, 1999,  there were  issued and  outstanding  379,858
shares of the issuer's Common Stock.

         Transitional Small Business Disclosure Format (check one):  YES   NO  X
                                                                         --   --

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the issuers Annual Report to  Stockholders  for the fiscal year
     ended September 30, 1999. (Part II)
2.   Portions  of the issuers  Proxy  Statement  for the 2000 Annual  Meeting of
     Stockholders. (Part III)


<PAGE>

                                     PART I

         Farnsworth Bancorp,  Inc. (the "Company" or "Registrant") may from time
to time make written or oral "forward-looking statements",  including statements
contained in the Company's  filings with the Securities and Exchange  Commission
("SEC")  (including this Annual Report on Form 10-KSB and the exhibits thereto),
in its reports to stockholders and in other communications by the Company, which
are made in good faith by the Company  pursuant to the "safe harbor"  provisions
of the Private Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the board of  governors of the
federal  reserve  system,   inflation,   interest  rates,  market  and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the Company and the perceived  overall  value of these  products and
services by users,  including  the  features,  pricing  and quality  compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial services' laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological changes,  acquisitions;  changes in consumer spending
and  saving  habits;  and the  success  of the  Company  at  managing  the risks
resulting from these factors.

         The Company  cautions that the listed  factors are not  exclusive.  The
Company does not  undertake  to update any  forward-looking  statement,  whether
written  or oral,  that may be made  from  time to time by or on  behalf  of the
Company.

Item 1.  Description of Business
-------  -----------------------

General

         The Company is a New Jersey corporation organized in May of 1998 at the
direction  of Peoples  Savings  Bank (the  "Bank") to acquire all of the capital
stock that the Bank  issued in its  conversion  from the mutual to stock form of
ownership  (the  "Conversion").  On September 29, 1998,  the Bank  completed the
Conversion and became a wholly owned subsidiary of the Company. The Company is a
unitary savings and loan holding company which,  under existing laws,  generally
is not  restricted  in the types of business  activities  in which it may engage
provided   that  the  Bank   retains  a  specified   amount  of  its  assets  in
housing-related  investments.  The Company  conducts no significant  business or
operations  of its own other than  holding all of the  outstanding  stock of the
Bank and  investing the  Company's  portion of the net proceeds  obtained in the
Conversion.

         The Bank,  which traces its origins to 1880,  is a federally  chartered
stock savings bank headquartered in Bordentown,  New Jersey. The Bank is subject
to examination and comprehensive  regulation by the Office of Thrift Supervision
("OTS")  and its  deposits  are  federally  insured by the  Savings  Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance  Corporation  ("FDIC").




                                       2
<PAGE>
The Bank is a member of, and owns  capital  stock in, the Federal Home Loan Bank
("FHLB") of New York, which is one of the 12 regional banks in the FHLB System.

         The Bank  operates a  traditional  savings  bank  business,  attracting
deposit accounts from the general public and using those deposits, together with
other  funds,  primarily  to  originate  and invest in loans  secured by one- to
four-family residential real estate.

Competition

         The Bank is one of many financial  institutions serving its market area
of northern  Burlington County, New Jersey. The competition for deposit products
comes from other insured financial institutions such as commercial banks, thrift
institutions, credit unions, and multi-state regional banks in the Bank's market
area.  Deposit  competition also includes a number of insurance products sold by
local agents and investment  products such as mutual funds and other  securities
sold by local and regional  brokers.  Loan  competition  varies  depending  upon
market  conditions and comes from other insured  financial  institutions such as
commercial  banks,  thrift  institutions,  credit unions,  multi-state  regional
banks, and mortgage bankers.

Lending Activities

     Loan  Portfolio  Data.  Set forth  below is selected  data  relating to the
composition of the Bank's loan portfolio by type of loan on the dates indicated:
<TABLE>
<CAPTION>
                                                                           At September 30,
                                                         ---------------------------------------------------------
                                                                  1999                         1998
                                                         --------------------------  -----------------------------
                                                                $              %             $              %
                                                          ----------       --------    ----------        ------
                                                                  (Dollars in thousands)
<S>                                                      <C>               <C>        <C>               <C>
  Type of Loans:
   --------------
     Residential..................................        $   27,443          68.6%    $   24,736           77.6%
     Construction.................................             1,886           4.7          2,435            7.6
     Commercial real estate.......................             3,743           9.4          1,019            3.2
     Commercial Business..........................               271           0.7            181            0.6
     Consumer loans:..............................
       Home equity................................             6,261          15.6          3,197           10.0
       Savings account loans......................               172           0.4            157            0.5
       Automobile loans ..........................                50           0.1             37            0.1
       Other......................................               205           0.5            114            0.4
                                                          ----------    ----------     ----------       --------
                                                              40,031         100.0%        31,876          100.0%
                                                          ----------    ==========     ----------       ========
   Less:
     Loans in process.............................               830                          500
     Deferred loan origination fees and costs.....               193                          199
     Allowance for loan losses....................               176                          135
                                                          ----------                   ----------
   Total loans, net...............................        $   38,832                   $   31,042
                                                          ==========                    =========
</TABLE>


                                       3
<PAGE>
Loan Maturity Tables

         The  following  table sets forth the  estimated  maturity of the Bank's
loan portfolio at September 30, 1999. The table does not include  prepayments or
scheduled principal  repayments.  Prepayments and scheduled principal repayments
on  loans  totalled  $5.5  million  for  the  year  ended  September  30,  1999.
Adjustable-rate  mortgage  loans  are  shown as  maturing  based on  contractual
maturities.
<TABLE>
<CAPTION>
                                                                   Due after
                                                    Due within     1 through      Due after
                                                       1 year         5 years         5 years          Total
                                                    ------------   ------------   --------------  -------------
                                                                           (In thousands)
<S>                                                   <C>            <C>            <C>            <C>
1-4 family mortgage............................          1,833          2,514          23,096         27,443
Construction...................................          1,886              0               0          1,886
Commercial real estate.........................            154            295           3,294          3,743
Commercial business............................              0            271               0            271
Consumer.......................................            627          2,650           3,411          6,688
                                                           ---         ------          ------         ------
     Total.....................................          4,500          5,730          29,801         40,031
                                                       =======         ======         =======         ======
</TABLE>


         The following table sets forth the dollar amount of all loans due after
September  30, 2000,  which have  pre-determined  interest  rates and which have
floating or adjustable interest rates.

                                                        Floating or
                                         Fixed Rates  Adjustable Rates     Total
                                         -----------  ----------------     -----
                                                       (In thousands)
Residential .......................         25,342            268         25,610
Construction ......................              0              0              0
Commercial real estate ............          3,589              0          3,589
Commercial business ...............            271              0            271
Consumer ..........................          5,716            345          6,061
                                           -------        -------        -------
    Total .........................        $34,918        $   613        $35,531
                                           =======        =======        =======
Mortgage Loans:

         One- to  Four-Family  Residential  Loans.  The Bank's  primary  lending
activity  consists of  originating  one- to four-family  fixed-rate  residential
mortgage loans which are  owner-occupied  and secured by property located in the
Bank's market area. The Bank generally  originates  fixed-rate loans with terms,
conditions and  documentation  which would permit it to either sell the loans to
Federal  National  Mortgage  Association  ("FNMA" or Federal Home Loan  Mortgage
Corporation ("FHLMC")), in the secondary market or retain them in its portfolio,
depending on the yield on the loan and on the Bank's asset/liability  management
objectives.  While the Bank has in the past originated  adjustable-rate mortgage
("ARM") loans, this has not been a significant aspect of the Bank's business. At
September 30, 1999, the Bank had $ 268,000 in ARM loans.


                                       4
<PAGE>



         The Bank's  fixed-rate  loans  generally have terms from 10 to 30 years
with  principal  and  interest  payments   calculated  using  up  to  a  30-year
amortization period. Some of these fixed-rate loans are balloon loans with terms
of 5 or 7 years, with principal and interest  payments  calculated using up to a
30-year  amortization  period.  The maximum  loan-to-value  ratio on residential
mortgage loans is 95%. Loans originated with a loan-to-value  ratio in excess of
80% require private mortgage insurance.

         The Bank's mortgage loans generally include due-on-sale  clauses.  This
gives the Bank the right to deem the loan  immediately  due and  payable  in the
event the borrower  transfers  ownership  of the property  securing the mortgage
loan without the Bank's consent.

         Commercial Real Estate Loans.  The Bank's  commercial real estate loans
are secured by office  buildings,  retail  establishments  and other  commercial
properties.  These loans generally do not exceed $500,000,  although they may be
made in an  amount  up to the  Bank's  maximum  loan to one  borrower  limit  of
approximately $ 793,000. These loans generally do not have terms greater than 15
years. If a borrower should require a longer amortization  period, the loan will
be an adjustable or balloon mortgage, adjusting or maturing in five years.

         Commercial real estate lending  entails  significant  additional  risks
compared to residential  property  lending.  These loans typically involve large
loan balances to single borrowers or groups of related borrowers.  The repayment
of these loans  typically is dependent on the  successful  operation of the real
estate project  securing the loan. For commercial real estate these risks can be
significantly  affected by supply and demand conditions in the market for office
retail space and may also be subject to adverse  conditions  in the economy.  To
minimize  these  risks,  the Bank  generally  limits this type of lending to its
market  area  and to  borrowers  who are  otherwise  well  known to the Bank and
generally limit the loan to value ratio to 75%.

         Construction   Loans.   The   Bank   makes   residential   construction
loans/permanent  loans  on  one-  to  four-family  residential  property  to the
individuals   who  will  be  the  owners  and  occupants   upon   completion  of
construction.  The  Bank  also  makes  commercial  construction  loans  to local
businesses.

         Interest  payments only are required during  construction and these are
to be paid from the borrower's own funds. These loans are made at 1% to 2% above
prime and have terms of up to 12 months. The maximum  loan-to-value ratio is 75%
of the appraised value of the completed project. Upon completion of construction
the loan  converts  to a  permanent  loan and  regular  principal  and  interest
payments commence. The Bank does not finance any speculative projects.

         Construction lending is generally considered to involve a higher degree
of credit risk than longterm  financing of  residential  properties.  The Bank's
risk of loss on a  construction  loan is dependent  largely upon the accuracy of
the initial  estimate of the property's  value at completion of construction and
the estimated cost of construction. If the estimate of construction cost and the
marketability  of the  property  upon  completion  of the  project  prove  to be
inaccurate,  the Bank may be compelled to advance  additional  funds to complete
the construction.  Furthermore,  if the final value of the completed property is
less  than  the  estimated  amount,  the  value  of the  property  might  not be
sufficient to assure the repayment of the loan.

         Commercial  Business  Loans.  The  Bank's  commercial  loans  generally
constitute  lines of  credit to local  businesses.  These  loans  are  primarily
secured by real estate and  generally  do not have terms

                                       5
<PAGE>

greater than one year. The Bank offers commercial business loans to benefit from
the higher fees and interest rates and the shorter terms to maturity.

         Unlike  residential  mortgage  loans,  which  generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income and which are secured by real property whose value tends to be more
easily ascertainable,  commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business  loans may be  substantially  dependent  on the success of the business
itself and the general economic environment.  Commercial loans, therefore,  have
greater credit risk than residential mortgage loans.

         The Bank is also a Small  Business  Administration  ("SBA")  authorized
lender. A variety of types of small business administration loans are available.
Currently there are no SBA loans in the portfolio.

         Consumer Loans.  The Bank offers  non-collateralized  personal loans in
the  amounts of up to $10,000  in order to  provide a wider  range of  financial
services to its customers and because these loans provide higher  interest rates
and shorter terms (12 to 36 months) than many of its other loans.  The Bank also
offers loans with savings  pledged as additional  security.  The Bank's consumer
loans consist of home equity, savings account, automobile and personal loans.

         The home  equity  loans  the Bank  originates  are  secured  by one- to
four-family residences.  These loans have terms of 3 to 15 years, generally will
not exceed  $100,000 and have  loan-to-value  ratios of 80% or less. Home equity
lines of  credit  have  interest  rates set at prime  and are  subject  to a 75%
loan-to-value ratio, which includes a first mortgage balance.

         Consumer loans may entail greater risk than residential mortgage loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

         Loan Approval  Authority and  Underwriting.  The Bank's loan committee,
which is comprised of President Pelehaty,  Vice President Alessi, and the Bank's
Senior Loan  Officer and the Bank's Loan  Servicing  Manager,  approves  one- to
four-family mortgage loans up to the conforming loan limit and other loans up to
$50,000. Loan requests above these amounts must be approved by the full board of
directors,  which meets twice monthly, or by the Executive Committee composed of
four non-employee directors and President Pelehaty.

         Loan  Commitments.   At  September  30,  1999,   commitments  to  cover
originations  of mortgage  loans  totaled $ 1,325,000.  The Bank  believes  that
virtually all of its commitments will be funded.

        Loans to One Borrower.  The maximum  amount of loans which the Bank may
make to any one  borrower  may not  exceed  15% of its  unimpaired  capital  and
unimpaired  surplus.  The  Bank  may lend an  additional  10% of its  unimpaired
capital  and  unimpaired  surplus  if the  loan  is  fully  secured  by  readily
marketable  collateral.  The  Bank's  maximum  loan to one  borrower  limit  was
approximately  $793,000 at September  30,  1999.  At  September  30,  1999,  the
aggregate loans of the Bank's five largest borrowers had outstanding balances of
between $346,000 and $522,000.

                                       6
<PAGE>


Non-performing and Problem Assets

         Loan  Delinquencies.  Loans are  reviewed  on a  monthly  basis and are
placed on a non-accrual  status when, in the Bank's  opinion,  the collection of
additional interest is doubtful.  Interest accrued and unpaid at the time a loan
is placed on nonaccrual  status is charged against interest  income.  Subsequent
interest  payments,  if any,  are either  applied to the  outstanding  principal
balance or recorded as  interest  income,  depending  on the  assessment  of the
ultimate collectibility of the loan.

         Non-performing  Assets.  The  following  table sets  forth  information
regarding  non-accrual  loans and real estate owned, as of the dates  indicated.
For the year ended  September  30,  1999,  interest  income that would have been
recorded on loans accounted for on a non-accrual  basis under the original terms
of such loans was $46,127.

<TABLE>
<CAPTION>
                                                                         At September 30,
                                                                           1999    1998
                                                                          ------ -------
                                                                      (Dollars in thousands)
<S>                                                                       <C>     <C>
        Loans accounted for on a non-accrual basis:
        Mortgage loans:
          Permanent loans secured by 1-4 family units ..................   $404    $195
          All other mortgage loans .....................................    --       95
                                                                           ----    ----
        Total ..........................................................   $404    $290
                                                                           ====    ====

        Accruing loans which are contractually past due 90 days or more:
        Mortgage loans:
          Permanent loans secured by 1-4 family units ..................   $120    $--
        Total ..........................................................    120     --
        Total non-accrual and accrual loans ............................    524     290

        Real estate owned ..............................................     88      --
        Total non-performing assets ....................................    612     290
        Total non-accrual and accrual loans to net loans ...............   1.35%   0.93%
        Total non-accrual and accrual loans to total assets ............   0.94%   0.69%
        Total non-performing assets to total assets ....................   1.09%   0.69%
</TABLE>

         Classified Assets. OTS regulations provide for a classification  system
for problem  assets of savings  associations  which  covers all problem  assets.
Under this classification system, problem assets of savings institutions such as
the Bank are  classified as  "substandard,"  "doubtful,"  or "loss." An asset is
considered  substandard if it is inadequately protected by the current net worth
and paying  capacity  of the  borrower  or of the  collateral  pledged,  if any.
Substandard  assets include those  characterized  by the "distinct  possibility"
that the savings  institution  will sustain "some loss" if the  deficiencies are
not corrected. Assets classified as doubtful have all of the weaknesses inherent
in  those  classified  substandard,  with  the  added  characteristic  that  the
weaknesses  present make  "collection  or  liquidation in full," on the basis of
currently  existing facts,  conditions,  and values,  "highly  questionable  and
improbable." Assets classified as loss are those considered  "uncollectible" and
of such little value that their  continuance as assets without the establishment
of a specific loss reserve is not warranted.  Assets

                                       7
<PAGE>

may be designated  "special  mention" because of potential  weakness that do not
currently warrant classification in one of the aforementioned categories.

         When  a  savings  association   classifies  problem  assets  as  either
substandard or doubtful,  it may establish general allowances for loan losses in
an amount  deemed  prudent by  management.  General  allowances  represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets.  When a savings  association  classifies
problem assets as loss, it is required either to establish a specific  allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. A savings association's  determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the OTS,  which may order the  establishment  of additional  general or specific
loss  allowances.  A portion of general  loss  allowances  established  to cover
possible  losses related to assets  classified as substandard or doubtful may be
included in determining a savings  association's  regulatory  capital.  Specific
valuation  allowances  for loan losses  generally  do not qualify as  regulatory
capital.  At September  30, 1999,  the Bank had $524,000 of loans  classified as
special mention, and no loans classified as substandard, doubtful and loss.

         Allowances  for Loan Losses.  A provision for loan losses is charged to
operations  based on management's  evaluation of the losses that may be incurred
in the Bank's loan portfolio. The evaluation, including a review of all loans on
which full  collectibility  of  interest  and  principal  may not be  reasonably
assured,  considers:  (i) the Bank's past loan loss  experience,  (ii) known and
inherent risks in the Bank's portfolio, (iii) adverse situations that may affect
the  borrower's  ability to repay,  (iv) the estimated  value of any  underlying
collateral, and (v) current economic conditions.

         The Bank monitors its  allowance for loan losses and make  additions to
the allowance as economic  conditions  dictate.  Although the Bank maintains its
allowance for loan losses at a level that it considers adequate for the inherent
risk of loss in its loan portfolio, future losses could exceed estimated amounts
and additional  provisions for loan losses could be required.  In addition,  the
Bank's determination as to the amount of allowance for loan losses is subject to
review by the OTS,  as part of its  examination  process.  After a review of the
information available,  the OTS might require the establishment of an additional
allowance.

         The following  table  illustrates  the  allocation of the allowance for
loan losses for each category of loans.  The allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not restrict the Bank's use of the  allowance to absorb losses in other
loan categories.

                                       8
<PAGE>
<TABLE>
<CAPTION>
                                                        September 30,
                               ------------------------------------------------------------------
                                          1999                             1998
                               -------------------------------    -------------------------------
                                                Percent of                         Percent of
                                               Allowance in                       Allowance in
                                                   Each                               Each
                                                 Category                           Category
                                                 to Total                           To Total
                                  Amount         Allowance        Amount            Allowance
                               ------------- ----------------- -------------- -------------------
                                                      (Dollars in thousands)
<S>                             <C>                <C>           <C>                <C>
Residential ...........           $110               62.50%        $ 84               62.22%
Commercial real estate              17                9.66            4                2.96
Commercial business ...             41               23.29           41               30.37
Consumer ..............              8                4.55            6                4.45
                                  ----              ------         ----              ------
    Total allowance for
      loan losses .....           $176              100.00%        $135              100.00%
                                  ====              ======         ====              ======
</TABLE>


         The following table sets forth  information  with respect to the Bank's
allowance for loan losses at the dates and for the periods indicated:

                                                   At September 30,
                                                   ----------------
                                                  1999         1998
                                                  ----         ----
                                                (Dollars in thousands)
Total loans outstanding (1) .................   $ 39,201     $ 31,042
                                                ========     ========

Average loans outstanding(1) ................   $ 35,536     $ 28,940
                                                ========     ========
Allowance balances (at beginning of period) .        135           66
Provision:
  Residential ...............................         26           18
  Commercial real estate ....................         13            4
  Commercial Business .......................          0           41
  Consumer ..................................          7            9
Net recoveries (charge offs) ................         (5)          (3)
                                                --------     --------
Allowance balance (at end of period) ........   $    176     $    135
                                                ========     ========

Allowance for loan losses as a percent of
  total loans outstanding ...................        .45%         .43%
Net loans charged off as a percent of average
  loans outstanding .........................        .01%         .01%

(1) Excludes  allowance for loan losses and deferred loan  origination  fees and
costs.


                                       9
<PAGE>

Investment Activities

         Investment  Securities.  The Bank is required under federal regulations
to maintain a minimum amount of liquid assets which may be invested in specified
short-term  securities and certain other  investments.  The Bank  classifies its
investment   securities  as   "available-for-sale"   or   "held-to-maturity"  in
accordance with SFAS No. 115.

         The   Bank's    investment    securities    "available-for-sale"    and
"held-to-maturity"  portfolios at September 30, 1999 did not contain  securities
of any  issuer  with an  aggregate  book  value in excess  of 10% of the  Bank's
equity, excluding those issued by the United States government agencies.

         Mortgage-Backed  Securities. To supplement lending activities, the Bank
has  invested  in  residential   mortgage-backed   securities.   Mortgage-backed
securities can serve as collateral for borrowings and, through repayments,  as a
source  of  liquidity.  Mortgage-backed  securities  represent  a  participation
interest in a pool of  single-family  or other type of mortgages.  Principal and
interest   payments   are  passed  from  the   mortgage   originators,   through
intermediaries (generally  quasi-governmental  agencies) that pool and repackage
the participation interests in the form of securities,  to investors such as the
Bank.  The  quasi-governmental  agencies  guarantee the payment of principal and
interest to investors and include the FHLMC,  the Government  National  Mortgage
Association  ("GNMA") and FNMA. Expected maturities will differ from contractual
maturities due to scheduled  repayments and because borrowers may have the right
to call or prepay obligations with or without prepayment penalties.

         Investment Portfolio. The following table sets forth the carrying value
of the  Bank's  investments.  See  Notes 3 and 4 to the  Company's  consolidated
financial statements included in the Company's Annual Report to Stockholders for
the fiscal year ended  September 30, 1999,  which is filed as Exhibit 13 to this
document.

                                                        At September 30,
                                                        ----------------
                                                         1999     1998
                                                       -------   -------
                                                        (In thousands)
Investments securities held-to-maturity:
U.S. Agency Securities .............................   $ 2,168   $ 2,662
State and local government .........................        99        99
                                                       -------   -------
      Total investment securities held-to-maturity .     2,267     2,761

Investment securities available for sale:
FHLMC Stock ........................................       141       134
Corporate Bonds ....................................       391        --
U.S. Agency Securities .............................     8,141        --
                                                       -------   -------
      Total investment securities available-for-sale     8,673       134

Interest-bearing deposits ..........................     1,347     3,400
FHLB stock .........................................       419       261
Mortgage-backed securities held-to-maturity ........     1,755     1,891
                                                       -------   -------
      Total investments ............................   $14,461   $ 8,447
                                                       =======   =======


                                       10
<PAGE>



         The following table sets forth certain information  regarding scheduled
maturities,  carrying  values,  approximate  fair values,  and weighted  average
yields for the Bank's investments at September 30, 1999 by contractual maturity.
The following  table does not take into  consideration  the effects of scheduled
repayments or the effects of possible prepayments.
<TABLE>
<CAPTION>
                                                                                                                 Total
                              One Year or Less   One to Five Years Five to Ten Years More than Ten Years    Investment Securities
                              ----------------   ----------------- ----------------- -------------------    ---------------------
                                        Weighted          Weighted         Weighted            Weighted          Weighted
                               Carrying  Average Carrying  Average Carrying Average  Carrying   Average  Carrying Average    Market
                                 Value    Yield   Value    Yield    Value   Yield     Value     Yield    Value   Yield     Value
                                 -----    -----   -----    -----    -----   -----   ----------   -----    -----   -----     -----
<S>                          <C>         <C>    <C>        <C>    <C>       <C>    <C>         <C>      <C>         <C>   <C>
U.S. Agency Securities - Held
     to Maturity              $    --       -- % $ 1,249    6.15%  $  919    2.78%  $    --       -- %   $ 2,168     5.00% $ 2,071

State and local government -
     Held to Maturity                                                                    99     6.04          99     6.04      107
U. S. Agency Securities
     - Available-for-Sale                          3,420    5.80    3,855    6.64       866     5.25       8,141     6.10    8,141
Corporate Bonds -
     Available-for-Sale                                                                 391     7.01         391     7.01      391
FHLMC stock                       141     1.09                                                               141     1.09      141
Interest-bearing deposits       1,347     4.27                                                             1,347     4.27    1,347
FHLB stock                                                                              419     5.01         419     5.01      419
Mortgage-backed securities         58     5.50       211    6.00                      1,486     6.50       1,755     6.41    1,728
                              -------     ----   -------    ----   ------    ----   -------     ----     -------     ----  -------
     Total investments        $ 1,546     4.03%  $ 4,880    5.90%  $4,774    5.91%  $ 3,261     6.01%    $14,461     5.73% $14,345
                              =======     ====   =======    ====   ======    ====   =======     ====     =======     ====  =======
</TABLE>


                                       11

<PAGE>

Sources of Funds

         General.  Deposits  are the Bank's major  external  source of funds for
lending and other investment  purposes.  Funds are also derived from the receipt
of  payments  on loans and  prepayment  of loans and  maturities  of  investment
securities  and  mortgage-backed   securities  and  borrowings  and  operations.
Scheduled  loan principal  repayments  are a relatively  stable source of funds,
while  deposit  inflows and  outflows  and loan  prepayments  are  significantly
influenced by general interest rates and market conditions.

         Consumer and commercial deposits are attracted  principally from within
the Bank's  primary  market area  through the offering of a selection of deposit
instruments including checking accounts,  regular savings accounts, money market
accounts, and term certificate accounts. IRA accounts are also offered.

         Certificates  of Deposit.  The following  table indicates the amount of
the Bank's  certificates  of deposit of $100,000 or more by time remaining until
maturity as of September 30, 1999.

                                         Certificates
Maturity Period                           of Deposit
---------------                         --------------
                                        (In thousands)
Within three months............                $100
Three through six months.......                  --
Six through twelve months......                 986
Over twelve months.............                 476
                                           --------
                                           $  1,562
                                           ========

         Borrowings.  Advances (borrowings) may be obtained from the FHLB of New
York to supplement the Bank's supply of lendable  funds.  Advances from the FHLB
of New York are typically secured by a pledge of the Bank's stock in the FHLB of
New York, a portion of the Bank's first mortgage loans, and other assets.

         The following table sets forth the terms of the Bank's  short-term FHLB
advances.

                                             During the year ended September 30,
                                             -----------------------------------
                                                         1999      1998
                                                         ----      ----
                                                    (Dollars in thousands)

Balance at period end ..........................       $6,368       $--
Average balance outstanding during the period ..        3,962        --
Maximum amount outstanding at any month-end
  During the period ............................        7,972        --
Weighted average interest rate during the period         5.48%       --%

                                       12
<PAGE>

Personnel

         At  September  30,  1999 the Bank had 17  full-time  employees  and one
part-time employee. None of the Bank's employees are represented by a collective
bargaining  group.  The Bank believes that its  relationship  with  employees is
good.

Regulation

         Set forth below is a brief  description  of certain laws that relate to
the Company and the Bank.  The  description  is not complete and is qualified in
its entirety by references to applicable laws and regulation.

Holding Company Regulation

         General.  The Company is required to register and file reports with the
OTS and is subject to regulation and  examination  by the OTS. In addition,  the
OTS has enforcement  authority over the Company and any non-savings  institution
subsidiaries.  This permits the OTS to restrict or prohibit  activities  that it
determines  to be a  serious  risk to the  Bank.  This  regulation  is  intended
primarily for the protection of the Bank's depositors and not for the benefit of
stockholders of the Company.

         Qualified  Thrift  Lender  ("QTL")  Test.  As the Company owns only one
savings institution,  it is able to diversify its operations into activities not
related to banking,  but only so long as the Bank satisfies the QTL test. If the
Company controlled more than one savings institution,  it would lose the ability
to diversify its operations  into  nonbanking  related  activities,  unless such
other savings  institutions  each also  qualified as a QTL or were acquired in a
supervised  acquisition.  See "-- Savings  Institution  Regulation  -- Qualified
Thrift Lender Test."

Savings Institution Regulation

         General. As a federally  chartered,  SAIF-insured  savings institution,
the Bank is subject to extensive  regulation by the OTS and the Federal  Deposit
Insurance  Corporation  ("FDIC").  Lending activities and other investments must
comply with various federal and state statutory and regulatory requirements. The
Bank is also subject to certain reserve requirements promulgated by the Board of
Governors of the Federal Reserve System ("Federal Reserve").

         Insurance of Deposit Accounts.  The Bank's deposit accounts are insured
by the SAIF to a maximum of $100,000 for each insured  member (as defined by law
and  regulation).  Insurance  of deposits may be  terminated  by the FDIC upon a
finding that the institution has engaged in unsafe or unsound  practices,  is in
an unsafe or unsound  condition  to  continue  operations  or has  violated  any
applicable law, regulation,  rule, order or condition imposed by the FDIC or the
institution's primary regulator.

         As a member of the  SAIF,  the Bank pays an  insurance  premium  to the
FDIC. The FDIC also maintains  another  insurance  fund, the Bank Insurance Fund
("BIF"), which primarily insures commercial bank deposits. The deposit insurance
assessment for most SAIF members is .064% of deposits on an annual basis through
the end of  1999.  During  this  same  period,  BIF  members  will  be  assessed
approximately  .013%  of  deposits.  After  1999,  assessments  for BIF and SAIF
members should be the

                                       13
<PAGE>

same. It is expected  that these  continuing  assessments  for both SAIF and BIF
members  will  be  used  to  repay   outstanding   Financing   Corporation  bond
obligations.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) core capital equal to at least 4% of total
adjusted assets, and (3) risk-based  capital equal to 8% of total  risk-weighted
assets.  The Bank was in compliance  with all of its capital  requirements as of
September 30, 1999.

         Dividend and Other Capital  Distribution  Limitations.  OTS regulations
require  the  Bank  to  give  the OTS 30 days  advance  notice  of any  proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory  powers to  prohibit  the  payment of  dividends  by the Bank to the
Company.  In  addition,  the Bank may not declare or pay a cash  dividend on its
capital  stock if the effect  would be to reduce the Bank's  regulatory  capital
below the amount required for the liquidation account established at the time of
the conversion from mutual to stock form.

         In the event the Bank's capital falls below the Bank's fully  phased-in
requirement  or the OTS notifies the Bank that it is in need of more than normal
supervision,   the  Bank's  ability  to  make  capital  distributions  could  be
restricted.  In addition, the OTS could prohibit a proposed capital distribution
by any institution, which would otherwise be permitted by the regulation, if the
OTS  determines  that such  distribution  would  constitute an unsafe or unsound
practice.

         Qualified  Thrift  Lender  Test.  Savings   institutions  must  meet  a
qualified thrift lender ("QTL") test. If the Bank maintains an appropriate level
of qualified thrift investments  ("QTIs") (primarily  residential  mortgages and
related  investments,   including  certain   mortgage-related   securities)  and
otherwise  qualify as a QTL,  the Bank will  continue  to enjoy  full  borrowing
privileges from the FHLB of New York. The required  percentage of QTIs is 65% of
portfolio assets (defined as all assets minus intangible  assets,  property used
by the  institution in conducting its business and liquid assets equal to 10% of
total assets).  Certain assets are subject to a percentage  limitation of 20% of
portfolio assets. In addition,  savings institutions may include shares of stock
of the  FHLBs,  FNMA,  and  FHLMC  as  QTIs.  Compliance  with  the QTL  test is
determined  on a monthly  basis in nine out of every 12 months.  As of September
30, 1999, the Bank was in compliance with its QTL requirement.

         Federal   Reserve.   The  Federal   Reserve   requires  all  depository
institutions  to  maintain  noninterest-bearing  reserves  at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking  accounts) and non-personal time deposits.  The balances  maintained to
meet the  reserve  requirements  imposed by the  Federal  Reserve may be used to
satisfy liquidity requirements that are imposed by the OTS.

                                       14
<PAGE>

Item 2. Description of Property
-------------------------------

(a)      Properties.

         The Bank operates from its main office and one branch office.

                                                      Leased or
                         Location                       Owned
                         --------                       -----


             MAIN OFFICE:
             789 Farnsworth Avenue
             Bordentown, NJ  08505                      Owned

             BRANCH OFFICE:
             4 Broad Street
             Florence, NJ  08518                        Owned


(b)      Investment Policies.

         See "Item 1.  Description of Business" above for a general  description
of the Bank's  investment  policies and any  regulatory  or Board of  Directors'
percentage  of assets  limitations  regarding  certain  investments.  The Bank's
investments are primarily  acquired to produce  income,  and to a lesser extent,
possible capital gain.

     (1)  Investments  in Real Estate or Interests in Real Estate.  See "Item 1.
Description  of  Business - Lending  Activities,"  and "Item 2.  Description  of
Property."

     (2)  Investments  in Real Estate  Mortgages.  See "Item 1.  Description  of
Business - Lending Activities."

     (3) Securities of or Interests in Persons  Primarily Engaged in Real Estate
Activities. See "Item 1. Description of Business - Lending Activities."

(c)      Description of Real Estate and Operating Data.

         Not applicable.

Item 3. Legal Proceedings
-------------------------

         There are various  claims and lawsuits in which the Company or the Bank
are  periodically  involved,  such as  claims  to  enforce  liens,  condemnation
proceedings  on properties in which the Bank holds  security  interests,  claims
involving  the making and  servicing of real  property  loans,  and other issues
incident to the Bank's business. In the opinion of management,  no material loss
is expected from any of such pending claims or lawsuits.

                                       15



<PAGE>



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

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.

                                     PART II

Item  5.  Market for Common Equity and Related Stockholder Matters
------------------------------------------------------------------

(a)  The  information   contained  under  the  section  captioned  "Stock  Price
Information" in the Company's  Annual Report to Stockholders for the fiscal year
ended  September  30, 1999 (the  "Annual  Report"),  is  incorporated  herein by
reference.

(b)      Not applicable.

Item  6.  Management's Discussion and Analysis or Plan of Operation
-------------------------------------------------------------------

         The  information  contained  in  the  section  captioned  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Annual Report is incorporated herein by reference.

Item  7.  Financial Statements
------------------------------

         The  Registrant's   financial  statements  listed  under  Item  13  are
incorporated herein by reference.

Item  8.  Changes  in and  Disagreements  with  Accountants  On  Accounting  and
--------------------------------------------------------------------------------
          Financial Disclosure.
          ---------------------

         On October 20, 1998, the Registrant retained Kronick Kalada Berdy & Co.
as its independent  public accountants for the purpose of auditing its financial
statements  for the fiscal  year  ended  September  30,  1998 and  providing  an
independent  auditors'  report  thereon.  The Registrant did not consult Kronick
Kalada Berdy & Co. of the matters set forth in Item  304(a)(2) of Regulation S-B
prior to that date.  Prior to becoming a public  company in September  1998, the
financial  statements  of  the  Registrant's  wholly-owned  subsidiary,  Peoples
Savings Bank, were audited by Lewis W. Parker, III, independent certified public
accountant. Mr.
Parker is still  actively  engaged by the  Registrant for accounting and related
services.

         In connection with the audits of the Banks fiscal years ended September
30,  1997 and 1996,  the last two years  audited by Lewis W.  Parker,  III,  and
through  October 20, 1998,  there were no  disagreements  with Mr. Parker on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures  that, if not resolved to his  satisfaction,  would
have  caused  him to make  reference  to the  subject  of such  disagreement  in
connection with his reports. In addition,  during these periods,  the reports of
Lewis W. Parker, III on the financial statements of Peoples Savings Bank did not
contain an adverse  opinion or disclaimer of opinion,  and were not qualified or
modified as to uncertainty, audit scope or accounting principles.



                                       16
<PAGE>

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
--------------------------------------------------------------------------------
        With Section 16(a) of the Exchange Act
        --------------------------------------

         The information  contained under the section  captioned  "Proposal I --
Election of Directors" and "Voting  Securities and Principal  Holders Thereof --
Security  Ownership of Certain  Beneficial  Owners" in  Registrant's  definitive
proxy  statement for  Registrant's  Annual Meeting of  Stockholders  (the "Proxy
Statement") is incorporated herein by reference.

Item 10.  Executive Compensation
--------------------------------

         The  information  contained under the section  captioned  "Director and
Executive  Compensation"  in the  Proxy  Statement  is  incorporated  herein  by
reference.

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal Holders Thereof" in the Proxy Statement.

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal  Holders  Thereof"  and to  the  first  table  under
                  "Proposal I -- Election of Directors" in the Proxy Statement.

         (c)      Management of Registrant knows of no  arrangements,  including
                  any  pledge by any person of  securities  of  Registrant,  the
                  operation of which may at a subsequent date result in a change
                  in control of Registrant.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
reference  to  the  section   captioned   "Certain   Relationships  and  Related
Transactions" in the Proxy Statement.

Item 13.  Exhibits, List, and Reports on Form 8-K
--------------------------------------------------

         (a)      The following documents are filed as a part of this report.

                  1.       The following financial  statements and the report of
                           independent accountants of the Registrant included in
                           the  Registrants  Annual Report to  Stockholders  are
                           incorporated herein by reference.

                                       17
<PAGE>
<TABLE>
<CAPTION>
<S>             <C>      <C>

                           Independent Auditors' Report

                           Consolidated  Statements of Financial Condition as of
                           September 30, 1999 and 1998.

                           Consolidated Statements of Income for the Years Ended September 30, 1999 and
                           1998

                           Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
                           September 30, 1999 and 1998

                           Consolidated  Statements  of Cash Flows for the Years
                           Ended September 30, 1999 and 1998.

                           Notes to Consolidated Financial Statements

                  2.       Schedules omitted as they are not applicable.

                  3.       The  following  exhibits  are  included  in this  Report or
                           incorporated herein by reference:

                           (a)      List of Exhibits:

                            3(i)    Articles of Incorporation of Farnsworth Bancorp, Inc. *
                            3(ii)   Bylaws of Farnsworth Bancorp, Inc. *
                           10.1     Employment Agreement with Gary N. Pelehaty *
                           10.2     Employment Agreement with Charles Alessi *
                           10.3     Severance Agreement with Elaine Denelsbeck *
                           10.4     Farnsworth Bancorp, Inc. 1999 Stock Option Plan**
                           10.5     Peoples Savings Bank Restricted Stock Plan**
                           13       Annual Report to Stockholders for the
                                    fiscal year ended September 30, 1999
                           21       Subsidiaries of the Registrant (See "Item 1 - Description of Business")
                           23       Consent of Kronick Kalada Berdy & Co.
                           27       Financial Data Schedule (electronic filing only)
</TABLE>

------------------
*    Incorporated by reference to the Registration  Statement on Form SB-2 (File
     No. 333-56689) declared effective by the SEC on August 10, 1999.

**   Incorporated  by reference to the exhibits to the Proxy  Statement  for the
     Annual Meeting of Stockholders held on April 6, 1999 and filed with the SEC
     on February 22, 1999 (File No. 0-24621).

          (b)  No reports on Form 8-K were filed  during the last quarter of the
               period covered by this report.


<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the registrant has duly caused this report to
be signed on its behalf by the  undersigned,  thereunto  duly  authorized  as of
December 27, 1999.

                                  FARNSWORTH BANCORP, INC.


                                  By: /s/ Gary N. Pelehaty
                                     -------------------------------------------
                                     Gary  N. Pelehaty
                                     President and Chief Executive Officer
                                     (Duly Authorized Representative)

         Pursuant to the requirement of the Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated as of December 27, 1999.

<TABLE>
<CAPTION>
<S>                                                          <C>
/s/ Gary N. Pelehaty                                          /s/ Charles Alessi
--------------------------------------------                  --------------------------------------------------------
Gary N. Pelehaty                                              Charles Alessi
President and Chief Executive Officer                         Vice President, Secretary and Treasurer
(Principal Executive Officer)                                 (Principal Accounting and Financial Officer)


/s/ Herman Gutstein                                           /s/ George G. Aaronson, Jr.
--------------------------------------------                  --------------------------------------------------------
Herman Gutstein                                               George G. Aaronson, Jr.
Chairman of the Board                                         Director


/s/ G. Edward Koenig, Jr.                                     /s/ Edgar N. Peppler
--------------------------------------------                  --------------------------------------------------------
G. Edward Koenig, Jr.                                         Edgar N. Peppler
Director                                                      Director


/s/ William H. Wainwright, Jr.                                /s/ Charles E. Adams
--------------------------------------------                  --------------------------------------------------------
William H. Wainwright, Jr.                                    Charles E. Adams
Director                                                      Director
</TABLE>