Washington Bancorp


                               1999 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, 1999
(Dollars in Thousands)

Total assets ...............................................           $102,984
Total loans, net ...........................................             72,779
Investment securities and other
  earning assets ...........................................             24,557
Deposits ...................................................             75,689
Borrowings .................................................             15,706
Net income .................................................                831
Stockholders' equity .......................................             10,711
Stockholders' equity as a percent of
  assets ...................................................              10.40%





                                 ANNUAL MEETING

                The Annual Meeting of Stockholders of Washington
              Bancorp will be held on October 19, 1999 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 21, 1999



Dear Fellow Stockholder,

It is with pleasure and pride that the Board of Directors,  the Officers and the
Staff of Washington  Bancorp and its  subsidiaries,  Washington  Federal Savings
Bank and Rubio  Savings Bank of Brighton  present our fourth annual  report.  In
1996, when this organization first became a public stock corporation,  our total
assets were $60,890,943.  When our year officially ended on June 30, 1999, those
assets had grown to $102,984,080, an increase of more than 69%.

This has been an exciting and enriching year with the addition to the Washington
Bancorp  family of Wellman  Federal  Savings,  a division of Washington  Federal
Savings  Bank.  The  Wellman  community  has greeted us warmly and appears to be
enjoying the full services of a locally-owned  community bank. An Advisory Board
of local residents will soon be in place to enable Wellman Federal to respond to
the unique needs of the Wellman area.

In addition to the geographical growth in the Washington Bancorp locations which
now cross Washington  County from north to south, we have formed a collaborative
relationship  with  Eagle  One  Financial  Services,  LLC,  which  will  provide
financial  planning  services  conveniently  located  within the main  office of
Washington  Bancorp.  This will broaden the investment  choices available to the
community  beyond our  traditional  FDIC-insured  offerings  to include  stocks,
bonds, mutual funds and insurance products.

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,   and  we  invite  your
participation  and  thank  you for your  support  and  confidence.  Our  present
Washington Bancorp family consists of more than 400 different individuals/family
members who own our stock. We look forward to an exciting year 2000.

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,
                                                       ----------------------------------------------------
                                                         1999       1998      1997       1996        1995
                                                       ----------------------------------------------------
                                                                         (Dollars in Thousands)
<S>                                                    <C>        <C>        <C>        <C>        <C>
Selected Financial Condition Data:

Total assets .......................................   $102,984   $ 94,327   $ 64,875   $ 60,891   $ 55,100
Loans receivable, net ..............................     72,779     65,885     52,530     40,906     40,435
Cash and cash equivalents ..........................      2,557      3,306        808      1,903      1,658
Investment securities ..............................     21,456     20,254      9,850     14,628     11,517
Investment in Federal Home Loan Bank ("FHLB")  Stock        860        812        466        369        362
Goodwill, net ......................................      1,281      1,375       --         --         --
Deposits ...........................................     75,689     66,595     44,754     44,176     42,950
Borrowed funds .....................................     15,706     15,724      8,652      5,505      7,230
Stockholders' equity ...............................     10,711     10,971     10,675     10,548      4,400
</TABLE>
<TABLE>
                                                                           Year Ended June 30,
                                                               -------------------------------------------
                                                                1999     1998     1997    1996       1995
                                                               -------------------------------------------
                                                                          (Dollars in Thousands)
<S>                                                            <C>      <C>      <C>      <C>       <C>
Selected Operations Data:

Total interest income ......................................   $7,455   $6,034   $4,990   $4,207    $3,939
Total interest expense .....................................    4,295    3,259    2,553    2,499     2,181
                                                               -------------------------------------------
  Net interest income ......................................    3,160    2,775    2,437    1,708     1,758
Provision for loan losses ..................................      112       89       40       15        --
                                                               -------------------------------------------
                                                                3,048    2,686    2,397    1,693     1,758
Total noninterest income ...................................      392      320      231      197       138
Total noninterest expense ..................................    2,077    1,744    1,712    1,206     1,278
                                                               -------------------------------------------
Income before income taxes .................................    1,363    1,262      916      684       618
Income tax expense .........................................      532      439      351      243       259
                                                               -------------------------------------------
Net income .................................................   $  831   $  823   $  565   $  441    $  359
                                                               ===========================================

Earnings per common share:
  Basic ....................................................   $ 1.48   $1.36    $ 0.92   $ 0.25*      N/A
                                                               ==================================
  Diluted ..................................................   $ 1.44   $1.33    $ 0.91   $ 0.25*      N/A
                                                               ==================================

Tangible earnings per common share(1) ......................   $ 1.60   $1.40    $ 0.91   $ 0.25*      N/A
                                                               ==================================
<FN>
*    Earnings  per  share  information  for the  year  ended  June  30,  1996 is
     calculated  by  dividing  net  income,  subsequent  to the  mutual to stock
     conversion,  by the  weighted  average  number of shares  outstanding.  Net
     income  subsequent to the conversion was $150,832 for the period ended June
     30, 1996.

(1)  Tangible  earnings per common share is  calculated by dividing the total of
     goodwill  expense plus net income by the weighted average number of diluted
     common shares outstanding.
</FN>
</TABLE>
<PAGE>


<TABLE>
                                                                           Year Ended June 30,
                                                            ---------------------------------------------
                                                             1999      1998      1997      1996     1995
                                                            ---------------------------------------------
<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) ...........................        0.83%     1.06%     0.90%     0.78%    0.67%
    total assets)
Interest rate spread information:
  Average during period .............................        2.81      2.95      3.09      2.55     3.04
  End of period .....................................        3.21      2.95      3.09      2.96     2.91
  Net interest margin(1) ............................        3.31      3.70      3.97      3.13     3.38
  Ratio of operating expense to  average total assets        2.18      2.24      2.72      2.15     2.38
  Return on equity (ratio of net  income to average
    equity) .........................................        7.79      7.56      5.34      6.94     8.41

Quality Ratios:
  Non-performing assets to total  assets at end of
    period(2) .......................................        0.15      0.09      0.35      0.07     0.54
  Allowance for loan losses to non-performing loans .      304.64    435.99     98.52    475.00    68.81

Capital Ratios:
  Equity to total assets at end of period ...........       10.40     11.63     16.45     17.32     7.99
  Average equity to average assets ..................       10.62     13.99     16.80     11.31     7.96
  Ratio of average interest-earning assets to average
    interest-bearing liabilities ....................      111.04    117.22    121.22    112.79   108.01
Number of full service offices ......................           3         2         1         1        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  Federal's
compliance with its capital requirements at June 30, 1999.


                                                         Capital Level
                                 OTS Requirement      at June 30, 1999(1)
                                 ---------------   ---------------------------
                                 % of               % of               Amount
                                 Assets   Amount   Assets   Amount   of Excess
                                 ---------------------------------------------
                                           (Dollars in Thousands)
Capital Standard

Tangible Capital .........        1.50%   $1,184    8.53%   $6,728     $5,544
Core Capital .............        4.00%   $3,156    8.53%   $6,728     $3,572
Risk-based Capital .......        8.00%   $4,372   12.92%   $7,062     $2,690


(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, 1999.


                                      Capital Level
                                       Requirement        at June 30, 1999
                                     ---------------   -------------------------
                                      % of              % of            Amount
                                     Assets   Amount   Assets  Amount  of Excess
                                     -------------------------------------------
                                              (Dollars in Thousands)

Tier 1 or Leverage Capital ......      3.00%  $  700   11.09%  $2,587   $1,887
Tier 1 Risk-based Capital .......      4.00%     499   20.72%   2,587    2,088
Risk-based Capital ..............      8.00%     999   21.65%   2,704    1,705




                      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. The principal
assets of the  Company  are  Washington  Federal  and Rubio  (collectively,  the
"Banks").  The Company  presently  has no separate  operations  and its business
consists  only of the  business of the Banks.  All  references  to the  Company,
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.  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 originate 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;
(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

When used in this  Annual  Report  or future  filings  by the  Company  with the
Securities  and Exchange  Commission,  in the Company's  press releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized  executive officer,  the words or phrases "will likely
result," "are  expected  to," "will  continue,"  "is  anticipated,"  "estimate,"
"project,"   "believe"   or  similar   expressions   are  intended  to  identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform Act of 1995.  The  Company  wishes to caution  readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made, and to advise readers that various factors, including regional
and national  economic  conditions,  changes in levels of market interest rates,
credit risks of lending  activities,  and  competitive  and regulatory  factors,
could affect the Company's  financial  performance and could cause the Company's
actual results for future periods to differ materially from those anticipated or
projected.

The Company does not undertake,  and specifically disclaims any obligations,  to
revise any  forward-looking  statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.

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,  shares owned by the 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.

In addition to the earnings per share ("EPS") information  typically  disclosed,
the Company provided "tangible" EPS as an alternative measure for evaluating the
Company's  ability to grow  tangible  capital.  The  Company's  tangible  EPS is
calculated  by  dividing  the total of goodwill  expense  plus net income by the
weighted average number of diluted common shares outstanding.

Impact of the Year 2000

In preparation  for the century date change,  the Banks have completed  upgrades
and  replacements  of all computer  systems and software  that did not meet Year
2000 standards. Testing of the new products has been completed and the Banks are
satisfied with the results.  Four separate  special  examinations  for Year 2000
issues have been  conducted by regulators  since July 1, 1998 and the Banks have
utilized the guidance of the OTS and the Federal Deposit  Insurance  Corporation
(the "FDIC") in applying their Year 2000 plans.  Communication  with vendors and
service providers is ongoing to assure  uninterrupted  services.  The Banks have
worked with local officials in developing  community-wide  contingency plans for
vital  community-wide  services and have communicated with customers with regard
to their Year 2000  preparations  and concerns.  A cash management plan has been
formulated to meet anticipated  additional cash needs of our customers.  Capital
expenditures  for Year 2000 readiness to date have been  approximately  $91,000,
with an expected  total of $120,000.  These  expenses are not expected to have a
significant impact on financial position or results of operations.

Financial Condition

Total  Assets.  Total assets  increased  from $64.9  million at June 30, 1997 to
$94.3 million at June 30, 1998 and to $103.0  million at June 30, 1999.  The net
increase from 1997 to 1998 was primarily due to the  acquisition of Rubio,  with
total  assets of $25.1  million,  as well as a $5.5  million  increase  in loans
receivable,  net  partially  offset by a $1.3  million  decrease  in  investment
securities.  The net  increase  from  1998 to 1999 was  primarily  due to a $6.9
million increase in loans receivable, net, a $1.2 million increase in investment
securities, and a $681,000 increase in federal funds sold, partially offset by a
$749,000 decrease in cash and cash equivalents.
<PAGE>


Loans receivable. Loans receivable, net increased from $52.5 million at June 30,
1997 to $65.9  million at June 30, 1998 to $72.8  million at June 30, 1999.  The
increase from 1997 to 1998 was primarily  due to the  acquisition  of Rubio with
loans receivable, net of $7.8 million. There was also a $5.5 million increase in
loans  receivable,  net due to the  continued  increase  in loan  demand  in the
Company's  market area.  The increase from 1998 to 1999 was due to the continued
mortgage  loan demand in the  Company's  market area,  as well as an increase in
commercial and agriculture  loan demand.  The majority of commercial loan growth
is in the agriculture sector. These loans provide for a higher rate of return to
the Company, but also carry some increased risk over our traditional residential
loan products.  The Company  believes that it follows  appropriate  underwriting
guidelines  in order to reduce this  potential  risk.  In addition,  the Company
obtains  guarantees  through the Farm Service Agency Guarantee  Lender's Program
when possible,  to further manage  portfolio  risk.  Commercial and  agriculture
loans increased $3.4 million from June 30, 1998 to June 30, 1999.

The Company's  non-performing  assets were $155,000 or 0.15% of totals assets at
June 30, 1999 as compared to $89,000 or .09% of total  assets at June 30,  1998.
Management is committed to maintaining the non-performing  assets to total asset
ratio within industry standards.

Deposits. Deposits increased $21.8 million or 48.7% to $66.6 million at June 30,
1998 from $44.8  million at June 30,  1997.  Transaction  and  savings  deposits
increased as a percentage of total  deposits from $14.3 million or 32.0% at June
30, 1997 to $24.3  million or 36.4% at June 30,  1998.  Certificates  of deposit
decreased as a percentage of total  deposits from $30.4 million or 68.0% at June
30, 1997 to $42.3 million or 63.6% at June 30, 1998.  This decrease was a result
of the  Rubio  acquisition  and  their  larger  amount  of  commercial  checking
accounts.

Deposits  increased $9.1 million or 13.7% to $75.7 million at June 30, 1999 from
$66.6 million at June 30, 1998.  Transaction and savings deposits decreased as a
percentage  of total  deposits  from $24.3  million or 36.4% at June 30, 1998 to
$25.7 million or 34.0% at June 30, 1999.  Certificates of deposit increased as a
percentage  of total  deposits  from $42.3  million or 63.6% at June 30, 1998 to
$50.0 million or 66.0% at June 30, 1999. The increase in certificates of deposit
was primarily  due to Washington  Federal  offering  more  competitive  rates on
certain of its certificate of deposit products.

Stockholders' Equity.  Stockholders' equity increased from $10.7 million at June
30, 1997 to $11.0  million at June 30, 1998,  and  decreased to $10.7 million at
June 30, 1999.  The increase  from June 30, 1997 to June 30, 1998 was  primarily
due to net income of $823,000,  the allocation of shares in the ESOP of $72,000,
the amortization of compensation  under the Company's  Recognition and Retention
Plan of  $67,000,  the  exercise  of 1,096  shares  of  common  stock  under the
Company's Stock Option and Incentive Plan ("Stock Option Plan") of $12,000,  and
the net  reduction in  unrealized  losses on available  for sale  securities  of
$3,000  partially  offset by $308,000 in payments for the  repurchase  of 16,500
shares of the Company's common stock,  dividends paid of $268,000, of redeemable
common  stock under the ESOP of $84,000 and the  retirement  of 1,096  shares of
common stock of $21,000.  The  decrease  from June 30, 1998 to June 30, 1999 was
primarily due to $684,000 in payments for the repurchase of 37,000 shares of the
Company's  common  stock,  dividends  paid  of  $272,000  and  the  increase  in
unrealized losses on available for sale securities of $235,000  partially offset
by net income of $831,000  and the  allocation  of ESOP  shares of $73,000.  The
portfolio of available-for-sale  securities is comprised primarily of investment
securities  carrying fixed interest rate. The fair value of these  securities is
subject to changes in interest  rates and the fair value of these  securities is
less than their carrying value as of June 30, 1999.Net Interest Income Analysis
<PAGE>


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,
                                       ---------------------------------------------------------------------------------------
                                                     1999                        1998                           1997
                                       ---------------------------- ----------------------------  -----------------------------
                                         Average   Interest           Average   Interest            Average    Interest
                                       Outstanding Earned/   Yield/ Outstanding Earned/   Yield/  Outstanding   Earned/  Yield/
                                         Balance     Paid     Rate    Balance     Paid     Rate     Balance      Paid     Rate
                                       ----------------------------------------------------------------------------------------
<S>                                    <C>         <C>       <C>    <C>         <C>       <C>     <C>          <C>       <C>
                                                               (Dollars in Thousands)

Interest-earning assets:
  Loans receivable(1) ................   $69,013   $ 5,979    8.66%   $59,089   $ 5,138    8.69%     $47,538    $ 4,128   8.68%
  Investment securities ..............    21,692     1,253    5.78     13,622       800    5.87       11,528        757   6.57
  FHLB stock .........................       851        55    6.43        596        40    6.77          411         29   7.01
  Other interest-earning assets ......     3,897       168    4.32      1,654        56    3.40        1,822         76   4.18
                                         -----------------            -----------------              ------------------
    Total interest-earning assets(1)..   $95,453   $ 7,455    7.81    $74,961   $ 6,034    8.05      $61,299    $ 4,990   8.14
                                         -----------------            -----------------              ------------------

Interest-bearing liabilities:
  Certificates of deposit ............   $48,250   $ 2,712    5.62    $35,753   $ 2,060    5.76      $30,682    $ 1,741   5.68
  NOW, money market and passbook .....    21,991       700    3.18     16,508       558    3.38       13,226        472   3.57
    savings
  Advances from borrowers for taxes ..       185         1    0.46        167         2    1.02          155          2   1.52
    and insurance
  FHLB advances ......................    15,537       882    5.68     11,519       639    5.55        6,504        337   5.19
                                         -----------------            -----------------              ------------------
    Total interest-bearing liabilities   $85,963   $ 4,295    5.00    $63,947   $ 3,259    5.10      $50,567    $ 2,553   5.05
                                         -----------------            -----------------              ------------------

Net interest income ..................              $ 3,160                     $ 2,775                         $ 2,437
                                                    =======                     =======                         =======
Net interest rate spread(2) ..........                        2.81%                        2.95%                          3.09%
                                                              =====                        =====                          =====

Net interest-earning assets ..........   $ 9,490                      $11,014                       $10,732
                                         =======                      =======                       =======

Net yield on average interst-earnings
  assets .............................                        3.31%                        3.70%                          3.97%
                                                              =====                        =====                          =====

Average interest-earning assets to
  average interest-earning
  liabilities ........................              111.04%                              117.22%                        121.22%
                                                    =======                              =======                        =======
<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,
                                                      --------------------------
                                                       1999      1998      1997
                                                      --------------------------

Weighted average yield on:
  Loans receivable .............................       8.44%     8.61%     8.55%
  Investment securities ........................       5.92      5.94      6.61
  Other interest-earning assets ................       5.50      5.86      5.96
Combined weighted average yield on interest- ...       7.81      7.93      8.21
 earning assets

Weighted average rate paid on:
  Passbook savings accounts ....................       1.55      2.36      2.30
  NOW accounts .................................       1.50      2.32      2.29
  Money market accounts ........................       3.47      3.87      3.92
  Certificates of deposit ......................       5.40      5.73      5.74
  Advances from borrowers for taxes & ..........         --      2.30      2.30
   insurance
  FHLB advances ...............................        5.66      5.54      5.50
Combined weighted average rate paid on ........        4.60      4.98      5.12
 interest-bearing liabilities
Spread ........................................        3.21      2.95      3.09

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. Year Ended June 30,
<TABLE>
                                                    1999 vs. 1998                          1998 vs. 1997
                                         -----------------------------------     --------------------------------
                                             Increase                               Increase
                                            (Decrease)                              (Decrease)
                                              Due to                Total              Due to             Total
                                         -------------------       Increase      ------------------     Increase
                                           Volume      Rate       (Decrease)     Volume        Rate    (Decrease)
                                         ------------------------------------------------------------------------
                                                                    (In Thousands)
                                         <S>          <C>          <C>           <C>          <C>      <C>
Interest-earning assets:
  Loans receivable                          $859      $ (18)         $ 841       $1,005       $  5        $1,010
  Investment securities                      465        (12)           453          129        (86)           43
  FHLB stock                                  17         (2)            15           12         (1)           11
  Other interest-earning
   assets                                     94          18           112          (7)        (13)         (20)
                                          ----------------------------------------------------------------------
Total interest-earning
  assets                                  $1,435       $(14)         1,421       $1,139       $(95)        1,044
                                          ======================================================================
Interest-bearing liabilities:
 Certificates of Deposit                   $ 704      $ (51)           704        $ 294        $ 25          319
 NOW, money market, and
  passbook savings                           177        (35)           142          112        (26)           86
 Advances from borrowers for
  taxes and insurance                        ---         (1)           (1)          ---         (1)          (1)
  FHLB advances                              227          15           242          277          25          302
                                         -----------------------------------------------------------------------
Total interest-bearing
 liabilities                             $ 1,108        $ 72         1,036        $ 683        $ 23          706
                                         =======================================================================
Net interest income                                                  $ 385                                 $ 338
                                                                     =====                                 =====
</TABLE>
<PAGE>


Comparison of Operating Results For The Years Ended June 30, 1999 and 1998

Performance  Summary.  Net income for the year ended June 30, 1999  increased by
$8,000 or 0.9% to $831,000 from  $823,000 for the year ended June 30, 1998.  The
increase was primarily due to an increase in net interest income of $385,000 and
an increase in non-interest  income of $72,000,  partially offset by an increase
in  non-interest  expense of  $333,000,  an  increase  in income tax  expense of
$92,000  and an increase in  provision  for loan loss of $24,000.  For the years
ended June 30,  1999 and 1998 the  return on average  assets was 0.83% and 1.06%
respectively,   while  the  return  on  average   equity  was  7.79%  and  7.56%
respectively.

Net  Interest  Income.  For the year ended June 30, 1999,  net  interest  income
increased  by $385,000 to $3.1 million from $2.7 million for the year ended June
30, 1998.  Interest  income  increased $1.4 million to $7.4 million for the year
ended June 30, 1999 from $6.0 million for the year ended June 30, 1998 partially
offset by a $1.0 million increase in interest expense to $4.3 for the year ended
June 30,  1999 from $3.3  million  for the year  ended  June 30,  1998.  The net
increase was primarily due to the increase in net interest-earning assets.

For the year ended June 30, 1999, the average yield on  interest-earning  assets
was 7.81%  compared to 8.05% for the year ended June 30, 1998.  The average cost
of  interest-bearing  liabilities  was 5.00% for the year  ended  June 30,  1999
compared  to 5.10% for the year  ended June 30,  1998.  The  average  balance of
interest-earning assets increased by $20.5 million to $95.5 million for the year
ended June 30, 1999 from $75.0 million for the year ended June 30, 1998.  During
the same time  period,  the  average  balance  of  interest-bearing  liabilities
increased  by $22.1  million to $86.0  million  for the year ended June 30, 1999
from $63.9 million for the year ended June 30, 1998.

Due to the lower returns on interest-earning assets, and despite the lower rates
on interest-bearing  liabilities, the average interest rate spread was 2.81% for
the year ended June 30, 1999 compared to 2.95% for the year ended June 30, 1998.
In  addition,  the lower ratio of  interest-earning  assets to  interest-bearing
liabilities,  as a result of market pricing, has caused the average net interest
margin to be  reduced by 29 basis  points,  to 3.31% for the year ended June 30,
1999 compared to 3.70% for the year ended June 30, 1998.

Provision  for Loan Loss.  For the year ended June 30, 1999,  the  provision for
loan loss increased $24,000 to $113,000 from $89,000 for the year ended June 30,
1998.  The primary  reason for 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.  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  $472,000  or .65% of loans  receivable,  net at June 30,  1999 is an
increase when compared to $388,000 or .59% of loans receivable,  net at June 30,
1998. The allowance for loan losses as a percentage of non-performing assets was
304.64% at June 30, 1999 compared to 435.99% at June 30, 1998.

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,  1999,  non-interest  income
increased $72,000 or 22.6% to $392,000 from $320,000 for the year ended June 30,
1998.  The  increase  was  primarily  due to a $75,000  increase in bank service
charges and fees, a $13,000 increase in other non-interest income, and a $10,000
increase  in gain  on  securities,  available-for-sale,  partially  offset  by a
$25,000  decrease  in  insurance  commissions  and a  $1,000  decrease  in  loan
origination and commitment fees.
<PAGE>


Bank service  charges and fees increased  $75,000 to $284,000 for the year ended
June 30, 1999 from  $209,000 for the year ended June 30,  1998.  The increase is
primarily  due to a $46,000  increase in overdraft  fees, a $17,000  increase in
checking account  charges,  a $6,000 increase in credit card related fees, and a
$3,000  increase in late fees  assessed.  The primary reason for the increase in
bank service charges and fees is due to the inclusion of Rubio's service charges
and fees for the entire year as  compared  to only a six-month  period in fiscal
1998.

Other  non-interest  income increased $13,000 to $33,000 for the year ended June
30,1999 from $20,000 for the year ended June 30, 1998. The increase is primarily
due to an increase in gain realized on foreclosed  properties.  Gain on the sale
of available-  for- sale  securities  increased  $10,000 to $15,000 for the year
ended June 30, 1999 from $5,000 for the year ended June 30, 1998  primarily  due
to the sale of U.S. Treasury securities. Insurance commissions decreased $25,000
to $51,000 for the year ended June 30, 1999 from $76,000 for the year ended June
30, 1998 primarily due to fluctuations in the volume of sales of credit life and
disability insurance products.

Non-interest  Expense.  For the year ended June 30, 1999,  non-interest  expense
increased  $333,000  to $2.1  million for the year ended June 30, 1999 from $1.7
million for the year ended June 30, 1998.  The  increase is  primarily  due to a
$136,000  increase in compensation  and benefits,  an $88,000  increase in other
expense,  a $51,000  increase in goodwill,  a $42,000  increase in occupancy and
equipment,  an $8,000  increase  in  deposit  insurance  premiums,  and a $7,000
increase in data processing.

Compensation and benefits  increased $136,000 to $1.1 million for the year ended
June 30, 1999 from  $929,000 for the year ended June 30, 1998.  The increase was
primarily  due to the  addition of three  full-time  equivalent  employees  as a
result of  Washington  Federal's  new branch in Wellman,  Iowa,  and to a lesser
extent, normal salary increases.

Other non-interest expense increased $88,000 to $549,000 for the year ended June
30, 1999 from  $460,000  for the year ended June 30, 1998  primarily  due to the
increased cost of operating  additional  offices since the  acquisition of Rubio
and the opening of Washington  Federal's  branch in Wellman,  Iowa. The increase
was primarily due to a $34,000 increase in supplies,  a $22,000 increase in fees
paid for services provided by outside contractors, a $14,000 increase in ATM and
debit card processing fees, a $12,000 increase in postage and delivery  expense,
a $12,000 increase in real estate owned expense,  a $10,000 increase in checking
accounts, and a $9,000 increase in non-capitalized  expenses related to the Year
2000 issue, partially offset by a $25,000 decrease in professional fees paid.

Goodwill expense  increased  $51,000 to $95,000 for the year ended June 30, 1999
from $43,000 for the year ended June 30, 1998 due to the  acquisition  of Rubio.
Occupancy and equipment expense increased $42,000 to $225,000 for the year ended
June 30, 1999 from  $183,000 for the year ended June 30, 1998  primarily  due to
the addition of  Washington  Federal's  branch in Wellman,  Iowa and the Rubio's
office  building.  FDIC insurance  premiums  increased $8,000 to $57,000 for the
year ended June 30, 1999 from $48,000 for the year ended June 30, 1998 primarily
due to the increase in deposits.  Data processing  expense  increased  $7,000 to
$87,000  for the year ended June 30,  1999 from  $80,000 for the year ended June
30, 1998.

Income  Taxes.  Income tax expense  increased  $92,000 to $532,000  for the year
ended  June 30,  1999  from  $440,000  for the year  ended  June 30,  1998.  The
effective income tax rates for the years ended June 30, 1999 and 1998 were 39.0%
and 34.8%,  respectively.  The increase was primarily due to the  non-deductible
goodwill expense.

Comparison of Operating Results For The Years Ended June 30, 1998 And 1997

Performance  Summary.  Net income for the year ended June 30, 1998  increased by
$258,000 or 45.7% to $823,000  from  $565,000  for the year ended June 30, 1997.
The increase was primarily due to an increase in net interest income of $338,000
and an  increase  in  non-interest  income of  $89,000,  partially  offset by an
increase  in  provision  for  loan  losses  of  $49,000,   and  an  increase  in
non-interest  expense  of  $32,000  and an  increase  in income  tax  expense of
$89,000.  For the years  ended  June 30,  1998 and 1997,  the  return on average
assets was 1.06% and .90%, respectively,  while the return on average equity was
7.56% and 5.34%, respectively.
<PAGE>


Net  Interest  Income.  For the year ended June 30, 1998,  net  interest  income
increased  by $338,000 to $2.7 million from $2.4 million for the year ended June
30, 1997.  Interest  income  increased $1.0 million to $6.0 million for the year
ended June 30, 1998 from $5.0 million for the year ended June 30, 1997 offset by
a $706,000  increase in interest expense to $3.3 million for the year ended June
30, 1998 from $2.6  million for the year ended June 30,  1997.  The net increase
was primarily due to the increase in net  interest-earning  assets caused by the
acquisition  of Rubio as well as a result of strong loan demand in the Company's
market area.

For the year ended June 30, 1998, the average yield on  interest-earning  assets
was 8.05%  compared to 8.14% for the year ended June 30, 1997.  The average cost
of  interest-bearing  liabilities  was 5.10% for the year  ended  June 30,  1998
compared  to 5.05% for the year  ended June 30,  1997.  The  average  balance of
interest-earning assets increased by $13.7 million to $75.0 million for the year
ended June 30, 1998 from $61.3 for the year ended June 30, 1997. During the same
time period, the average balance of  interest-bearing  liabilities  increased by
$13.3  million to $63.9  million  for the year  ended  June 30,  1998 from $50.6
million for the year ended June 30, 1997.

Due to lower  returns on  interest-earnings  assets and higher  funding costs on
interest-bearing liabilities, the average interest rate spread was 2.95% for the
year ended June 30, 1998 compared to 3.09% for the year ended June 30, 1997. The
average net interest  margin was 3.70% for the year ended June 30, 1998 compared
to 3.97% for the year ended June 30, 1997.

Provision  for Loan Loss.  For the year ended June 30, 1998,  the  provision for
loan loss increased  $49,000 to $89,000 from $40,000 for the year ended June 30,
1997.  The primary  reason for the provision was the increased  size of the loan
portfolio,  particularly  in  commercial  loans which are  considered to carry a
higher  risk of default  than  residential  loans,  but do earn a higher rate of
return.  The Company's loan portfolio remains primarily of residential  mortgage
loans and it has  experienced a minimal  amount of charge-offs in the past three
years. The allowance of loan losses of $388,000 or .59% of loans receivable, net
at June 30, 1998 is an increase, partially due to the acquisition of Rubio, when
compared to  $226,000 or .43% of loans  receivable,  net at June 30,  1997.  The
allowance for loan losses as a percentage of  non-performing  assets was 435.99%
at June 30, 1998 compared to 98.52% at June 30, 1997.

Non-interest  Income.  For the year ended  June 30,  1998,  non-interest  income
increased $89,000 or 38.4% to $320,000 from $231,000 for the year ended June 30,
1997.  The  increase  was  primarily  due to a $92,000  increase in bank service
charges and fees, a $5,000  increase in gain on securities,  available-for-sale,
and a $1,000 increase in loan origination and commitment fees,  partially offset
by a $7,000  decrease  in other  non-interest  income and a $2,000  decrease  in
insurance commissions.

Bank service  charges and fees increased  $92,000 to $209,000 for the year ended
June 30, 1998 from  $117,000 for the year ended June 30,  1997.  The increase is
primarily due to a $60,000  increase in overdraft  fees, an $18,000  increase in
checking  account  charges,  a $5,000 increase in merchant  discount  income,  a
$5,000  increase in late  charges  assessed,  a $2,000  increase in safe deposit
rental,  $1,000  increase in credit card fee  income,  and a $1,000  increase in
exchange fees. These increases are largely due to the acquisition of Rubio. Gain
on securities,  available-for-sale increased $5,000 to $5,000 for the year ended
June 30, 1998 from $0 for the year ended June 30, 1997 due to the Company taking
an opportunity to realize gain on securities  classified as  available-for-sale.
Loan  origination and commitment fee income  increased  $1,000 to $9,000 for the
year ended June 30,  1998 from  $8,000 for the year ended June 30,  1997.  Other
non-interest income decreased $7,000 to $21,000 for the year ended June 30, 1998
from  $28,000  for the year  ended June 30,  1997 due to a decrease  in the gain
realized on foreclosed  properties.  Insurance  commissions  decreased $2,000 to
$76,000  for the year ended June 30,  1998 from  $78,000 for the year ended June
30,  1997 due to the  fluctuation  in the  volume  of sales of  credit  life and
disability  products.  Non-interest  Expense.  For the year ended June 30, 1998,
non-interest  expense  increased  $32,000 or 1.9% from $1.7 million for the year
ended June 30, 1997.  The increase is  primarily  due to a $207,000  increase in
compensation and benefits, a $115,000 increase in other non-interest  expense, a
$33,000  increase in  occupancy  and  equipment,  and a $5,000  increase in data
processing expense offset by a $328,000 decrease in deposit insurance premiums.
<PAGE>


Compensation and benefits increased $207,000 to $929,000 for the year ended June
30,  1998 from  $722,000  for the year  ended June 30,  1997.  The  increase  is
primarily due to a $145,000 increase in employee salaries, a $24,000 increase in
employee insurance premiums,  a $21,000 increase in retirement and ESOP expense,
a $15,000 increase in bonuses accrued and incentives paid for product promotion,
a $7,000  increase in director's  fees, and a $4,000 increase in employee travel
and work expenses  partially  offset by a $5,000 decrease in the Recognition and
Retention  Plan  expense and a $4,000  decrease  in credit  life and  disability
broker  fees.  The  increase  is  primarily  due  to an  increase  in  full-time
equivalent  employees  as a result of the Rubio  acquisition  and normal  salary
increases.

Other  non-interest  expense  increased  $115,000 to $503,000 for the year ended
June 30, 1998 from  $388,000 for the year ended June 30,  1997.  The increase is
primarily due to a $43,000 increase in the  amortization of goodwill,  a $13,000
increase  in office  supplies,  a  $12,000  increase  in  postage  and  delivery
primarily due to special promotional  mailings,  an $11,000 increase in checking
account expenses due to a new checking  account  program,  a $10,000 increase in
charges assessed by the FHLB of Des Moines, a $9,000 increase in advertising,  a
$9,000  increase in ATM and debit card  processing  fees, an $8,000  increase in
appraisal  and  inspection   fees,  and  an  $8,000   increase  in  professional
organization  dues  partially  offset by an $8,000  decrease in  accounting  and
auditing fees. Most of these changes resulted from the Rubio acquisition.

Occupancy and equipment expense increased $33,000 to $183,000 for the year ended
June 30, 1998 from  $150,000 for the year ended June 30,  1997.  The increase is
primarily due to a $9,000 increase in small asset  purchases,  a $7,000 increase
in the equipment  repairs,  a $5,000 increase in property tax expense,  a $4,000
increase in utilities,  a $3,000  increase in office  building  depreciation,  a
$3,000  increase  in  building  maintenance  expense,  and a $2,000  increase in
telephone expenses. Data processing expenses increased $5,000 to $80,000 for the
year ended June 30, 1998 from $75,000 for the year ended June 30, 1997 due to an
additional services provided in relation to Year 2000 preparedness.

Deposit insurance premiums decreased $328,000 to $49,000 for the year ended June
30,  1998 from  $377,000  for the year  ended June 30,  1997.  The  decrease  is
primarily due to the $294,000 one-time Savings  Association  Insurance Fund (the
"SAIF")  assessment for the year ended June 30, 1997, and a $34,000  decrease in
deposit insurance premiums.

The  deposits of  Washington  Federal  are  insured by the  Savings  Association
Insurance  Fund "the "SAIF"),  and the deposits of Rubio are insured by the Bank
Insurance Fund (the "BIF").  The two insurance  funds are  administrated  by the
FDIC. Prior to September 1996,  financial  institutions which are members of the
BIF had experienced  substantially  lower deposit insurance premiums because the
BIF had  achieved  its  required  level of  reserves,  while  the SAIF  prior to
September 1996 had not yet achieved its required  reserves.  A  recapitalization
plan for the SAIF was signed by the  President on September  30, 1996 as part of
the Economic  Growth and  Regulatory  Paperwork  Reduction  Act and provided the
one-time  special  assessment of 0.657% of deposits  imposed on all SAIF insured
institutions to enable the SAIF to achieve its required levels of reserves.  The
assessment  of 0.657% was  assessed  based on  deposits as of March 31, 1995 and
Washington Federal's special assessment amounted to approximately $294,000. As a
result of the special assessment, Washington Federal's deposit insurance premium
was  reduced to 0.065%  from 0.23% of  deposits  previously  paid by  Washington
Federal. Rubio's deposit insurance premium was 0.012% of deposits.

Income Taxes. Income taxes increased $89,000 to $440,000 for the year ended June
30, 1998 from $351,000 for the year ended June 30, 1997.  The  effective  income
tax rates for the  years  ended  June 30,  1998 and 1997 were  34.8% and  38.3%,
respectively.  The  fluctuations  in  the  effective  income  tax  rate  relates
primarily to the treatment of the Recognition  and Retention  expense for income
tax purposes.
<PAGE>


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
balloon  loan  which  accounted  for $30.7  million  of its $72.7  million  loan
portfolio,  or 42.3% at June 30, 1999.  Adjustable  rate loans account for $15.9
million of its $72.7 million loan portfolio, or 21.8% at June 30, 1998.

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 a more stable source 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,  1999,  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 $1.5 million or 19% and a 300 basis point
decrease  in interest  rates would  increase  Washington  Federal's  NPV by $1.4
million or 17%. As previously mentioned, the OTS has informed Washington Federal
that it is not subject to the IRR component as discussed  above.  Further,  were
Washington  Federal  subject to the IRR component at June 30, 1999, 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, 1999
--------------------------------------------------------------------------------
                 Net Portfolio Value                    NPV as % of PV of Assets
-----------------------------------------------------   ------------------------
Change in
 Rates           $ Amount      $ Change      % Change    NPV Ratio       Change
--------------------------------------------------------------------------------
            (Dollars in Thousands)

+300 bp            6,437         -1,532          -19%      8.40%         -157 bp
+200 bp            7,036           -933          -12%      9.04%          -93 bp
+100 bp            7,544           -425           -5%      9.56%           -41bp
   0 bp            7,969                                   9.97%
-100 bp            8,348            379           +5%     10.32%          +35 bp
-200 bp            8,781            813          +10%     10.71%          +74 bp
-300 bp            9,333          1,364          +17%     11.22%         +125 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, 1999.
<TABLE>
                                                                           Maturing Within
                                                            ----------------------------------------------
                                                              0-6          6-12         1-2         2-3
                                                             Months       Months       Years       Years        Total
                                                            ----------------------------------------------------------
<S>                                                         <C>          <C>          <C>         <C>         <C>
                                                                               (Dollars in Thousands)

Assets
  Loans receivable ......................................   $  2,057     $  2,126     $  1,867    $  7,193    $ 13,243
  Securities ............................................        500        1,550        1,510       3,071       6,631
                                                            ----------------------------------------------------------
     Total interest-earning assets ......................      2,557        3,676        3,377      11,264      19,874
                                                            ----------------------------------------------------------

Liabilities
  Interest-bearing deposits .............................     11,797        4,102        2,248         334      18,481
                                                            ----------------------------------------------------------

Asset/(Liability) funding GAP ...........................     (9,240)        (426)       1,129      10,930       1,393
                                                            ----------------------------------------------------------

GAP ratio (assets/liabilities) ..........................         22%          90%         150%        103%        108%
</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, 1999,  1998, and 1997,
the Company  originated  loans for its portfolio in the amount of $42.1 million,
$32.1 million,  and $28.2 million,  respectively.  These  activities were funded
primarily by deposits,  principal repayments of loans, and FHLB borrowings. FHLB
borrowings  have been more costly than deposits,  but 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,  mortgaged-backed  securities  and
corporation and other securities.
<PAGE>


Washington Federal is required to maintain minimum levels of liquid assets under
the OTS  regulations.  Savings  institutions are required to maintain an average
daily balance of liquid  assets  (including  cash,  certain time  deposits,  and
specified U.S. government, state or federal agency obligations) of not less than
4.0% of its average daily  balance of net  withdrawal  accounts plus  short-term
borrowings.  It  is  Washington  Federal's  policy  to  maintain  its  liquidity
portfolio in excess of regulatory  requirements.  Washington Federal's liquidity
ratios were 18.84%, 13.17%, and 8.7%,  respectively,  at June 30, 1999, 1998 and
1997.

Cash was generated by the Company's operating  activities during the years ended
June  30,  1999,  1998  and  1997,  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 primary financing activities consist of deposits,
borrowing/repayments with the FHLB of Des Moines.

The Company's  most liquid assets are cash and cash  equivalents,  which include
short-term  investments.  At June  30,  1999,  1998  and  1997,  cash  and  cash
equivalents were $2.6 million, $3.3 million, and $808,000, 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  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 1999,  1998
and 1997,  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, 1999, the Company had outstanding  loan  commitments of $2.8 million
and undisbursed  loans in process of $546,000.  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,  1999  were  $27.4  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 June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative  Instrument and Hedging  Activities."  This statement
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging activities.  This statement must be adopted no later than June 30, 2002,
although earlier application is permitted.  The adoption of Statement 133 is not
expected to have a material impact on the Company.
<PAGE>


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, 1999



<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, 1999 and 1998, 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,
1999.  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  generally   accepted  auditing
standards.  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,  1999  and  1998,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
June 30, 1999 in conformity with generally accepted accounting principles.


                                                     /s/ McGladrey & Pullen, LLP

Cedar Rapids, Iowa
August 12, 1999



<PAGE>


Washington Bancorp and Subsidiaries

Consolidated Statements of Financial Condition
June 30, 1999 and 1998
<TABLE>
ASSETS                                                                                   1999             1998
------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>               <C>
Cash and cash equivalents (Note 2):
   Interest-bearing ...........................................................     $    901,346      $  1,858,527
   Noninterest-bearing ........................................................        1,656,084         1,447,847
Investment securities (Notes 2 and 3):
   Held to maturity (fair value approximates $760,520 at June 30, 1999) .......          760,520         1,131,478
   Available-for-sale .........................................................       20,695,366        19,122,283
Federal funds sold ............................................................        1,340,000           659,497
Loans receivable, net of allowance for loan losses of $472,187
   in 1999 and $388,034 in 1998 (Notes 4, 8 and 15) ...........................       72,779,177        65,884,941
Accrued interest receivable (Note 5) ..........................................        1,190,600           959,663
Federal Home Loan Bank stock ..................................................          860,000           812,400
Foreclosed real estate ........................................................          235,914               - -
Premises and equipment, net (Note 6) ..........................................          874,551           799,806
Goodwill ......................................................................        1,280,526         1,375,087
Other assets ..................................................................          409,996           275,416
                                                                                    ------------------------------
              Total assets ....................................................     $102,984,080      $ 94,326,945
                                                                                    ==============================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
   Deposits (Note 7):
      Noninterest-bearing .....................................................     $  2,596,143      $  2,768,561
      Interest-bearing ........................................................       73,093,323        63,826,915
                                                                                    ------------------------------
              Total deposits ..................................................       75,689,466        66,595,476
   Borrowed funds (Notes 3 and 8) .............................................       15,706,290        15,724,071
   Advances from borrowers for taxes and insurance ............................          223,033           221,911
   Accrued expenses and other liabilities .....................................          464,638           660,492
                                                                                    ------------------------------
              Total liabilities ...............................................       92,083,427        83,201,950
                                                                                    ------------------------------
Commitments and Contingencies (Note 13)
Redeemable Common Stock Held by Employee Stock
   Ownership Plan (ESOP) (Note 9) .............................................          189,972           153,788
                                                                                    ------------------------------
Stockholders' Equity (Note 12)
   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 1999 and 1998 651,133 shares .....................................            6,511             6,511
   Additional paid-in capital .................................................        6,150,310         6,122,664
    Retained earnings .........................................................        6,384,863         5,825,363
   Accumulated other comprehensive income, unrealized (losses)
      on debt securities, net .................................................         (235,778)             (507)
                                                                                    ------------------------------
                                                                                      12,305,906        11,954,031
   Less:
      Cost of common shares acquired for the treasury
        1999 50,935 shares; 1998 16,127 shares ................................         (946,435)         (300,944)
      Deferred compensation (Note 9) ..........................................          (79,098)         (104,962)
      Maximum cash obligation related to ESOP shares (Note 9) .................         (189,972)         (153,788)
      Unearned ESOP shares (Note 9) ...........................................         (379,720)         (423,130)
                                                                                    ------------------------------
              Total stockholders' equity ......................................       10,710,681        10,971,207
                                                                                    ------------------------------
              Total liabilities and stockholders' equity ......................     $102,984,080      $ 94,326,945
                                                                                    ==============================
</TABLE>
See Notes to Financial Statements
<PAGE>


Washington bancorp and Subsidiaries

Consolidated Statements of Income
Years Ended June 30, 1999, 1998 and 1997

                                               1999        1998         1997
------------------------------------------------------------------------------
Interest income:
   Loans receivable:
      First mortgage loans ...............  $4,662,591  $4,156,209  $3,549,039
      Consumer and other loans ...........   1,316,663     981,498     578,635
   Investment securities:
      Taxable ............................   1,396,926     847,215     840,485
      Nontaxable .........................      79,037      49,330      21,516
                                            ----------------------------------
              Total interest income ......   7,455,217   6,034,252   4,989,675
                                            ----------------------------------
Interest expense:
   Deposits (Note 7) .....................   3,413,212   2,619,618   2,215,768
   Borrowed funds ........................     881,818     639,162     337,405
                                            ----------------------------------
              Total interest expense .....   4,295,030   3,258,780   2,553,173
                                            ----------------------------------
              Net interest income ........   3,160,187   2,775,472   2,436,502
Provision for loan losses (Note 4) .......     112,500      89,000      40,085
                                            ----------------------------------
              Net interest income after
                 provision for loan losses   3,047,687   2,686,472   2,396,417
                                            ----------------------------------
Noninterest income:
   Securities gains, net (Note 3) ........      15,205       5,383         388
   Loan origination and commitment fees ..       7,588       8,744       7,724
   Service charges and fees ..............     284,425     209,127     117,241
   Insurance commissions .................      51,750      76,295      77,922
   Other .................................      33,348      20,404      27,893
                                            ----------------------------------
              Total noninterest income ...     392,316     319,953     231,168
                                            ----------------------------------
Noninterest expense:
   Compensation and benefits (Note 9) ....   1,064,847     929,224     722,087
   Occupancy and equipment ...............     224,963     183,009     149,738
   SAIF deposit insurance premium ........      56,699      48,365     376,862
   Data processing .......................      86,907      79,507      75,196
   Goodwill amortization .................      94,561      43,341         - -
   Other .................................     548,804     460,463     388,258
                                            ----------------------------------
              Total noninterest expense ..   2,076,781   1,743,909   1,712,141
                                            ----------------------------------
              Income before income taxes .   1,363,222   1,262,516     915,444
Income tax expense (Note 10) .............     532,022     439,680     350,767
                                            ----------------------------------
              Net income .................  $  831,200  $  822,836  $  564,677
                                            ==================================

Earnings per common share (Note 11):
   Basic .................................  $     1.48  $     1.36  $     0.92
                                            ==================================

   Diluted ...............................  $     1.44  $     1.33  $     0.91
                                            ==================================

Weighted average common shares for:
   Basic earnings per share ..............     563,303     603,589     611,539
                                            ==================================

   Diluted earnings per share ............     578,115     620,266     617,602
                                            ==================================


See Notes to Financial Statements.


<PAGE>


Washington bancorp and Subsidiaries

Consolidated Statements of comprehensive income
Years Ended June 30, 1999, 1998 and 1997
<TABLE>
                                                        1999        1998       1997
--------------------------------------------------------------------------------------
<S>                                                  <C>         <C>         <C>
Net income ........................................  $ 831,200   $ 822,836   $ 564,677
                                                     ---------------------------------

Other comprehensive income, net of income taxes:
   Unrealized holding gains (losses) arising during
      the year, net of income taxes 1999 $135,393;
      1998 $3,688; 1997 $39,087 ...................   (225,737)      6,175      65,145
   Reclassification adjustments for net (gains)
      realized in net income, net of income taxes
      1999 $5,671; 1998 $2,008; 1997 $145 .........     (9,534)     (3,375)       (243)
                                                     ---------------------------------
              Other comprehensive income (loss) ...   (235,271)      2,800      64,902
                                                     ---------------------------------

              Comprehensive income ................  $ 595,929   $ 825,636   $ 629,579
                                                     =================================
</TABLE>
See Notes to Financial Statements.
<PAGE>

Washington Bancorp and Subsidiaries

Consolidated Statements of Stockholders' Equity
(Notes 9, 12 and 17)
Years Ended June 30, 1999, 1998 and 1997
<TABLE>
                                                                     Accum-     Cost Of
                                                                     mulated     Common             Maximum
                                                                     Other       Shares              Cash                   Total
                                            Additional              Compre-    Acquired  Deferred Obligation   Unearned     Stock
                           Preferred Common  Paid-In    Retained    hensive    For the    Comp-   Related to     ESOP      holders'
                            Stock    Stock   Capital    Earnings    Income     Treasury  ensation ESOP Shares   Shares      Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>     <C>    <C>        <C>         <C>       <C>        <C>        <C>        <C>        <C>
Balance, June 30, 1996 .... $  - -  $6,575 $6,172,680 $4,941,449  $(68,209) $     - -  $    - -   $     - -  $(504,330) $10,548,165
   Net income .............    - -     - -        - -    564,677       - -        - -       - -         - -         - -     564,677
   Dividends ($0.36 per
     share) ...............    - -     - -        - -   (213,707)      - -        - -       - -         - -         - -    (213,707)
   Acquisition of 26,300
     shares of common stock
     for the treasury .....    - -     - -        - -        - -       - -   (348,563)      - -         - -         - -    (348,563)
   Issuance of 19,914 shares
     under stock awards
     program ..............    - -     - -    (38,703)       - -       - -    262,736  (224,033)        - -         - -         - -
   Amortization of compen-
     sation under stock
     award programs .......    - -     - -        - -        - -       - -        - -    72,294         - -         - -      72,294
   Allocation of ESOP
     shares ...............    - -     - -     16,055        - -       - -        - -       - -         - -      41,000      57,055
   Other comprehensive
     income ...............    - -     - -        - -        - -    64,902        - -       - -         - -         - -      64,902
   Change related to ESOP
     shares ...............    - -     - -        - -        - -       - -        - -       - -     (69,392)        - -     (69,392)
                            --------------------------------------------------------------------------------------------------------
Balance, June 30, 1997 ....    - -   6,575  6,150,032  5,292,419    (3,307)   (85,827) (151,739)    (69,392)   (463,330) 10,675,431
   Net income .............    - -     - -        - -    822,836       - -        - -       - -         - -         - -     822,836
   Dividends ($0.44 per
     share) ...............    - -     - -        - -   (267,925)      - -        - -       - -         - -         - -    (267,925)
   Acquisition of 16,500
     shares of common stock
     for the treasury .....     - -     - -        - -        - -       - -   (307,938)      - -         - -        - -    (307,938)
   Forfeiture of 1,754
     shares under stock
     awards program ........    - -     - -      3,507        - -       - -    (23,240)   19,733         - -        - -         - -
   Issuance of 2,127
     shares under stock
     awards program ........    - -     - -     10,051        - -       - -     30,234   (40,285)        - -        - -         - -
   Retire 6,386 shares of
     common stock from the
     treasury ..............    - -     (64)   (63,796)   (21,967)      - -     85,827       - -         - -        - -         - -
   Stock options exercised
     for 1,096 shares ......    - -      11     12,319        - -       - -        - -       - -         - -        - -      12,330
   Amortization of compen-
     sation under stock award
     program ...............    - -     - -        - -        - -       - -        - -    67,329         - -        - -      67,329
   Allocation of ESOP
     shares ................    - -     - -     31,501        - -       - -        - -       - -         - -     40,200      71,701
   Acquisition of 1,096
     shares of common stock
     for retirement ........    - -     (11)   (20,950)       - -       - -        - -       - -         - -        - -     (20,961)
   Other comprehensive
     income ................    - -     - -        - -        - -     2,800        - -       - -         - -        - -       2,800
   Change related to ESOP
     shares ................    - -     - -        - -        - -       - -        - -       - -     (84,396)       - -     (84,396)
                             -------------------------------------------------------------------------------------------------------
Balance, June 30, 1998 .....    - -   6,511  6,122,664  5,825,363      (507)  (300,944) (104,962)   (153,788)  (423,130) 10,971,207

(continue....)
<PAGE>

                                                                     Accum-     Cost Of
                                                                     mulated     Common             Maximum
                                                                     Other       Shares              Cash                   Total
                                            Additional              Compre-    Acquired  Deferred Obligation   Unearned     Stock
                           Preferred Common  Paid-In    Retained    hensive    For the    Comp-   Related to     ESOP      holders'
                            Stock    Stock   Capital    Earnings    Income     Treasury  ensation ESOP Shares   Shares      Equity
------------------------------------------------------------------------------------------------------------------------------------
(continued)

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 compen-
     sation 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
                             =======================================================================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>


Washington BANCORP and subsidiaries


Consolidated Statements of Cash Flows
 Years Ended June 30, 1999, 1998  AND 1997
<TABLE>
                                                               1999            1998           1997
-----------------------------------------------------------------------------------------------------
<S>                                                          <C>            <C>            <C>

Cash Flows from Operating Activities
   Net income ...........................................    $  831,200     $  822,836     $  564,677
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Amortization of premiums and discounts on
        debt securities .................................       (58,188)        48,049         37,771
      Amortization of goodwill ..........................        94,561         43,341            - -
      Provision for loan losses .........................       112,500         89,000         40,085
      (Gain) on sale of investment securities ...........       (15,205)        (5,383)          (388)
      (Gain) on sale of foreclosed real estate ..........       (21,424)       (10,573)       (36,911)
      Depreciation ......................................        77,289         70,548         56,620
      Compensation under stock awards ...................        62,317         67,329         72,294
      ESOP contribution expense .........................        73,237         71,701         57,055
      Deferred income taxes .............................       (76,153)       (31,383)       (16,798)
      (Increase) in accrued interest receivable .........      (230,936)       (87,398)      (102,439)
      (Increase) decrease in other assets ...............      (134,582)      (171,664)       (27,718)
      Increase (decrease) in accrued expenses and
        other liabilities ...............................        21,363       (140,901)        54,215
                                                              ---------------------------------------
               Net cash provided by operating activities        735,979        765,502        698,463
                                                              ---------------------------------------

Cash Flows from Investing Activities
   Held-to-maturity securities:
      Maturities and calls ..............................       368,250        153,250            - -
      Purchases .........................................           - -        (65,000)           - -
   Available-for-sale securities:
      Sales .............................................     1,800,000      1,416,719            911
      Maturities ........................................    22,336,682     12,054,554     11,238,648
      Purchases .........................................   (26,010,000)   (12,250,000)    (6,395,000)
   Federal funds sold, net ..............................      (680,503)       527,272            - -
   Purchase of Federal Home Loan Bank stock .............       (47,600)      (346,800)       (96,500)
   Loans made to customers, net .........................    (7,221,225)    (5,584,292)    (9,627,628)
   Purchase of premises and equipment ...................      (152,033)       (93,489)       (63,245)
   Purchase of stock of Rubio Savings Bank of Brighton,
      net of cash and cash equivalents received (Note 16)           - -     (2,466,021)           - -
                                                             ----------------------------------------
              Net cash (used in) investing activities ...    (9,606,429)    (6,653,807)    (4,942,814)
                                                             ----------------------------------------

  Cash Flows from Financing Activities
   Net increase in deposits .............................    $9,093,990    $ 1,881,828    $   577,880
   Proceeds from Federal Home Loan Bank advances ........     9,500,000     50,450,000     98,650,000
   Principal payments on Federal Home Loan Bank
      advances ..........................................    (9,517,781)   (43,377,694)   (95,502,977)
   Net increase in advances from borrowers for taxes
      and insurance .....................................         1,122         17,234        (13,829)
   Proceeds from issuance of common stock ...............           - -         12,330            - -
   Acquisition of common stock ..........................      (684,125)      (328,899)      (348,563)
   Dividends paid .......................................      (271,700)      (267,925)      (213,707)
                                                            -----------------------------------------
               Net cash provided by financing activities      8,121,506      8,386,874      3,148,804
                                                            -----------------------------------------

              Net increase (decrease) in cash and
                    cash equivalents ....................      (748,944)     2,498,569     (1,095,547)

Cash and cash equivalents:
   Beginning ............................................     3,306,374        807,805      1,903,352
                                                            -----------------------------------------
   Ending ...............................................   $ 2,557,430    $ 3,306,374     $  807,805
                                                            -----------------------------------------
</TABLE>
                                                    (Continued)
<PAGE>


Washington Bancorp and subsidiaries

Consolidated Statements of Cash Flows ( Continued)
 Years Ended June 30, 1999, 1998  and 1997
<TABLE>

                                                                                        1999            1998          1997
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>             <C>            <C>
Supplemental Disclosures of Cash Flow Information
   Cash payments for:
      Interest paid to depositors ..............................................     $3,434,349     $ 2,562,216     $2,225,796
      Interest paid on other obligations .......................................        881,818         639,162        337,405
      Income taxes, net of refunds .............................................        558,300         684,779        288,713

Supplemental Schedule of Noncash Investing and
   Financing Activities
   Transfers from loans to foreclosed real estate ..............................     $  485,722     $   110,427     $  106,289
   Contract sales of foreclosed real estate ....................................        271,233         121,000        143,200
   Stock issued under stock awards program .....................................         36,453          40,285        262,736

   Acquisition of assets and  liabilities  from Rubio  Savings  Bank of Brighton
      (Note 16):
      Assets acquired:
        Cash and cash equivalents ..............................................                    $ 2,331,668
        Federal funds sold .....................................................                      1,186,769
        Investment securities, held to maturity ................................                      1,221,156
        Investment securities, available for sale ..............................                     10,530,323
        Loans ..................................................................                      7,848,923
        Premesis and equipment .................................................                        226,634
        Goodwill ...............................................................                      1,418,428
        Other assets ...........................................................                        304,762
                                                                                                   ------------
                                                                                                     25,068,663
      Liabilities assumed:
        Deposits ...............................................................                    (19,959,320)
        Other liabilities ......................................................                       (311,654)
                                                                                                    -----------

      Cash purchase price ......................................................                    $ 4,797,689
                                                                                                    ===========
</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 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. The activity of Washington  Financial Services Inc., is
not material.  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, 1999 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.

Acquisition of a business: On January 15, 1998, the Company purchased all of the
outstanding stock of Rubio in a transaction accounted for as a purchase.

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, 1999 and 1998.

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.
<PAGE>


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.

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.

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 is being
amortized by the  straight-line  method over 15 years.  Goodwill is 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:  In fiscal year 1996, 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.

Recently issued accounting  standards:  SFAS No. 130,  "Reporting  Comprehensive
Income," establishes standards for reporting and display of comprehensive income
and its  components  (revenues,  expenses,  gains and  losses)  in a full set of
general-purpose financial statements. The Statement requires that all items that
are  required to be  recognized  under  accounting  standards as  components  of
comprehensive income be reported in a financial statement that is displayed with
the same  prominence  as other  financial  statements.  The  Statement  does not
require a specific  format for that  financial  statement  but requires  that an
enterprise  display an amount  representing total  comprehensive  income for the
period in that financial  statement.  The Statement requires that an enterprise:
(a) classify items of other comprehensive  income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive  income
separately from retained  earnings and additional  paid-in capital in the equity
section of a statement  of  financial  position.  The  Company has adopted  this
accounting standard for the year ended June 30, 1999 and retroactively presented
prior year statements of comprehensive income.

Other recently issued accounting standards are not expected to materially affect
the Company's 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  their  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.

   Investment securities (including mortgage-backed 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 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.
<PAGE>


   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.

   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.

   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 and Investments

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,  1999.  In  addition,  Washington  is required to maintain a
minimum   balance  of  unpledged   cash  and  investment   securities   totaling
approximately $2,228,000 as of June 30, 1999 to provide liquidity for deposits.


Note 3.  Investment Securities

The amortized cost and fair value of investment securities available for sale as
of June 30, 1999 and 1998 are as follows:

<TABLE>
                                                          Cost Or        Gross           Gross
                                                         Amortized     Unrealized     Unrealized       Fair
                                                            Cost         Gains          (Losses)       Value
                                                        -------------------------------------------------------
<S>                                                     <C>           <C>            <C>            <C>
1999:
   U. S. Treasury securities ........................   $ 1,704,558   $     3,192    $       - -    $ 1,707,750
   U. S. Government agencies ........................    13,871,569           - -       (248,191)    13,623,378
   Corporations and other ...........................     5,053,899           179       (128,573)     4,925,505
   State and political subdivisions .................       442,485           257         (4,009)       438,733
                                                        -------------------------------------------------------
                                                        $21,072,511   $     3,628    $  (380,773)   $20,695,366
                                                        =======================================================

1998:
   U. S. Treasury securities ........................   $ 6,329,349   $     9,417    $    (1,857)   $ 6,336,909
   U. S. Government agencies ........................     6,774,264         2,778         (6,582)     6,770,460
   Corporations and other ...........................     5,621,549         1,379         (6,776)     5,616,152
   State and political subdivisions .................       347,500           735            - -        348,235
   Mortgage-backed securities,
      FHLMC certificates ............................        50,432            95            - -         50,527
                                                        -------------------------------------------------------
                                                        $19,123,094   $    14,404    $   (15,215)   $19,122,283
                                                        =======================================================
</TABLE>

The amortized cost and fair value of investment  securities held to maturity are
as follows:

                                     Cost Or     Gross       Gross
                                    Amortized  Unrealized  Unrealized   Fair
                                      Cost       Gains      (Losses)    Value
                                    --------------------------------------------

State and political subdivisions:
  1999 ..........................   $  760,520  $     - -   $    - -  $  760,520
                                    ============================================

  1998 ..........................   $1,131,478  $     - -   $    - -  $1,131,478
                                    ============================================
<PAGE>


The  amortized  cost and fair value of debt  securities  as of June 30,  1999 by
contractual maturity are shown below.
<TABLE>
                                                                                       Amortized      Fair
                                                                                         Cost         Value
                                                                                      ------------------------
<S>                                                                                   <C>          <C>

Available for sale:
   Due in one year or less .........................................................  $ 2,364,459  $ 2,365,089
   Due after one year through five years ...........................................   12,252,601   12,037,768
   Due after five years through ten years ..........................................    6,355,024    6,196,077
   Due after ten years .............................................................      100,428       96,432
                                                                                      ------------------------
                                                                                       21,072,512   20,695,366
                                                                                      ------------------------
Held to maturity:
   Due in one year or less .........................................................      150,022      150,022
   Due after one year through five years ...........................................      505,498      505,498
   Due after five years through ten years ..........................................      105,000      105,000
                                                                                      ------------------------
                                                                                          760,520      760,520
                                                                                      ------------------------
                                                                                      $21,833,032 $ 21,455,886
                                                                                      ========================
</TABLE>

Investment  securities  with a carrying  amount of $3,741,599  and $3,302,984 at
June 30,  1999 and 1998,  respectively,  were  pledged as  collateral  on public
deposits.

Securities  gains (losses) for the years ended June 30, 1999,  1998 and 1997 are
as follows:

                                               1999      1998       1997
                                             -----------------------------

Realized gains .........................     $20,367   $ 5,383    $    388
Realized (losses) ......................      (5,162)      - -         - -
                                             -----------------------------
                                             $15,205   $ 5,383    $    388
                                             =============================



Note 4.  Loans Receivable

Loans receivable are summarized as follows:

                                                             June 30,
                                                    ------------------------
                                                        1999        1998
                                                    ------------------------
First mortgage loans (principally conventional):
   Secured by one-to-four family residences ......  $49,464,296  $45,302,569
   Home equity and second mortgage ...............    1,257,725    1,164,377
   Multifamily and commercial real estate ........    8,611,583    7,411,209
   Construction loans ............................      796,418      152,143
                                                    ------------------------
              Total mortgage loans ...............   60,130,022   54,030,298
Commercial loans .................................    8,714,483    8,163,641
Consumer and other loans:
   Automobile ....................................    3,161,472    3,064,531
   Other .........................................    1,245,387    1,014,505
                                                    ------------------------
              Total loans ........................   73,251,364   66,272,975
   Less allowance for loan losses ................      472,187      388,034
                                                    ------------------------
                                                    $72,779,177  $65,884,941
                                                    ========================

<PAGE>



Loans receivable are net of loans in process of $546,229 and $335,835 as of June
30, 1999 and 1998, respectively.

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

                                                 1999        1998        1997
                                               --------------------------------

Balance, beginning .........................   $388,034    $225,650    $209,394
   Provision charged to expense ............    112,500      89,000      40,085
   Charge-offs .............................    (47,208)    (46,428)    (33,841)
   Recoveries ..............................     18,861      14,638      10,012
   Allowance of Rubio at date of acquisition        - -     105,174         - -
                                               --------------------------------
Balance, ending ............................   $472,187    $388,034    $225,650
                                               ================================

The Banks have no loans  receivable at June 30, 1999 and 1998 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:

                                                            1999        1998
                                                        -----------------------

Investment securities ..............................    $  324,475   $  206,974
Loans receivable ...................................       866,125      752,689
                                                        -----------------------
                                                        $1,190,600   $  959,663
                                                        =======================



Note 6.  Premises and Equipment

Premises and equipment consisted of the following at June 30:

                                                             1999         1998
                                                         -----------------------

Land ...............................................     $   83,080   $   83,080
Building ...........................................        812,799      724,357
Furniture, fixtures and equipment ..................        745,915      682,322
                                                         -----------------------
                                                          1,641,794    1,489,759
Less accumulated depreciation ......................        767,243      689,953
                                                         -----------------------
                                                         $  874,551   $  799,806
                                                         =======================
<PAGE>


Note 7.  Deposits

Deposits at June 30 are as follows:
<TABLE>
                                     Weighted
                                     Average
                                     Rate At           1999                   1998
                                     June 30,  --------------------  ---------------------
                                       1999      Amount     Percent     Amount     Percent
                                     -----------------------------------------------------
<S>                                  <C>       <C>          <C>      <C>           <C>
Demand and NOW accounts,
   including noninterest-bearing
   deposits 1999 $2,596,143;
   1998 $2,768,561 .............       1.22%   $ 8,536,323    11.3%  $ 8,246,486     12.4%
Money market ...................       3.47     11,470,925    15.1    10,472,641     15.7
Passbook savings ...............       2.04      5,728,502     7.6     5,537,316      8.3
                                               -------------------------------------------
                                                25,735,750    34.0    24,256,443     36.4
                                               -------------------------------------------
Certificates of deposit:
   2.01% to 3% .................       2.11        360,797     0.5       155,246      0.2
   4.01% to 5% .................       4.65     11,423,071    15.1     2,550,322      3.8
   5.01% to 6% .................       5.54     31,958,585    42.2    32,583,131     48.9
   6.01% to 7% .................       6.29      6,211,263     8.2     7,050,334     10.7
                                               -------------------------------------------
                                                49,953,716    66.0    42,339,033     63.6
                                               -------------------------------------------
                                       4.38    $75,689,466   100.0%  $66,595,476    100.0%
                                               ===========================================
</TABLE>
The aggregate amount of short-term jumbo  certificates of deposit with a minimum
denomination of $100,000 was approximately $3,233,000 and $6,329,000 at June 30,
1999 and 1998,  respectively.  Deposits in excess of $100,000 are not insured by
the FDIC.

At June 30,  1999,  scheduled  maturities  of  certificates  of  deposit  are as
follows:
<TABLE>
                                                    Year Ending June 30,
                       ------------------------------------------------------------------------------
                            2000        2001         2002          2003         2004        Total
                       ------------------------------------------------------------------------------
<S>                    <C>          <C>          <C>           <C>          <C>           <C>
2% to 3% ...........   $   360,797  $       - -  $       - -   $       - -  $       - -   $   360,797
4.01% to 5% ........     9,452,215    1,689,624      281,232           - -          - -    11,423,071
5.01% to 6% ........    16,760,271    5,826,329    8,192,437       336,448      843,100    31,958,585
6.01% to 7% ........       862,214    5,148,570      200,479           - -          - -     6,211,263
                       ------------------------------------------------------------------------------
                       $27,435,497  $12,664,523  $ 8,674,148   $   336,448  $   843,100   $49,953,716
                       ==============================================================================
</TABLE>
Interest  expense  on  deposits  for the years  ended June 30 is  summarized  as
follows:
                                                1999         1998      1997
                                             ---------------------------------

Money market ............................    $  404,713  $  360,080  $  384,112
Passbook savings ........................       184,866     116,880      53,293
NOW .....................................       111,094      82,454      36,907
Certificates of deposit .................     2,712,539   2,060,204   1,741,456
                                             ----------------------------------
                                             $3,413,212  $2,619,618  $2,215,768
                                             ==================================

Note 8.  Borrowed Funds

Borrowed funds at June 30 are as follows:
                                                            1999        1998
                                                        ------------------------

Short-term advances from the Federal Home Loan Bank .   $ 8,750,000  $ 9,596,975
Long-term advances from the Federal Home Loan Bank ..     6,956,290    6,127,096
                                                        ------------------------
                                                        $15,706,290  $15,724,071
                                                        ========================
<PAGE>


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  $41,935,000.  Of this
total,  $8,750,000  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, 1999 have maturity dates as follows:

  Year Ending                                                       June 30,
    June 30,                           Interest Rate                  1999
--------------------------------------------------------------------------------

   2000                                4.79% to 6.33%              $ 9,013,041
   2001                                5.31% to 6.33%                1,279,115
   2002                                5.79% to 6.33%                  296,173
   2003                                5.41% to 6.33%                  814,275
   2004                                5.79% to 6.33%                  333,481
   Thereafter                          5.79% to 6.33%                3,970,204
                                                                   -----------
                                                                   $15,706,289
                                                                   ===========



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 to pay 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  $74,924  and  $68,865  for the  years  ended  June 30,  1999 and  1998,
respectively.

Shares  of  common  stock  held by the  ESOP at June  30,  1999  and 1998 are as
follows:

                                                    1999       1998
                                                  -------------------

Allocated shares ..............................   $ 12,376   $  8,202
Shares released for allocation ................      2,254      2,087
Unreleased (unearned) shares ..................     37,972     42,313
                                                  -------------------
                                                    52,602     52,602
                                                  -------------------

Fair value of unreleased (unearned) shares ....   $576,795   $785,329
                                                  ===================

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, 1999 and 1998,  $6,005 and $2,503,
respectively, was charged to expense.
<PAGE>


Defined contribution plan:

Rubio has a defined contribution  retirement plan covering  substantially all of
its  employees.   Contributions,  which  are  10%  of  each  covered  employee's
compensation,  totaled  $18,920 and $5,961 for the years ended June 30, 1999 and
1998, respectively.

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,
                                           ------------------------------
                                             1999       1998       1997
                                           ------------------------------

Pro forma net income ................      $806,468   $781,465   $534,323
Pro forma earnings per share:
   Basic ............................          1.43       1.29       0.87
   Diluted ..........................          1.39       1.26       0.87

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, 1998 and 1997:  dividend rates of 2.2%, 1.9% and
3.2%; price volatility of 22.79%,  8.25% and 14.2%;  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, 1997 ..................       49,782              11.25
     Granted ..................................        2,818              18.94
     Exercised ................................       (1,096)             11.25
     Forfeited ................................       (4,383)             11.25
                                                     --------------------------
Outstanding at June 30, 1998 ..................       47,121              11.71
   Granted ....................................        5,479              16.63
   Exercised ..................................          - -
   Forfeited ..................................          - -
                                                     --------------------------
Outstanding at June 30, 1999 ..................       52,600              12.22
                                                     ==========================


                                                     1999      1998      1997
                                                   -----------------------------
Weighted-average fair value per option of
     options granted during the year ..........    $  4.16   $  3.27   $   1.82
                                                   ============================
<PAGE>


Other pertinent  information related to the options outstanding at June 30, 1999
is as follows:

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

   44,303      $  11.25    7 Years          17,726
    2,818         18.94    8 Years             564
    5,479         16.63    9 Years             - -
-----------------------                  ------------
   52,600      $  12.22                     18,290
=======================                  ============

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,  1999,  1998 and 1997,  awards  were  granted for
2,192 shares, 2,127 shares and 19,914 shares respectively,  with a fair value of
$16.63, $18.94 and $11.25 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,  1999,  1998 and 1997  totaled  $62,317,  $67,329  and
$72,294, 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, 1999 and 1998:

                                                     1999      1998
                                                   -------------------
Deferred tax assets:
   Unrealized loss on investment securities
      available for sale .......................   $141,368   $    304
   Accrued compensation ........................     29,387     24,301
   Allowance for loan losses ...................    147,888    122,762
                                                   -------------------
                                                    318,643    147,367
                                                   -------------------
Deferred tax liabilities:
   Recapture of allowance for loan losses ......    130,040    136,541
   FHLB stock dividends ........................     44,067     44,067
   Premises and equipment ......................     87,556     77,420
   Accrued expenses ............................     32,201     48,408
   Other .......................................      6,411     39,780
                                                   -------------------
                                                    300,275    346,216
                                                   -------------------
              Net deferred tax asset (liability)   $ 18,368  $(198,849)
                                                   ===================

The net  change in the  deferred  income  taxes is  reflected  in the  financial
statements for the years ended June 30, 1999, 1998 and 1997 as follows:

                                                    1999       1998       1997
                                                  -----------------------------

Statement of income ............................. $ 76,153  $ 31,383   $ 16,798
Statement of stockholders' equity* ..............  141,064    (1,680)   (38,942)
Deferred taxes related to acquisition of Rubio ..      - -  (122,753)       - -
                                                  -----------------------------
                                                  $217,217  $(93,050)  $(22,144)
                                                  =============================

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


The provision  for income taxes  charged to operations  for the years ended June
30, 1999, 1998 and 1997 consisted of the following:

                                                 1999       1998       1997
                                               ------------------------------

Current ....................................   $608,175   $471,063   $367,565
Deferred ...................................    (76,153)   (31,383)   (16,798)
                                               ------------------------------
                                               $532,022   $439,680   $350,767
                                               ==============================

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, 1999, 1998 and 1996 due to the following:
<TABLE>
                                                Years Ended June 30,
                             -------------------------------------------------------------
                                     1999               1998                  1997
                             ------------------  -------------------  --------------------
                                          % Of                 % Of                  % Of
                                         Pretax               Pretax                Pretax
                               Amount    Income    Amount     Income    Amount      Income
                             -------------------------------------------------------------
<S>                          <C>         <C>     <C>          <C>     <C>           <C>
Computed "expected" tax
   expense ...............   $ 477,128    35.0%  $ 441,881     35.0%  $ 320,405      35.0%
Tax-exempt interest ......     (34,454)   (2.5)    (26,760)    (2.1)     (9,833)     (1.1)
State income taxes, net of
   federal benefit .......      50,009     3.7      37,811      3.0      32,271       3.5
Nondeductible goodwill
   amortization ..........      33,097     2.4      15,169      1.2
Other, net ...............       6,242     0.4     (28,421)    (2.3)      7,924       0.9
                             -------------------------------------------------------------
                             $ 532,022    39.0%  $ 439,680     34.8%  $ 350,767      38.3%
                             =============================================================
</TABLE>

Note 11.  Earnings Per Share

Basic and diluted earnings per share are calculated as follows:
<TABLE>
                                                              Year Ended June 30,
                                                         ----------------------------
                                                           1999      1998       1997
                                                         ----------------------------
<S>                                                      <C>       <C>       <C>
Basic earnings per share:
   Net income available to common stockholders, basic .  $831,200  $822,836  $564,677
                                                         ============================

   Weighted average shares outstanding, basic .........   563,303   603,589   611,539
                                                         ============================

   Basic earnings per share ...........................  $   1.48  $   1.36  $   0.92
                                                         ============================

Diluted earnings per share:
   Net income available to common shareholders, diluted
      (Note 1) ........................................  $831,200  $822,836  $564,677
                                                         ============================

   Weighted average shares outstanding, basic .........   563,303   603,589   611,539
      Effect of dilutive securities, stock options ....    14,812    16,677     6,063
                                                         ----------------------------
   Weighted average shares outstanding, diluted .......   578,115   620,266   617,602
                                                         ============================

   Diluted earnings per share .........................  $   1.44  $   1.33  $   0.91
                                                         ============================
</TABLE>
<PAGE>


Note 12.  Regulatory Capital Requirements

The ability of the Company to pay  dividends  to its  shareholders  is dependent
upon dividends paid by its subsidiary banks.

Federal regulatory agencies have adopted various capital standards for financial
institutions,   including  risk-based  capital  standards.   Risk-based  capital
standards  have  requirements  for a  minimum  Tier 1 capital  to  assets  ratio
(leverage  ratio).  In addition,  regulatory  agencies  consider  the  published
capital  levels as minimum  levels and may  require a financial  institution  to
maintain capital at higher levels.

A  comparison  of the  Banks'  capital  as of June 30,  1999  with  the  minimum
requirements is presented below:

                                                                      Minimum
                                                        Actual      Requirements
                                                        ------------------------
Washington:
   Tangible capital ..........................           8.53%           1.5%
   Risk-based capital ........................          12.92            8.0
   Core capital ..............................           8.53            4.0

According to the Office of Thrift Supervision ("OTS"),  Washington is considered
to be "well capitalized."

                                                                      Minimum
                                                        Actual      Requirements
                                                        ------------------------

Rubio:
   Tier 1 risk-based capital ...................        20.72%          4.0%
   Total risk-based capital ....................        21.65           8.0
   Leverage ratio ..............................        11.09           3.0

According  to  FDIC  capital  guidelines,   Rubio  is  considered  to  be  "well
capitalized."

Banking  laws and  regulations  limit the amount of  dividends  that may be paid
without  prior   approval  of  the  Bank's   regulatory   agency.   Under  these
restrictions,  the Company's  subsidiary  banks may not pay dividends that would
result in its capital levels being reduced below the minimum  requirements shown
above.


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.

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
                                                                       National
                                                                        Amount
                                                                      ----------
Financial instruments whose contract amounts
  represent credit risk,  commitments to
  extend credit:
  First mortgage loans ............................................   $1,910,601
  Consumer and other loans ........................................    1,412,509
                                                                      ----------
                                                                      $3,323,110
                                                                      ==========
<PAGE>


The above commitments are to make fixed rate loans with a June 30, 1999 weighted
average interest rate of 8.52%.

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, 1999, the Banks have
approximately $12,642,000 of agriculturally dependent loans.

Risks and uncertainies:  Certain data processing  application systems could fail
or perform  improperly as a result of erroneous  calculation  or data  integrity
problems if they are unable to process  date  information  beyond  December  31,
1999,  an issue  known as Year 2000.  The Banks have  identified,  assessed  and
tested critical  information  systems and are developing  contingency  plans for
their own applications.  There is risk that in the early weeks of the Year 2000,
the  Banks  could  experience   disruptions  that  may  affect  its  operations.
Management  believes  that  the Year  2000  problem  will  not pose  significant
operations  problems for the Bank's computer  systems,  but disruptions could be
material to the financial  statements if there are significant  interruptions in
basic  services,  such as the  electric  power grid,  telephone  services or the
banking system. These risks cannot be estimated.


Note 14.  Fair Value of Financial Instruments

The carrying  value and estimated  fair values of financial  instruments at June
30, 1999 and 1998 are as follows:
<TABLE>
                                                              1999                       1998
                                                     ------------------------  ------------------------
                                                                  Estimated                 Estimated
                                                       Carrying      Fair        Carrying      Fair
                                                        Amount       Value        Amount       Value
                                                     --------------------------------------------------
<S>                                                  <C>          <C>          <C>          <C>
Financial assets:
   Cash and cash equivalents ......................  $ 2,557,430  $ 2,557,430  $ 3,306,374  $ 3,306,374
   Investment securities:
      Held to maturity ............................      760,520      760,520    1,131,478    1,131,478
      Available-for-sale ..........................   20,695,366   20,695,366   19,122,283   19,122,283
   Federal funds sold .............................    1,340,000    1,340,000      659,497      659,497
   Loans ..........................................   72,779,177   72,830,503   65,884,941   65,763,645
Financial liabilities:
   Deposits .......................................   75,689,466   76,479,543   66,595,476   67,042,333
   Borrowed funds .................................   15,706,290   15,225,298   15,724,071   15,662,707

                                                     Face Amount               Face Amount
                                                     -----------               -----------

Off-balance sheet instruments,
   loan commitments ...............................  $ 3,323,110  $       - -  $ 3,208,419  $       - -
</TABLE>


Note 15.  Transactions with Related Parties

The  Banks  have  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), all of which
have, in the opinion of management,  on the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
others.
<PAGE>


Aggregate loan transactions with related parties were as follows:

                                                          Year Ended June 30,
                                                        -----------------------
                                                            1999        1998
                                                        -----------------------

Balance, beginning ...............................      $  791,826   $  602,041
   Loans to directors and officers of Rubio at
     date of acquisition .........................             - -      259,097
   New loans .....................................       1,174,375      387,281
   Repayments ....................................      (1,015,936)    (456,593)
                                                        -----------------------
Balance, ending ..................................      $  950,265   $  791,826
                                                        =======================

Maximum balance during the year ..................      $1,085,305   $1,219,418
                                                        =======================


Note 16.  Acquisition of a Business

Effective January 15, 1998, the Company acquired for cash all of the outstanding
shares of Rubio. The total  acquisition  cost was $4,797,689.  The excess of the
acquisition  cost over the fair value of the net assets  acquired was $1,418,428
and is being  amortized  over fifteen  years by the  straight-line  method.  The
acquisition was accounted for as a purchase and the results of operations  since
the date of the acquisition are included in the Company's statement of income.

Unaudited  proforma  net income  and  earnings  per share for 1998 and 1997,  as
though  Rubio  had  been  acquired  as of July 1,  1996,  are not  significantly
different than the reported amounts of the Company.
<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, 1999 and 1998
<TABLE>
ASSETS                                                                                      1999            1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>             <C>
Cash ...............................................................................    $     4,632     $   458,809
Investment in subsidiary banks, at cost plus equity in
   undistributed earnings ..........................................................     10,526,726      10,616,841
Other assets .......................................................................        369,295          67,288
                                                                                        ---------------------------
                                                                                        $10,900,653     $11,142,938
                                                                                        ===========================

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------

Liabilities, accrued expenses and other liabilities ................................    $       - -     $    17,943
                                                                                        ---------------------------
Redeemable common stock held by Employee Stock
   Ownership Plan (ESOP) ...........................................................        189,972         153,788
                                                                                        ---------------------------
Stockholders' equity:
   Preferred stock
   Common stock ....................................................................          6,511           6,511
   Additional paid-in capital ......................................................      6,150,310       6,122,664
   Retained earnings ...............................................................      6,384,863       5,825,363
   Accumulated other comprehensive income, unrealized (losses)
      on debt securities, net ......................................................       (235,778)           (507)
                                                                                        --------------------------
                                                                                         12,305,906      11,954,031
   Less:
      Cost of common shares acquired for the treasury
        1999 50,935 shares; 1998 16,127 shares .....................................       (946,435)       (300,944)
      Deferred compensation ........................................................        (79,098)       (104,962)
      Maximum cash obligation related to ESOP shares ...............................       (189,972)       (153,788)
      Unearned shares, Employee Stock Ownership Plan ...............................       (379,720)       (423,130)
                                                                                        ---------------------------
                                                                                         10,710,681      10,971,207
                                                                                        ---------------------------
                                                                                        $10,900,653     $11,142,938
                                                                                        ===========================
</TABLE>
<PAGE>



                               WASHINGTON BANCORP

                              STATEMENTS OF INCOME
                    Years Ended June 30, 1999, 1998 and 1997
<TABLE>

                                                                1999        1998          1997
-------------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>           <C>
Dividends from subsidiaries .............................   $  782,292   $2,800,000    $      - -
Interest income .........................................        2,043        5,666         5,693
Miscellaneous income ....................................        8,359           25           - -
Miscellaneous expense ...................................      (46,663)     (60,593)      (65,600)
                                                            -------------------------------------
              Income (loss) before equity in
                  subsidiaries' undistributed
                  income and taxes on income ............      746,031    2,745,098       (59,907)
Equity in undistributed net income (loss) of subsidiaries       71,919   (1,945,071)      604,285
                                                            -------------------------------------
              Income before taxes on income .............      817,950      800,027       544,378
Federal and state income taxes (credits) ................      (13,250)     (22,809)      (20,299)
                                                            -------------------------------------
              Net income ................................   $  831,200   $  822,836    $  564,677
                                                            =====================================
</TABLE>
<PAGE>



                               WASHINGTON BANCORP

                            STATEMENTS OF CASH FLOWS
                    Years Ended June 30, 1999, 1998 and 1997
<TABLE>
                                                                          1999          1998        1997
-----------------------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>          <C>
Cash Flows from Operating Activities
   Net income .....................................................   $  831,200    $  822,836   $  564,677
   Adjustments to reconcile net income to net cash
      provided by operations:
      Equity in net income of subsidiaries ........................     (854,211)     (854,929)    (604,285)
      (Increase) in other assets ..................................     (302,007)      114,853      (74,818)
      Increase (decrease) in accrued expenses and other liabilities      (17,943)        4,338      (47,858)
                                                                      -------------------------------------
              Net cash provided by (used in) operating activities .     (342,961)       87,098     (162,284)
                                                                      -------------------------------------

Cash Flows from Investing Activities
   Dividends received from subsidiaries ...........................      782,292     2,800,000          - -
   Return of equity from subsidiaries .............................          - -     1,000,000          - -
   Maturity of available-for-sale securities ......................          - -           - -      500,000
   Purchase of stock of Rubio .....................................          - -    (4,797,689)         - -
                                                                      -------------------------------------
              Net cash provided by (used in) investing activities .      782,292      (997,689)     500,000
                                                                      -------------------------------------

Cash Flows from Financing Activities
   Proceeds from issuance of shares of common stock ...............          - -        12,330          - -
   Payments received from subsidiary for compensation
      under stock awards ..........................................       62,317        67,329          - -
   Acquisition of common stock ....................................     (684,125)     (328,899)    (348,563)
   Dividends paid .................................................     (271,700)     (267,925)    (213,707)
                                                                      -------------------------------------
              Net cash (used in) financing activities .............     (893,508)     (517,165)    (562,270)
                                                                      -------------------------------------

              (Decrease) in cash ..................................     (454,177)   (1,427,756)    (224,554)

Cash balance:
   Beginning ......................................................      458,809     1,886,565    2,111,119
                                                                      -------------------------------------
   Ending .........................................................   $    4,632    $  458,809   $1,886,565
                                                                      =====================================

Supplemental Disclosures
   Cash payments for income taxes, net of payments
      from subsidiary .............................................   $  221,103    $  148,806   $  129,458

</TABLE>
<PAGE>


                               WASHINGTON BANCORP


                        DIRECTORS AND EXECUTIVE OFFICERS



Directors

Stan Carlson                              Rick R. Hofer
President and Chief Executive             Personnel Manager,
Officer, Washington and Washington        Sitler Electric Supply
 Federal

James D. Gorham                           Mary Levy
Sales Agent, Northwestern Mutual          Treasurer and co-owner, Mose Levy
 Life Insurance Co.                       Steel Company

Myron L. Graber                           Richard L. Weeks
Co-owner, Graber Home                     Owner, Sitler Electric Supply, Inc.
 Improvement, Inc.

J. Richard Wiley                          Dean Edwards
Retired business owner                    Chairman of the Board, Washington
                                          and Washington Federal
                                          President and Chief Executive Officer,
                                          Rubio Savings Bank

Executive Officers

Stan Carlson                              Leisha Linge
President and Chief Executive Officer     Executive Vice President and Treasurer

Jeff Johnson                              Chris Davies
Vice President                            Vice President

Quintin T. Harmon
Vice President





<PAGE>




                             STOCKHOLDER INFORMATION

Corporate Profile

The Company 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. The
principal  assets of the Company  are the  outstanding  stock of the Banks,  its
wholly owned subsidiaries.  The Company 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                        Washington, Iowa

Rubio Savings Bank                      Wellman Federal Savings Bank
Main Office                             Branch office of Washington Federal
122 East Washington Street              801 Sixth Street
Brighton, Iowa                          Wellman, Iowa

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                    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, 1999  including  financial  statements,  as filed with the SEC, will be
furnished  without charge to stockholders of the Company upon written request to
the Secretary, Washington Bancorp, 102 East Main Street, Washington, Iowa 52353.

Stock Listing

The Company's  common stock is reported on the National Daily Quotation  Service
by the National Quotation Bureau under the symbol "WBIO". As of August 31, 1999,
the Company had 417  stockholders  of record and 600,198  outstanding  shares of
common stock. Price Range of Common Stock
<PAGE>


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
                                      ------------------------------------------

1996
----
Third quarter ................        $      11.50     $      10.50     $     --
Fourth quarter ...............        $      11.38     $      10.50     $     --

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