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FIRST NILES FINANCIAL, INC.

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|                                                                                          | Page No.
|----------------------------------------------------------------------------------------- | --------
|                                                                                          |         
|President's Message                                                                       | 1       
|Selected Consolidated Financial Information                                               | 2       
|Management's Discussion and Analysis of Financial      Condition and Results of Operation | 4       
|Report of Independent Certified Public Accountants                                        | 15      
|Consolidated Financial Statements                                                         | 16      
|Notes to Consolidated Financial Statements                                                | 20      
|Stockholder Information                                                                   | 45      
|Corporate Information                                                                     | 46      

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March 16, 2001

| | Sincerely,                              
| | ----------------------------------------
| |                                         
| | /s/ William L. Stephens                 
| |                                         
| | WILLIAM L. STEPHENS                     
| | Chairman of the Board, President and CEO

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|                                                    | December 31,                           
|--------------------------------------------------- | ---------------------------------------
|                                                    | 2000                                   
|                                                    | (In Thousands)                         
|Selected Financial Condition Data:                  |                                        
|                                                    |                                        
|Total assets                                        | $77,554                                
|Loans receivable, net                               | 35,740                                 
|Securities - held to maturity                       | 13,901                                 
|Securities - available for sale and FHLB stock      | 23,043                                 
|Deposits                                            | 52,194                                 
|Total borrowings                                    | 5,000                                  
|Stockholders' equity                                | 18,758                                 
|                                                    |                                        
|                                                    |                                        
|                                                    | Years Ended December 31,               
|                                                    | 2000                                   
|                                                    | (In Thousands Except Per Share Amounts)
|Selected Operations Data:                           |                                        
|                                                    |                                        
|Total interest income                               | $5,372                                 
|Total interest expense                              | 2,186                                  
|Net interest income                                 | 3,186                                  
|Provision (recovery) for loan losses                | 30                                     
|Net interest income after provision for loan losses | 3,156                                  
|Fees and service charges                            | 32                                     
|Gain on sales of investment securities              | 8                                      
|Other non-interest income                           | 16                                     
|Total non-interest income                           | 56                                     
|Total non-interest expense                          | 2,118                                  
|Income before taxes and extraordinary item          | 1,094                                  
|Income tax provision                                | 287                                    
|Net income                                          | $   807                                
|                                                    |                                        
|Earnings per share - basic and diluted              | $0.54                                  
|Dividends per share                                 | $0.41                                  

|(1) | Does not reflect the $6.00 per share capital distribution paid by the Company to stockholders on the common stock during the quarter ended December 31, 1999.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

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|                                                                                          | Years Ended December 31,
|----------------------------------------------------------------------------------------- | ------------------------
|                                                                                          | 2000                    
|Selected Financial Ratios and Other Data:                                                 |                         
|                                                                                          |                         
|Performance Ratios:                                                                       |                         
|Return on assets (ratio of net income to      average total assets)                       | 1.09%                   
|Return on equity (ratio of net income to      average equity)                             | 4.47                    
|Interest rate spread:                                                                     |                         
|Average during year                                                                       | 3.41                    
|End of year                                                                               | 2.73                    
|Net interest margin (net interest income divided      by average interest-earning assets) | 4.39                    
|Ratio of operating expense to average total assets                                        | 2.75                    
|Ratio of average interest-earning assets to average      interest-bearing liabilities     | 1.32                    
|                                                                                          |                         
|Quality Ratios:                                                                           |                         
|Non-performing assets to total assets at end of year                                      | 1.00%                   
|Non-performing loans to loans receivable, net,      end of year                           | 2.17                    
|Allowance for loan losses to non-performing loans,      end of year                       | 76.49                   
|Allowance for loan losses to loans receivable, net,      end of year                      | 1.66                    
|                                                                                          |                         
|Capital Ratios:                                                                           |                         
|Equity to total assets at end of year                                                     | 24.19%                  
|Average equity to average assets                                                          | 24.30                   
|                                                                                          |                         
|Other Data:                                                                               |                         
|Book value per common share outstanding                                                   | $  11.57                
|Dividends declared per share                                                              | $    0.41               
|Dividend payout ratio(3)                                                                  | 75.93%                  
|Number of full-service offices                                                            | 1                       

|(1) | Reflects the effect of the special capital distribution paid by the Company to stockholders in the amount of $6.00 per share during December 1999.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|
|(2) | Does not reflect the special capital distribution paid by the Company to stockholders in the amount of $6.00 per share during December 1999.      
|
|(3) | Dividends per share divided by earnings per common share and common share equivalent.                                                             
|

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|                                                                          | Year Ended December 31,  
|------------------------------------------------------------------------- | -------------------------
|                                                                          | 2000                     
|                                                                          | AverageOutstandingBalance
|                                                                          | (Dollars in Thousands)   
|Interest-Earning Assets:                                                  |                          
|Loans receivable(1)                                                       | $37,171                  
|Mortgage-backed and related securities                                    | 14,562                   
|Investment securities                                                     | 17,135                   
|FHLB stock                                                                | 350                      
|Interest-bearing deposits                                                 | 3,353                    
|Total interest-earning assets(1)                                          | 72,571                   
|Noninterest earnings assets                                               | 2,300                    
|Allowance for loan losses                                                 | (574)                    
|Total Assets                                                              | $74,297                  
|Interest-Bearing Liabilities:                                             |                          
|Savings deposits                                                          | $23,321                  
|Demand and NOW deposits                                                   | 3,123                    
|Certificate accounts                                                      | 27,471                   
|Borrowings                                                                | 923                      
|Total interest-bearing liabilities                                        | 54,838                   
|Noninterest-bearing liabilities                                           | 1,401                    
|Total Liabilities                                                         | 56,239                   
|Equity                                                                    | 18,058                   
|Total Liabilities and Equity                                              | $74,297                  
|Net interest income                                                       |                          
|Net interest rate spread                                                  |                          
|Net earning assets                                                        | $17,733                  
|Net yield on average interest-earning assets                              |                          
|Average interest-earning assets to average   interest-bearing liabilities |                          

|(1) | Calculated net of deferred loan fees, loan discounts and loans in process.  Includes non-accrual loans.
|--- | -------------------------------------------------------------------------------------------------------

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|                                       | Years Ended December 31,2000 vs. 1999
|-------------------------------------- | -------------------------------------
|                                       | Increase/(Decrease)Due to            
|                                       | Volume                               
|                                       | (Dollars in Thousands)               
|Interest-earning assets:               |                                      
|Loans receivable                       | $  (29)                              
|Mortgage-backed and related securities | (52)                                 
|Investment securities                  | (373)                                
|Interest-bearing deposits and other    | (331)                                
|Total interest-earning assets          | $(785)                               
|                                       |                                      
|Interest-bearing liabilities:          |                                      
|Savings deposits                       | $(25)                                
|Demand and NOW deposits                | -                                    
|                                       |                                      
|Borrowings                             | 17                                   
|Certificate accounts                   | 45                                   
|Total interest-bearing  liabilities    | $37                                  
|Net interest income                    |                                      

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---

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|                       | December 31, 2000  
|---------------------- | -------------------
|                       | Net Portfolio Value
|Changein Rate          | Amount             
|(Dollars in Thousands)
|                       |                    
|+300                   | $13,655            
|+200                   | 15,479             
|+100                   | 17,007             
|-                      | 18,319             
|-100                   | 19,042             
|-200                   | 19,651             
|-300                   | 20,032             

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> the strength of the United States economy in general and the strength of the local
> economies in which we conduct our operations;the effects of, and changes in, trade, monetary and fiscal policies and laws, including
> interest rate policies of the Federal Reserve Board;inflation, interest rate, market and monetary fluctuations;the timely development of and acceptance of new products and services of Home
> Federal 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 our
> products and services;the success of Home Federal 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);the impact of  technological changes;acquisitions;changes in consumer spending and saving habits; andour success at managing the risks involved in the foregoing.

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|                                                                                                                           | 2000      | 1999   
|-------------------------------------------------------------------------------------------------------------------------- | --------- | -------
|ASSETS                                                                                                                     |           |        
|Cash and cash equivalents:                                                                                                 |           |        
|Noninterest bearing                                                                                                        | $     969 | $1,610 
|Interest bearing                                                                                                           | 2,864     | 6,338  
|TOTAL CASH AND CASH EQUIVALENTS                                                                                            | 3,833     | 7,948  
|Securities:                                                                                                                |           |        
|Available for sale - at market                                                                                             | 22,677    | 16,515 
|Held to maturity - at cost                                                                                                 | 13,901    | 17,255 
|Loans receivable                                                                                                           | 35,740    | 36,863 
|Accrued interest receivable                                                                                                | 343       | 356    
|Federal Home Loan Bank stock, at cost                                                                                      | 366       | 340    
|Real estate investment - limited partnership, at equity                                                                    | 263       | 340    
|Prepaid expenses and other assets                                                                                          | 30        | 163    
|Prepaid federal income taxes                                                                                               | 60        | 222    
|Deferred income tax benefit                                                                                                | -         | 171    
|Premises and equipment, at cost less accumulated depreciation                                                              | 341       | 245    
|TOTAL ASSETS                                                                                                               | $77,554   | $80,418
|                                                                                                                           |           |        
|LIABILITIES                                                                                                                |           |        
|Deposits                                                                                                                   | $52,194   | $54,545
|Accrued interest payable                                                                                                   | 120       | 129    
|Accounts payable and other liabilities                                                                                     | 1,236     | 1,234  
|Federal Home Loan Bank advances                                                                                            | 5,000     | -      
|Note payable                                                                                                               | -         | 6,000  
|Deferred federal income tax liability                                                                                      | 246       | -      
|TOTAL LIABILITIES                                                                                                          | 58,796    | 61,908 
|                                                                                                                           |           |        
|STOCKHOLDERS' EQUITY                                                                                                       |           |        
|Stockholders' equity:                                                                                                      |           |        
|Preferred stock, $.01 par value, authorized 500,000 shares,      none outstanding                                          | -         | -      
|Common stock, $.01 par value, authorized 6,000,000 shares; issued 1,754,411      shares;                                   | 18        | 18     
|Additional paid-in capital                                                                                                 | 6,748     | 6,708  
|Retained earnings                                                                                                          | 13,334    | 13,134 
|Accumulated other comprehensive income:                                                                                    |           |        
|Net unrealized gains on securities available for sale, net of related         tax effects of $736 in 2000 and $338 in 1999 | 1,429     | 656    
|Common stock purchased by the Employee Stock Ownership Plan                                                                | (1,052)   | (1,159)
|Unearned compensation                                                                                                      | (264)     | (528)  
|Treasury stock - 132,663 shares in 2000 and 24,563 shares in 1999      at cost                                             | (1,455)   | (319)  
|TOTAL STOCKHOLDERS' EQUITY                                                                                                 | 18,758    | 18,510 
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                 | $77,554   | $80,418

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|                                                   | Year Ended December 31
|-------------------------------------------------- | ----------------------
|                                                   | 2000                  
|Interest income:                                   |                       
|Loans receivable:                                  |                       
|First mortgage loans                               | $3,118                
|Consumer and other loans                           | 113                   
|Mortgage-backed and related securities             | 893                   
|Investments                                        | 1,031                 
|Interest-bearing deposits                          | 217                   
|TOTAL INTEREST INCOME                              | 5,372                 
|                                                   |                       
|Interest expense:                                  |                       
|Deposits                                           | 2,118                 
|Borrowings                                         | 68                    
|TOTAL INTEREST EXPENSE                             | 2,186                 
|                                                   |                       
|NET INTEREST INCOME                                | 3,186                 
|                                                   |                       
|Provision for loan losses                          | 30                    
|NET INTEREST INCOME AFTERPROVISION FOR LOAN LOSSES | 3,156                 
|                                                   |                       
|Noninterest income:                                |                       
|Gain on sale of securities                         | 8                     
|Service fees and other                             | 48                    
|TOTAL NONINTEREST INCOME                           | 56                    
|                                                   |                       
|Noninterest expense:                               |                       
|Equity in loss of limited partnership              | 77                    
|General and administrative:                        |                       
|Compensation and benefits                          | 1,271                 
|Occupancy and equipment                            | 83                    
|Federal deposit insurance premiums                 | 11                    
|Other operating expense                            | 676                   
|TOTAL NONINTEREST EXPENSE                          | 2,118                 
|                                                   |                       
|INCOME BEFORE INCOME TAXES                         | 1,094                 
|                                                   |                       
|Federal income taxes                               | 287                   
|NET INCOME                                         | $807                  
|EARNINGS PER SHARE - BASIC AND DILUTED             | $0.54                 

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|                                                                                                                                                                   | CommonStock | AdditionalPaid-inCapital | RetainedEarnings | NetUnrealizedGains onSecuritiesAbailablefor Sale | CommonStockPurchasedby theEmployeeStockOwnershipPlan | UnearnedCompen-sation | TreasuryStock | Total   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------- | ------------------------ | ---------------- | ------------------------------------------------ | ---------------------------------------------------- | --------------------- | ------------- | --------
|                                                                                                                                                                  
|Balance, January 1, 1999                                                                                                                                           | $18         | $16,897                  | $12,709          | $1,586                                           | $(1,287)                                             | $       -             | $          -  | $29,923 
|                                                                                                                                                                  
|Comprehensive income:                                                                                                                                              |            
|Net income                                                                                                                                                         | -           | -                        | 1,012            | -                                                | -                                                    | -                     | -             | 1,012   
|Other comprehensive income,      net of tax:                                                                                                                       |            
|Change in unrealized gains and losses         on securities of $1,007, net of         
reclassification adjustment for         gains included in net income of $77 | -           | -                        | -                | (930)                                            | -                                                    | -                     | -             | (930)   
|Total comprehensive income                                                                                                                                         | -           | -                        | 1,012            | (930)                                            | -                                                    | -                     | -             | 82      
|                                                                                                                                                                  
|Cash dividends - $.37 per share                                                                                                                                    | -           | -                        | (587)            | -                                                | -                                                    | -                     | -             | (587)   
|Return of capital distribution - $6 per share                                                                                                                      | -           | (10,131)                 | -                | -                                                | -                                                    | -                     | -             | (10,131)
|                                                                                                                                                                  
|ESOP shares allocated to employees                                                                                                                                 | -           | 43                       | -                | -                                                | 128                                                  | -                     | -             | 171     
|Purchase of shares for  treasury                                                                                                                                   | -           | -                        | -                | -                                                | -                                                    | -                     | (1,211)       | (1,211) 
|Shares issued for recognition and retention plan                                                                                                                   | -           | (101)                    | -                | -                                                | -                                                    | (528)                 | 892           | 263     
|BALANCE DECEMBER 31, 1999                                                                                                                                          | 18          | 6,708                    | 13,134           | 656                                              | (1,159)                                              | (528)                 | (319)         | 18,510  
|                                                                                                                                                                  
|Comprehensive income:                                                                                                                                              |            
|Net income                                                                                                                                                         | -           | -                        | 807              | -                                                | -                                                    | -                     | -             | 807     
|Other comprehensive income, net of tax:                                                                                                                            |            
|Change in unrealized gains and losses on         securities of $778, net of reclassification      
   adjustment for gains included in net         income of $5    | -           | -                        | -                | 773                                              | -                                                    | -                     | -             | 773     
|Total comprehensive income                                                                                                                                         | -           | -                        | 807              | 773                                              | -                                                    | -                     | -             | 1,580   
|                                                                                                                                                                  
|Cash dividends - $.41 per share                                                                                                                                    | -           | -                        | (607)            | -                                                | -                                                    | -                     | -             | (607)   
|                                                                                                                                                                  
|ESOP shares allocated to employees                                                                                                                                 | -           | 40                       | -                | -                                                | 107                                                  | -                     | -             | 147     
|Purchase of shares for treasury                                                                                                                                    | -           | -                        | -                | -                                                | -                                                    | -                     | (1,136)       | (1,136) 
|                                                                                                                                                                  
|Shares issued for recognition and retention plan                                                                                                                   | -           | -                        | -                | -                                                | -                                                    | 264                   | -             | 264     
|BALANCE DECEMBER 31, 2000                                                                                                                                          | $18         | $6,748                   | $13,334          | $1,429                                           | $(1,052)                                             | $(264)                | $(1,455)      | $18,758 

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|                                                                                                                        | Year Ended December 31
|----------------------------------------------------------------------------------------------------------------------- | ----------------------
|                                                                                                                        | 2000                  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                    |                       
|Net income                                                                                                              | $   807               
|Adjustments to reconcile net income to net cash provided by operating activities:                                       |                       
|Deferred income taxes                                                                                                   | 19                    
|Depreciation                                                                                                            | 39                    
|Amortization of deferred loan fees and costs                                                                            | (3)                   
|Amortization of discounts and premiums on investments and            
      mortgage-backed and related securities, net | (30)                  
|Recognition and Retention Plan shares                                                                                   | 264                   
|Gain on sale of securities                                                                                              | (8)                   
|ESOP shares allocated                                                                                                   | 147                   
|Equity in loss of limited partnership                                                                                   | 77                    
|Provision for loan losses                                                                                               | 30                    
|Federal Home Loan Bank stock dividends                                                                                  | (26)                  
|                                                                                                                        | 1,316                 
|Net (increase) decrease in accrued interest receivable and prepaid expenses and other assets                            | 307                   
|Net decrease in accrued interest, accounts payable and other liabilities                                                | (8)                   
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                               | 1,615                 
|                                                                                                                        |                       
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                    |                       
|Proceeds from sale of securities available for sale                                                                     | 4,876                 
|Purchase of securities available for sale                                                                               | (9,860)               
|Proceeds from principal payments on mortgage-backed and related securities                                              | 3,385                 
|Purchase of mortgage-backed and related securities                                                                      | -                     
|Net decrease in interest-bearing deposits with banks                                                                    | 3,474                 
|Net (increase) decrease in loans                                                                                        | 1,097                 
|Additions to premises and equipment                                                                                     | (135)                 
|NET CASH PROVIDED BY INVESTING ACTIVITIES                                                                               | 2,837                 
|                                                                                                                        |                       
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                    |                       
|Purchases of treasury stock                                                                                             | (1,136)               
|Dividends paid                                                                                                          | (607)                 
|Net increase (decrease) in savings accounts                                                                             | (3,855)               
|Net increase (decrease) in certificates of deposit                                                                      | 1,505                 
|Proceeds of Federal Home Loan Bank advances                                                                             | 5,000                 
|Proceeds of note payable                                                                                                | -                     
|Repayment of note payable                                                                                               | (6,000)               
|Return of capital distribution                                                                                          | -                     
|NET CASH USED IN FINANCING ACTIVITIES                                                                                   | (5,093)               
|                                                                                                                        |                       
|NET INCREASE (DECREASE) IN CASH                                                                                         | (641)                 
|                                                                                                                        |                       
|CASH AT BEGINNING OF YEAR                                                                                               | 1,610                 
|CASH AT END OF YEAR                                                                                                     | $969                  
|Cash paid during the period for:                                                                                        |                       
|Interest                                                                                                                | $ 2,195               
|Income taxes                                                                                                            | $125                  

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|                                             | 2000      | 1999     
|-------------------------------------------- | --------- | ---------
|Basic weighted-average shares                | 1,501,955 | 1,600,492
|Effect of diluted shares:      Stock options | -         | 127      
|Diluted weighted-average shares              | 1,501,955 | 1,600,619

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|                                 | December 31,  
|-------------------------------- | --------------
|                                 | 2000          
|                                 | AmortizedCost 
|                                 | (In thousands)
|Available for sale securities:   |               
|FHLMC common stock               | $     34      
|Asset management funds:          |               
|Income Trust                     | 5,668         
|ARMS                             | -             
|GNMA Trust                       | 5,795         
|U.S. Agencies:                   |               
|Due within one year              | -             
|Due after one year to five years | 1,000         
|Due after five to ten years      | 8,000         
|Other                            | 15            
|TOTALS                           | $20,512       

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|                                                                                  | December 31, 2000
|--------------------------------------------------------------------------------- | -----------------
|                                                                                  | AmortizedCost    
|                                                                                  | (In thousands)   
|Held to maturity securities:                                                      |                  
|Mortgage-backed and related securities:                                           |                  
|Government National Mortgage         Association participation certificates       | $        2       
|Federal National Mortgage Association         collateralized mortgage obligations | 8,107            
|Federal Home Loan Mortgage Corporation:                                           |                  
|Participation certificates                                                        | 16               
|Collateralized mortgage obligations                                               | 4,776            
|Federal Home Loan Bank bond - due March 2001                                      | 1,000            
|TOTALS                                                                            | $13,901          
|                                                                                  |                  
|                                                                                  | December 31, 2000
|                                                                                  | AmortizedCost    
|                                                                                  | (In thousands)   
|Held to maturity securities:                                                      |                  
|Mortgage-backed and related securities:                                           |                  
|Government National Mortgage         Association participation certificates       | $      12        
|Federal National Mortgage Association         collateralized mortgage obligations | 9,900            
|Federal Home Loan Mortgage Corporation:                                           |                  
|Participation certificates                                                        | 34               
|Collateralized mortgage obligations                                               | 6,309            
|Federal Home Loan Bank bond - due March 2001                                      | 1,000            
|TOTALS                                                                            | $17,255          

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|                                                                | December 31   
|--------------------------------------------------------------- | --------------
|                                                                | 2000          
|                                                                | (In thousands)
|Real estate mortgage (primarily one-to four-family residential) | $27,279       
|Construction and development                                    | 1,440         
|Commercial real estate                                          | 6,302         
|Consumer and other                                              | 1,216         
|Loans on deposits                                               | 95            
|                                                                | 36,332        
|Less allowance for loan losses                                  | 592           
|TOTALS                                                          | $35,740       

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|                                  | December 31   
|--------------------------------- | --------------
|                                  | 2000          
|                                  | (In thousands)
|Balance at beginning of year      | $549          
|Provision reflected in operations | 30            
|Less loans charged off            | -             
|Recovery                          | 13            
|Balance at end of year            | $592          

|                          | 2000   | 1999  
|------------------------- | ------ | ------
|Balance Sheet:            |        |       
|Investment in real estate | $4,542 | $4,747
|Total assets              | 4,875  | 4,858 
|Mortgage payable          | 2,827  | 2,851 
|Partners' equity          | 1,374  | 1,552 
|                          |        |       
|Operations:               |        |       
|Rental income             | 609    | 439   
|Net loss                  | 178    | 357   

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|                                   | December 31   
|---------------------------------- | --------------
|                                   | 2000          
|                                   | (In thousands)
|Land                               | $32           
|Building and building improvements | 493           
|Furniture, equipment and vehicles  | 374           
|                                   | 899           
|Less accumulated depreciation      | 558           
|TOTALS                             | $341          

|                                 | December 31   
|-------------------------------- | --------------
|                                 | 2000          
|                                 | (In thousands)
|Savings and transaction accounts | $ 24,261      
|Certificates of deposit          | 27,933        
|TOTALS                           | $52,194       

|                   | December 31   
|------------------ | --------------
|                   | 2000          
|                   | (In thousands)
|Within one year    | $23,618       
|One to two years   | 3,090         
|Two to three years | 1,225         
|TOTALS             | $27,933       

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|                                             | Year Ended December 31
|-------------------------------------------- | ----------------------
|                                             | 2000                  
|                                             | (In thousands)        
|Income tax expense is summarized as follows: |                       
|Federal:                                     |                       
|Current                                      | $268                  
|Deferred                                     | 19                    
|TOTALS                                       | $287                  

|                                         | Year Ended December 31
|---------------------------------------- | ----------------------
|                                         | 2000                  
|                                         | (In thousands)        
|Federal taxes computed at statutory rate | $372                  
|Increase (decrease) resulting from:      |                       
|Limited partnership tax credits          | (78)                  
|Dividends received deduction             | (6)                   
|Other                                    | (1)                   
|FEDERAL INCOME TAX PROVISION             | $287                  
|                                         |                       
|Effective federal income tax rate        | 26.2%                 

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|                                                  | December 31   
|------------------------------------------------- | --------------
|                                                  | 2000          
|                                                  | (In thousands)
|Deferred tax liabilities:                         |               
|Federal Home Loan Bank stock dividends            | $   (88)      
|Unrealized gains on securities available for sale | (736)         
|TOTAL DEFERRED TAX LIABILITIES                    | (824)         
|Deferred tax assets:                              |               
|Deferred compensation                             | 351           
|Allowance for loan losses                         | 201           
|Imputed loan interest                             | 4             
|Other                                             | 22            
|TOTAL DEFERRED TAX ASSETS                         | 578           
|NET DEFERRED FEDERALINCOME TAX ASSET (LIABILITY)  | $(246)        

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|InterestRate           | Maturity       | Convertible toVariable Rate | Amount(in thousands)
|---------------------- | -------------- | --------------------------- | --------------------
|                       |                |                             |                     
|5.01%                  | December, 2010 | December, 2001              | $3,000              
|5.20%                  | December, 2010 | December, 2003              | 2,000               
|                       |                |                             |                     
|Weighted-average 5.09% |                |                             | $5,000              

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|                            |             | 2000 | 1999   
|--------------------------- | ----------- | ---- | -------
|Net earnings (in thousands) | As reported | $807 | $1,012 
|                            | Pro forma   | $807 | $   838
|Earnings per share:         |             |      |        
|Basic                       | As reported | $.54 | $.63   
|                            | Pro forma   | $.54 | $.52   
|Diluted                     | As reported | $.54 | $.63   
|                            | Pro forma   | $.54 | $.52   

|                                                                    | 2000    | 1999                           
|------------------------------------------------------------------- | ------- | -------------------------------
|                                                                    | Shares  | Weighted-AverageExcercise Price
|Outstanding at beginning of year                                    | 157,896 | $12.53                         
|Granted                                                             | -       | -                              
|Exercised                                                           | -       | -                              
|Forfeited                                                           | -       | -                              
|Outstanding at end of year                                          | 157,896 | $12.53                         
|Options exercisable at year-end                                     | 105,264 | $12.53                         
|Weighted average fair value of      options granted during the year |         |                                

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|Number outstanding                          | 157,896    
|------------------------------------------- | -----------
|Weighted-average exercise price             | $12.53     
|Weighted-average remaining contractual life | 10.89 years

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|                                   | December 31    
|---------------------------------- | ---------------
|                                   | 2000           
|                                   | CarryingAmounts
|                                   | (In thousands) 
|Cash and equivalents               | $    3,833     
|Securities:                        |                
|Available for sale                 | 22,677         
|Held to maturity                   | 13,901         
|Federal Home Loan Bank stock       | 366            
|Loans                              | 35,740         
|Accrued interest receivable        | 343            
|Deposits:                          |                
|Checking, savings and money market | (24,262)       
|Certificates of deposit            | (27,932)       
|Accrued interest payable           | (120)          
|Federal Home Loan Bank advances    | (5,000)        
|Note payable                       | -              

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|2000:              |                        |                              |                                                                  |       |         |        
|------------------ | ---------------------- | ---------------------------- | ---------------------------------------------------------------- | ----- | ------- | -------
|                   | Actual                 | For Capital AdequacyPurposes | To be "Well-Capitalized"under Prompt CorrectiveAction Provisions
|                   | Amount                 | Ratio                        | Amount                                                           | Ratio | Amount  | Ratio  
|                   | (Dollars in thousands)
|Tangible capital   | $16,706                | 22.0%                        | ≥$1,138                                                          | ≥1.5% | ≥$3,794 | ≥  5.0%
|Core capital       | $16,706                | 22.0%                        | ≥$3,035                                                          | ≥4.0% | ≥$4,553 | ≥  6.0%
|Risk-based capital | $18,115                | 52.2%                        | ≥$2,775                                                          | ≥8.0% | ≥$3,468 | ≥10.0% 
|                   |                        |                              |                                                                  |       |         |        
|1999:              |                        |                              |                                                                  |       |         |        
|                  
|                   | Actual                 | For Capital AdequacyPurposes | To be "Well-Capitalized"under Prompt CorrectiveAction Provisions
|                   | Amount                 | Ratio                        | Amount                                                           | Ratio | Amount  | Ratio  
|                   | (Dollars in thousands)
|Tangible capital   | $22,207                | 28.2%                        | ≥$1,181                                                          | ≥1.5% | ≥$3,932 | ≥  5.0%
|Core capital       | $22,207                | 28.2%                        | ≥$3,150                                                          | ≥4.0% | ≥$4,725 | ≥  6.0%
|Risk-based capital | $23,161                | 57.1%                        | ≥$3,243                                                          | ≥8.0% | ≥$4,053 | ≥10.0% 

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|                                                                                | 2000      | 1999       
|------------------------------------------------------------------------------- | --------- | -----------
|ASSETS                                                                          |           |            
|                                                                                |           |            
|Cash and cash equivalents:                                                      |           |            
|Noninterest bearing                                                             | $     152 | $         3
|Interest bearing                                                                | 33        | 1,438      
|                                                                                | 185       | 1,441      
|Account receivable from Home Federal Savings      and Loan Association of Niles | 360       | 263        
|Investment in Home Federal Savings and      Loan Association of Niles           | 18,134    | 22,863     
|Accrued interest and prepaid expense                                            | 118       | 20         
|TOTAL ASSETS                                                                    | $18,797   | $24,587    
|                                                                                |           |            
|LIABILITIES AND STOCKHOLDERS' EQUITY                                            |           |            
|                                                                                |           |            
|Accrued expense                                                                 | $39       | $77        
|Note payable                                                                    | -         | 6,000      
|TOTAL LIABILITIES                                                               | 39        | 6,077      
|Stockholders' equity                                                            | 18,758    | 18,510     
|                                                                                |           |            
|TOTAL LIABILITIES ANDSTOCKHOLDERS' EQUITY                                       | $18,797   | $24,587    

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|                                                           | 2000  | 1999   
|---------------------------------------------------------- | ----- | -------
|                                                           |       |        
|Revenue:                                                   |       |        
|Interest income                                            | $  34 | $   321
|TOTAL REVENUE                                              | 34    | 321    
|General and administrative expenses                        | 323   | 375    
|LOSS BEFORE INCOME TAX AND EQUITY INEARNINGS OF SUBSIDIARY | (289) | (54)   
|                                                           |       |        
|Income tax credit                                          | (98)  | (18)   
|LOSS BEFORE EQUITY IN      EARNINGS SUBSIDIARY             | (191) | (36)   
|Equity in earnings of subsidiary                           | 998   | 1,048  
|NET INCOME                                                 | $807  | $1,012 

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|                                                                                                 | 2000    | 1999    
|------------------------------------------------------------------------------------------------ | ------- | --------
|Cash flows from operating activities:                                                            |         |         
|Net income for the period                                                                        | $   807 | $ 1,012 
|Adjustments to reconcile net income to net cash provided by operating                activities: |         |         
|Undistributed income of consolidated subsidiary                                                  | (998)   | (1,048) 
|Amortization of premium on securities available for sale                                         | -       | 20      
|Net decrease in due from subsidiary, accrued interest and prepaid            
   expenses        | 216     | 89      
|Increase (decrease) in accounts payable and accrued expense                                      | (38)    | 72      
|NET CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES                                               | (13)    | 145     
|                                                                                                 |         |         
|Cash flows from investing activities:                                                            |         |         
|Purchase of securities available for sale                                                        | (880)   | (3,984) 
|Proceeds from sale of securities available for sale                                              | 880     | 5,790   
|Net decrease in interest bearing deposits                                                        | 1,405   | 3,966   
|NET CASH PROVIDED BY INVESTING ACTIVITIES                                                        | 1,405   | 5,772   
|                                                                                                 |         |         
|Cash flows from investing activities:                                                            |         |         
|Dividends paid                                                                                   | (607)   | (587)   
|Dividends received from subsidiary                                                               | 6,500   | -       
|Purchase of treasury stock                                                                       | (1,136) | (1,211) 
|Proceeds of note payable                                                                         | -       | 6,000   
|Payment of note payable                                                                          | (6,000) | -       
|Return of capital distribution                                                                   | -       | (10,131)
|NET CASH USED IN FINANCING ACTIVITIES                                                            | (1,243) | (5,929) 
|                                                                                                 |         |         
|NET INCREASE (DECREASE) IN CASH                                                                  | 149     | (12)    
|Cash and cash equivalents at beginning of period                                                 | 3       | 15      
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                       | $152    | $3      
|Noncash transaction:                                                                             |         |         
|Employee stock benefit plan transactions                                                         | $411    | $434    

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|                                         | **HIGH** | **LOW** | **CASHDISTRIBUTIONSDECLARED**
|---------------------------------------- | -------- | ------- | -----------------------------
|                                         |          |         |                              
|First Quarter (ended March 31, 1999)     | $11.250  | $10.250 | $0.07                        
|Second Quarter (ended June 30, 1999)     | 13.875   | 10.750  | 0.10                         
|Third Quarter (ended September 30, 1999) | 15.750   | 13.250  | 0.10                         
|Fourth Quarter (ended December 31, 1999) | 21.000   | 11.750  | 6.10                         
|                                         |          |         |                              
|First Quarter (ended March 31, 2000)     | 12.750   | 10.125  | 0.10                         
|Second Quarter (ended June 30, 2000)     | 10.438   | 8.250   | 0.10                         
|Third Quarter (ended September 30, 2000) | 10.438   | 8.688   | 0.10                         
|Fourth Quarter (ended December 31, 2000) | 11.750   | 10.000  | 0.11                         

|**STOCKHOLDER AND GENERAL INQUIRIES**                                                                             | **TRANSFER AGENT**                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                  |                                                                                                                                                       
|Lawrence Safarek, Vice President First Niles Financial, Inc. 55 North Main StreetNiles, Ohio 44446 (330) 652-2539 | Fifth Third BankCorporate Trust ServicesMail Drop 10AT6638 Fountain Square PlazaCincinnati, Ohio 45263(800) 837-2755 (toll free)(513) 579-5320 (local)

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|**COMPANY AND BANK ADDRESS**                                                                                                                                       |                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                   |                                                                                                                                                      
|55 North Main StreetNiles, Ohio  44446                                                                                                                             | Telephone:      (330) 652-2539Fax:                   (330) 652-0911                                                                                  
|                                                                                                                                                                   |                                                                                                                                                      
|BOARD OF DIRECTORS                                                                                                                                                 | EXECUTIVE OFFICERS                                                                                                                                   
|                                                                                                                                                                   |                                                                                                                                                      
|William L. StephensChairman, President and Chief ExecutiveOfficer of First Niles Financial, Inc. andHome Federal Savings and LoanAssociation of Niles              | William L. StephensChairman, President and Chief ExecutiveOfficer of First Niles Financial, Inc. andHome Federal Savings and LoanAssociation of Niles
|George J. SwiftVice President and Secretary of First NilesFinancial, Inc. and Home Federal Savings andLoan Association of Niles                                    | George J. SwiftVice President and Secretary of First NilesFinancial, Inc. and Home Federal Savings andLoan Association of Niles                      
|P. James KramerPresident, William Kramer & Son
Horace L. McleanPresident, McLean Engineering, Inc.
Ralph A. Zuzolo, Sr.Partner, Law Firm of Zuzolo, Zuzolo& Zuzolo | Lawrence SafarekVice President and Treasurer of First NilesFinancial, Inc. and Home Federal Savingsand Loan Association of Niles                     
|                                                                                                                                                                   |                                                                                                                                                      
|INDEPENDENT AUDITORS                                                                                                                                               | SPECIAL COUNSEL                                                                                                                                      
|                                                                                                                                                                   |                                                                                                                                                      
|Anness, Gerlach & Williams,
   a Professional Corporation
Certified Public Accountants
1275 Boardman-Canfield Road
Youngstown, Ohio 44513                          | Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor, East Tower
Washington, D.C.  20005                                         

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