Washington Bancorp

                               2001 Annual Report


<PAGE>



                               WASHINGTON BANCORP






                                TABLE OF CONTENTS

Letter to Stockholders................................
Selected Consolidated Financial Information...........
Management's Discussion and Analysis of
 Financial Condition and Results of Operations........
Report of Independent Auditors........................
Consolidated Financial Statements.....................
Directors and Executive Officers......................
Stockholder Information...............................






CONSOLIDATED FINANCIAL HIGHLIGHTS

June 30, 2001
(Dollars in Thousands)

Total assets...........................          $119,692
Total loans, net.......................            84,095
Investment securities and other
  earning assets.......................            30,802
Deposits...............................            72,904
Borrowings.............................            33,835
Net income.............................             1,093
Stockholders' equity...................            11,616
Stockholders' equity as a percent of
  assets...............................             9.71%





                                 ANNUAL MEETING

                The Annual Meeting of Stockholders of Washington
              Bancorp will be held on October 16, 2001 at 4:00 P.M.
                at the office of the Company, located at 102 East
                         Main Street, Washington, Iowa.

<PAGE>



                               WASHINGTON BANCORP

                              102 East Main Street
                             Washington, Iowa 52353

                               September 20, 2001



Dear Stockholders:

It is with pleasure and pride that the board of directors,  the officers and the
staff of Washington  Bancorp present our sixth annual report.  In 1996, when our
organization   became  a  public  stock  corporation,   our  total  assets  were
$60,891,000.  When our year  ended  June 30,  2001,  those  assets  had grown to
$119,692,000, an increase of more than 96.5%.

The Washington Bancorp family of banks continues to grow. Washington
Bancorp has two subsidiary  banks -- Washington  Federal  Savings Bank and Rubio
Savings  Bank of  Brighton.  In 1998,  we  opened  our  first  branch  office of
Washington Federal Savings Bank in Wellman, Iowa. In September of 2000 we opened
our second branch office of Washington  Federal Savings Bank in Richland,  Iowa.
Our commitment to Wellman Federal Savings and Richland  Federal Savings has been
warmly  welcomed  by those  communities.  Both  locations  are  being  served by
advisory  boards  comprised of local residents to ensure that we are meeting the
local needs.

Our  mission  at  Washington  Bancorp  is for our  community-involved  financial
institutions  to offer  diversified  services by friendly  and  competent  staff
committed to developing  lasting customer  relationships.  The annual report and
the  annual  meeting  are  for  you,  our   stockholders,   as  we  invite  your
participation on Tuesday,  October 16, 2001 at 4:00 p.m. at Washington Bancorp's
main office located at 102 East Main Street, Washington, Iowa.

We sincerely appreciate and want to thank you, our customers and
stockholders, for your continued support.

                                                     Sincerely,


                                                     /s/ Stan Carlson
                                                     ---------------------------
                                                     Stan Carlson
                                                     President & CEO
<PAGE>



                   SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following consolidated financial information does not purport to be complete
and is qualified in its entirety by reference to the more detailed  consolidated
financial information contained elsewhere herein.
<TABLE>
                                                                               At June 30,
                                                     -------------------------------------------------------
                                                          2001       2000       1999        1998      1997
                                                     -------------------------------------------------------
                                                                       (Dollars in Thousands)
<S>                                                     <C>        <C>        <C>        <C>        <C>
Selected Financial Condition Data:
Total assets ........................................   $119,692   $115,422   $102,984   $ 94,327   $ 64,875
Loans receivable, net ...............................     84,095     83,988     72,779     65,885     52,530
Cash and cash equivalents ...........................      3,141      2,849      2,557      3,306        808
Investment securities ...............................     23,233     22,377     21,456     20,254      9,850
Investment in Federal Home Loan Bank ("FHLB")  Stock       1,756      1,729        860        812        466
Goodwill, net .......................................      1,091      1,186      1,281      1,375       --
Deposits ............................................     72,904     73,297     75,689     66,595     44,754
Borrowed funds ......................................     33,835     30,193     15,706     15,724      8,652
Stockholders' equity ................................     11,616     10,821     10,711     10,971     10,675
</TABLE>

                                                 Year Ended June 30,
                                      ------------------------------------------
                                       2001     2000     1999     1998     1997
                                      ------------------------------------------
                                                (Dollars in Thousands)

Selected Operations Data:
Total interest income .............   $8,874   $8,260   $7,455   $6,034   $4,990
Total interest expense ............    5,289    4,706    4,295    3,259    2,553
                                      ------------------------------------------
  Net interest income .............    3,585    3,554    3,160    2,775    2,437
Provision for loan losses .........      136      187      112       89       40
                                      ------------------------------------------
                                       3,449    3,367    3,048    2,686    2,397
Total noninterest income ..........      683      511      392      320      231
Total noninterest expense .........    2,363    2,149    2,077    1,744    1,712
                                      ------------------------------------------

Income before income taxes ........    1,769    1,729    1,363    1,262      916
Income tax expense ................      676      713      532      439      351
                                      ------------------------------------------
Net income ........................   $1,093   $1,016   $  831   $  823   $  565
                                      ==========================================
Earnings per common share:
  Basic ...........................   $ 2.21   $ 1.86   $ 1.48   $ 1.36   $ 0.92
                                      ==========================================

  Diluted .........................   $ 2.16   $ 1.83   $ 1.44   $ 1.33   $ 0.91
                                      ==========================================

<TABLE>
<PAGE>

                                                                               Year Ended June 30,
                                                                   ---------------------------------------------
                                                                    2001      2000      1999      1998     1997
                                                                   ---------------------------------------------
<S>                                                                <C>       <C>       <C>       <C>      <C>
Selected Financial Ratios and Other Data:
Performance Ratios:
  Return on assets (ratio of  net  earnings to average .....
    total assets) ..........................................        0.95%     0.93%     0.83%     1.06%    0.90%
Interest rate spread information:
  Average during period ....................................        2.72      2.94      2.81      2.95     3.09
  End of period ............................................        3.13      2.92      3.21      2.95     3.09
  Net interest margin(1) ...................................        3.25      3.41      3.31      3.70     3.97
  Ratio of operating expense to  average total assets ......        2.04      1.96      2.18      2.24     2.72
  Return on equity (ratio of net  income to average equity)        10.04      9.44      7.79      7.56     5.34

Quality Ratios:
  Non-performing assets to total  assets at end of period(2)        0.60      0.57      0.15      0.09     0.35
  Allowance for loan losses to non-performing loans ........       85.13     99.91    304.64    435.99    98.52

Capital Ratios:
  Equity to total assets at end of period ..................        9.71      9.38     10.40     11.63    16.45
  Average equity to average assets .........................        9.43      9.81     10.62     13.99    16.80
  Ratio of average interest-earning assets to average ......
   interest-bearing liabilities ............................      111.02    110.35 111. 4    117. 2    121.

Number of full service offices .............................        4         3         3         2        1
------------------------------
<FN>
(1)  Net interest income divided by average interest-earning assets.
(2)  Non-performing assets consist of nonaccruing loans, accruing loans past-due
     90 or more days and foreclosed assets.
</FN>
</TABLE>

Capital  Requirements.  The  following  table  sets forth  Washington  Bancorp's
compliance with its capital requirements at June 30, 2001.
<TABLE>
                                                                               Capital Level
                                                         Requirement          at June 30, 2001
                                                      -------------------------------------------------
                                                       % of                % of                 Amount
                                                      Assets    Amount    Assets    Amount    of Excess
                                                      -------------------------------------------------
                                                                         (Dollars in Thousands)
<S>                                                   <C>       <C>       <C>       <C>      <C>
Capital Standard
Tier 1 Capital to Average Assets..................     4.00%    $4,622     9.13%    $10,555    $5,933
Tier 1 Capital to Risk Weighted Assets............     4.00%     3,187    13.25%     10,555     7,368
Total Capital to Risk Weighted Assets.............     8.00%     6,374    14.58%     11,616     5,242
</TABLE>

Capital  Requirements.  The  following  table  sets forth  Washington  Federal's
compliance with its capital requirements at June 30, 2001.

                                                           Capital Level
                                  OTS Requirement       at June 30, 2001(1)
                                  ----------------------------------------------

                                   % of              % of                Amount
                                  Assets   Amount   Assets    Amount   of Excess
                                  ----------------------------------------------
                                             (Dollars in Thousands)
Capital Standard

Tangible Capital .........        1.50%   $1,427     8.25%    $7,849    $6,422
Core Capital .............        4.00%    3,805     8.25%     7,849     4,044
Risk-based Capital .......        8.00%    5,193    12.77%     8,288     3,095
--------------------------

(1)   Tangible  and core  capital  figures are  determined  as a  percentage  of
      adjusted  total assets;  risk-based  capital  figures are  determined as a
      percentage of  risk-weighted  assets in  accordance  with Office of Thrift
      Supervision ("OTS") regulations.
<PAGE>

The following table sets forth Rubio Savings Bank's  compliance with its capital
requirements at June 30, 2001.

                                                           Capital Level
                                       Requirement        at June 30, 2001
                                      ------------------------------------------
                                       % of            % of             Amount
                                      Assets  Amount   Assets  Amount  of Excess
                                      ------------------------------------------
                                                 (Dollars in Thousands)

Tier 1 Capital to Average Assets ...    4.00%   $  928   11.14%  $2,585   $1,657
Tier 1 Risk-based Capital ..........    4.00%      580   17.83%   2,585    2,005
Risk-based Capital .................    8.00%    1,160   18.85%   2,733    1,573


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

General

Washington Bancorp ("Washington",  and with its subsidiaries, the "Company"), an
Iowa corporation,  became the holding company of Washington Federal Savings Bank
("Washington  Federal")  on March 11,  1996.  Washington  Federal is a federally
chartered  stock savings bank  headquartered  in  Washington,  Iowa. On June 24,
1997,  Washington  entered into a merger agreement to acquire Rubio Savings Bank
of Brighton, Brighton, Iowa ("Rubio"). Rubio is held as a separate subsidiary of
Washington.  In January 1998,  Washington became a bank holding company upon the
completion of its  acquisition of Rubio.  In December 1998,  Washington  Federal
opened a branch office,  Wellman Federal Savings, in Wellman, Iowa. In September
2000,  Washington Federal opened a branch office,  Richland Federal Savings,  in
Richland,  Iowa. The principal  assets of Washington are Washington  Federal and
Rubio  (collectively,   the  "Banks").  Washington  presently  has  no  separate
operations  and its business  consists  only of the  business of the Banks.  All
references to Washington,  unless  otherwise  indicated,  at or before March 11,
1996 refer to Washington Federal.

The  earnings  of the  Company  depend  primarily  on its level of net  interest
income,  which is the difference  between  interest  earned on  interest-earning
assets,  consisting primarily of mortgage loans and investment  securities,  and
the  interest  paid on  interest-bearing  liabilities,  consisting  primarily of
deposits and FHLB borrowings. Net interest income is a function of the Company's
"interest rate spread," which is the difference between the average yield earned
on  interest-earning  assets  and the  average  rate paid on  interest-  bearing
liabilities.  The interest rate spread is affected by  regulatory,  economic and
competitive  factors  that  influence  interest  rates,  loan demand and deposit
flows.  The  Company,   like  other  financial   institutions,   is  subject  to
interest-rate  risk to the degree  that its  interest-earning  assets  mature or
reprice at different times, or on a different basis,  than its  interest-bearing
liabilities.  To a lesser  extent,  the  Company's  operating  results  are also
affected by the amount of its non-interest income, including service charges and
loan fees, and other income which includes  commissions  from sales of insurance
by Washington  Federal's  service  corporation.  Non-interest  expense  consists
primarily  of  compensation  and  benefits,  occupancy  and  equipment,  federal
insurance premiums,  data processing and other operating expenses. The Company's
operating results are significantly affected by general economic conditions,  in
particular, the changes in market interest rate, government policies and actions
by regulatory authorities.

The  Company's  basic  mission is to  maximize  shareholder  value  through  the
origination  of  mortgage  loans on a  profitable  basis to the  communities  it
serves.  In seeking to  accomplish  this  mission,  the Board of  Directors  and
management  have  adopted a  business  strategy  designed  (i) to  maintain  the
Company's capital level in excess of regulatory  requirements;  (ii) to maintain
the Company's asset quality;  (iii) to control operating  expenses;  and (iv) to
manage the  Company's  exposure  to changes in interest  rates.  The Company has
attempted to achieve these goals by focusing on originating  first mortgage home
loans,  consumer  loans and  commercial  loans and by  offering  a full range of
deposit products.
<PAGE>

Forward-Looking Statements

This document,  including  information  included in or incorporated by reference
to, contains,  and future filings by the Company on Form 10-KSB, Form 10-QSB and
Form  8-K  and  future  oral  and  written  statements  by the  Company  and its
management  may contain,  forward-looking  statements  about the Company and its
subsidiaries  which we believe are within the meaning of the Private  Securities
Litigation Reform Act of 1995. These forward-looking statements include, without
limitation,   statements  with  respect  to  anticipated  future  operating  and
financial  performance,  growth opportunities,  interest rates,  acquisition and
divestiture opportunities, and synergies, efficiencies, cost savings and funding
advantages  expected to be realized  from our prior  acquisition.  Words such as
"may,"  "could,"  "should,"  "would,"   "believe,"   "anticipate,"   "estimate,"
"expect,"  "intend,"  "plan" and similar  expressions  are  intended to identify
these forward-looking statements.  Forward-looking statements by the Company and
its management are based on beliefs,  plans,  objectives,  goals,  expectations,
anticipations,  estimates and intentions of management and are not guarantees of
future performance. The Company disclaims any obligation to update or revise any
forward-looking statements based on the occurrence of future events, the receipt
of new  information,  or otherwise.  The important  factors we discuss below and
elsewhere in this document, as well as other factors discussed under the caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  in this  document  and  identified  in our filings with the SEC and
those  presented  elsewhere  by our  management  from time to time,  could cause
actual results to differ materially from those indicated by the  forward-looking
statements made in this document.

Earnings Per Share

Basic  per  share   amounts  are   computed  by  dividing   net  income  by  the
weighted-average number of common shares outstanding.  Diluted per share amounts
assume the  conversion,  exercise  or  issuance of all  potential  common  stock
instruments  unless  the effect is to reduce a loss or  increase  the income per
common  share from  continuing  operations.  In  accordance  with  Statement  of
Position 93-6 of the American Institute of Certified Public Accountants,  shares
owned by the Company's employee stock ownership plan ("ESOP") that have not been
committed  to be  released  are not  considered  outstanding  for the purpose of
computing earnings per share.

Financial Condition

Total Assets.  Total assets  increased  from $103.0  million at June 30, 1999 to
$115.4  million at June 30, 2000 and to $119.7 million at June 30, 2001. The net
increase  from 1999 to 2000 was  primarily  due to a $11.2  million  increase in
loans  receivable,  net, a $921,000  increase in  investment  securities  and an
$870,000 increase in FHLB stock,  partially offset by a $1.2 million decrease in
fed funds sold.  The net increase  from 2000 to 2001 was primarily due to a $3.2
million  increase in federal  funds sold,  an  $856,000  increase in  investment
securities,  a  $292,000  increase  in cash and  cash  equivalents,  a  $168,000
increase  in  premises  and  equipment,  net,  and a $107,000  increase in loans
receivable,  net,  partially offset by a $255,000 decrease in other assets and a
$125,000 decrease in foreclosed real estate.

Loans receivable. Loans receivable, net increased from $72.8 million at June 30,
1999 to $84.0  million at June 30, 2000 and to $84.1  million at June 30,  2001.
The  increase  from  1999 to 2000  and from  2000 to 2001  was due to  continued
mortgage  loan demand in the  Company's  market area,  as well as an increase in
commercial and agriculture loan demand.  The Company primarily  originates loans
for its own  portfolio.  During the fiscal  year ended June 30, 2001 the Company
originated  twenty six one- to- four family real estate loans for the  secondary
market  compared to two for the year ended June 30,  2000.  The  commercial  and
agriculture loans originated by the Company provide for a higher rate of return,
but also carry some increased risk over  traditional  residential loan products.
The  Company  obtains  guarantees  through  the Farm  Service  Agency  Guarantee
Lender's  Program,  Small Business  Administration  and USDA when  possible,  to
further manage portfolio risk.  Commercial and agriculture  loans increased $1.8
million from June 30, 2000 to June 30, 2001. The Company's non-performing assets
were  $714,000 or 0.60% of total assets at June 30, 2001 as compared to $648,000
or 0.57% of totals assets at June 30, 2000.

Deposits.  Deposits  decreased $2.4 million or 3.2% to $73.3 million at June 30,
2000 from $75.7  million at June 30,  1999.  Transaction  and  savings  deposits
increased as a percentage of total  deposits from $25.7 million or 34.0% at June
30, 1999 to $26.6  million or 36.3% at June 30,  2000.  Certificates  of deposit
decreased as a percentage of total  deposits from $50.0 million or 66.0% at June
30, 1999 to $46.7 million or 63.7% at June 30, 2000.  This decrease was a result
of increased local competition in a rising interest rate environment.
<PAGE>

Deposits decreased $393,000 or 0.5% to $72.9 million at June 30, 2001 from $73.3
million  at June  30,2000.  Transaction  and  savings  deposits  decreased  as a
percentage  of total  deposits  from $26.6  million or 36.3% at June 30, 2000 to
$25.9 million or 35.5% at June 30, 2001.  Certificates of deposit increased as a
percentage  of total  deposits  from $46.7  million or 63.7% at June 30, 2000 to
$47.0 million or 64.5% at June 30, 2001.

Stockholders' Equity.  Stockholders' equity increased from $10.7 million at June
30,  1999 to $10.8  million  at June 30,  2000 and to $11.6  million at June 30,
2001.  The increase from June 30, 1999 to June 30, 2000 was primarily due to net
income  of $1.0  million,  the  allocation  of ESOP  shares of  $64,000  and the
amortization of deferred  compensation of $29,000,  partially offset by $680,000
in payments for the  repurchase of 50,710 shares of the Company's  common stock,
the increase in unrealized  losses on available for sale securities of $212,000,
dividends paid of $67,000,  and the increase in maximum cash  obligation on ESOP
shares of $39,000.

The increase from June 30, 2000 to June 30, 2001 was primarily due to net income
of $1.1  million,  the  decrease  in  unrealized  loss  on  available  for  sale
securities of $418,000,  the  allocation of ESOP shares of $72,000,  the sale of
shares out of treasury  for the  exercise of stock  options of $49,000,  and the
amortization of deferred  compensation of $11,000,  partially offset by $489,000
in payments for the  repurchase of 36,147 shares of the Company's  common stock,
dividends paid of $252,000,  and the increase in maximum cash obligation on ESOP
shares of $108,000.

Net Interest Income Analysis

The following  table presents for the periods  indicated the total dollar amount
of  interest  income  from  average  interest-earning  assets and the  resultant
yields,  as well as the total  dollar  amount of  interest  expense  on  average
interest-bearing   liabilities  and  the  resultant  rates.  No  tax  equivalent
adjustments were made. All average balances are monthly average balances.
<TABLE>
                                                                           Year Ended June 30,
                                       -------------------------------------------------------------------------------------------
                                                     2001                           2000                           1999
                                       ----------------------------- ------------------------------ ------------------------------
                                         Average    Interest           Average    Interest            Average    Interest
                                       Outstanding  Earned/   Yield/ Outstanding  Earned/   Yield/  Outstanding   Earned/   Yield/
                                         Balance     Paid      Rate    Balance      Paid     Rate     Balance      Paid      Rate
                                       -------------------------------------------------------------------------------------------
                                                                          (Dollars in Thousands)
<S>                                    <C>        <C>         <C>    <C>          <C>       <C>     <C>         <C>         <C>
Interest-earning assets:
  Loans receivable(1) ................   $ 84,547 $  7,391    8.74%    $78,148    $ 6,688    8.56%    $69,013   $  5,979    8.66%
  Investment securities ..............     21,317    1,263    5.92      23,058      1,412    6.12      21,692      1,253    5.78
  FHLB stock .........................      1,751       95    5.45       1,198         78    6.53         851         55    6.43
  Other interest-earning assets ......      2,770      125    4.51       1,866         82    4.41       3,897        168    4.32
                                         -----------------             ------------------             ------------------
    Total interest-earning assets(1) .    110,385    8,874    8.04     104,270      8,260    7.92      95,453      7,455    7.81
                                         -----------------             ------------------             ------------------
Interest-bearing liabilities:
  Certificates of deposit ............     47,587    2,721    5.72      48,785      2,629    5.39      48,250      2,712    5.62
  NOW, money market and passbook .....
    savings ..........................     22,011      775    3.52      22,263        696    3.13      21,991        700    3.18
  Advances from borrowers for taxes
    and insurance ....................         --       --      --          --         --      --         185          1    0.46
  FHLB advances ......................     29,832    1,793    6.01      23,441      1,381    5.89      15,537        882    5.68
                                         -----------------              -----------------             ------------------
    Total interest-bearing liabilities     99,430    5,289    5.32      94,489      4,706    4.98      85,963      4,295    5.00
                                         -----------------             ------------------             ------------------
Net interest income ..................            $  3,585                        $ 3,554                        $ 3,160
                                                  ========                        =======                        =======
Net interest rate spread(2) ..........                        2.72%                          2.94%                          2.81%
                                                              =====                          =====                          =====
Net interest-earning assets ..........    $10,955                      $ 9,781                        $ 9,490
                                          =======                      =======                        =======
Net yield on average interest-earning
  assets.............................                         3.25%                          3.41%                          3.31%
                                                              =====                          =====                          =====
Average interest-earning assets to
  average interest-earning liabilities             111.02%                        110.35%                        111.04%
                                                   =======                        =======                        =======
---------------------
<FN>
(1)  Calculated net of deferred loan fees, loan discounts,  loans in process and
     loss reserves.
(2)  Net interest  rate spread  represents  the  difference  between the average
     yield on  interest-earning  assets and the average rate on interest-bearing
     liabilities.
</FN>
</TABLE>
<PAGE>

The following table presents the weighted  average yields on loans,  investments
and other  interest-  earning  assets,  and the weighted  average  rates paid on
deposits and  borrowings  and the  resultant  interest rate spreads at the dates
indicated.

                                                              At June 30,
                                                       -------------------------
                                                       2001      2000      1999
                                                       -------------------------


Weighted average yield on:
  Loans receivable ...............................     8.72%     8.57%     8.44%
  Investment securities ..........................     5.73      6.23      5.92
  Other interest-earning assets ..................     3.96      6.41      5.50
Combined weighted average yield on interest-
 earning assets ..................................     7.86      8.04      7.81

Weighted average rate paid on:

  Passbook savings accounts ......................     2.14      3.29      1.55
  NOW accounts ...................................     0.96      1.82      1.50
  Money market accounts ..........................     3.22      4.35      3.47
  Certificates of deposit ........................     5.67      5.47      5.40
  FHLB advances ..................................     5.35      6.38      5.66
Combined weighted average rate paid on
 interest-bearing liabilities ....................     4.73      5.12      4.60
Spread ...........................................     3.13      2.92      3.21

Rate/Volume Analysis

The following  schedule presents the dollar amount of changes in interest income
and  interest  expense  for major  components  of  interest-earning  assets  and
interest-bearing  liabilities.  It  distinguishes  between  the  changes  due to
changes in outstanding  balances and those due to changes in interest rates. For
each  category  of  interest-earning  assets and  interest-bearing  liabilities,
information is provided on changes  attributable to (i) changes in volume (i.e.,
changes in volume  multiplied by prior  interest  rate) and (ii) changes in rate
(i.e.,  changes in rate multiplied by prior volume). For purposes of this table,
changes attributable to both rate and volume,  which cannot be segregated,  have
been allocated  proportionately to the changes due to the volume and the changes
due to rate.

<TABLE>
                                                   Year Ended June 30,
                                ------------------------------------------------------
                                         2001 vs. 2000             2000 vs. 1999
                                ------------------------------------------------------
                                   Increase                                  Increase
                                  (Decrease)      Total      (Decrease)       Total
                                    Due to       Increase      Due to        Increase
                                ------------------------------------------------------
                                Volume    Rate  (Decrease)  Volume    Rate  (Decrease)
                                ------------------------------------------------------
<S>                             <C>      <C>    <C>         <C>      <C>    <C>
Interest-earning assets:
  Loans receivable ..........   $ 559    $ 144    $ 703     $ 779    $ (70)   $ 709
  Investment securities .....    (104)     (45)    (149)       82       77      159
  FHLB stock ................      32      (15)      17        22        1       23
  Other interest-earning
   assets ...................      41        2       43       (90)       4      (86)
                                ---------------------------------------------------
Total interest-earning
  assets ....................   $ 528    $  86    $ 614     $ 793    $  12    $ 805
                                ===================================================
Interest-bearing liabilities:
 Certificates of deposit ....   $ (66)   $ 158    $  92     $  30    $(113)   $  30
 NOW, money market, and
  passbook savings ..........      (8)      87       79         8      (12)      (4)
 Advances from borrowers for
  taxes and insurance .......      --       --       --        --       (1)      (1)
  FHLB advances .............     383       29      412       465       34      499
                                ---------------------------------------------------
Total interest-bearing
 liabilities ................   $ 309    $ 274    $ 583     $ 503    $ (92)   $ 411
                                ===================================================
Net interest income .........                     $  31                       $ 394
                                ===================================================
</TABLE>
<PAGE>

Comparison of Operating Results For The Years Ended June 30, 2001 and 2000

Performance  Summary.  Net income for the year ended June 30, 2001, increased by
$77,000 or 7.59% to $1.1  million  from $1.0 million for the year ended June 30,
2000.  The increase was primarily due to an increase in  non-interest  income of
$172,000,  a decrease in the provision  for loan loss of $50,000,  a decrease in
income  tax  expense of  $38,000,  and an  increase  in net  interest  income of
$31,000,  partially  offset by an increase in non-interest  expense of $214,000.
For the years  ended June 30,  2001 and 2000,  the return on average  assets was
0.95% and 0.93%, respectively, while the return on average equity was 10.04% and
9.44%, respectively.

Net  Interest  Income.  For the year ended June 30, 2001,  net  interest  income
increased  by $31,000 to $3.6  million from $3.5 million for the year ended June
30, 2000.  Interest income increased $614,000 to $8.9 million for the year ended
June 30,  2001 from $8.3  million  for the year ended June 30,  2000,  partially
offset by a $583,000  increase in interest  expense to $5.3 million for the year
ended June 30, 2001 from $4.7 million for the year ended June 30, 2000.  The net
increase was  primarily  due to the  increase in net  interest-  earning  assets
partially  offset by a thirty-four  basis point  increase in the average cost of
interest-bearing liabilities.

For the year ended June 30, 2001, the average yield on  interest-earning  assets
was 8.04%  compared to 7.92% for the year ended June 30, 2000.  The average cost
of  interest-bearing  liabilities  was 5.32% for the year  ended  June 30,  2001
compared  to 4.98% for the year  ended June 30,  2000.  The  average  balance of
interest-earning assets increased by $6.1 million to $110.4 million for the year
ended June 30, 2001 from $104.3 million for the year ended June 30, 2000. During
the same time  period,  the  average  balance  of  interest-bearing  liabilities
increased by $4.9 million to $99.4 million for the year ended June 30, 2001 from
$94.5 million for the year ended June 30, 2000.

The  average  interest  rate  spread was 2.72% for the year ended June 30,  2001
compared to 2.94% for the year ended June 30,  2000.  During the same period the
average net interest  margin was 3.25% for the year ended June 30, 2001 compared
to 3.41% for the year ended June 30,  2000.  Despite the increase in the average
yield  on   interest-earning   assets   and  the   increase   in  the  ratio  of
interest-earning  assets to  interest-  bearing  liabilities,  the net  interest
margin decreased primarily due to the higher cost of funds during the year ended
June 30, 2001.

Provision for Loan Losses.  For the year ended June 30, 2001,  the provision for
loan losses decreased  $50,000 to $137,000 from $187,000 for the year ended June
30, 2000.  The primary  reason for the decrease in the provision was the slowing
growth  rate  of the  loan  portfolio.  The  Company's  loan  portfolio  remains
primarily  residential  mortgage  loans and has  experienced a minimal amount of
charge-offs  in the past three years.  The allowance for loan losses of $608,000
or 0.72% of loans  receivable,  net at June 30, 2001 is a decrease when compared
to $648,000 or .77% of loans receivable, net at June 30, 2000. The allowance for
loan losses as a percentage of non-performing assets was 85.13% at June 30, 2001
compared to 99.91% at June 30, 2000.

Management will continue to monitor the Company's  allowance for loan losses and
will make  additions to the  allowance  through the provision for loan losses as
economic  conditions  dictate.  Although the Company maintains its allowance for
loan losses at a level which management  considers to be adequate to provide for
loan  losses,  there can be no  assurance  that  future  losses  will not exceed
estimated  amounts or that  additional  provisions  for loan  losses will not be
required in the future.

Non-interest  Income.  For the year ended  June 30,  2001,  non-interest  income
increased  $172,000 to $683,000  from $511,000 for the year ended June 30, 2000.
The  increase was  primarily  due to a $90,000  increase in service  charges and
fees, a $53,000 increase in security gains, net, a $12,000 increase in insurance
commissions,  an  $11,000  increase  in  investment  commissions,  and a  $6,000
increase in other non-interest income.
<PAGE>

Service  charges and fees increased  $90,000 to $477,000 for the year ended June
30,  2001 from  $387,000  for the year ended June 30,  2000.  The  increase  was
primarily  due to a $39,000  increase in overdraft  fees, a $30,000  increase in
loan  processing  fees, a $10,000  increase in revenue from a new check printing
product,  a $6,000  increase in late  charges on loans and a $4,000  increase in
credit card related fees.  Security gains, net increased  $53,000 to $44,000 for
the year ended  June 30,  2001 from a loss of $9,000 for the year ended June 30,
2000 due to the sale of five  available-  for-  sale  securities  for a net gain
resulting from declining interest rates. Insurance commissions increased $12,000
to $82,000 for the year ended June 30, 2001 from $70,000 for the year ended June
30, 2000  primarily due to increases in the volume of credit life and disability
sales.  Investment  commissions  increased $11,000 to $40,000 for the year ended
June 30, 2001 from  $29,000  for the year ended June 30,  2000.  The  investment
center opened in July of 1999 and generated  $29,000 in  commissions  during the
first fiscal year.  The increase is  primarily  due to the  continued  growth in
client base. Other non-interest  income increased $6,000 to $40,000 for the year
ended June 30, 2001 from $34,000 for the year ended June 30, 2000  primarily due
to income received on other assets.

Non-interest  Expense.  For the year ended June 30, 2001,  non-interest  expense
increased $214,000 to $2.3 million from $2.1 million for the year ended June 30,
2000. The increase was primarily due to a $141,000  increase in compensation and
benefits,  a $66,000 increase in occupancy and equipment,  a $12,000 increase in
data processing and an $8,000 increase in other non-interest expense,  partially
offset by a $13,000 decrease in FDIC deposit insurance premium.

Compensation and benefits  increased $141,000 to $1.3 million for the year ended
June 30, 2001 from $1.1 million for the year ended June 30, 2000.  This increase
was primarily due to the increased level of staffing  resulting from the opening
of Washington  Federal's branch office,  Richland Federal Savings,  in Richland,
Iowa and normal salary increases.  Occupancy and equipment  increased $66,000 to
$283,000 for the year ended June 30, 2001 from  $217,000 for the year ended June
30,  2000  primarily  due to the  purchase,  remodeling,  and  equipping  of the
Richland, Iowa branch. The Company also acquired a building in Wellman, Iowa and
began  remodeling  the  property  during  the year  ended  June 30,  2001.  Data
processing  increased  $12,000 to $114,000 for the year ended June 30, 2001 from
$102,000  for the year  ended  June 30,  2000  primarily  due to the  expense of
upgrading  communication  systems and the addition of on-line banking  services.
Other non-interest  expense increased $8,000 to $572,000 for the year ended June
30, 2001 from  $564,000  for the year ended June 30, 2000  primarily  due to the
cost of operating an additional bank office.

FDIC deposit  insurance  premium decreased $13,000 to $38,000 for the year ended
June 30, 2001 from $51,000 for the year ended June 30, 2000.  This  decrease was
primarily  due to the decrease in  Washington  Federal's  regulatory  assessment
rate.

Income Tax  Expense.  Income tax expense  decreased  $38,000 to $676,000 for the
year ended June 30, 2001 from  $713,000  for the year ended June 30,  2000.  The
effective income tax rates for the years ended June 30, 2001 and 2000 were 38.2%
and 41.2%, respectively.

Comparison of Operating Results For The Years Ended June 30, 2000 and 1999

Performance  Summary.  Net income for the year ended June 30, 2000, increased by
$185,000 or 22.26% to $1.0  million  from  $831,000  for the year ended June 30,
1999.  The increase was primarily  due to an increase in net interest  income of
$394,000 and an increase in non-interest income of $118,000, partially offset by
an increase in income tax expense of $181,000, an increase in provision for loan
losses of $74,000 and an increase in  non-interest  expense of $72,000.  For the
years ended June 30, 2000 and 1999,  the return on average  assets was 0.93% and
0.83%,  respectively,  while the return on  average  equity was 9.44% and 7.79%,
respectively.

Net  Interest  Income.  For the year ended June 30, 2000,  net  interest  income
increased  by $394,000 to $3.5 million from $3.1 million for the year ended June
30, 1999.  Interest income increased $805,000 to $8.2 million for the year ended
June 30,  2000 from $7.4  million  for the year ended June 30,  1999,  partially
offset by a $411,000  increase in interest  expense to $4.7 million for the year
ended June 30, 2000 from $4.3 million for the year ended June 30, 1999.  The net
increase was primarily due to the increase in net interest- earning assets.
<PAGE>

For the year ended June 30, 2000, the average yield on  interest-earning  assets
was 7.92%  compared to 7.81% for the year ended June 30, 1999.  The average cost
of  interest-bearing  liabilities  was 4.98% for the year  ended  June 30,  2000
compared  to 5.00% for the year  ended June 30,  1999.  The  average  balance of
interest-earning assets increased by $8.8 million to $104.3 million for the year
ended June 30, 2000 from $95.5 million for the year ended June 30, 1999.  During
the same time  period,  the average  balance of  interest-  bearing  liabilities
increased by $8.5 million to $94.5 million for the year ended June 30, 2000 from
$86.0 million for the year ended June 30, 1999.

The  average  interest  rate  spread was 2.94% for the year ended June 30,  2000
compared  to  2.81%  for the year  ended  June 30,  1999,  primarily  due to the
increase in the percentage of loans  receivable,  which carry a higher  interest
rate than other interest earning assets.

Provision for Loan Losses.  For the year ended June 30, 2000,  the provision for
loan losses increased  $74,000 to $187,000 from $113,000 for the year ended June
30, 1999. The primary reason for the increase in the provision was the increased
size of the loan portfolio,  particularly  in commercial and  agriculture  loans
which are considered to carry a higher risk of default than  residential  loans.
Despite  this  increase,   the  Company's  loan  portfolio   remains   primarily
residential  mortgage loans and has  experienced a minimal amount of charge-offs
in the past three years.  The  allowance for loan losses of $648,000 or 0.77% of
loans receivable,  net at June 30, 2000 is an increase when compared to $472,000
or .65% of loans receivable, net at June 30, 1999. The allowance for loan losses
as a percentage of non-performing assets was 99.91% at June 30, 2000 compared to
304.64% at June 30, 1999.

Management will continue to monitor the Company's  allowance for loan losses and
will make  additions to the  allowance  through the provision for loan losses as
economic  conditions  dictate.  Although the Company maintains its allowance for
loan losses at a level which management  considers to be adequate to provide for
loan  losses,  there can be no  assurance  that  future  losses  will not exceed
estimated  amounts or that  additional  provisions  for loan  losses will not be
required in the future.

Non-interest  Income.  For the year ended  June 30,  2000,  non-interest  income
increased  $119,000 to $511,000  from $392,000 for the year ended June 30, 1999.
The increase was primarily due to a $95,000 increase in bank service charges and
fees, a $29,000 increase in investment  commissions,  and an $18,000 increase in
insurance  commissions,  partially  offset by a $25,000  decrease in  securities
gain, net.

Bank service  charges and fees increased  $95,000 to $387,000 for the year ended
June 30, 2000 from  $292,000 for the year ended June 30, 1999.  The increase was
primarily  due to a $78,000  increase in overdraft  fees, a $14,000  increase in
credit card related  fees,  and a $3,000  increase in ATM and debit card income.
The  investment  center  opened  in  July  of  1999  and  generated  $29,000  in
commissions  during  fiscal 2000.  Insurance  commissions  increased  $18,000 to
$70,000  for the year ended June 30,  2000 from  $52,000 for the year ended June
30, 1999.  This  increase was primarily due to increases in the volume of credit
life and disability  sales.  Security gains, net decreased  $25,000 to a loss of
$9,000  for the year ended  June 30,  2000 from a gain of  $15,000  for the year
ended June 30, 1999 due to the sale of two available-for-sale  agency securities
which contained call options.  These  instruments were sold to reduce Washington
Federal's interest rate risk exposure.

Non-interest  Expense.  For the year ended June 30, 2000,  non-interest  expense
increased  $72,000 to $2.1 million from $2.1 million for the year ended June 30,
1999. The increase was primarily due to a $55,000  increase in compensation  and
benefits,  a $15,000 increase in data processing and a $15,000 increase in other
non-interest  expense,  partially  offset by an $8,000 decrease in occupancy and
equipment expense and a $5,000 decrease in deposit insurance premiums.

Compensation and benefits  increased  $55,000 to $1.1 million for the year ended
June 30, 2000 from $1.1 million for the year ended June 30, 1999.  This increase
was primarily due to the increased  level of staffing to prepare for the opening
of Washington  Federal's branch office,  Richland Federal Savings,  in Richland,
Iowa. Data processing  increased $15,000 to $102,000 for the year ended June 30,
2000 from $87,000 for the year ended June 30, 1999.  This increase was primarily
due to the  expense  of  upgrading  communication  systems.  Other  non-interest
expense  increased  $15,000 to  $564,000  for the year ended June 30,  2000 from
$549,000 for the year ended June 30, 1999.  This  increase was  primarily due to
the increase in examination and auditing fees.
<PAGE>

Occupancy and equipment decreased $8,000 to $217,000 for the year ended June 30,
2000 from $225,000 for the year ended June 30, 1999. This decrease was primarily
due to a decrease in the accrual of real estate taxes and a decrease in the cost
of  equipment  maintenance,  partially  offset by an  increase  in  depreciation
expense. FDIC deposit insurance premium decreased $5,000 to $51,000 for the year
ended June 30, 2000 from $56,000 for the year ended June 30, 1999. This decrease
was primarily due to the decrease in Washington Federal's regulatory  assessment
rate.

Income Tax Expense.  Income tax expense  increased  $181,000 to $713,000 for the
year ended June 30, 2000 from  $532,000  for the year ended June 30,  1999.  The
increase was primarily  due to the increase in income  before income taxes.  The
effective income tax rates for the years ended June 30, 2000 and 1999 were 41.2%
and 39.0%, respectively.

Asset/Liability Management

One of the Company's  principal  financial  objectives  is to achieve  long-term
profitability while reducing its exposure to fluctuations in interest rates. The
Company  has  sought to reduce  exposure  of its  earnings  to changes in market
interest rates by managing the mismatch  between asset and liability  maturities
and interest rates.  The principal  element in achieving this objective has been
to increase the interest-rate sensitivity of the Company's assets by originating
loans with interest rates subject to periodic  adjustments to market conditions.
Accordingly, the Company's primary one- to four-family loan product has been a 3
year  balloon  loan.  Balloon  loans  accounted  for $36.5  million of its $84.1
million  loan  portfolio,  or 43.4%  at June 30,  2001.  Adjustable  rate  loans
accounted for an additional  $10.0 million of its $84.1 million loan  portfolio,
or 11.9% at June 30, 2001.

The Company has historically  relied upon retail deposit accounts as its primary
source of funds and will  continue  to do so.  Management  believes  that retail
deposit  accounts  and long term  borrowings  as sources of funds,  compared  to
brokered  deposits,  reduce the effects of interest  rate  fluctuations  because
these deposits and borrowings generally represent more stable sources of funds.

Net Portfolio Value. In order to encourage savings  associations to reduce their
interest rate risk, the OTS adopted a rule  incorporating  an interest rate risk
("IRR")  component  into the risk-based  capital  rules.  The IRR component is a
dollar  amount  that will be  deducted  from total  capital  for the  purpose of
calculating an institution's  risk-based capital  requirement and is measured in
terms of the  sensitivity  of its net  portfolio  value  ("NPV")  to  changes in
interest rates. NPV is the difference  between incoming and outgoing  discounted
cash flows  from  assets,  liabilities,  and  off-balance  sheet  contracts.  An
institution's  IRR  is  measured  as  the  change  to its  NPV  as a  result  of
hypothetical  200 basis  point  ("bp")  changes  in  market  interest  rates.  A
resulting  change in NPV of more than 2% of the  estimated  market  value of its
assets  will  require  the  institution  to deduct  from its capital 50% of that
excess  change.  The rules provide that the OTS will calculate the IRR component
quarterly for each institution.  The Company, based on asset size and risk-based
capital, has been informed by the OTS that it is exempt from this rule.

Presented  on the  following  table,  as of June 30,  2001,  is an  analysis  of
Washington  Federal's  interest  rate risk as  measured  by  changes  in NPV for
instantaneous  and sustained  parallel  shifts in the yield curve,  in 100 basis
point  increments,  up  and  down  300  basis  points  in  accordance  with  OTS
regulations.  For example,  a 300 basis point  increase in interest  rates would
decrease  Washington  Federal's NPV by $1.1 million or 12% and a 300 basis point
decrease in interest rates would increase  Washington  Federal's NPV by $491,000
or 5%. As discussed  above, the OTS has informed  Washington  Federal that it is
not subject to the IRR component.  Further,  were Washington  Federal subject to
the IRR  component at June 30, 2001,  it would not have been  considered to have
had a greater than normal level of interest rate  exposure and a deduction  from
capital would not have been  required,  although it is still subject to interest
rate risk and, as can be seen below,  increasing  rates could reduce  Washington
Federal's NPV.

                            At June 30, 2001
---------------------------------------------------------------------
                                                     NPV as % of
               Net Portfolio Value                   PV of Assets
---------------------------------------------------------------------
Change in
  Rates       $ Amount     $ Change   % Change    NPV Ratio    Change
---------------------------------------------------------------------
                        (Dollars in Thousands)
 +300 bp        7,939       -1,069       -12%        8.47%     -85 bp
 +200 bp        8,329         -679        -8%        8.79%     -53 bp
 +100 bp        8,676         -333        -4%        9.06%     -25 bp
 0 bp           9,009                                9.32%
 -100 bp        9,238          230         3%        9.47%      15 bp
 -200 bp        9,382          374         4%        9.53%      22 bp
 -300 bp        9,500          491         5%        9.57%      26 bp
<PAGE>

Management of interest  sensitivity of Rubio has historically  been accomplished
by matching  the  maturities  of  interest-earning  assets and  interest-bearing
liabilities.  The following table illustrates the asset/(liability) funding gaps
for selected maturity periods as of June 30, 2001.
<TABLE>
                                                            Maturing Within
                                     ----------------------------------------------------------
                                       0-6          6-12          1-2          2-3
                                      Months       Months        Years        Years      Total
                                     ----------------------------------------------------------
                                                        (Dollars in Thousands)
<S>                                  <C>          <C>          <C>         <C>         <C>
Assets
  Loans receivable ...............   $  1,776     $  1,326     $  2,113    $  1,240    $  6,455
  Securities .....................        154          525        1,572       1,421       3,672
                                     ----------------------------------------------------------
     Total interest-earning assets      1,930        1,851        3,685       2,661      10,127

Liabilities
  Interest-bearing deposits ......      3,056        4,643        2,135         376      10,210
                                     ----------------------------------------------------------
Asset/(Liability) funding GAP ....   $ (1,126)    $ (2,792)    $  1,550    $  2,285    $    (83)
                                     ==========================================================

GAP ratio (assets/liabilities) ...         64%          40%         173%        708%         99%
</TABLE>

Certain  shortcomings  are  inherent in the method of analysis  presented in the
computation of NPV.  Although  certain assets and  liabilities  may have similar
maturities or periods within which they will reprice, they may react differently
to changes in market  interest  rates.  The interest  rates on certain  types of
assets and  liabilities  may fluctuate in advance of changes in market  interest
rates,  while  interest  rates on other  types may lag behind  changes in market
rates. Additionally, the Company's primary loan products, the three-year balloon
and  adjustable  rate  loans,  may  permit  the  Company to adjust to changes in
interest  rates on a short-  term  basis  and  over the life of the  asset.  The
proportion of three-year  balloon and adjustable  rate loans could be reduced in
future periods if market  interest rates decrease and remain at lower levels for
a sustained period, due to increased refinance  activity.  Further, in the event
of a change in interest  rates,  prepayment  and early  withdrawal  levels would
likely  deviate  significantly  from those  assumed in the table.  Finally,  the
ability of many  borrowers to service their  three-year  balloon and  adjustable
rate  mortgage  loans may  decrease  in the event of a sustained  interest  rate
increase.

Liquidity and Capital Resources

The Company's primary sources of funds are deposits,  long-term  borrowings from
the FHLB,  repayments  and  prepayments  of loans,  the  maturity of  investment
securities and interest income.  Although maturity and scheduled amortization of
loans are relatively predictable sources of funds, deposit flows and prepayments
on loans are  influenced  significantly  by  general  interest  rates,  economic
conditions and competition.

The primary investing  activity of the Company is originating  mortgage loans to
be held to maturity.  For the fiscal years ended June 30, 2001,  2000, and 1999,
the Company  originated  loans for its portfolio in the amount of $39.2 million,
$42.6 million,  and $42.1 million,  respectively.  These  activities were funded
primarily by deposits,  principal repayments of loans and FHLB borrowings.  FHLB
borrowings have been less costly than new certificates of deposit, and less than
other financing sources available.

For  investment  and liquidity  purposes,  the Company  maintains a portfolio of
investment  securities  including  U.S.  Treasury  securities,  U.S.  government
agencies,  state  and  political  subdivisions,   mortgage-  backed  securities,
corporation and other securities.

Cash was generated by the Company's operating  activities during the years ended
June  30,  2001,  2000  and  1999,  primarily  as a result  of net  income.  The
adjustments  to reconcile net income to net cash  provided by operations  during
the periods  presented  consisted  primarily  of  amortization  of premiums  and
discounts on debt securities,  depreciation  expense,  amortization of goodwill,
deferred  income  taxes and  increases  and  decreases in other assets and other
liabilities. The primary investing activities of the Company are the origination
of loans and the purchase of investment  securities,  which are funded with cash
provided  from  operations  and financing  activities,  as well as proceeds from
amortization  and  prepayments  on existing  loans and  proceeds  from sales and
maturities  of  securities.  The Company's  primary  financing  activities  have
consisted of deposits and borrowing/repayments with the FHLB of Des Moines.
<PAGE>

The Company's  most liquid assets are cash and cash  equivalents,  which include
unpledged U.S. Government agency securities and other short-term investments. At
June 30, 2001, 2000 and 1999, cash and cash equivalents were $3.1 million,  $2.8
million, and $2.6 million, respectively.

Liquidity  management for the Company is both an ongoing and long-term  function
of the Company's asset/liability management strategy. Excess funds generally are
invested in overnight  deposits at the FHLB of Des Moines or at other  financial
institutions.  Should the Company  require  funds beyond its ability to generate
them internally,  additional  sources of funds are available through FHLB of Des
Moines  advances.  The  Company  would  pledge its FHLB of Des Moines  stock and
certain other assets as collateral for such advances.  During fiscal 2001,  2000
and 1999,  the Company  used FHLB  advances to meet cash flow  requirements  and
finance  loan  growth.  The FHLB  advances  are  generally  at a higher  rate of
interest than transaction and savings deposit accounts.

At June 30, 2001, the Company had outstanding  loan  commitments of $3.5 million
and undisbursed  loans in process of $605,000.  The Company  anticipates it will
have sufficient funds available to meet its current loan commitments,  including
loan  applications  received  and in  process  prior  to the  issuance  of  firm
commitments.  Certificates  of deposit which are scheduled to mature in one year
or  less at  June  30,  2001  were  $32.1  million.  Based  on past  experience,
management believes that a significant portion of such deposits will remain with
the Company.

Under  federal law, the Banks are  required to meet certain  tangible,  core and
risk  based  capital  requirements.  For  information  regarding  the  Company's
regulatory   capital   compliance,    see   "Selected   Consolidated   Financial
Information."

Recent Accounting Developments

In July 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business  Combinations"  and Statement  No. 142 "Goodwill and Other  Intangible
Assets."  Statement No. 141  eliminates  the pooling  method for  accounting for
business  combinations,  requires  that  intangible  assets  that  meet  certain
criteria be reported  separately from goodwill,  and requires  negative goodwill
arising from a business  combination  to be recorded as an  extraordinary  gain.
Statement No. 142 eliminates the amortization of goodwill and other  intangibles
that are determined to have an indefinite  life and requires  annual  impairment
tests. The adoption of Statements No. 141 and No. 142 are generally  required to
be implemented by the Company in its 2002 financial  statement.  The Company has
not yet completed its full assessment of the effects on its financial statements
so is uncertain of the impact.

In July 2001,  the Securities and Exchange  Commission  issued Staff  Accounting
Bulletin No. 102,  "Selected Loan Loss Allowance  Methodology and  Documentation
Issues." The Bulletin does not change accounting  guidance for the Allowance for
Loan Losses, but does provide significant  interpretation of the manner in which
institutions  should develop and document their  methodology for calculating the
allowance  for loan  losses,  as well as  measuring  the  adequacy of such.  The
adoption of Bulletin  No. 102 is not  expected to have a material  impact on the
Company.

Impact of Inflation and Changing Prices

The Consolidated  Financial  Statements and Notes thereto  presented herein have
been prepared in accordance with generally accepted accounting principles, which
generally  requires the measurement of financial  position and operating results
in terms of historical  dollars  without  considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the  increased  cost of the  Company's  operations.  Nearly all the
assets and  liabilities  of the Company are  financial,  unlike most  industrial
companies.  As a result,  the  Company's  performance  is  directly  impacted by
changes in interest  rates,  which are  indirectly  influenced  by  inflationary
expectations.  The Company's  ability to match the interest  sensitivity  of its
financial assets to the interest sensitivity of its financial liabilities in its
asset/liability management may tend to minimize the effect of change in interest
rates on the Company's performance. Changes in interest rates do not necessarily
move to the same  extent as  changes  in the price of goods  and  services.  The
liquidity and the maturity structure of the Company's assets and liabilities are
critical to the maintenance of acceptable performance levels.


<PAGE>






                               Washington Bancorp

                                 and Subsidiary

                          Consolidated Financial Report

                                  June 30, 2001


<PAGE>




                                    Contents

INDEPENDENT AUDITOR'S REPORT

FINANCIAL STATEMENTS

   Consolidated  statements of financial condition
   Consolidated  statements of income
   Consolidated  statements  of  comprehensive  income
   Consolidated  statements of stockholders' equity
   Consolidated  statements of cash flows
   Notes to financial statements

<PAGE>


                          Independent Auditor's Report

To the Board of Directors
Washington Bancorp
Washington, Iowa

We have audited the accompanying  consolidated statements of financial condition
of Washington Bancorp and its subsidiaries as of June 30, 2001 and 2000, and the
related consolidated statements of income,  comprehensive income,  stockholders'
equity and cash flows for each of the three  years in the period  ended June 30,
2001.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Washington Bancorp
and  subsidiaries  as of June  30,  2001  and  2000,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
June 30, 2001 in conformity with accounting principles generally accepted in the
United States of America.


/s/ McGladrey & Pullen, LLP
---------------------------

Cedar Rapids, Iowa
August 8, 2001
<PAGE>

WASHINGTON BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

June 30, 2001 and 2000
<TABLE>

ASSETS                                                                          2001             2000
---------------------------------------------------------------------------------------------------------
<S>                                                                        <C>              <C>
Cash and cash equivalents (Note 2):
  Interest-bearing .....................................................   $   2,462,282    $   1,859,278
  Noninterest-bearing ..................................................         679,041          990,107
Investment securities (Note 3):
  Held to maturity (fair value approximates $1,142,599 at June 30, 2001)       1,142,599          774,629
  Available-for-sale ...................................................      22,090,836       21,602,351
Federal funds sold .....................................................       3,350,000          110,000
Loans receivable, net of allowance for loan losses of $607,833
  in 2001 and $647,605 in 2000 (Notes 4, 8 and 15) .....................      84,095,349       83,988,473
Accrued interest receivable (Note 5) ...................................       1,517,702        1,463,838
Federal Home Loan Bank stock (Note 8) ..................................       1,756,200        1,729,600
Foreclosed real estate .................................................         145,949          271,302
Premises and equipment, net (Note 6) ...................................         986,635          818,228
Goodwill ...............................................................       1,091,402        1,185,964
Other assets ...........................................................         373,855          628,668
                                                                           ------------------------------
        Total assets ...................................................   $ 119,691,850    $ 115,422,438
                                                                           ==============================

LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------
Liabilities
  Deposits (Note 7):
    Noninterest-bearing ................................................       4,107,003    $   4,225,007
    Interest-bearing ...................................................      68,797,275       69,072,090
                                                                           ------------------------------
        Total deposits .................................................      72,904,278       73,297,097
  Federal funds purchased ..............................................       1,500,000               --
  Borrowed funds (Note 8) ..............................................      32,334,794       30,193,250
  Advances from borrowers for taxes and insurance ......................         244,377          249,683
  Accrued expenses and other liabilities ...............................         754,975          632,003
                                                                           ------------------------------
        Total liabilities ..............................................     107,738,424      104,372,033
                                                                           ------------------------------
Commitments and Contingencies (Note 13)
Redeemable Common Stock Held by Employee Stock
  Ownership Plan (ESOP) (Note 9) .......................................         336,980          228,947
-                                                                          ------------------------------
Stockholders' Equity (Notes 12 and 16)
  Preferred stock, $.01 par value, authorized 1,000,000 shares;
    none issued and outstanding ........................................              --               --
  Common stock, $.01 par value, authorized 4,000,000 shares;
    issued 2001 and 2000 651,133 shares ................................           6,511            6,511
   Additional paid-in capital ..........................................       6,175,332        6,169,796
   Retained earnings ...................................................       8,175,145        7,333,909
   Accumulated other comprehensive (loss) ..............................         (29,669)        (447,899)
                                                                           ------------------------------
                                                                              14,327,319       13,062,317
Less:
  Cost of common shares acquired for the treasury
    2001 134,162 shares; 2000 103,399 shares ...........................      (2,070,600)      (1,658,017)
  Deferred compensation (Note 9) .......................................         (21,093)         (21,060)
  Maximum cash obligation related to ESOP shares (Note 9) ..............        (336,980)        (228,947)
  Unearned ESOP shares (Note 9) ........................................        (282,200)        (332,835)
                                                                           ------------------------------
        Total stockholders' equity .....................................      11,616,446       10,821,458
                                                                           ------------------------------
        Total liabilities and stockholders' equity .....................   $ 119,691,850    $ 115,422,438
                                                                           ==============================
</TABLE>
See Notes to Financial Statements.
<PAGE>

WASHINGTON BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30, 2001, 2000 and 1999
<TABLE>
                                                2001          2000           1999
------------------------------------------------------------------------------------
<S>                                         <C>           <C>            <C>
Interest and dividend income:
  Loans, including fees:
    Mortgage loans ......................   $ 4,602,065   $ 4,301,666    $ 4,662,591
    Consumer and other loans ............     2,789,004     2,386,385      1,316,663
  Investment securities:
    Taxable .............................     1,319,318     1,428,419      1,342,164
    Nontaxable ..........................        68,394        65,418         79,037
  Federal Home Loan Bank stock ..........        95,505        78,192         54,762
                                            ----------------------------------------
        Total interest income ...........     8,874,286     8,260,080      7,455,217
                                            ----------------------------------------
Interest expense:
  Deposits (Note 7) .....................     3,496,099     3,325,496      3,413,212
  Borrowed funds ........................     1,792,966     1,380,504        881,818
                                            ----------------------------------------
        Total interest expense ..........     5,289,065     4,706,000      4,295,030
                                            ----------------------------------------
        Net interest income .............     3,585,221     3,554,080      3,160,187
Provision for loan losses (Note 4) ......       136,500       186,500        112,500
                                            ----------------------------------------
        Net interest income after
        provision for loan losses .......     3,448,721     3,367,580      3,047,687
                                            ----------------------------------------
Noninterest income:
  Securities gains (losses), net (Note 3)        43,509        (9,456)        15,205
  Service charges and fees ..............       477,575       387,345        292,013
  Insurance commissions .................        81,492        69,931         51,750
  Investment commissions ................        40,533        29,132           --
  Other .................................        40,092        33,923         33,348
                                            ----------------------------------------
        Total noninterest income ........       683,201       510,875        392,316
                                            ----------------------------------------
Noninterest expense:
  Compensation and benefits (Note 9) ....     1,260,959     1,120,107      1,064,847
  Occupancy and equipment ...............       283,154       217,059        224,963
  SAIF deposit insurance premium ........        37,929        50,788         56,699
  Data processing .......................       114,429       102,226         86,907
  Goodwill amortization .................        94,562        94,562         94,561
  Other .................................       571,732       564,034        548,804
                                            ----------------------------------------
        Total noninterest expense .......     2,362,765     2,148,776      2,076,781
                                            ----------------------------------------
        Income before income taxes ......     1,769,157     1,729,679      1,363,222
Income tax expense (Note 10) ............       675,763       713,437        532,022
                                            ----------------------------------------
        Net income ......................   $ 1,093,394   $ 1,016,242    $   831,200
                                            ========================================

Earnings per common share (Note 11):
  Basic .................................   $      2.21   $      1.86    $      1.48
                                            ========================================
  Diluted ...............................   $      2.16   $      1.83    $      1.44
                                            ========================================

Weighted average common shares for:
  Basic earnings per share ..............       495,353       545,963        563,303
                                            ========================================
  Diluted earnings per share ............       505,726       555,606        578,115
                                            ========================================
</TABLE>
See Notes to Financial Statements.
<PAGE>

WASHINGTON BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended June 30, 2001, 2000 and 1999
<TABLE>
                                                                    2001           2000           1999
---------------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
Net income ..................................................   $ 1,093,394    $ 1,016,242    $   831,200
                                                                -----------------------------------------

Other  comprehensive  income,  net of income  taxes:
  Unrealized  holding  gains (losses) arising during the
    year, net of income taxes 2001 $(283,493); 2000 $148,513;
    1999 $135,393 ...........................................       445,641       (218,059)      (225,737)
  Reclassification adjustments for net losses (gains)
    realized in net income, net of income taxes
    2001 $16,098; 2000 $(3,518); 1999 $5,671 ................       (27,411)         5,938         (9,534)
                                                                -----------------------------------------
        Other comprehensive income (loss) ...................       418,230    $  (212,121)   $  (235,271)
                                                                =========================================

        Comprehensive income ................................   $ 1,511,624    $   804,121    $   595,929
                                                                =========================================
</TABLE>
See Notes to Financial Statements.
<PAGE>

WASHINGTON BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Notes 9, 12 and 16)
Years Ended June 30, 2001, 2000 and 1999
<TABLE>
                                                                                                    Maximum
                                                                   Accumu-   Cost Of                 Cash
                                                                   lated     Common                 Obliga-
                                                                   Other     Shares                  tion                  Total
                                           Additional            Comprehen-  Acquired   Deferred    Related   Unearned     Stock-
                        Preferred  Common    Paid-In   Retained sive Income  For The    Compen-     to ESOP     ESOP       holders'
                          Stock    Stock     Capital   Earnings    (Loss)    Treasury   sation      Shares     Shares      Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>      <C>      <C>        <C>         <C>       <C>         <C>        <C>        <C>        <C>
Balance, June 30, 1998 . $   --  $ 6,511  $6,122,664 $5,825,363  $   (507) $ (300,944) $(104,962) $(153,788) $(423,130) $10,971,207
  Net income ...........     --       --          --    831,200        --          --         --         --         --      831,200
  Dividends ($0.48 per
    share) .............     --       --          --   (271,700)       --          --         --         --         --     (271,700)
  Acquisition of 37,000
    shares of common
    stock for the
    treasury ...........     --       --          --         --        --    (684,125)        --         --         --     (684,125)
  Issuance of 2,192
    shares under stock
    awards program .....     --       --      (2,181)        --        --      38,634    (36,453)        --         --           --
  Amortization of
    compensation under
    stock award program      --       --          --         --        --          --     62,317         --         --       62,317
  Allocation of ESOP
    shares .............     --       --      29,827         --        --          --         --         --     43,410       73,237
  Other comprehensive
    income .............     --       --          --         --  (235,271)         --         --         --         --     (235,271)
  Change related to ESOP
    shares .............     --       --          --         --        --          --         --    (36,184)        --      (36,184)
                        ------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 .     --    6,511   6,150,310  6,384,863  (235,778)   (946,435)   (79,098)  (189,972)  (379,720)  10,710,681
  Net income ...........     --       --          --  1,016,242        --          --         --         --         --    1,016,242
  Dividends ($0.48 per
    share) .............     --       --          --    (67,196)       --          --         --         --         --      (67,196)
  Acquisition of 50,710
    shares of common
    stock for the
    treasury ...........     --       --          --         --        --    (680,232)        --         --         --     (680,232)
  Forfeiture of 1,754
    shares under stock
    awards program .....     --       --       2,181         --        --     (31,350)    29,169         --         --           --
  Amortization of
    compensation under
    stock award program      --       --          --         --        --          --     28,869         --         --       28,869
  Allocation of ESOP
    shares .............     --       --      17,305         --        --          --         --         --     46,885       64,190
  Other comprehensive
    income .............     --       --          --         --  (212,121)         --         --         --         --     (212,121)
  Change related to
    ESOP shares ........     --       --          --         --        --          --         --    (38,975)        --      (38,975)
                        ------------------------------------------------------------------------------------------------------------
Balance, June 30, 2000 .     --    6,511   6,169,796  7,333,909  (447,899) (1,658,017)   (21,060)  (228,947)  (332,835)  10,821,458
  Net income ...........     --       --          --  1,093,394        --          --         --         --         --    1,093,394
  Dividends ($0.50 per
    share) .............     --       --          --   (252,158)       --          --         --         --         --     (252,158)
  Acquisition of 35,708
    shares of common
    stock for the
    treasury ...........     --       --          --         --        --    (489,018)        --         --         --     (489,018)
  Forfeiture of 439
    shares under stock
    awards program .....     --       --       1,701         --        --      (6,640)     4,939         --         --           --
  Issuance of 1,000
    shares under stock
    awards program .....     --       --         695         --        --      15,430    (16,125)        --         --           --
  Amortization of
    compensation under
    stock award program      --       --          --         --        --          --     11,153         --         --       11,153
  Stock options exercised
    for 4,384 shares ...     --       --     (18,324)        --        --      67,645         --         --         --       49,321
  Allocation of ESOP
    shares .............     --       --      21,464         --        --          --         --         --     50,635       72,099
  Other comprehensive
    income .............     --       --          --         --   418,230          --         --         --         --      418,230
  Change related to
    ESOP shares ........     --       --          --         --        --          --         --   (108,033)        --     (108,033)
                         -----------------------------------------------------------------------------------------------------------
Balance, June 30, 2001 . $   --  $ 6,511  $6,175,332 $8,175,145  $(29,669) $(2,070,600) $(21,093) $(336,980) $(282,200) $11,616,446
                         ==========================================================================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>

WASHINGTON BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2001, 2000 and 1999
<TABLE>
                                                        2001             2000           1999
                                                    --------------------------------------------
<S>                                                 <C>             <C>             <C>
Cash Flows from Operating Activities
  Net income ....................................   $  1,093,394    $  1,016,242    $    831,200
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Amortization of premiums and accretion of
      discounts on investment securities ........       (121,775)         19,835         (58,188)
    Amortization of goodwill ....................         94,562          94,562          94,561
    Provision for loan losses ...................        136,500         186,500         112,500
    (Gain) loss on sale of investment securities         (43,509)          9,456         (15,205)
    (Gain) loss on sale of foreclosed real estate         65,385          (7,606)        (21,424)
     Depreciation ...............................         93,417          88,106          77,289
     Compensation under stock awards ............         11,153          28,869          62,317
     ESOP contribution expense ..................         72,099          64,190          73,237
     Deferred income taxes ......................        (38,500)         14,000         (76,153)
     (Increase) in accrued interest receivable ..        (53,864)       (273,238)       (230,936)
     (Increase) decrease in other assets ........        (12,580)         67,690        (134,582)
     Increase in accrued expenses and
       other liabilities ........................        161,470          11,997          21,363
                                                    --------------------------------------------
        Net cash provided by operating activities      1,457,752       1,320,603         735,979
                                                    --------------------------------------------

Cash Flows from Investing Activities
  Held-to-maturity securities:
    Maturities and calls ........................      5,311,250         198,750         368,250
    Purchases ...................................     (5,677,200)       (215,000)             --
  Available-for-sale securities:
    Sales .......................................      3,695,000       1,250,000       1,800,000
    Maturities ..................................     14,865,355       2,358,750      22,336,682
    Purchases ...................................    (18,199,951)     (4,900,000)    (26,010,000)
  Federal funds sold, net .......................     (3,240,000)      1,230,000        (680,503)
  Purchase of Federal Home Loan Bank stock ......        (26,600)       (869,600)        (47,600)
  Loans made to customers, net ..................       (183,407)    (11,423,578)     (7,221,225)
  Purchase of premises and equipment ............       (261,824)        (31,783)       (152,033)
                                                    --------------------------------------------
        Net cash (used in) investing activities .     (3,717,377)    (12,402,461)     (9,606,429)
                                                    --------------------------------------------
</TABLE>
<PAGE>

WASHINGTON BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended June 30, 2001, 2000 and 1999
<TABLE>
                                                           2001              2000              1999
------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>
Cash Flows from Financing Activities
  Net increase (decrease) in deposits ..............   $    (392,819)   $  (2,392,369)   $   9,093,990
  Proceeds from Federal Home Loan Bank advances ....     283,000,000      524,350,000        9,500,000
  Principal payments on Federal Home Loan Bank
    advances .......................................    (280,858,456)    (509,863,040)      (9,517,781)
  Federal funds purchased, net .....................       1,500,000             --               --
  Net increase (decrease) in advances from borrowers
    for taxes and insurance ........................          (5,307)          26,650            1,122
  Acquisition of common stock ......................        (489,018)        (680,232)        (684,125)
  Stock options exercised ..........................          49,321             --               --
  Dividends paid ...................................        (252,158)         (67,196)        (271,700)
                                                       -----------------------------------------------
        Net cash provided by financing activities ..       2,551,563       11,373,813        8,121,506
                                                       -----------------------------------------------

        Increase (decrease) in cash and
        cash equivalents ...........................         291,938          291,955         (748,944)

Cash and cash equivalents:
  Beginning ........................................       2,849,385        2,557,430        3,306,374
                                                       -----------------------------------------------
  Ending ...........................................   $   3,141,323    $   2,849,385    $   2,557,430
                                                       ===============================================

Supplemental Disclosures of Cash Flow Information
  Cash payments for:
    Interest paid to depositors ....................   $   3,435,035    $   3,292,959    $   3,434,349
    Interest paid on other obligations .............       1,798,943        1,371,867          881,818
    Income taxes, net of refunds ...................         733,800          701,222          558,300

Supplemental Schedule of Noncash Investing and
  Financing Activities
  Transfers from loans to foreclosed real estate ...   $     474,608    $     114,811    $     485,722
  Contract sales of foreclosed real estate .........         534,350           72,250          271,233
  Stock issued under stock awards program ..........          16,125               --           36,453
</TABLE>
See Notes to Financial Statements.
<PAGE>

WASHINGTON BANCORP AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 1.  Significant Accounting Policies

Nature of activities:  Washington Bancorp is a multibank holding company engaged
in the business of banking. The Company's two wholly-owned  subsidiary banks are
Washington  Federal  Savings  Bank,  Washington,  Iowa and Rubio Savings Bank of
Brighton,  Brighton,  Iowa.  The Banks are full service  banks  extending  their
services  to  individuals,  businesses,  governmental  units  and  institutional
customers  primarily in the  communities  of Washington,  Wellman,  Richland and
Brighton, Iowa.

Principles of consolidation:  The accompanying consolidated financial statements
include the accounts of Washington  Bancorp (the "Company"),  Washington Federal
Savings Bank  ("Washington")  and Rubio  Savings Bank of Brighton  ("Rubio") and
collectively  known as (the  "banks"),  and  Washington  Federal  Savings Bank's
wholly-owned  subsidiary,  Washington  Financial  Services,  Inc.,  which  is  a
discount brokerage firm. All significant  intercompany accounts and transactions
have been eliminated in consolidation.

Accounting estimates: The preparation of financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the reported  amount of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Certain  significant  estimates:  The allowance for loan losses,  fair values of
securities and other financial instruments, and stock-based compensation expense
involve certain  significant  estimates made by management.  These estimates are
reviewed  by  management   routinely   and  it  is   reasonably   possible  that
circumstances that exist at June 30, 2001 may change in the near-future and that
the effect could be material to the consolidated financial statements.

Cash equivalents: Cash equivalents consist of FHLB-daily time, cash on hand, and
funds due from  banks.  For  purposes  of  reporting  cash  flows,  the  Company
considers all highly liquid debt instruments  purchased with a maturity of three
months  or less to be  equivalents.  Cash  flows  from  loans and  deposits  are
reported net.

Investment  securities:  Held-to-maturity  securities  consist  solely  of  debt
securities  which the Banks  have the  positive  intent  and  ability to hold to
maturity and are stated at amortized cost.

Available-for-sale  securities  consist of debt  securities  not  classified  as
trading or held to maturity.  Available-for-sale  securities  are stated at fair
value, and unrealized  holding gains and losses, net of the related deferred tax
effect, are reported as a separate component of stockholders' equity. There were
no trading securities as of June 30, 2001 and 2000.

Stock of the Federal Home Loan Bank is carried at cost.

Premiums and discounts on debt  securities  are amortized  over the  contractual
lives of those  securities.  The  method of  amortization  results in a constant
effective yield on those  securities (the interest  method).  Realized gains and
losses on investment securities are included in income,  determined on the basis
of the cost of the specific securities sold.

Loans receivable:  Loans receivable are stated at unpaid principal balances less
the allowance for loan losses.

Interest  on loans is  accrued  daily on the  outstanding  balances.  Accrual of
interest is discontinued on a loan when management  believes,  after considering
collection efforts and other factors, that the borrower's financial condition is
such that collection of interest is doubtful.

Loan origination and commitment fees and certain direct loan  origination  costs
are deferred and the net amount is  amortized  as an  adjustment  to the related
loans yield.
<PAGE>

The allowance  for loan losses is increased by provisions  charged to income and
reduced by charge-offs,  net of recoveries.  Management's periodic evaluation of
the adequacy of the allowance is based on the Banks' past loan loss  experience,
known and inherent risks in the portfolio,  adverse  situations  that may affect
the borrower's ability to repay,  estimated value of any underlying  collateral,
and current economic conditions.

Loans are considered impaired when, based on all current information and events,
it is  probable  the Banks  will not be able to collect  all  amounts  due.  The
portion of the allowance for loan losses  applicable to impaired  loans has been
computed  based on the  present  value of the  estimated  future  cash  flows of
interest and principal  discounted at the loan's  effective  interest rate or on
the fair value of the  collateral  for collateral  dependent  loans.  The entire
change in present value of expected cash flows on impaired  loans is reported as
bad debt expense in the same manner in which impairment initially was recognized
or as a reduction  in the amount of bad debt  expense  that  otherwise  would be
reported. Interest income on impaired loans is recognized on the cash basis.

Foreclosed real estate: Real estate properties acquired through loan foreclosure
are initially recorded at the lower of cost or fair value less estimated selling
expenses  at  the  date  of  foreclosure.  Costs  relating  to  development  and
improvement  of property  are  capitalized,  whereas  costs  relating to holding
property are expensed.

Valuations are periodically performed by management.  If the carrying value of a
property  exceeds its  estimated  fair value less  estimated  selling  expenses,
either an allowance for losses is established,  or the property's carrying value
is reduced, by a charge to income.

Credit related financial  instruments:  In the ordinary course of business,  the
Banks have entered into  commitments  to extend  credit,  including  commitments
under commercial letters of credit and standby letters of credit. Such financial
instruments are recorded when they are funded.

Transfers of financial  assets:  Transfers of financial assets are accounted for
as sales,  when  control  over the assets  has been  surrendered.  Control  over
transferred  assets is deemed to be  surrendered  when (1) the assets  have been
isolated from the Bank, (2) the transferee obtains the right (free of conditions
that constrain it from taking advantage of that right) to pledge or exchange the
transferred assets and (3) the Bank does not maintain effective control over the
transferred  assets  through  an  agreement  to  repurchase  them  before  their
maturity.

Premises and  equipment:  Premises  and  equipment  are carried at cost,  net of
accumulated  depreciation.  Depreciation  is computed by the  straight-line  and
declining-balance methods over the estimated useful lives of the assets.

Goodwill:  Goodwill resulting from the Company's  acquisition of Rubio was being
amortized by the  straight-line  method over 15 years.  Beginning  July 1, 2001,
goodwill  will no longer be  amortized,  but will be  periodically  reviewed for
impairment  based upon an assessment  of future  operations to ensure that it is
appropriately valued.

Income taxes: Deferred taxes are provided on a liability method whereby deferred
tax assets are  recognized for deductible  temporary  differences  and operating
loss and tax credit  carryforwards  and deferred tax  liabilities are recognized
for taxable  temporary  differences.  Temporary  differences are the differences
between  the  reported  amounts of assets and  liabilities  and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management,  it is more likely than not that some portion or all of the deferred
tax  assets  will not be  realized.  Deferred  tax assets  and  liabilities  are
adjusted  for the  effects  of  changes  in tax  laws  and  rates on the date of
enactment.

Earnings per common share:  Basic per-share amounts are computed by dividing net
income  (the  numerator)  by  the  weighted-average   number  of  common  shares
outstanding (the denominator).  Diluted per-share amounts assume the conversion,
exercise or  issuance  of all  potential  common  stock  unless the effect is to
reduce  the loss or  increase  the  income  per  common  share  from  continuing
operations. Shares owned by the ESOP that have not been committed to be released
are not considered to be outstanding  for the purpose of computing  earnings per
share.

Unearned ESOP shares and expense:  The unearned ESOP shares have been treated as
a reduction of equity.  This amount is reduced as the ESOP shares are allocated.
Compensation  expense  for the ESOP is  based  upon  the  fair  value of  shares
allocated to participants.
<PAGE>

Stock  awards:  Expense  for  common  stock to be  issued  under  the  Company's
recognition and retention plan is based upon the fair value of the shares at the
date of grant, allocated over the period of vesting.

Redeemable  common stock held by ESOP:  The  Company's  maximum cash  obligation
related to these shares is classified outside  stockholders'  equity because the
shares are not readily traded and could be put to the Company for cash.

Stock options  issued to employees:  The Company  adopted the provisions of SFAS
No. 123,  "Accounting for Stock-Based  Compensation,"  which  establishes a fair
value based  method for the  financial  reporting  of its  stock-based  employee
compensation plans. However, as allowed by the standard, the Company has elected
to continue to measure  compensation  using the intrinsic  value based method as
prescribed by Accounting  Principles Board Opinion No. 25, "Accounting for Stock
Issued to  Employees."  Under  this  method,  compensation  is  measured  as the
difference  between the market  value of the stock on the grant  date,  less the
amount required to be paid for the stock. The difference,  if any, is charged to
expense over the periods of service.

Pronouncements  issued not yet adopted:  In July 2001, the Financial  Accounting
Standards  Board issued two statements - Statement 141,  Business  Combinations,
and Statement 142, Goodwill and Other Intangible Assets,  which will potentially
impact the Company's  accounting for its reported  goodwill and other intangible
assets.

Statement 141:

  o  Eliminates the pooling method for accounting for business combinations.
  o  Requires  that  intangible  assets that meet  certain  criteria be reported
     separately  from  goodwill.
  o  Requires  negative  goodwill  arising  from a  business  combination  to be
     recorded as an extraordinary gain.

Statement 142:

  o  Eliminates  the  amortization  of goodwill and other  intangibles  that are
     determined to have an  indefinite  life.
  o  Requires,  at a minimum,  annual  impairment  tests for  goodwill and other
     intangible assets that are determined to have an indefinite life.

Upon adoption of these Statements, the Company is required to:

  o  Re-evaluate  goodwill and other intangible  assets that arose from business
     combinations  entered  into  before  July 1, 2001.  If the  recorded  other
     intangibles assets do not meet the criteria for recognition, they should be
     reclassified to goodwill.  Similarly,  if there are other intangible assets
     that meet the criteria for  recognition  but were not  separately  recorded
     from goodwill, they should be reclassified from goodwill.
  o  Reassess the useful  lives of  intangible  assets and adjust the  remaining
     amortization  periods  accordingly.
  o  Write-off any remaining negative goodwill.

The Company has not yet  completed  its full  assessment of the effects of these
new  pronouncements  on its financial  statements  and so is uncertain as to the
impact. The standards generally are required to be implemented by the Company in
its 2002 financial statements.

Fair value of financial instruments:  FASB Statement No. 107, "Disclosures About
Fair  Value  of  Financial  Instruments,"  requires  disclosure  of  fair  value
information  about  financial  instruments,  whether  or not  recognized  in the
balance  sheet,  for which it is  practicable  to estimate that value.  In cases
where quoted market prices are not available, fair values are based on estimates
using  present  value  or  other  valuation  techniques.  Those  techniques  are
significantly  affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate  settlement of the instrument.  Statement No.
107 excludes certain financial instruments and all nonfinancial instruments from
its  disclosure  requirements.  Accordingly,  the  aggregate  fair value amounts
presented do not represent the underlying value of the Company.

The  following  methods and  assumptions  were used by the Company in estimating
fair value of its financial instruments:

   Cash and cash equivalents: The carrying amounts reported in the balance sheet
   for cash and cash equivalents approximate their fair values.
<PAGE>

   Investment  securities:  Fair values for  investment  securities are based on
   quoted  market  prices,  where  available.  If quoted  market  prices are not
   available,  fair  values  are based on  quoted  market  prices of  comparable
   instruments.

   Federal funds sold:  The carrying  amounts  reported in the balance sheet for
   federal funds sold approximate their values.

   Loans and accrued interest  receivable:  For variable-rate loans that reprice
   frequently and have no significant change in credit risk, the fair values are
   based on carrying values. The fair values of other loans are determined using
   estimated future cash flows, discounted at the interest rates currently being
   offered  for loans  with  similar  terms to  borrowers  with  similar  credit
   quality. The carrying amount of accrued interest receivable  approximates its
   fair value.

   Deposits:  The fair values of demand  deposits equal their  carrying  amounts
   which represent the amount payable on demand.  The carrying amounts for money
   market and passbook  savings  accounts  approximate  their fair values at the
   reporting  date.  Fair  values for  fixed-rate  certificates  of deposit  are
   estimated  using a discounted  cash flow  calculation  that applies  interest
   rates  currently  being offered on  certificates  to a schedule of aggregated
   expected monthly maturities on time deposits.  The carrying amount of accrued
   interest payable approximates its fair value.

   Federal funds  purchased:  The carrying amounts reported in the balance sheet
   for federal funds purchased approximate their values.

   Borrowed  funds:  Fair  values  for  borrowed  funds  are  estimated  using a
   discounted cash flow  calculation that applies interest rates currently being
   charged for borrowed funds of similar maturities.

   Accrued  interest  payable:  The carrying amount of accrued  interest payable
   approximates its fair value.

   Off-balance  sheet  instruments:  Fair values for the  Company's  off-balance
   sheet  instruments  are  valued  based upon the  current  fee  structure  for
   outstanding letters of credit. Unfunded loan commitments are not valued since
   the loans are generally priced at market at the time of funding.

Note 2.  Restrictions on Cash Due from Banks

Washington is required to maintain  reserve  balances in cash or on deposit with
Federal  Reserve Banks.  The total of those reserve  balances was  approximately
$25,000 at June 30, 2001 and 2000.

Note 3.  Investment Securities

The amortized cost and fair value of investment securities available for sale as
of June 30, 2001 and 2000 are as follows:
<TABLE>
                                        Cost Or        Gross             Gross
                                       Amortized     Unrealized        Unrealized       Fair
                                         Cost          Gains            (Losses)        Value
                                     -----------------------------------------------------------
<S>                                  <C>             <C>              <C>           <C>
2001:
  U. S. Treasury securities ......   $  1,995,427   $         --      $     (690)   $  1,994,737
  U. S. Government agencies ......     11,297,790          4,160         (26,332)     11,275,618
  Corporations and other .........      5,905,690         64,866         (80,060)      5,890,496
  State and political subdivisions        457,390          2,945              --         460,335
  Mortgage-backed securities .....      2,483,176             --         (13,526)      2,469,650
                                     -----------------------------------------------------------
                                     $ 22,139,473   $     71,971    $   (120,608)   $ 22,090,836
                                     ===========================================================

2000:
  U. S. Treasury securities ......   $    299,993   $          7    $         --    $    300,000
  U. S. Government agencies ......     16,517,807             --        (462,027)     16,055,780
  Corporations and other .........      5,185,907             --        (265,731)      4,920,176
  State and political subdivisions        332,905             --          (6,510)        326,395
                                     -----------------------------------------------------------
                                     $ 22,336,612   $          7    $   (734,268)   $ 21,602,351
                                     ===========================================================
</TABLE>
<PAGE>

The amortized cost and fair value of investment  securities held to maturity are
as follows:
<TABLE>
                                           Cost Or     Gross       Gross
                                          Amortized  Unrealized  Unrealized      Fair
                                             Cost      Gains      (Losses)       Value
                                          ----------------------------------------------
<S>                                       <C>        <C>         <C>          <C>
State and political subdivisions:
  2001 ................................   $1,142,599   $    --    $    --     $1,142,599
                                          ==============================================

  2000 ................................   $  774,629   $    --    $    --     $  774,629
                                          ==============================================
</TABLE>

The amortized  cost and fair value of investment  securities as of June 30, 2001
by contractual maturity are shown below.

                                                      Amortized         Fair
                                                        Cost            Value
                                                     ---------------------------
Available for sale:
  Due in one year or less ......................     $ 2,601,841     $ 2,605,671
  Due after one year through five years ........      15,782,311      15,729,567
  Due after five years through ten years .......       1,552,460       1,564,096
  Due after ten years ..........................       2,202,861       2,191,502
                                                     ---------------------------
                                                     $22,139,473     $22,090,836
                                                     ===========================
Held to maturity:
  Due in one year or less ......................     $   243,450     $   243,450
  Due after one year through five years ........         250,000         250,000
  Due after five years through ten years .......         549,149         549,149
  Due after ten years ..........................         100,000         100,000
                                                     ---------------------------
                                                     $ 1,142,599     $ 1,142,599
                                                     ===========================

Investment  securities  with a carrying  amount of $2,616,446  and $1,260,631 at
June 30,  2001 and 2000,  respectively,  were  pledged as  collateral  on public
deposits.

For the years  ended  June 30,  2001,  2000 and  1999,  proceeds  from  sales of
securities available for sale amounted to $3,695,000, $1,250,000 and $1,800,000,
respectively.

Securities  gains (losses) for the years ended June 30, 2001,  2000 and 1999 are
as follows:

                                          2001            2000           1999
                                       -----------------------------------------

Realized gains .................       $ 49,281        $     --        $ 20,367
Realized (losses) ..............         (5,772)         (9,456)         (5,162)
                                       ----------------------------------------
                                       $ 43,509        $ (9,456)       $ 15,205
                                       ========================================

<PAGE>

Note 4.  Loans Receivable

Loans receivable are summarized as follows:

                                                              June 30,
                                                     ---------------------------
                                                        2001            2000
                                                     ---------------------------
Mortgage loans on real estate:
  Residential 1-4 family .......................     $48,770,685     $50,766,522
  Home equity and second mortgage ..............       2,523,032       2,430,726
  Multifamily and commercial real estate .......      13,936,435      13,726,769
  Construction loans ...........................       1,174,191       1,781,924
                                                     ---------------------------
        Total mortgage loans ...................      66,404,343      68,705,941
  Commercial loans .............................      12,498,478      10,963,334
  Consumer and other loans:
    Automobile .................................       4,935,693       4,141,674
    Other ......................................         864,668         825,129
                                                     ---------------------------
        Total loans ............................      84,703,182      84,636,078
  Less allowance for loan losses ...............         607,833         647,605
                                                     ---------------------------
                                                     $84,095,349     $83,988,473
                                                     ===========================


Loans  receivable  are net of loans in process of $608,910 and  $1,807,091 as of
June 30, 2001 and 2000, respectively.

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

                                             2001          2000          1999
                                          -------------------------------------

Balance, beginning ...................    $ 647,605     $ 472,187     $ 388,034
  Provision charged to expense .......      136,500       186,500       112,500
  Charge-offs ........................     (197,013)      (44,033)      (47,208)
  Recoveries .........................       20,741        32,951        18,861
                                          -------------------------------------
Balance, ending ......................    $ 607,833     $ 647,605     $ 472,187
                                          =====================================

Information regarding impaired loans is as follows:

   The  Banks  have no loans  receivable  at June 30,  2001 and 2000  that  they
   consider to be impaired  that are not part of a  homogeneous  group of loans.
   Accordingly, no separate allowance has been provided for these loans.

Note 5.  Accrued Interest Receivable

Accrued interest receivable at June 30 is summarized as follows:

                                                     2001                2000
                                                  ------------------------------

Investment securities ..................          $  383,340          $  388,206
Loans receivable .......................           1,134,362           1,075,632
                                                  ------------------------------
                                                  $1,517,702          $1,463,838
                                                  ==============================


Note 6.  Premises and Equipment

Premises and equipment consisted of the following at June 30:

                                                         2001            2000
                                                     ---------------------------

Land .........................................       $  100,080       $   83,080
Building .....................................          950,476          812,799
Furniture, fixtures and equipment ............          884,845          777,698
                                                     ---------------------------
                                                      1,935,401        1,673,577
Less accumulated depreciation ................          948,766          855,349
                                                     ---------------------------
                                                     $  986,635       $  818,228
                                                     ===========================
<PAGE>

Note 7.  Deposits

Deposits at June 30 are as follows:
<TABLE>
                                    Weighted
                                    Average
                                    Rate At           2001                    2000
                                    June 30, ---------------------------------------------
                                      2001      Amount     Percent     Amount      Percent
                                    ------------------------------------------------------
<S>                                 <C>      <C>           <C>       <C>           <C>
Demand and NOW accounts,
  including noninterest-bearing
  deposits 2001 $4,107,003;
  2000 $4,225,007 .............      $0.96   $ 9,381,915     12.9%   $ 9,459,327    12.9%
Money market ..................       3.22    10,879,577     14.9     11,580,033    15.8
Passbook savings ..............       2.14     5,603,774      7.7      5,531,253     7.6
                                             --------------------------------------------
                                              25,865,266     35.5     26,570,613    36.3
                                             --------------------------------------------
Certificates of deposit:
  2.01% to 3% .................       2.00       132,250      0.2        260,335     0.4
  2.01% to 3% .................       2.39       124,231      0.1        185,203     0.2
  3.01% to 4% .................       3.39       154,285      0.2             --      --
  4.01% to 5% .................       4.61    10,274,718     14.1      9,843,292    13.4
  5.01% to 6% .................       5.71    20,467,396     28.1     21,965,258    30.0
  6.01% to 7% .................       6.38    15,886,132     21.8     14,472,396    19.7
                                             --------------------------------------------
                                              47,039,012     64.5     46,726,484    63.7
                                             --------------------------------------------
                                      4.43   $72,904,278    100.0%   $73,297,097   100.0%
                                             ============================================
</TABLE>

The aggregate amount of short-term jumbo  certificates of deposit with a minimum
denomination of $100,000 was approximately $3,151,000 and $3,282,000 at June 30,
2001 and 2000,  respectively.  Deposits in excess of $100,000 are not insured by
the FDIC.

At June 30,  2001,  scheduled  maturities  of  certificates  of  deposit  are as
follows:
<TABLE>
                                             Year Ending June 30,
              ---------------------------------------------------------------------------------
                  2002          2003         2004           2005           2006        Total
              ---------------------------------------------------------------------------------
<S>           <C>           <C>           <C>           <C>           <C>           <C>
1.01% to 2%   $   132,250   $        --   $        --   $        --   $        --   $   132,250
2.01% to 3%       124,231            --            --            --            --       124,231
3.01% to 4%       154,285            --            --            --            --       154,285
4.01% to 5%     7,062,008     1,866,013     1,346,697            --            --    10,274,718
5.01% to 6%    14,753,857     2,530,881     1,894,880       519,162       768,616    20,467,396
6.01% to 7%     9,829,297     4,676,893     1,280,959        84,674        14,309    15,886,132
              ---------------------------------------------------------------------------------
              $32,055,928   $ 9,073,787   $ 4,522,536   $   603,836   $   782,925   $47,039,012
              =================================================================================
</TABLE>

Interest  expense  on  deposits  for the years  ended June 30 is  summarized  as
follows:

                                         2001             2000            1999
                                      ------------------------------------------

Money market ...................      $  488,892      $  420,364      $  404,713
Passbook savings ...............         185,875         175,702         184,866
NOW ............................         100,029         100,135         111,094
Certificates of deposit ........       2,721,303       2,629,295       2,712,539
                                      ------------------------------------------
                                      $3,496,099      $3,325,496      $3,413,212
                                      ==========================================
<PAGE>

Note 8.  Borrowed Funds

Borrowed funds at June 30 are as follows:
                                                           2001          2000
                                                       -------------------------

Short-term advances from the Federal Home Loan Bank    $26,800,000   $24,500,000
Long-term advances from the Federal Home Loan Bank .     5,534,794     5,693,250
                                                       -------------------------
                                                       $32,334,794   $30,193,250
                                                       =========================

Pursuant to collateral  agreements with the Federal Home Loan Bank (FHLB), these
advances  are  collateralized  by all the  Institution's  stock  in the FHLB and
qualifying first mortgage loans with a face amount of approximately $44,939,000.
Of this total,  $18,900,000  of the  advances  are  callable  every three months
thereafter  with a three  calendar  day notice.  Therefore,  these  advances are
categorized as maturing within one year per the schedule below.

Advances at June 30, 2001 have maturity dates as follows:

Year Ending                                                         June 30,
June 30,                                   Interest Rate              2001
-----------------------------------------------------------------------------

  2002 .........................          3.86% to 6.09%           $27,057,336
  2003 .........................          5.41% to 5.99%             1,522,906
  2004 .........................          5.92% to 5.99%               289,416
  2005 .........................          5.92% to 5.99%               306,932
  2006 .........................          5.92% to 5.99%               325,504
  Thereafter ...................          5.92% to 5.99%             2,832,700
                                                                   -----------
                                                                   $32,334,794
                                                                   ===========

Note 9.  Employee Benefit Plans

Employee Stock  Ownership  Plan:  The Company has  established an Employee Stock
Ownership  Plan  "(ESOP)" for eligible  employees.  The Company has financed the
ESOP's purchase of the Company's stock and, therefore, the ESOP is considered to
be internally leveraged. Employees are eligible to participate after they attain
age 21 and  complete  one year of service  during which they work at least 1,000
hours.  The Company issued 52,602 shares of common stock to the ESOP on the date
of the conversion and reorganization.

The  Company  makes  annual  contributions  to the ESOP equal to the ESOP's debt
service less dividends  received by the ESOP. All dividends received by the ESOP
are used for debt service.  Contributions  to the ESOP and shares  released from
the suspense account in an amount proportional to the repayment of the ESOP loan
are allocated  among ESOP  participants on the basis of compensation in the year
of  allocation.  Benefits  generally  become  100%  vested  after seven years of
credited service.  Forfeitures will be reallocated among remaining participating
employees,  in the same proportion as contributions.  Benefits may be payable in
the form of stock or cash upon termination of employment.

As shares are released,  the Company reports  compensation  expense equal to the
current  fair  value  of the  shares,  and the  shares  become  outstanding  for
earnings-per-share computations. Dividends on allocated ESOP shares are recorded
as a reduction of retained  earnings;  dividends on unallocated  ESOP shares are
recorded as a reduction of debt and accrued interest.  ESOP compensation expense
totaled $73,000, $69,872 and $74,924 for the years ended June 30, 2001, 2000 and
1999, respectively.

Shares  of  common  stock  held by the  ESOP at June  30,  2001  and 2000 are as
follows:

                                                            2001          2000
                                                          ----------------------

Allocated shares ...................................      $ 20,898      $ 16,884
Shares released for allocation .....................         2,629         2,435
Unreleased (unearned) shares .......................        28,220        33,283
                                                          ----------------------
                                                          $ 51,747      $ 52,602
                                                          ======================
Fair value of unreleased (unearned) shares .........      $455,048      $451,317
                                                          ======================
<PAGE>

The ESOP plan may allow, at the discretion of the Advisory Committee,  employees
to elect to defer up to fifteen  percent of compensation  annually.  The Company
may, at the discretion of the Advisory Committee, make matching contributions on
an annual  basis.  For the years  ended June 30,  2001,  2000 and 1999,  $8,820,
$7,225 and$6,005, respectively, was charged to expense.

Defined contribution plan:

Rubio had a defined contribution  retirement plan covering  substantially all of
its  employees.   Contributions,  which  are  10%  of  each  covered  employee's
compensation,  totaled $12,886, $18,640 and $18,920 for the years ended June 30,
2001, 2000 and 1999, respectively.

Rubio   terminated  the  defined   contribution   plan  December  31,  2000  and
substantially all of its employees entered in the Company's ESOP.

Stock-based  compensation  plans:  The Company has two stock-based  compensation
plans,  which  are  described  below.  As  permitted  under  generally  accepted
accounting principles,  grants under those plans are accounted for following APB
Opinion No. 25 and related  interpretations.  Had compensation  cost for the two
stock-based  compensation  plans  been  determined  based on the grant date fair
values of the awards (the  method  prescribed  in SFAS No.  123),  reported  net
income and  earnings  per common  share would have been reduced to the pro forma
amounts shown below:

                                                   Year Ended June 30,
                                       -----------------------------------------
                                           2001            2000          1999

Pro forma net income ...............   $   1,064,516   $   989,015   $   806,468
  Pro forma earnings per share:
  Basic ............................            2.15          1.81          1.43
  Diluted ..........................            2.10          1.78          1.39

The pro forma  effects of  applying  SFAS No. 123 are not  indicative  of future
amounts.

The fair value of each grant and award is  estimated at the grant date using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions for grants in 1999:  dividend rates 2.2%; price  volatility  22.79%;
risk-free interest rates of 6.0%; and expected life of 5 years.

Stock options:  During the year ended June 30, 1997, the Company adopted a stock
option plan for certain officers and directors  whereby up to 65,751 shares were
reserved for grants.  The Board has granted  options at prices equal to the fair
value of the stock on the dates of the grants. All options are for a term of ten
years  after  vesting  and 20%  become  exercisable  each year for the next five
years.

A summary of the status of the Company's stock option plan is as follows:

                                                                       Weighted-
                                                                        Average
                                                                       Exercise
                                                             Shares      Price
                                                             -------------------

Outstanding at June 30, 1999 .................               52,600    $   12.22
  Granted ....................................                   --
  Exercised ..................................                   --
  Forfeited ..................................               (5,479)       16.63
                                                             ------
Outstanding at June 30, 2000 .................               47,121        11.71
  Granted ....................................                   --           --
  Exercised ..................................               (4,384)       11.25
  Forfeited ..................................               (1,095)       11.25
                                                             -------------------
Outstanding at June 30, 2001 .................               41,642    $   11.77
                                                             ===================

                                                  2001        2000        1999
                                                 -------------------------------
Weighted-average fair value per option of
  options granted during the year ............   $   --     $    --    $    4.16
                                                 ===============================
<PAGE>

Other pertinent  information related to the options outstanding at June 30, 2001
is as follows:

                             Remaining
   Number        Exercise   Contractual     Number
Outstanding        Price       Life       Exercisable
-----------------------------------------------------

  38,824         $ 11.25      5 Years        31,057
   2,818           18.94      6 Years         1,690
  ------                                     ------
  41,642                                     32,747
  ======                                     ======

Stock awards:  The Company  adopted a recognition  and retention plan in October
1996 whereby  26,300  shares of common stock have been  reserved for issuance to
certain executive officers and directors.  Shares awarded under the plan vest in
five equal  annual  installments,  beginning on the  anniversary  of the grants.
During the year ended June 30,  2001,  2000 and 1999,  awards  were  granted for
1,000  shares,  no shares and 2,192 shares,  respectively,  with a fair value of
$16.13, none and $16.63 per share at the date of the grant, respectively.

The  expense  under the plan is based  upon the fair  value of the shares on the
date of the grant, allocated over the five-year term of vesting. The expense for
the years  ended June 30,  2001,  2000 and 1999  totaled  $11,500,  $28,869  and
$62,317, respectively. Shares of common stock are issued upon vesting.

Note 10. Income Taxes

Net deferred income tax assets (liabilities) consist of the following components
as of June 30, 2001 and 2000:

                                                           2001           2000
                                                        ------------------------
Deferred tax assets:
  Unrealized loss on investment securities
    available for sale ............................     $  18,968      $ 286,363
  Accrued compensation ............................        16,729         26,272
  Allowance for loan losses .......................       217,715        168,845
  Other ...........................................         7,742          7,640
                                                        ------------------------
                                                          261,154        489,120
                                                        ------------------------
Deferred tax liabilities:
  Recapture of allowance for loan losses ..........        78,023        104,032
  FHLB stock dividends ............................        44,067         44,067
  Premises and equipment ..........................       101,645         91,735
  Accrued expenses ................................        12,599         28,374
  Loan origination fees and costs .................       100,606         68,170
  Other ...........................................         3,746          3,379
                                                        ------------------------
                                                          340,686        339,757
                                                        ------------------------
Net deferred tax asset (liability) ................     $ (79,532)     $ 149,363
                                                        ========================

The net  change in the  deferred  income  taxes is  reflected  in the  financial
statements for the years ended June 30, 2001, 2000 and 1999 as follows:

                                              2001         2000          1999
                                           -------------------------------------

Statement of income ...................    $  38,500     $ (14,000)    $  76,153
Statement of stockholders' equity* ....     (267,395)      144,995       141,064
                                           -------------------------------------
                                           $(228,895)    $ 130,995     $ 217,217
                                           =====================================

* Change in deferred taxes related to unrealized  loss on investment  securities
  available for sale.

The provision  for income taxes  charged to operations  for the years ended June
30, 2001, 2000 and 1999 consisted of the following:

                                             2001         2000           1999
                                          --------------------------------------

Current .......................           $ 714,263     $ 699,437     $ 608,175
Deferred ......................             (38,500)       14,000       (76,153)
                                          --------------------------------------
                                          $ 675,763     $ 713,437     $ 532,022
                                          ======================================
<PAGE>

The income tax  provision  differs from the amount of income tax  determined  by
applying the U. S. Federal  income tax rate to pretax income for the years ended
June 30, 2001, 2000 and 1999 due to the following:
<TABLE>
                                                Year Ended June 30,
                          ------------------------------------------------------------
                                  2001                 2000                 1999
                          ------------------------------------------------------------
                                       % Of                 % Of                 % Of
                                      Pretax               Pretax               Pretax
                            Amount    Income     Amount    Income     Amount    Income
                          ------------------------------------------------------------
<S>                       <C>         <C>      <C>         <C>      <C>         <C>
Computed "expected"
  tax expense .........   $ 619,205    35.0%   $ 605,388    35.0%   $ 477,128    35.0%
Tax-exempt interest ...     (23,938)   (1.4)     (23,754)   (1.4)     (34,454)   (2.5)
State income taxes, net
  of federal benefit ..      58,152     3.3       62,376     3.6       50,009     3.7
Nondeductible goodwill
  amortization ........      33,097     1.9       33,097     1.9       33,097     2.4
Other, net ............     (10,753)   (0.6)      36,330     2.1        6,242     0.4
                          ------------------------------------------------------------
                          $ 675,763    38.2%   $ 713,437    41.2%   $ 532,022    39.0%
                          ============================================================
</TABLE>

Note 11.  Earnings Per Share

Basic and diluted earnings per share are calculated as follows:
<TABLE>
                                                           Year Ended June 30,
                                                   ------------------------------------
                                                      2001         2000         1999
                                                   ------------------------------------
<S>                                                <C>          <C>          <C>
Basic earnings per share:
  Net income available to common stockholders,
    basic ......................................   $1,093,394   $1,016,242   $  831,200
                                                   ====================================

  Weighted average shares outstanding, basic ...      495,353      545,963      563,303
                                                   ====================================

  Basic earnings per share .....................   $     2.21   $     1.86   $     1.48
                                                   ====================================

Diluted earnings per share:
  Net income available to common shareholders,
    diluted ....................................   $1,093,394   $1,016,242   $  831,200
                                                   ====================================

  Weighted average shares outstanding, basic ...      495,353      545,963      563,303
    Effect of dilutive securities, stock options       10,373        9,643       14,812
                                                   ------------------------------------
  Weighted average shares outstanding, diluted .      505,726      555,606      578,115
                                                   ====================================

  Diluted earnings per share ...................   $     2.16   $     1.83   $     1.44
                                                   ====================================
</TABLE>

Note 12. Minimum Regulatory Capital Requirements

The  Company  (on a  consolidated  basis)  and the Banks are  subject to various
regulatory  capital  requirements  administered by the federal banking agencies.
Failure to meet minimum capital  requirements can initiate certain mandatory and
possibly  additional  discretionary  actions by regulators  that, if undertaken,
could  have a direct  material  effect on the  Company's  and  Banks'  financial
statements.  Under capital adequacy guidelines and the regulatory  framework for
prompt corrective  action,  the Company and the Banks must meet specific capital
guidelines that involve quantitative  measures of their assets,  liabilities and
certain  off-balance-sheet  items  as  calculated  under  regulatory  accounting
practices.   The  capital  amounts  and   classification  are  also  subject  to
qualitative  judgments by the regulators about  components,  risk weightings and
other factors.  Prompt  corrective  action provisions are not applicable to bank
holding companies.
<PAGE>

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company  and the Banks to maintain  minimum  amounts and ratios (set
forth in the  following  table) of total and Tier 1 capital  (as  defined in the
regulations)  to  risk-weighted  assets (as  defined)  and of Tier 1 capital (as
defined) to average  assets (as defined).  Management  believes,  as of June 30,
2001  and  2000,  that  the  Company  and  the  Bank  met all  capital  adequacy
requirements to which they are subject.

As of June 30,  2001,  the most recent  notification  from the  Federal  Deposit
Insurance  Corporation  categorized  the  Banks as well  capitalized  under  the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized,  an  institution  must maintain  minimum total  risk-based,  Tier 1
risk-based  and Tier 1  leverage  ratios as set forth in the  following  tables.
There  are no  conditions  or  events  since the  notification  that  management
believes have changed the Banks'  category.  The Company's and the Banks' actual
capital  amounts and ratios as of June 30, 2001 and 2000 are also  presented  in
the table.
<TABLE>
                                                                    Minimum To Be Well
                                                      Minimum       Capitalized Under
                                                      Capital       Prompt Corrective
                                    Actual          Requirement     Action Provisions
                              --------------------------------------------------------
                               Amount   Ratio     Amount    Ratio    Amount     Ratio
                              --------------------------------------------------------
                                              (Dollars In Thousands)
<S>                           <C>       <C>      <C>        <C>     <C>         <C>
June 30, 2001:
  Total capital to risk
    weighted assets:
    Consolidated ..........   $11,616    14.6%   $ 6,374     8.0%       N/A       N/A
    Washington ............     7,837    12.1      5,193     8.0    $ 6,491     10.0%
    Rubio .................     3,658    17.8      1,160     8.0      1,450     10.0

  Tier 1 capital to risk
    weighted assets:
    Consolidated ..........    10,555    13.3     3,187     4.0         N/A       N/A
    Washington ............     7,849    12.1     2,596     4.0     $ 3,895      6.0%
    Rubio .................     2,585    17.8       580     4.0         870      6.0

  Tier 1 capital to
    average assets:
    Consolidated ..........    10,555     9.1     4,622     4.0         N/A       N/A
    Washington ............     7,849     8.3     3,805     4.0     $ 4,757      5.0%
    Rubio .................     2,585    11.1       928     4.0       1,160      5.0

June 30, 2000:
  Total capital to risk
    weighted assets:
    Consolidated ..........    10,821    13.7     6,327     8.0         N/A       N/A
    Washington ............     6,993    12.1     5,070     8.0     $ 6,339     10.0%
    Rubio .................     3,523    17.8     1,248     8.0       1,560     10.0

  Tier 1 Capital to risk
    weighted assets:
    Consolidated ..........    10,083    12.8     3,163     4.0         N/A       N/A
    Washington ............     7,370    12.1     2,535     4.0     $ 3,803      6.0%
    Rubio .................     2,409    15.4       624     4.0         936      6.0

  Tier 1 capital to
    average assts:
    Consolidated ..........    10,083     9.2     4,389     4.0         N/A       N/A
    Washington ............     7,370     8.0     3,698     4.0     $ 4,622      5.0%
    Rubio .................     2,409    10.6       913     4.0       1,141      5.0
</TABLE>

Note 13. Commitments and Contingencies

Financial  instruments  with  off-balance  sheet risk:  The Banks are parties to
financial  instruments  with  off-balance-sheet  risk in the  normal  course  of
business  to  meet  the  financing  needs  of  its  customers.  These  financial
instruments include commitments to extend credit.  Those instruments involve, to
varying  degrees,  elements  of credit and  interest  rate risk in excess of the
amount recognized in the statement of financial position.
<PAGE>

The Banks' exposure to credit loss in the event of  nonperformance  by the other
party  to  the  financial   instrument  for  commitments  to  extend  credit  is
represented by the contractual  notional amount of those instruments.  The Banks
use the same credit policies in making  commitments and conditional  obligations
as they do for on-statement of financial condition instruments.

Unless  noted  otherwise,  the Banks  require  collateral  or other  security to
support financial instruments with credit risk.

                                                              Contract Or
                                                             Notional Amount
                                                         -----------------------
                                                                June 30,
                                                         -----------------------
                                                            2001         2000
                                                         -----------------------
Financial instruments whose contract amounts
  represent credit risk, commitments to extend credit:
  First mortgage loans ...............................   $1,489,607   $2,847,198
  Consumer and other loans ...........................    2,641,118    2,890,459
                                                         -----------------------
                                                         $4,130,725   $5,737,657
                                                         =======================

The above commitments are to make fixed rate loans with a June 30, 2001 and 2000
weighted average interest rate of 9.27% and 8.97%, respectively.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is not violation of any condition established in the contract. Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require payment of a fee. The Banks evaluate each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained,  if deemed necessary by
the Banks,  upon extension of credit is based on management's  credit evaluation
of the party.  Collateral  held  varies  but may  include  accounts  receivable,
inventory, property and equipment, and income-producing commercial properties.

Concentrations  of credit  risk:  Most of the Banks'  lending  activity  is with
customers located within the state. The Banks generally originate  single-family
residential  loans within its primary  lending area of  southeastern  Iowa.  The
Banks' underwriting policies require such loans to be an 85% loan to value based
upon appraised values. These loans are secured by the underlying properties. The
Banks are also active in  originating  secured  consumer loans to its customers,
primarily  automobile and home equity loans. As of June 30, 2001, the Banks have
approximately $14,805,000 of agriculturally dependent loans.

Note 14.  Fair Value of Financial Instruments

The carrying  value and estimated  fair values of financial  instruments at June
30, 2001 and 2000 are as follows:
<TABLE>
                                                                 2001                        2000
                                                       ----------------------------------------------------
                                                                      Estimated                   Estimated
                                                        Carrying        Fair        Carrying        Fair
                                                          Amount        Value        Amount         Value
                                                       -----------------------------------------------------
<S>                                                    <C>           <C>           <C>           <C>
Financial assets:
  Cash and cash equivalents ........................   $ 3,141,323   $ 3,141,323   $ 2,849,385   $ 2,849,385
  Investment securities:
    Held to maturity ...............................     1,142,599     1,142,599       774,629       774,629
    Available-for-sale .............................    22,090,836    22,090,836    21,602,351    21,602,351
  Federal funds sold ...............................     3,350,000     3,350,000       110,000       110,000
  Loans ............................................    84,095,349    84,289,295    83,988,473    82,934,380
  Accrued interest receivable ......................     1,517,702     1,517,702     1,463,838     1,463,838
Financial liabilities:
  Deposits .........................................    72,904,278    73,996,150    73,297,097    73,622,836
  Federal funds purchased ..........................     1,500,000     1,500,000            --            --
  Borrowed funds ...................................    32,334,794    34,024,753    30,193,250    29,559,753
  Accrued interest payable .........................       484,325       484,325       420,601       420,601

                                                       Face Amount                 Face Amount
                                                       -----------                 -----------
Off-balance sheet instruments,
  loan commitments .................................   $ 4,130,725   $        --   $ 5,737,657   $        --
</TABLE>
<PAGE>

Note 15.  Transactions with Related Parties

The Banks had, and may be expected to have in the future,  banking  transactions
in the ordinary course of business with  directors,  principal  officers,  their
immediate  families  and  affiliated  companies  in  which  they  are  principal
stockholders  (commonly  referred to as related  parties).  It is the opinion of
management  that all of these  transactions  have been  made on the same  terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable transactions with other bank customers.

Aggregate loan transactions with related parties were as follows:

                                                       Year Ended June 30,
                                                 ------------------------------
                                                    2001                2000
                                                 ------------------------------

Balance, beginning .......................       $ 1,343,555        $   950,265
  New loans ..............................           951,160            689,250
  Repayments .............................        (1,287,657)          (295,960)
                                                 ------------------------------
Balance, ending ..........................       $ 1,007,058        $ 1,343,555
                                                 ==============================

Maximum balance during the year ..........       $ 1,343,555        $ 1,411,639
                                                 ==============================

Note 16. Restrictions on Dividends, Loans and Advances

Federal and state banking  regulations  place certain  restrictions on dividends
paid and loans or advances made by the Banks to the Company. The total amount of
dividends  which may be paid at any date is  generally  limited to the  retained
earnings of each Bank,  and loans or advances  are limited to 10% of each Bank's
capital stock and surplus on a secured basis.

At June 30, 2001,  the Banks'  retained  earnings  available  for the payment of
dividends was $3,993,000. Accordingly, $7,501,000 of the Company's equity in the
net assets of the Banks was  restricted  at June 30, 2001.  Funds  available for
loans or advances by the Bank to the Company amounted to $703,000.

In addition,  dividends  paid by the Banks to the Company would be prohibited if
the effect thereof would cause the Banks' capital to be reduced below applicable
minimum capital requirements. Note 17.
<PAGE>

Note 17.  Parent Company Only Financial Information

Following is condensed  financial  information  of the Company  (Parent  Company
only):

                               WASHINGTON BANCORP

                   CONDENSED STATEMENTS OF FINANCIAL CONDITION
                          As Of June 30, 2001 and 2000
<TABLE>
ASSETS                                                             2001            2000
--------------------------------------------------------------------------------------------
<S>                                                             <C>             <C>
Cash ........................................................   $    126,785    $    432,621
Investment in subsidiary banks, at cost plus equity in
  undistributed earnings ....................................     11,494,198      10,516,430
Other assets ................................................        362,258         102,614
                                                                ----------------------------
                                                                $ 11,983,241    $ 11,051,665
                                                                ============================

LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------------------
Liabilities, accrued expenses and other liabilities .........   $     29,815    $      1,260
                                                                ----------------------------
Redeemable common stock held by Employee Stock
  Ownership Plan (ESOP) .....................................        336,980         228,947
                                                                ----------------------------
Stockholders' equity:
  Preferred stock ...........................................             --              --
  Common stock ..............................................          6,511           6,511
  Additional paid-in capital ................................      6,175,332       6,169,796
  Retained earnings .........................................      8,175,145       7,333,909
  Accumulated other comprehensive income, unrealized (losses)
    on debt securities, net .................................        (29,669)       (447,899)
                                                                ----------------------------
                                                                  14,327,319      13,062,317
Less:
  Cost of common shares acquired for the treasury
    2001 134,162 shares; 2000 103,399 shares ................     (2,070,600)     (1,658,017)
  Deferred compensation .....................................        (21,093)        (21,060)
  Maximum cash obligation related to ESOP shares ............       (336,980)       (228,947)
  Unearned shares, Employee Stock Ownership Plan ............       (282,200)       (332,835)
                                                                ----------------------------
                                                                  11,616,446      10,821,458
                                                                ----------------------------
                                                                $ 11,983,241    $ 11,051,665
                                                                ============================
</TABLE>
<PAGE>

                               WASHINGTON BANCORP

                              STATEMENTS OF INCOME
                    Years Ended June 30, 2001, 2000 and 1999
<TABLE>
                                             2001           2000           1999
                                         -----------------------------------------
<S>                                      <C>            <C>            <C>
Dividends from subsidiaries ..........   $   600,000    $   914,560    $   782,292
Interest income ......................            --             --          2,043
Miscellaneous income .................         2,108          7,762          8,359
Miscellaneous expense ................       (55,651)       (43,715)       (46,663)
                                         -----------------------------------------
        Income (loss) before equity in
        subsidiaries' undistributed
        income and taxes on income ...       546,457        878,607        746,031
Equity in undistributed net income of
  of subsidiaries ....................       487,437        137,635         71,919
                                         -----------------------------------------
        Income before taxes on income      1,033,894      1,016,242        817,950
Federal and state income tax (credits)       (59,500)            --        (13,250)
                                         -----------------------------------------
        Net income ...................   $ 1,093,394    $ 1,016,242    $   831,200
                                         =========================================
</TABLE>
<PAGE>

                               WASHINGTON BANCORP

                            STATEMENTS OF CASH FLOWS
                    Years Ended June 30, 2001, 2000 and 1999
<TABLE>

                                                          2001            2000          1999
                                                       -----------------------------------------
<S>                                                    <C>            <C>            <C>
Cash Flows from Operating Activities
  Net income .......................................   $ 1,093,394    $ 1,016,242    $   831,200
  Adjustments to reconcile net income to net cash
    provided by (used in) operations:
    Equity in net income of subsidiaries ...........    (1,087,437)    (1,052,195)      (854,211)
    (Increase) decrease in other assets ............      (259,644)       266,681       (302,007)
    Increase (decrease) in accrued expenses and
      other liabilities ............................        28,553          1,260        (17,943)
                                                       -----------------------------------------
        Net cash provided by (used in) operating
        activities .................................      (225,134)       231,988       (342,961)
                                                       -----------------------------------------

Cash Flows from Investing Activities,
  dividends received from subsidiaries .............       600,000        914,560        782,292
                                                       -----------------------------------------
Cash Flows from Financing Activities
  Stock options exercised ..........................        49,321             --             --
  Payments received from subsidiary for compensation
    under stock awards .............................        11,153         28,869         62,317
  Acquisition of common stock ......................      (489,018)      (680,232)      (684,125)
  Dividends paid ...................................      (252,158)       (67,196)      (271,700)
                                                       -----------------------------------------
        Net cash (used in) financing activities ....      (680,702)      (718,559)      (893,508)
                                                       -----------------------------------------

        Increase (decrease) in cash ................      (305,836)       427,989       (454,177)

Cash balance:
  Beginning ........................................       432,621          4,632        458,809
                                                       -----------------------------------------
  Ending ...........................................   $   126,785    $   432,621    $     4,632
                                                       =========================================

Supplemental Disclosures
  Cash payments for income taxes, net of payments
    from subsidiary ................................   $    30,800    $   120,035    $   221,103
</TABLE>
<PAGE>




                        DIRECTORS AND EXECUTIVE OFFICERS

Directors

/s/ Stan Carlson                             /s/ Rick R. Hofer
--------------------------------------       -----------------------------------
Stan Carlson                                 Rick R. Hofer
President and Chief Executive Officer,       Personnel and Credit Manager,
Washington and Washington Federal            Sitler Electric Supply, Inc.
President, Rubio Savings

/s/ James D. Gorham                          /s/ Mary Levy
--------------------------------------       -----------------------------------
James D. Gorham                              Mary Levy
Sales Agent, Northwestern Mutual             Chairman of the Board,
Life Insurance Co.                           Washington and Washington Federal
                                             Treasurer and Co-owner, Mose
                                             Levy Co., Inc.

/s/ Myron L. Graber                          /s/ Richard L. Weeks
--------------------------------------       -----------------------------------
Myron L. Graber                              Richard L. Weeks
President, Graber Home                       President, Chief Executive Officer
Improvement, Inc.                            and Owner, Sitler Electric Supply,
                                             Inc.

/s/ J. Richard Wiley                         /s/ Dean Edwards
--------------------------------------       -----------------------------------
J. Richard Wiley                             Dean Edwards
Owner, Wiley Computer                        Past President and Chief Executive
                                             Officer, Rubio Savings


Executive Officers

/s/ Stan Carlson                             /s/ Leisha A. Linge
--------------------------------------       -----------------------------------
Stan Carlson                                 Leisha A. Linge
President and Chief Executive Officer,       Executive Vice President and
Washington and  Washington Federal           Treasurer, Washington and
President, Rubio Savings                     Washington Federal

/s/ Gary J. Collier
--------------------------------------
Gary J. Collier
Executive Vice President and Chief Executive Officer,
Rubio Savings

<PAGE>



                             STOCKHOLDER INFORMATION

Corporate Profile

Washington  is an Iowa  corporation  which was  organized in 1995 by  Washington
Federal  for the  purpose of  becoming  a thrift  institution  holding  company.
Washington Federal was organized in 1934 and converted to a federal savings bank
in 1994.  In March  1996,  Washington  Federal  converted  to the stock  form of
organization and concurrently  became the wholly-owned  subsidiary of Washington
through the sale and  issuance of common  stock.  Rubio was  acquired in January
1998.  Washington  Federal  opened a branch in Wellman,  Iowa in December  1998.
Washington  Federal  opened a branch in Richland,  Iowa in September  2000.  The
principal  assets of  Washington  are the  outstanding  stock of the Banks,  its
wholly owned subsidiaries.  Washington  presently has no separate operations and
its  business  consists  only of the business of the Banks.  The Banks'  primary
business consists of attracting deposits from the general public and using these
deposits to provide  financing for the purchase and  construction of residential
and, to a lesser extent, other properties.

Washington Federal Savings Bank            Washington Federal Savings Bank
Main Office                                Drive-thru Office
102 East Main Street                       220 East Washington Street
Washington, Iowa 52353                     Washington, Iowa 52353

Richland Federal Savings                   Wellman Federal Savings
Branch Office of Washington Federal        Branch Office of Washington Federal
107 Richland Street                        801 Sixth Street
Richland, Iowa 52585                       Wellman, Iowa 52356

Rubio Savings Bank of Brighton
Main Office
122 East Washington Street
Brighton, Iowa 52540

Independent Auditors                       Local Counsel

McGladrey & Pullen, LLP                    Tindal, Erdahl, Goddard & Nestor, PLC
Town Centre, Suite 300                     Attorneys at Law
221 Third Avenue, SE                       305 West Main Street - Suite A
Cedar Rapids, Iowa 52401                   Washington, Iowa 52353

Transfer Agent                             Special Counsel

Registrar & Transfer Co.                   Silver, Freedman & Taff, L.L.P.
10 Commerce Drive                          1100 New York Avenue, N.W.
Cranford, New Jersey  07016                Washington, D.C.  20005


Form 10-KSB Report

A copy of the  Company's  Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2001  including  financial  statements,  as filed with the SEC, will be
furnished  without charge to stockholders of the Company upon written request to
Bonita Tindal,  Corporate  Secretary,  Washington Bancorp, 102 East Main Street,
Washington, Iowa 52353.
<PAGE>

Stock Listing

Washington's common stock is reported on the National Daily Quotation Service by
the National  Quotation  Bureau under the symbol "WBIO".  As of August 31, 2001,
the Company had 360  stockholders  of record and 517,803  outstanding  shares of
common stock.

Price Range of Common Stock

The  table  below  shows the range of high and low  inter-dealer  prices.  These
prices do not include  retail  markups,  markdowns  or  commissions  and may not
represent actual transactions.  The table below also shows dividends paid by the
Company.

                                        High        Low       Dividend
                                        ------------------------------

1997
------------------------------
First quarter ................        $ 11.38     $ 10.63     $    .08
Second quarter ...............        $ 12.63     $ 10.88     $    .08
Third quarter ................        $ 15.00     $ 12.88     $    .10
Fourth quarter ...............        $ 15.35     $ 13.75     $    .10

1998
------------------------------
First quarter ................        $ 17.00     $ 15.50     $    .10
Second quarter ...............        $ 17.75     $ 17.00     $    .10
Third quarter ................        $ 18.50     $ 18.00     $    .12
Fourth quarter ...............        $ 18.675    $ 18.125    $    .12

1999
------------------------------
First quarter ................        $ 18.125    $ 17.00     $    .12
Second quarter ...............        $ 17.00     $ 15.00     $    .12
Third quarter ................        $ 17.00     $ 15.00     $    .12
Fourth quarter ...............        $ 15.50     $ 14.50     $    .12

2000
------------------------------
First quarter ................        $ 15.50     $ 13.25     $    .12
Second quarter ...............        $ 13.25     $ 13.00     $   ---*
Third quarter ................        $ 13.00     $ 12.75     $   ---*
Fourth quarter ...............        $ 13.75     $ 12.75     $   ---*


2001
------------------------------
First quarter ................        $ 13.75     $ 13.25     $    .50
Second quarter ...............        $ 13.75     $ 12.50     $   ---*
Third quarter ................        $ 19.75     $ 13.375    $   ---*
Fourth quarter ...............        $ 16.00     $ 14.50     $   ---*


*    As of July 1999 the Company  announced its intention to pay dividends  from
     time to time, as deemed  appropriate,  but in any event no more  frequently
     than annually.