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, 2000
                                           ------------------

[X]  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. [X]

         The issuer's revenues for its most recent fiscal year were $4,135,843.

         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 19, 2000, was $2.96 million.

         As of December  19,  2000,  there were issued and  outstanding  360,866
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  Registrant's  Annual Report to Stockholders for the fiscal
     year ended September 30, 2000. (Part II)
2.   Portions of the Registrant's Proxy Statement for the 2001 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,  originally  founded in 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:


                                                  At September 30,
                                  ----------------------------------------------
                                        2000                        1999
                                  -----------------         -------------------
                                      $          %             $            %
                                  -------     -----         -------      ------
                                               (Dollars in thousands)
Type of Loans:
-------------
  Residential.................... $27,305      67.2%        $27,443       68.6%
  Construction...................     861       2.1           1,886        4.7
  Commercial real estate.........   4,004       9.9           3,743        9.4
  Commercial Business............      71       0.2             271        0.7
  Consumer loans:
    Home equity..................   7,897      19.4           6,261       15.6
    Savings account loans........     161       0.4             172        0.4
    Automobile loans ............      56       0.1              50        0.1
    Other........................     254       0.7             205        0.5
                                  -------     -----         -------      -----
                                   40,609     100.0%         40,031      100.0%
                                  -------     =====         -------      =====
Less:
  Loans in process...............     377                       830
  Deferred loan origination fees
         and costs...............     196                       193
  Allowance for loan losses......     186                       176
                                  -------                   -------
Total loans, net................. $39,850                   $38,832
                                  =======                   =======

         Loan Maturity. The following table sets forth the estimated maturity of
the Bank's loan  portfolio  at September  30,  2000.  The table does not include
prepayments  or  scheduled  principal  repayments.

                                       3
<PAGE>

Prepayments and scheduled principal repayments on loans totaled $7.4 million for
the year ended September 30, 2000.  Adjustable-rate  mortgage loans are shown as
maturing based on contractual maturities.


                              Due      Due after
                            within     1 through   Due after
                            1 year      5 years     5 years     Total
                            ------      -------     -------     -----
                                          (In thousands)

1-4 family mortgage......   $1,470      $5,966      $19,071    $26,507
Construction.............      861          --           --        861
Commercial real estate...       --       1,069        3,733      4,802
Commercial business......       20          51           --         71
Consumer.................      844         294        7,230      8,368
                            ------      ------      -------    -------
     Total...............   $3,195      $7,380      $30,034    $40,609
                            ======      ======      =======    =======


         The following table sets forth the dollar amount of all loans due after
September  30, 2001,  which have  pre-determined  interest  rates and which have
floating or adjustable interest rates.


                                                    Floating or
                                   Fixed Rates    Adjustable Rates    Total
                                   -----------    ----------------    -----
                                                  (In thousands)
Residential...................       $24,647           $390          $25,037
Construction..................            --             --               --
Commercial real estate........         4,622            180            4,802
Commercial business...........            51             --               51
Consumer......................         7,118            406            7,524
                                     -------            ---          -------
    Total.....................       $36,438           $976          $37,414
                                     =======           ====           ======

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, 2000, the Bank had $546,000 in ARM loans.

         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.

                                       4
<PAGE>

         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 $807,000.  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 limits 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
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 long- term 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  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

                                       5
<PAGE>

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,  2000,   commitments  to  cover
originations  of  mortgage  loans  totaled  $488,000.  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  $807,000 at September  30,  2000.  At  September  30,  2000,  the
aggregate loans of the Bank's five largest borrowers had outstanding balances of
between $292,000 and $670,000.

                                       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,  2000,  interest  income that would have been
recorded on loans accounted for on a non-accrual  basis under the original terms
of such loans was $10,097.

<TABLE>
<CAPTION>
                                                                                  At September 30,
                                                                                -----------------------
                                                                                 2000            1999
                                                                                -------         -------
                                                                                 (Dollars in thousands)
<S>                                                                           <C>             <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
  Permanent loans secured by 1-4 family units..........................         $   125         $   404
All other mortgage loans...............................................               8              --
                                                                                -------         -------
Total..................................................................         $   133         $   404
                                                                                =======         =======

Accruing loans which are contractually past due 90 days or more:
Mortgage loans:
  Permanent loans secured by 1-4 family units..........................         $    87         $   120
Total..................................................................              87             120
Total non-accrual and accrual loans....................................             220             524
Real estate owned......................................................              --              88
Total nonperforming assets.............................................             220             612
Total non-accrual and accrual loans to net loans.......................            0.55%           1.35%
Total non-accrual and accrual loans to total assets....................            0.38%           0.94%
Total non performing assets to total assets............................            0.38%           1.09%
</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 may be designated  "special
mention"   because  of  potential   weakness  that  do  not  currently   warrant
classification in one of the aforementioned categories.

                                       7
<PAGE>

         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, 2000,  the Bank had $220,000 of loans  classified as
special mention. No loans were classified as substandard, doubtful or as loss at
September 30, 2000.

         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>
                                                               At September 30,
                                         ---------------------------------------------------------
                                                    2000                               1999
                                         ------------------------------  -------------------------
                                                         Percent of                   Percent of
                                                        Allowance in                  Allowance in
                                                       Each Category                 Each Category
                                                          to Total                     to Total
                                         Amount          Allowance       Amount       Allowance
                                         ------          ---------       ------       ---------
                                                           (Dollars in thousands)
<S>                                     <C>             <C>             <C>             <C>
Residential.........................      $118            63.44%          $110            62.50%
Commercial real estate..............        17             9.14             17             9.66
Commercial Business.................        41            22.04             41            23.29
Consumer ...........................        10             5.38              8             4.55
                                          ----           ------           ----           ------
    Total allowance for
      loan losses...................      $186           100.00%          $176           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:

<TABLE>
<CAPTION>
                                                                             At September 30,
                                                                          ------------------------
                                                                           2000             1999
                                                                          ------           ------
                                                                          (Dollars in thousands)
<S>                                                                     <C>              <C>
Total loans outstanding (1)...................................            $40,233          $39,201
                                                                          =======          =======
Average loans outstanding(1)..................................            $39,951          $35,122
                                                                          =======          =======

Allowance balances (at beginning of period)...................               $176             $135
Provision:
 Residential..................................................                  8               26
 Commercial real estate.......................................                 --               13
 Commercial Business..........................................                 --               --
 Consumer.....................................................                  2                7
Net recoveries (charge offs)..................................                 --               (5)
                                                                             ----             ----
Allowance balance (at end of period)..........................               $186             $176
                                                                             ====             ====
Allowance for loan losses as a percent of
  total loans outstanding.....................................                .46%             .45%
Net loans charged off as a percent of average
  loans outstanding...........................................                  0%             .01%
</TABLE>

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

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.

                                       9

<PAGE>

         The   Bank's    investment    securities    "available-for-sale"    and
"held-to-maturity"  portfolios at September 30, 2000 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, 2000,  which is filed as Exhibit 13 to this
Form 10-KSB.

<TABLE>
<CAPTION>
                                                                     At September 30,
                                                                  -----------------------
                                                                   2000            1999
                                                                  -------         -------
                                                                       (In thousands)
<S>                                                             <C>             <C>
Investments securities held-to-maturity:
  U.S. agency securities..................................        $ 2,174         $ 2,168
  State and local government..............................             99              99
                                                                  -------         -------
     Total investment securities held-to-maturity.........          2,273           2,267

Investment securities available-for-sale:
  FHLMC stock.............................................            146             141
  Corporate bonds.........................................            386             391
  U.S. agency securities..................................          8,228           8,141
                                                                  -------         -------
      Total investment securities available-for-sale......          8,760           8,673

Interest-bearing deposits.................................          2,903           1,347
FHLB stock................................................            458             419
Mortgage-backed securities held-to-maturity...............          1,468           1,755
                                                                  -------         -------
      Total investments...................................          4,829           3,521
                                                                  -------         -------
                                                                  $15,862         $14,461
                                                                  =======         =======
</TABLE>
                                       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, 2000 by contractual maturity.
The following  table does not take into  consideration  the effects of scheduled
repayments or the effects of possible prepayments.

<TABLE>
<CAPTION>
                                                                                                More than             Total
                                 One Year or Less    One to Five Years  Five to Ten Years       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
                                -----      -----      -----    -----      -----    -----    -----   -----    -----   -----   -----
                                                                       (Dollars in thousands)

<S>                            <C>        <C>        <C>        <C>     <C>        <C>   <C>        <C>   <C>        <C>   <C>
U.S. agency securities -
   Held to Maturity............ $   --       --%      $1,977     4.88%   $  197     2.68%     --       --% $ 2,174   4.68% $ 2,021
State and local government -
   Held to Maturity............     --       --           --       --        --       --      99     6.04       99    6.04      108
U.S. agency securities -
   Available-for-Sale..........     --       --        4,391     5.84     2,940     6.77     897     5.52    8,228    6.14    8,228
Corporate bonds -
  Available-for-Sale...........     --       --           --       --        --       --     386     7.01      386    7.01      386

FHLMC stock....................    146     1.22           --       --        --       --      --       --      146    1.22      146
Interest-bearing deposits......  2,903     6.01           --       --        --       --      --       --    2,903    6.01    2,903
FHLB stock.....................     --       --           --       --        --       --     458     8.01      458    8.01      458
Mortgage-backed securities.....     --       --          144     6.63        --       --   1,324     6.40    1,468    4.95   1 ,443
                                ------     ----       ------     ----    ------     ----  ------     ----  -------    ----  -------
  Total investments............ $3,049     5.78%      $6,512     5.57%   $3,137     6.51% $3,164     6.45% $15,862    5.97% $15,693
                                 =====     ====       ======     ====    ======     ====  ======     ====  =======    ====  =======
</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, 2000.


                                               Certificates
         Maturity Period                        of Deposit
         ---------------                        ----------
                                              (In thousands)

         Within three months...............        $1,999
         Three through six months..........            --
         Six through twelve months.........         1,385
         Over twelve months................           356


         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,
                                                            --------------------
                                                             2000          1999
                                                             ----          ----
                                                          (Dollars in thousands)

Balance at period end................................       $5,750        $6,368
Average balance outstanding during the period........        6,663         3,962
Maximum amount outstanding
     at any month-end during the period..............        7,750         7,972
Weighted average interest rate during the period.....        5.79%         5.48%

Subsidiary Activity

         In  addition  to the Bank,  the  Company  has one  subsidiary,  Peoples
Financial  Services,  Inc., a New Jersey  corporation  which was incorporated on
November 27, 2000.  Peoples  Financial  Services,  Inc.  was  organized  for the
purpose of providing  securities  brokerage and investment advisory services and
products

                                       12
<PAGE>

to customers of the Bank and the general  public.  Peoples  Financial  Services,
Inc.  has entered into a networking  agreement  with a third party,  which began
offering such  products and services from the Bank's main and branch  offices in
December 2000.

Personnel

         At  September  30,  2000  the  Bank had 20  full-time  employees  and 1
part-time employee. None of the Bank's employees are represented by a collective
bargaining group.

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.

         Financial  Modernization.  On November 12, 1999,  the President  signed
into law the  Gramm-Leach-Bliley  Financial  Services  Modernization Act of 1999
(the "GLB Act"), which repealed the prohibitions  against bank affiliations with
securities and insurance firms.  The GLB Act authorizes  qualifying bank holding
companies to become  financial  holding  companies  and thereby  affiliate  with
securities firms and insurance companies and engage in other activities that are
financial  in  nature.  The GLB Act  defines  financial  in  nature  to  include
securities underwriting,  dealing and market making; sponsoring mutual funds and
investment  companies;  insurance  underwriting  and  agency;  merchant  banking
activities,  and activities  that the Federal Reserve Board has determined to be
closely related to banking. A qualifying national bank also may engage,  subject
to limitations on investment,  in activities that are financial in nature, other
than insurance underwriting, insurance company portfolio investment, real estate
development,  and real estate investment,  through a financial subsidiary of the
bank.

         The GLB Act  repeals the  "unitary  savings  and loan  holding  company
exemption"  from the  restrictions  imposed by the Home  Owners' Loan Act on the
business activities of savings and loan holding companies.  However, the GLB Act
grandfathers from this provision companies that were already unitary savings and
loan  holding  companies  before  May 4, 1999 or that  result  from an  internal
reorganization of such preexisting unitary holding companies.  Since the Company
was a unitary  savings and loan holding company before May 4, 1999, it qualifies
as a  grandfathered  unitary  savings and loan  holding  company.  Grandfathered
unitary  savings  and  loan  holding  companies  have no  restrictions  on their
activities at the holding  company  level.  However,  non-grandfathered  unitary
savings and loan holding companies may engage only in activities  authorized for
savings  and loan  holding  companies  under  the Home  Owners'  Loan Act and in
banking,  securities,  insurance and merchant banking  activities  permitted for
financial holding companies under the GLB Act.

         The GLB Act imposes  significant new financial privacy  obligations and
reporting requirements on all financial institutions,  including federal savings
associations.  Specifically,  the  statute,  among other  things,  will  require
financial  institutions  (a) to establish  privacy policies and disclose them to
customers both at the  commencement of a customer  relationship and on an annual
basis and (b) to permit customers to opt out of

                                       13
<PAGE>

a financial institution's disclosure of financial
information to nonaffiliated  third parties.  The federal  financial  regulators
have promulgated final  regulations  implementing  these provisions,  which will
become effective July 1, 2001.

         The GLB Act also enacts  significant  changes to the Federal  Home Loan
Bank System.  The GLB Act expands the permissible uses of Federal Home Loan Bank
advances by community  financial  institutions (under $500 million in assets) to
include  funding  loans  to  small  businesses,  small  farms  and  small  agri-
businesses. In addition, the GLB Act makes membership in a regional Federal Home
Loan Bank voluntary for federal savings associations.

         Activities  Restrictions.  As a grandfathered  unitary savings and loan
holding  company  under the GLB Act, the Company is generally not subject to any
restrictions on its business activities or those of its non-savings  institution
subsidiaries.  However, if the Company were to fail to meet the Qualified Thrift
Lender Test, then it would become subject to the activities  restrictions of the
Home Owners' Loan Act applicable to multiple holding companies.  See "Regulation
of the Bank -- Qualified Thrift Lender Test."

         If the Company were to acquire control of another savings  association,
it would  lose  its  grandfathered  status  under  the GLB Act and its  business
activities  would  be  restricted  to  certain   activities   specified  by  OTS
regulation,  which include performing  services and holding properties used by a
savings institution  subsidiary,  certain activities  authorized for savings and
loan  holding  companies  as  of  March  5,  1987,  and  nonbanking   activities
permissible for bank holding companies  pursuant to the Bank Holding Company Act
of 1956 (the "BHC Act") or authorized for financial holding  companies  pursuant
to the GLB Act.  Furthermore,  no company  may  acquire  control of the  Company
unless the acquiring  company was a unitary  savings and loan holding company on
May 4, 1999 (or became a unitary savings and loan holding company pursuant to an
application pending as of that date) or the acquiring company is only engaged in
activities that are permitted for multiple savings and loan holding companies or
for financial holding companies under the BHC Act as amended by the GLB Act.

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 FDIC  administers  two  separate
deposit insurance funds. Generally,  the Bank Insurance Fund (the "BIF") insures
the  deposits of  commercial  banks and the SAIF insures the deposits of savings
institutions.  The FDIC is authorized to increase deposit insurance  premiums if
it determines  such increases are appropriate to maintain the reserves of either
the SAIF or BIF or to fund the administration of the FDIC. In addition, the FDIC
is authorized to levy emergency special assessments on BIF and SAIF members. The
FDIC has set the deposit insurance assessment rates for SAIF-member institutions
for the  first  six  months  of 2000 at 0% to .027% of  insured  deposits  on an
annualized basis, with the assessment rate for most savings  institutions set at
0%.

         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, 2000.

                                       14
<PAGE>


         Dividend and Other Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
capital distributions including cash dividends.

         A  savings  association  that is a  subsidiary  of a  savings  and loan
holding company, such as the Bank, must file an application or a notice with the
OTS at least 30 days before making a capital distribution.  Savings associations
are not  required  to file  an  application  for  permission  to make a  capital
distribution  and need only file a notice if the following  conditions  are met:
(1) they are eligible for expedited  treatment under OTS  regulations,  (2) they
would  remain  adequately  capitalized  after the  distribution,  (3) the annual
amount of capital  distribution does not exceed net income for that year to date
added to retained net income for the two  preceding  years,  and (4) the capital
distribution  would not violate any  agreements  between the OTS and the savings
association  or any OTS  regulations.  Any  other  situation  would  require  an
application to the OTS.

         In addition, the OTS could prohibit a proposed capital distribution if,
after making the  distribution,  by any  institution,  which would  otherwise be
permitted by the regulation,  if the OTS determines that the distribution  would
constitute an unsafe or unsound practice.

         A federal  savings  institutions  is  prohibited  from making a capital
distribution if, after making the distribution the savings  institution would be
unable to meet any one of its minimum regulatory capital requirements.  Further,
a federal  savings  institution  cannot  distribute  regulatory  capital that is
needed for its liquidation account.

         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, 2000, 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.

                                       15

<PAGE>

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

(a)      Properties.

         The Bank operates from its main office and two branch offices.



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

            MAIN OFFICE:
            Bordentown, New Jersey                      Owned

            BRANCH OFFICES:
            Florence, New Jersey                        Owned
            Mount Laurel, New Jersey                    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.

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.

                                       16

<PAGE>

                                     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  Registrant's  Annual Report to Stockholders  for the fiscal
year ended September 30, 2000 (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
--------------------------------------------------------------------------------

         None.

                                    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 the  Registrant's  2001 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.

                                       17
<PAGE>

         (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 the Registrant  knows of no  arrangements,  including
any pledge by any person of securities of the Registrant, the operation of which
may at a subsequent date result in a change in control of the 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  independent  auditor's
report included in the Annual Report are incorporated herein by reference.
<TABLE>
<CAPTION>
<S>     <C>
         Independent Auditor's Report
         Consolidated Statements of Financial Condition as of September 30, 2000 and 1999
         Consolidated Statements of Income and Comprehensive Income for the Years Ended
                  September 30, 2000 and 1999
         Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
                  September 30, 2000 and 1999
         Consolidated Statements of Cash Flows for the Years Ended September 30, 2000 and 1999
         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, 2000
         21       Subsidiaries of the Registrant
         23       Consent of Kronick Kalada Berdy & Co.
         27       Financial Data Schedule (electronic filing only)

</TABLE>

                                       18

<PAGE>


          ------------------
          *    Incorporated by reference to the  Registration  Statement on Form
               SB-2 (File No. 333-56689) declared effective by the SEC on August
               10, 1998.
          **   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) During the quarter ended September 30, 2000, the Registrant filed a
Current  Report on Form 8-K to report the completion of the repurchase of 5%, or
18,992 shares, of its outstanding common stock in the open market.

                                       19

<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 28, 2000.

                                       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 28, 2000.

<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>